Wesco Aircraft Holdings, InternationalPaper, Kellogg, Procter&Gambleand GeneralMills highlighted as Zacks Bull and Bear of the Day
CHICAGO, March 18, 2014 /PRNewswire/ -- Zacks Equity Research highlights Wesco Aircraft Holdings (NYSE:WAIR-Free Report) as the Bull of the Day and International Paper (NYSE:IP-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis onKellogg Company (NYSE:K-Free Report), Procter & Gamble Company (NYSE:PG-Free Report) and General Mills, Inc. (NYSE:GIS-Free Report).
Here is a synopsis of all five stocks:
Due to soaring demand for air travel as well as strong interest from militaries eager to beef up their air force hardware, events are shaping up nicely for firms across the aerospace sector. Several companies have seen soaring share prices or positive revisions to earnings estimates due to this trend, and with both the civilian and military demand stories still in place, the months ahead are shaping up nicely as well.
While many investors might focus in on giant companies like Boeingor aircraft leasing companies like Aercap Holdingsto play the trend, a look to the supply chain side of the equation could be another solid idea too. One way to do this is with Wesco Aircraft Holdings (NYSE:WAIR-Free Report), an overlooked firm that could also be a way to play the surging aerospace sector.
Wesco helps the aerospace industry manage their supply chains more efficiently, specializing in just in time inventory management systems, as well as long-term agreements, which set prices for specific parts. The firm has a global reach across more than a dozen countries, and it supports over 7,000 customers including all the leading original equipment manufacturers, giving WAIR exposure to all the major Western Aircraft programs.
WAIR hasn't taken off like some of its counterparts as of late, but given the trends in the space, smooth skies might be ahead for this company. This may be especially true when investors consider the earnings estimate revision activity that we have seen for WAIR in recent days.
Thanks to the wild weather over the past few months, a number of companies have been negatively impacted. While many might have focused on how these storms impacted air travel and other transportation companies, the storms have had a devastating impact on a number of other businesses too.
This includes International Paper (NYSE:IP-Free Report), as the company had significant trouble in moving product out of its key Southeastern United States operations. In fact, the CEO said that the terrible weather has cost the company between $40 million and $50 million, and approximately 40,000 tons of production volume as well.
Obviously this puts IP in a rough spot to start the year, and it doesn't help that many of the broader trends in the space aren't shaping up too well either. After all, the world is going digital at a furious pace and many of IP's products just aren't in as high of demand as they used to be.
This is particularly true given the recent slowdown in some of the world's key emerging markets. With weakness in places like China, International Paper could have greater difficulty in boosting revenues in the months ahead. So with this backdrop, it shouldn't be too surprising to note that earnings estimates have been on a downward spiral for IP over the past few weeks.
Estimates have been on a terrible trend over the past two months for International Paper, as not a single analyst has revised their estimate higher for either the current quarter or the current year. Instead, 4 estimates have gone lower in the past sixty days, pushing the current quarter profit estimate down from 93 cents a share two months ago to just 65 cents a share today.
This trend has also trickled into the current year and next year figures as these estimates have also seen some heavy downward revisions in the past two months. Next year's estimates are especially weak, as profit expectations of $4.88/share two months ago have fallen to just $4.45/share today.
Additional content:
Kellogg's Cereal Woes Continue
On Mar 13, 2014, we issued an updated research report on Kellogg Company (NYSE:K-Free Report).
On Feb 6, the global snacks and cereal company reported disappointing fourth-quarter 2013 results due to slower sales in the U.S. Kellogg's adjusted earnings of 83 cents per share beat the Zacks Consensus Estimate by a penny and increased 18.8% as the softer top-line performance was offset by strong gross margins and lower-than-expected tax rate. Revenues fell 1.7% once again due to lower volumes in the U.S. snacks and cereals businesses.
The 2014 outlook was also depressing. The organic sales, adjusted operating profit as well as earnings per share guidance fell well short of the long-term targets – suggesting that the 2013 woes could continue well into 2014.
However, Kellogg has strong fundamentals with its solid brand positioning, geographic diversity and significant investments behind innovation, marketing and supply-chain initiatives. We are also encouraged by the growth potential, diversification and international presence that the Pringles deal provides. Pringles, acquired by Kellogg in Jun 2012 from The Procter & Gamble Company (NYSE:PG-Free Report), has performed quite well. Sales and profit in the business have exceeded management's expectations in every quarter since the transaction closed.
However, the strained cereal and snacks categories keep us on the sidelines. Kellogg's mainstay U.S. cereal business, accounting for 40–45% of sales, performed poorly in 2012 and 2013 due to sluggish category growth. Lower demand for cereals due to competitive pressures from alternatives including yogurt, eggs, bread, and peanut butter is hurting category growth. Though the company is trying to re-invigorate this segment through innovation and aggressive marketing campaigns, these activities are yet to show results.
Moreover, even though the new cost savings plan, Project K, will free up funds for brand building, innovation and overall growth, it would easily take a couple of years before it delivers substantial results.
Another company that is being pressured by its cereals business is General Mills, Inc. (NYSE:GIS-Free Report). General Mills' cereal sales declined 2% in fiscal 2013 due to weak category growth.
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