CHICAGO, Jan. 14, 2014 /PRNewswire/ -- Zacks Equity Research highlights Waddell & Reed Financial (NYSE : WDR-Free Report) as the Bull of the Day and Rayonier (NYSE : RYN-Free Report)as the Bear of the Day. In addition, Zacks Equity Research provides analysis onPepsiCo, Inc. (NYSE : PEP-Free Report), Mondelez International, Inc. (Nasdaq : MDLZ-Free Report) and Coca-Cola Company (NYSE : KO-Free Report).
Here is a synopsis of all five stocks:
It is a Zacks Rank #1 (Strong Buy) stock.
Investment managers like Waddell & Reed continue to benefit from a strong equity market and from inflows by investors as they rotate into stocks. In fact, the 'Investment Management' industry ranks in the top 10% of all industries based on earnings momentum.
Waddell & Reed Financial is an investment manager with $114 billion in assets under management as of September 30, 2013. Approximately 79% of that was in equities. Waddell & Reed was founded in 1937 and is one of the oldest mutual fund complexes in the United States.
Waddell & Reed delivered strong third quarter financial results on October 29. Earnings per share came in at 80 cents, beating the Zacks Consensus Estimate by 11%. It was a stellar 31% increase over the same quarter last year.
Total operating revenues were up 18% year-over-year to $347.1 million, which was also ahead of the consensus of $341.0 million. This was driven by a 20% increase in assets under management (AUM) to $114 billion, which was due to "a combination of strong market action and solid, sustained inflows across equity and fixed income assets." And higher AUM = higher investment management fees.
Earnings estimates continue to fall for Rayonier (NYSE : RYN-Free Report). Analysts first lowered their estimates after the company delivered disappointing Q3 results. And they continued to revise their estimates lower after Rayonier warned about a price drop in one of its largest products.
Rayonier is a Zacks Rank #5 (Strong Sell) stock.
While shares have come down considerably over the last several weeks, the stock still does not look like a value at more than 20x forward earnings. Investors should consider avoiding this stock until its earnings momentum improves.
Rayonier is structured as a Real Estate Investment Trust (REIT). Its owns, leases or manages approximately 2.7 million acres of timberland across 9 U.S. states and New Zealand. Approximately half of its sales come from outside the United States.
While it is technically a REIT, the company's largest segment is 'Performance Fibers', which has accounted for 64% of total sales year-to-date. Cellulose specialties represent the majority of profits within the PF segment. Cellulose specialties are used in the manufacture of flat panel TVs, computer screens, impact-resistant plastics (acetate), filters, tires, and many other consumer products.
Pepsi Snacks & Drinks to Stay Together
PepsiCo, Inc.'s (NYSE : PEP-Free Report) chief executive officer (CEO), Indra Nooyi, said there is no need to split the company's beverage and snacks businesses. Nooyi insisted that the businesses are complementary and "better together", not just in United States but worldwide.
Pepsi has been under pressure from activist investor, Nelson Peltz to acquire food giant Mondelez International, Inc. (Nasdaq : MDLZ-Free Report) and then spin-off its underperforming beverage business. Peltz's investment company, Trian Fund Management, holds major stakes in both the food companies.
Pepsi earns approximately equal revenues from snacks and beverages. Pepsi's snack business is growing fast on the back of successful innovations and increased brand-building investments. However, the beverage business is lagging.
Peltz believes that shifting consumer preferences toward health and wellness and "good-for-you" products is lowering the demand for high-calorie soft drinks. Thus, beverage giants like Pepsi and The Coca-Cola Company (NYSE : KO-Free Report) are witnessing declining sales of carbonated beverages, especially the colas. Peltz feels Pepsi's underperforming beverage business is overshadowing its snack unit.
PepsiCo has increased marketing investments and is driving package and product innovation to boost its American beverage business. Moreover, the company is looking for structural alternatives to turn around this business.
Mondelez International focuses on the global food and snacks business of the erstwhile Kraft Foods which includes several popular brands like Tang, Oreo and Cadbury.
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