For Immediate Release
Chicago, IL - September 25, 2015 - Zacks Equity Research highlights Bob Evans Farms ( BOBE ) as the Bull of the Day and World Fuel Services ( INT ) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Southwest Airlines Co. ( LUV ), JetBlue Airways Corporation ( JBLU ) and Virgin America ( VA ).
Here is a synopsis of all five stocks:
Head quartered in New Albany, Ohio, Bob Evans Farms ( BOBE ) currently owns and operates more than 550 full-service family restaurants in 19 states, primarily in the Midwest, Mid-Atlantic and Southeast regions.
Excellent Quarterly Results and Improved Guidance
The company reported its fiscal 2016 first quarter results on September 1. Operating income was $0.51 per share, up from $0.10 per share in the prior-year quarter and significantly beating the Zacks Consensus Estimate of $0.30 per share. The company has beaten Zacks Consensus Estimates in three out of last four quarters, with an average quarterly surprise of 23%.
Restaurants operating income was up 21% from the same quarter last year while Food segment profit surged 327%. The management said that they are currently implementing the strategy of improving the quality of food offering while significantly lowering discounts that were earlier utilized to drive transactions, Same-store sales declined by 0.3% thanks mainly to reduced discounts but sales were more profitable with cost controls.
The management raised their fiscal 2016 EPS guidance to $1.85 to $2.00 from the previous guidance of $1.75 to $1.95.
After a strong quarterly report and upgraded guidance, analysts have raised their estimates for the company. Zacks Consensus Estimates for the current and the next fiscal year now stand at $1.94 per share and $2.22 per share respectively, up from $01.87 per share and $2.05 per share, 30 days ago.
Headquartered in Miami, Florida, World Fuel Services ( INT ) provides downstream marketing and financing of aviation, marine and land fuel products and related services. They deliver fuel solutions and logistics at more than 8,000 locations around the world. The company operates through three segments-Aviation, Marine and Land.
Disappointing Results and Outlook
The company reported second quarter results on August 3. Consolidated revenue for the quarter was $8.5 billion down 25% year-over-year, with Aviation segment revenue down 28%, Marine segment revenues down 21%, and Land segment revenue down 26%. All of these year-over-year declines were due to lower oil prices , partly offset by increased volumes.
Operating earnings for the quarter came in at $0.49 per share, significantly below the Zacks Consensus Estimate of $0.72 per share. Per management, results were significantly impacted by seasonality in Watson Fuels and low prices coupled with reduced volatility in Marine.
The management said that conditions in overall marine marketplace remain quite poor, specifically in the offshore, dry bulk and container markets. They added that the fuel market remains oversupplied, with weak demand and record high inventory levels.
Due to poor results and weak outlook, analysts have revised their estimates for the company sharply downwards. Zacks Consensus Estimates for the current and the next fiscal year are now $2.67 per share and $3.10 per share respectively, down sharply from $3.32 per share and $3.60 per share, before the results. Falling estimates sent the stock to a Zacks Rank #5 (Strong Sell).
Southwest Airlines Awaiting Pilot Vote: Buy Now?
On Sep 23, 2015, we issued an updated research report on the Dallas, TX-based low-cost carrier Southwest Airlines Co. ( LUV ).
The carrier has been grabbing headlines lately primarily due to labor issues with its pilots scheduled to vote next month on a tentative deal pertaining to their pay, retirement benefits as well as provisions to improve working conditions. Last week, the directors of the Southwest Airlines Pilots' Association decided that the pilots themselves will take the final call on their future pay.
A positive vote from the pilots would mean a happy ending to the negotiations which started more than three years ago. Moreover, the contract, if accepted by the pilots, will be amendable Apr 1, 2019, and ensure that their wages are in line with that of pilots at other major carriers.
The ratification voting procedure is scheduled to commence in October and close a month later. We expect investor focus to remain on the stance taken by the pilots on this issue. Moreover, we believe that shares of the carrier will remain range bound until the outcome of the pilot vote is revealed.
The Zacks Rank #3 (Hold) carried by Southwest Airlines also doesn't suggest outperformance; rather it is an indicator that the stock will perform in line with the broader market over the next 1-3 months. Earnings per share estimate for the current quarter has remained static at 92 cents over the last 7 days and has moved up by only a cent to $3.46 for the current year over the same time period. The lack of significant earnings estimate revisions further validate the rank carried by Southwest Airlines.
In view of the above scenario, we believe that investors should wait for a better entry point as far as Southwest Airlines is concerned.
Key Picks in the Sector
While we expect limited upside potential at Southwest Airlines currently, there are some gems which investors should consider adding to their respective portfolio for higher returns. JetBlue Airways Corporation ( JBLU ) and Virgin America ( VA ) represent significant upside potential. The Zacks Rank #1 (Strong Buy) carried by each of these stocks justifies our bullish stance on them.
About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
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