CHICAGO, July 9, 2013 /PRNewswire/ -- Zacks Equity Research highlights Valeant Pharmaceuticals (NYSE: VRX-Free Report) as the Bull of the Day and Yamana Gold (NYSE: AUY-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis onthe Helen of Troy Limited (Nasdaq: HELE-Free Report), Inter Parfums Inc. (Nasdaq: IPAR-Free Report) and Elizabeth Arden Inc. (Nasdaq: RDEN-Free Report).
Here is a synopsis of all five stocks:
Valeant Pharmaceuticals (NYSE: VRX-Free Report), Zacks Rank #1, is a healthcare provider with a focus on dermatology and eye care products. Valeant may provide a remedy for investors looking for growth in a macro environment filled with unease over higher interest rates, slow economic growth, and geopolitical strain. Interest rates have shot higher in recent weeks on firm U.S. labor market conditions and ideas the Federal Reserve could taper its asset purchase program in September, while the IMF recently hinted it could cut its global growth forecast due to the weak performance in emerging market economies. These dynamics are mixed social unrest in Egypt. Demand for healthcare products should be insulated from these macro dynamics, and growth shares in the healthcare sector may provide refuge for investors trying to avoid the pot holes of higher rates and slow global growth.
Valeant has produced vibrant revenue growth in recent years helped by an aggressive acquisition strategy. Valeant made 11 acquisitions in 2011 and another 12 in 2012. These actions helped to propel 108% revenue growth in 2011 and another 44% in 2012. In Late May, Valeant announced the purchase of Bausch and Lomb. The deal is expected to generate $800 mln in cost savings, an internal rate of return in excess of 20%, and be accretive to earnings. In a recent company presentation, Valeant highlighted an aging population, increased incidence of diabetes, and rising wealth in emerging nations as factors which will support growth in ophthalmology.
Of the nine analysts covering Valeant, five have moved their 2013 and 2014 earnings per share estimates higher in the past quarter. At the same time, the consensus earnings per share estimates for 2013 and 2014 have increased $0.29 and $1.39 to $5.93 and $7.92 respectively over the past quarter.
Investors have been fleeing gold investments this year, and the tarnish on the yellow metal has spilled into gold stocks. Yamana Gold (NYSE: AUY-Free Report), Zacks Rank #5, is a Canadian gold producer with operations in the Americas and has been a causality of the bear market in gold. Investors should look to mine for profits elsewhere.
Of the ten analysts covering Yamana, six have cut their profit estimate over the past 60 days. The consensus outlook for 2013 earnings per share has declined from $0.85 to $0.68 or 20% over the same period. Furthermore, the most accurate forecaster of earnings for Yamana is more pessimistic than the consensus looking for 2013 earnings per share at $0.49, which is about 28% below the consensus view of $0.68.
This raises the prospect for a downside earnings surprise. The weak trend in earnings estimates bodes poorly for Yamana which has already missed profit estimate four of the past five quarters. A firm dollar, higher treasury yields, strong equity returns, and talk of the Federal Reserve tapering its asset purchase program have created a bearish cocktail for the gold market and a headwind to the outlook for Yamana's profits.
Furthermore, India has historically been a large buyer of gold, but the weakness in the Indian rupee has hurt the purchasing power of the Indian consumer. The Indian government has implemented measures to restrict gold imports in order to reduce India's current account deficit and the Central Bank of India has curbed the use of credit cards for the purchase of gold items, including jewelry. Investor distaste for gold may be seen in the liquidation of gold held by the SPDR Gold ETF. Gold holdings have declined by almost 389 tons or 28.7% since the end of 2012. At 962 tons, holdings are at their lowest level since February 2009.
Helen of Troy Downgraded to Strong Sell
On Jul 6, 2013, Zacks Investment Research downgraded the global consumer products company, Helen of Troy Limited (Nasdaq: HELE-Free Report), to a Zacks Rank #5 (Strong Sell). The downgrade was based on the company's disappointing outlook for fiscal 2014 and tough macroeconomic conditions and higher costs lying ahead for the company.
Why the Downgrade?
On Apr 29, 2013, at its fourth-quarter fiscal 2013 conference call Helen of Troy provided a conservative fiscal 2014 guidance due to a tough retail environment and a conservative approach to the cold/cough/flu season. Further, management expects that the product costs will increase across all segments during fiscal 2014.
We expect that the company will incur high costs as it transitions to the new 1.3 million square foot distribution facility in Olive Branch, MS, to accommodate anticipated future growth.
Further, in the Personal Care segment Helen of Troy expects sales to decrease in fiscal 2014 due to the stiff competition in the liquids area. Some of its major competitors have launched shampoo lines that are competing directly with those of Helen of Troy. In fact, the Personal Care segment has been consistently reporting sluggish growth for several quarters mainly due to difficult U.S. retail sales environment in the grooming, skin care and hair care category.
Estimates mostly moved downwards following the discouraging guidance provided by the company for the fiscal 2014. The Zacks Consensus Estimate for fiscal 2014 fell 7.9% to $3.55 over the last 90 days. Similarly, the Zacks Consensus Estimate for fiscal 2015 fell 18.0% to $3.27 over the same period.
The company has missed estimates in two of the past four quarters. Moreover, though it beat the Zacks Consensus Estimate in the fourth quarter it was only because of tight cost control. The top line results were not strong enough – thus signaling lack of growth.
Other Stocks to Consider:
Others players in the same industry which look attractive at the current levels include
Inter Parfums Inc.
Elizabeth Arden Inc.
). While Inter Parfums carries a Zacks Rank #1 (Strong Buy), Elizabeth Arden holds a Zacks Rank #2 (Buy).
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