The Zacks Analyst Blog Highlights:Nu Skin, Herbalife, USANA Health Sciences, AmTrust Financial Services and Tower Group International
CHICAGO, Jan. 20, 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 Nu Skin Enterprises Inc. (NYSE:NUS-Free Report), Herbalife Ltd. (NYSE:HLF-Free Report), USANA Health Sciences Inc. (NYSE:USNA-Free Report), AmTrust Financial Services Inc. (Nasdaq:AFSI-Free Report) and Tower Group International Inc. (Nasdaq:TWGP-Free Report).
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Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Friday's Analyst Blog:
Multi-level Marketing Stocks Tumble on China Probe
A new challenge has arisen for multilevel-marketing companies operating in China. The Chinese government has recently begun an investigation on Nu Skin Enterprises Inc. (NYSE:NUS-Free Report) following claims by local newspaper, People's Daily (on Jan 15) that the company was operating an illegal pyramid scheme in the country.
The news has not only affected the share price of Nu Skin but also that of several other companies with the same distribution model as investors fear that the investigation could extend to these direct selling companies as well. Other companies that have lost their market value drastically in the last two trading days include Herbalife Ltd. (NYSE:HLF-Free Report) and USANA Health Sciences Inc. (NYSE:USNA-Free Report).
Shares of the skin-care and nutritional products marketer, Nu Skin have lost around 37.9% in the last two trading days while Herbalife and USANA lost 11.3% and 14.0, respectively.
China has become the highest revenue generating nation for most of the foreign based direct selling companies. China alone contributes over 30% to Nu Skin's total revenues, while for USANA and Herbalife, it generates nearly 60% and 11%, respectively of their total sales.
These companies are experiencing huge revenue growth opportunities in the world's second largest economy. This is evident from Herbalife's third-quarter fiscal 2013 results, in which revenues from China soared 77% year over year.
China has always been suspicious toward these direct selling companies. These were earlier banned by the Communist Party in 1998. Since then, any kind of pyramid selling scheme is illegal in the country. In 2005, the ban was lifted after multilevel-marketing companies changed their agent payment structure.
In near term, it will be wise to stay away from direct selling companies, which have much exposure in the Chinese market, until the investigation yields some positive news.
AmTrust Upped to Strong Buy
On Jan 17, Zacks Investment Research upgraded AmTrust Financial Services Inc. (Nasdaq:AFSI-Free Report) by a notch to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
AmTrust has been experiencing rising earnings estimates on the back of better market trends following the recent approval of its first stock repurchase program since 2007 and improved agency acquisitions.
Earlier this month, the company acquired Insco Dico Group, while it purchased Sagicor Europe Ltd. last month. These acquisitions are expected to be accretive to AmTrust's earnings in 2014 and beyond.
Last week, the company also announced its intention to buy the renewal rights and assets of the commercial lines insurance operations of Tower Group International Inc. (Nasdaq:TWGP-Free Report) for about $125 million. The deal is likely to culminate by mid-2014, upon receipt of regulatory approvals. Moreover, strong capitalization and financial strength reflected by a strong ratings upgrade by A.M. Best are deemed impressive.
Earnings Rationale
Additionally, this specialty property-casualty insurer delivered positive earnings surprises in the last 4 quarters with an average beat of 11.7%. On Nov 5, AmTrust reported third-quarter 2013 operating earnings per share of 83 cents, which outpaced both the Zacks Consensus Estimate of 74 cents and the year-ago quarter number of 64 cents.
Robust year-over-year growth of 58.4% in net earned premiums along with a 58.8% surge in commission and other revenues boosted the top line, margins and bottom line. Despite higher underwriting and acquisition expenses, combined ratio witnessed improvement. Moreover, capital position remained sturdy with appreciated cash position, book value per share and return on equity (ROE).
AmTrust's creditworthiness, prudent risk management, diversified product portfolio and effective capital deployment score well with the ratings agencies and investors.
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
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