The Zacks Analyst Blog Highlights:Netflix, Texas Instruments, Chipotle Mexican Grill, Apple and General Electric
CHICAGO, July 22, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Netflix (Nasdaq:NFLX-Free Report), Texas Instruments (Nasdaq:TXN-Free Report), Chipotle Mexican Grill, Inc. (NYSE:CMG-Free Report), Apple Inc. (Nasdaq:AAPL-Free Report) andGeneral Electric Company (NYSE:GE-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Monday's Analyst Blog:
Netflix Posts Earnings, Surpasses 50M Users; TI Beats
Streaming media giant Netflix (Nasdaq:NFLX-Free Report) reported Q2 earnings and sales after the closing bell Monday: earnings per share (EPS) of $1.15 on $1.34 billion in revenues amounted to a mixed result compared with the Zacks consensus -- a penny beat on the bottom line and a slight miss on the top. After-market shares were up moderately on the news.
For such a big name in growth companies, however, analysts and investors are all focused on Netflix's subscriber numbers and expansion plans. In Q2, the company pushed just past 50 million total subscribers (domestic and international), up from 48 million at the end of Q1. Net additions in the quarter reached 1.69 million. This subscriber growth, while still impressive by most metrics, represents a slowing down that the company had guided toward earlier. In Q1, Netflix gained 4 million new subscribers.
As for expansion, Netflix's international market -- while not yet demonstrating profitability -- will include a push into markets in Germany and France this September. The company has also announced another price increase, making sure to cite that the most recent price increase had no notable negative effect on company business.
With shares once again pushing up against all-time highs, however, investors may now been slightly wary about Netflix's performance for the first time in about two years. Recall that several of its earnings reports in the recent past were of the double-digit variety. Although as of now in late-day trading, no one seems to be penalizing NFLX shares for underperforming.
Also after the bell, Texas Instruments (Nasdaq:TXN-Free Report) posted a beat on top and bottom lines on improved Analog and Embedded Processing offerings. These businesses now make up 82% of TI's business, helping lead the company to an all-time high gross margin of 57.1%.
Chipotle Grills Q2 Earnings and Revenue Estimates
Chipotle Mexican Grill, Inc. (NYSE:CMG-Free Report), reported earnings after the bell today. The company posted an EPS of $3.50, coming in well above the Zacks Consensus Earnings Estimate of $3.05. On the Revenue front, CMG posted revenues of $1.05 billion beating the Zacks Consensus Revenue Estimate of $980 million. This is a +24.1% increase in Earnings year over year, and a 28.3% increase in Revenue year over year.
The main driver behind the strong results were due to price increases introduced in early May for the first time in 3 years. All items saw price increases ranging between 5% and 9% for an approximately 6% increase net total. Moreover, management has not seen any significant pushback by customers since the implementation of higher prices. Therefore, this should positively impact the next several quarters as well.
Chipotle also saw comp same store sales growth of 17.3% on the back of increased store traffic and an increase of individual patrons average check. During the quarter, the company opened 45 new stores, following managements Q1 statement that new locations would increase 11%-12% in 2014.
This company is cash heavy, and creates solid FCF, which analysts are hoping is to be soon followed by a share repurchase plan.
In afterhours trading Chipotle Mexican Grill is up over 8% on mild volume. This indicates that investors are very happy with management's direction and their recent results.
Will Apple (AAPL) Surprise on Q3 Earnings?
Apple Inc. (Nasdaq:AAPL-Free Report) is set to report fiscal third-quarter 2014 results on Jul 22. In the prior quarter, the company posted earnings surprise of 13.70%. Moreover, the company has posted an average positive earnings surprise of 6.0% over the past four quarters.
Let's see how things are shaping up for the company in this quarter.
Growth Factors this Past Quarter
We believe that Apple's third-quarter results will be significantly dependent on iPhone sales. Apple is rumored to release its new iPhone 6 in September, which may negatively impact third-quarter volumes. Consumers tend to postpone buying the older versions of the device prior to a new iPhone launch.
However, iPhone sales will benefit from Apple's China Mobile partnership despite significant competition from Samsung. We believe that iPad sales will stabilize and improving PC market will also boost Mac sales in the quarter.
For the third quarter, Apple forecasts revenues to be in the range of $36.0 to $38.0 billion. Gross margin is expected to be in the range of 37.0% to 38.0%, while operating expenses are projected to be within $4.4 to $4.5 billion.
Earnings Whispers?
Our proven model does not conclusively show that Apple will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Negative Zacks ESP: Apple has a -0.82% ESP. That is because the Most Accurate estimate stands at $1.21 while the Zacks Consensus Estimate is higher at $1.22.
Zacks Rank: Apple's Zacks Rank #3 (Hold) when combined with a negative ESP makes surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
GE to Raise $3B in Synchrony Financial IPO
General Electric Company's (NYSE:GE-Free Report) second-quarter 2014 results reflected the company's greater focus on its industrial operations, as the conglomerate looks to further stimulate its shift away from the financial business. Management has decided to initiate a $3 billion initial public offering (IPO) of Synchrony Financial, its North American consumer finance business.
The move is a part of the company's long-term strategy to shrink its financial arm, GE Capital, which it has been striving to do since the credit markets froze in the financial crisis.
Synchrony IPO
According to a regulatory filing, General Electric plans to raise about $3 billion from the IPO of its credit card unit. The divested unit, Synchrony Financial, is looking to be listed following the July IPO and will trade under the ticker "SYF."
Per the filing, General Electric intends to float 20% of Synchrony Financial in the IPO. The remaining 80% will be held by the conglomerate, to be reportedly spun off in a tax-free share exchange with its shareholders in 2015.
In the SEC filing, the company outlined its intent to offer 125 million shares of Synchrony Financial for $23 to $26 per share. The company has also granted underwriters the option to buy additional 18.75 million shares for over-allotment.
The company will use the proceeds to repay debt and increase its capital.
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
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