The Zacks Analyst Blog Highlights:Walgreen, CVS Health, Vantiv, Apple and Green Dot
CHICAGO, Sept. 17, 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 Walgreen Co. (NYSE:WAG-Free Report), CVS Health Corp. (NYSE:CVS-Free Report), Vantiv Inc. (NYSE:VNTV-Free Report), Apple Inc. (Nasdaq:AAPL-Free Report) and Green Dot Corp. (NYSE:GDOT-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Tuesday's Analyst Blog:
Retail Sales Rise: 2 Pharmacy Stocks in Focus
An encouraging increase in retail sales was among the major positives the market received last week. While auto sales continue to dominate these numbers, strength was seen in other areas as well. Coming in second place was growth in sales at healthcare stores. This is a significant development, and there are factors at work which may help sustain this trend over the long term.
Retail Sales Surge
The U.S. Department of Commerce reported that seasonally adjusted sales of retail and food services rose 0.6% in August, its biggest gain in four months. This rise in retail sales in August was more than the consensus forecast of it rising by 0.5%.
The gain was led by increase in demand for auto sales. Sales at auto dealers jumped 1.5%, its biggest rise since March. Auto sales increased 9.5% from the same period last year. This was followed by sales at healthcare stores, which increased by 8.1% from August 2013. Excluding motor vehicles sales, retail sales increased at 0.3%.
Consumer Sentiment Improves
Additionally, the University of Michigan and Thomson Reuters' preliminary reading of consumer sentiment touched its highest level in September since July 2013. The gauge was at 84.6 in September, which was more than the consensus forecast of an increase to 83.6.
This follows an increase in this metric during the month of August. Late last month, the Conference Board reported that the Consumer Confidence Index rose to 92.4 in August from 90.3 in July. The number was higher than the consensus estimate of 88.6. This was also the highest level since Oct 2007.
Increase in Healthcare Spending
There are strong reasons for an 8.1% increase in sales at healthcare stores. Overall, ACA or Obamacare has helped push healthcare spending upward. An aging population has also significantly contributed to healthcare spending. Most baby boomers are expected to turn 65 and older between 2012 and 2030.
Meanwhile, Americans are currently in a better position to meet medical costs thanks to the rebound in the U.S. economy. This recovery has also pushed up healthcare spending. PricewaterhouseCoopers's Health Research Institute forecasts a 6.8% increase in healthcare spending in 2015. This is higher than the forecast of a 6.5% increase for this year.
Stocks in Focus
All these factors indicate promising times for sales at healthcare stores. As enrollment under the ACA increases and a larger number of people get coverage, business will improve for such stores. Below we present two stocks which will gain from these trends, each of which also has a good Zacks Rank.
Walgreen Co. (NYSE:WAG-Free Report), popularly known as Walgreens, is the largest national retail pharmacy chain in terms of revenue and profitability. As of May 31, 2014, Walgreens operated 8,683 locations in all 50 states of the U.S., the District of Columbia, Puerto Rico and Guam and the U.S. Virgin Islands, including 8,217 drugstores.
The company also operates infusion and respiratory service facilities, worksite health and wellness centers, specialty pharmacies and mail service facilities. Walgreen Co. holds a Zacks Rank #3 (Hold). The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 16.78.
CVS Health Corp. (NYSE:CVS-Free Report) is the largest provider of prescription and related healthcare services in the U.S. The company, one of the largest domestic integrated pharmacy service providers, operates through three business segments: Pharmacy Services, Retail Pharmacy and Corporate.
As of Jun 30, 2014, the Retail Pharmacy Segment included 7,705 retail drugstores (of which 7,647 operated a pharmacy), 17 onsite pharmacies, 860 retail health care clinics, and the online retail websites, CVS.com and Onofre.com.br. The company currently holds a Zacks Rank #3 (Hold) and has a P/E (F1) of 18.13.
The boost in retail sales displays the renewed vigor of the US economy. The fact that healthcare spending has played a key role in this case comes as no surprise, since several factors are pushing it upward. Given current trends, such gains are expected to continue going forward.
Vantiv Up to Strong Buy on Healthy Alliances
On Sep 13, Zacks Investment Research upgraded Vantiv Inc. (NYSE:VNTV-Free Report) by a notch to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Earnings estimates of Vantiv witnessed accretion on the back of robust second-quarter 2014 results and a raised growth outlook. Moreover, strategic merchant service alliances like the one with Comerica Bank last month and the latest with Apple Inc.'s (Nasdaq:AAPL-Free Report) mobile wallet, Apple Pay, further raises the company's growth potential in the coming period.
Along with a strong network and merchant base, the acquisition of Mercury Payments Systems in June this year is aiding Vantiv's initiatives to strengthen its market position in the rapidly evolving payments' space. Mercury has brought in software solution services and value-added technological expertise, which should boost the company's competitive and operating leverage.
On Jul 31, Vantiv reported second-quarter 2014 earnings per share (EPS) of 47 cents, which topped the Zacks Consensus Estimate by 9.3% and the year-ago quarter figure by 17.5%. Additionally, this integrated payment processor delivered positive earnings surprises in 3 of the past 4 quarters, with an average beat of about 3.0%.
Results benefited from 12% year over year top-line growth, driven by improvement across merchant and financial institution services. This was partially offset by lower revenue per transaction, higher operating and interest expenses, owing to the debt incurred from the Mercury acquisition, which also reduced cash flows marginally. Nonetheless, adjusted EBITDA rose 7%, while total transactions witnessed strong double-digit growth of 15% during the quarter.
Strong Outlook
Despite high debt and acquisition costs, management expects to generate top-line growth of 19–20% in 2014, up from the prior mid-single digit estimate. EPS is also projected to grow higher by 19–22% in 2014, up from previous range, while EPS in third-quarter 2014 is expected to surge by 28–30% along with a healthy cash flow. These factors keep up the confidence of both investors and ratings agencies. They also remain optimistic of Vantiv's potential to reduce leverage modestly by 2015-end.
Based on an a solid outlook, the Zacks Consensus Estimate for 2014 and 2015 rose by 1.2% and 5.6% to $1.75 and $2.08 per share, respectively, in the last 60 days. On a year-over-year basis, earnings for 2014 and 2015 are expected to grow by 19.3% and 18.4%, respectively. Notably, no downward estimate revision has been witnessed for either year.
Other Stocks to Consider
Other financial stocks that warrant a look include Green Dot Corp. (NYSE:GDOT-Free Report), which also carries a Zacks Rank #1.
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
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