The Zacks Analyst Blog Highlights:Yum! Brands, McDonald, AK Steel, US Steel and ArcelorMittal
CHICAGO, Feb. 4, 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 Yum! Brands (NYSE:YUM-Free Report), McDonald (NYSE:MCD-Free Report), AK Steel (NYSE:AKS-Free Report), US Steel (NYSE:X-Free Report) and ArcelorMittal (NYSE:MT-Free Report).
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Here are highlights from Monday's Analyst Blog:
Yum Beats Earnings, Stock Takes Flight
Upon the earnings release for Yum! Brands' (NYSE:YUM-Free Report) fiscal 4th quarter 2013, after-market traders have been buying up shares of the stock. The global fast-food giant has gained 4% after the bell on Monday after posting earnings of 86 cents per share on revenues of $4.18 billion for the quarter. This amounts to a 7.5% positive earnings beat (and a 3-cents-per-share improvement yoy) on sales that came in light compared with our estimates.
So a mixed report sees this much love in the after-market? Sure -- it's clear investors were expecting bad news here, and they didn't really get it. Yum Restaurants International (YRI) actually came in 5% higher for the full year, despite being down 4% in China.
But everyone knew the avian flu issues in that country over the past year were going to lower its fortunes, and KFC is Yum's biggest business in China (it sells a lot more chicken there than McDonald's (NYSE:MCD-Free Report) does, and that company's already reported numbers were no great shakes). More important on this topic will be what the company projects going forward: Shanghai is currently banning chicken sales for three months and Hong Kong is doing so for three weeks.
Worldwide operating profit grew 2% in the quarter, including 5% in China, 2% in the U.S. and 11% in YRI. Yum's international business opened up a record-setting 1055 new stores, 708 of which were in emerging markets like Asia (ex-Japan), Latin America and Africa. Further, YRI saw key growth in select countries in Europe.
Analyst had been really taking down their earnings estimates throughout the quarter, for Q4, fiscal 2013 and fiscal 2014. Five downwardly revised estimates had taken place for the quarter in the past month, and three downward revisions came for the fiscal year numbers over the same time period. This helped lead Yum to a Zacks Rank #4 (Sell) ahead of the earnings report, though its longer-term recommendation is Neutral.
Consider also that while shares of YUM had fallen more than 11% year-to-date, largely on the continued bird-flu issues, this came off all-time highs toward the end of 2013. That said, the stock has been range bound going back nearly two years.
China remains key -- 50% of Yum's sales come from this country. For now it seems the other businesses, especially within YRI, have carried the company through to the earnings beat. Putting these serious avian flu problems behind them for good would likely demonstrate some strong upside for the shares.
"Steel" of a Deal
Last year Steel stocks barely made it out alive. After being down considerably most of the year a late stage rally helped push the sector into positive territory. As the sector limped across the finish line, the S&P 500 booked a 32.39% return on the year. Recently, a budding global economic recovery has seen steel come en vogue for 2014. Already this earnings season has given us a couple upside surprises on some big steel names.
AK Steel (NYSE:AKS-Free Report) reported fourth quarter earnings of $0.09, nearly doubling the analyst consensus of $0.05. This earnings surprise of 80% is a major factor contributing to a Zacks #2 Rank. This surprise led to upside revisions of 2014 estimates and helped bump AKS over $6 a share.
The day before AKS reported earnings, mainstay US Steel (NYSE:X-Free Report) surprised everyone to the upside. Analysts looking for a $0.26 loss in Q4 were shocked when the company reported positive earnings of $0.27 a share. Music to the ears of US Steel investors who had not heard a positive print since Q3 2012 when the company made $0.41 a share. Although analysts have curbed their expectations for Q1 of this year, the rest of year looks bullish for the steel business. All this together leads to a Zacks #1 Rank for US Steel.
Let's ignore the rearview mirror for a second and take aim on the future. With 2 major steel companies already reporting good quarterly numbers with upside surprises, who is next on the earnings calendar? The big boy on the block, ArcelorMittal (NYSE:MT-Free Report) is the world's leading steel and mining company. Operating in more than 60 countries this global company commands the lion's share of world steel market. Not only is the company a Zacks #1 Rank but it also reports earnings this week on February 7th. Given the great earnings we saw from AK Steel and US Steel, don't be surprised if ArcelorMittal beats the consensus estimate of a $0.16 loss.
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