The Zacks Analyst Blog Highlights:Portfolio Recovery Associates, Marsh & McLennan, CNO Financial Group, FBL Financial Group and Google
CHICAGO, Feb. 3, 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 Portfolio Recovery Associates Inc. (Nasdaq:PRAA-Free Report), Marsh & McLennan Companies, Inc. (NYSE:MMC-Free Report), CNO Financial Group, Inc. (NYSE:CNO-Free Report), FBL Financial Group Inc. (NYSE:FFG-Free Report) and Google Inc. (Nasdaq:GOOG-Free Report).
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Here are highlights from Friday's Analyst Blog:
Portfolio Recovery Downgraded to Neutral
On Jan 30 2014, we downgraded, Portfolio Recovery Associates Inc. (Nasdaq:PRAA-Free Report), to Neutral from Outperform owing to lack of potential growth catalysts in the near term. This outsourced receivables management services provider currently carries a Zacks Rank #3 (Hold).
Why the Downgrade?
Estimates for Portfolio Recovery have been unvarying over the last 30 days due to lack of any significant growth catalyst.
Although Portfolio Recovery delivered a 20.5% positive earnings surprise in the last reported quarter, we remain concerned about the near-term prospect as higher operating expenses and borrowing costs are likely to weigh on the company's positives.
Cause for Concern
Owing to a fragmented and competitive accounts receivable management industry, Portfolio Recovery faces several challenges in acquiring defaulted consumer receivables and placement of fee-for-service receivables. Going ahead, relatively low barriers to entry and high returns will likely create more – though less skilled – entrants over time, thereby adding pressure on pricing.
Moreover, global economic crisis has pressurized the operating leverage of Portfolio Recovery for quite some time. Operating expenses also witnessed a surge, pressurizing margins. Compensation and employee services, legal collection fees and costs, outside fees and communications drove much of the expense during the past few years. We expect further growth in expenses in the upcoming years, unless an effective cost management policy is adopted.
In several of the past quarters, rising borrowing costs and increasing leverage have resulted in higher interest expenses. Additionally, the stock split initiated in Aug 2013 may have an adverse effect on the company's earnings, given the increase in share count.
Nevertheless, amid the negatives, growth in income from finance receivables, higher cash collections and portfolio acquisitions raise optimism on the stock. Also, the credit facility amendment made in Aug 2013 strengthens the company's liquidity and is thus expected to help Portfolio Recovery enhance its operating efficiency.
Stocks That Warrant a Look
Some better-ranked stocks in the financial services space include Marsh & McLennan Companies, Inc. (NYSE:MMC-Free Report), CNO Financial Group, Inc. (NYSE:CNO-Free Report), FBL Financial Group Inc. (NYSE:FFG-Free Report). While CNO Financial and FBL Financial carry a Zacks Rank #1 (Strong Buy), Marsh & McLennan holds a Zacks Rank #2 (Buy).
Google Finds Partner for Google Glass
Earlier this week, Google Inc. (Nasdaq:GOOG-Free Report) has announced its official collaboration with VSP Global to make Google Glass available to the masses. With this partnership, Google will offer prescription lenses and frames for Google Glass at subsidized rates.
VSP Global is a group of leading companies, which work together for vision-care. VSP Global provides optical benefits, services, products and solutions. In 1950, this not-for-profit organization was set up with an aim to supply expert, cost-effective eyecare services.
Google Glass is a wearable Android-powered computer fitted into spectacle frameswith an optical head-mounted display (OHMD). According to Google, Glass was created to "be there when you need it and get out of your way when you don't." So it is designed for convenience.
Currently, Google Glass is available only to a few thousand early testers. This association will help Google reach a much broader customer base through VSP Global's network of 30,000 eye doctors across the U.S..
Last year, Google discovered that users who were shortsighted would perhaps need prescription lenses to use Glass. With the help of VSP Global, the users can either fit prescription lenses in the Glass or make new frames altogether. This step thus makes Google Glass trendier and more user-friendly. Of course, the prescription lenses are not meant for people who just wear reading glasses.
The search engine giant also announced that new frames (bold, curve, thin and split) and shades and various combinations of these are available for purchase.
Google faces challenges in the growing market of wearable technology. Reportedly, Samsung is set to unveil a Galaxy Glass wearable computer in the coming months.
Google currently holds a Zacks Rank #3 (Hold).
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