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Casey's General Store, MercadoLibre, Valero Energy, Mallinckrodt and Marathon Petroleum highlighted as Zacks Bull and Bear of the Day - Press Releases

Chicago, IL - April 10, 2015- Zacks Equity Research highlights Casey's General Store ( CASY - Free Report ) as the Bull of the Day and MercadoLibre ( MELI - Free Report ) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Valero Energy Corporation ( VLO - Free Report ), Mallinckrodt public limited company ( MNK - Free Report ) and Marathon Petroleum Corporation ( MPC - Free Report ).

Here is a synopsis of all five stocks:

Bull of the Day :

If you have ever driven through small towns in the Midwest, chances are good that you've seen a Casey's General Store ( CASY - Free Report ) along the way. The company owns and operates over 1,850 convenience stores in 14 Midwestern states, primarily Iowa, Illinois and Missouri. More than half of its stores are located in towns with populations under 5,000.

Although fuel prices have dropped significantly since last summer, the decline has not been as great as wholesale fuel costs, which has led to a huge increase in profits. It has also led analysts to revise their earnings estimates significantly higher for the company, sending the stock to a Zacks Rank #1 (Strong Buy).

Third Quarter Results

Casey's reported better-than-expect fiscal 2015 third quarter results on March 9. Earnings per share came in at $1.01, crushing the Zacks Consensus Estimate of $0.73. It was a 166% increase over the same quarter last year.

Revenue declined 7% to $1.672 billion, due to a 16% drop in fuel revenue. However, this was driven by plummeting oil prices , which actually benefited Casey's bottom line. While fuel revenue declined year-over-year, gross profit actually surged 76% as the gross profit margin expanded from 4.5% to 9.3% of revenue. Gross profit per gallon increased from $0.1359 to $0.2203 due to a favorable fuel margin environment that was the result of declining wholesale fuel costs. In other words, the decline in fuel prices it charged to customers was less than the decline in its fuel costs.

Casey's also received another benefit from lower fuel prices: customers who saved money at the pump spent some of those savings inside the stores. This was reflected in a 7.7% jump in same-store sales of grocery and other merchandise and a 14.1% increase in prepared foods and fountain.

Overall, the gross profit margin for Casey's increased from 15.5% to 21.0% of total revenue.

Estimates Rising

Following strong Q3 results, analysts revised their estimates significantly higher for both 2015 and 2016. This sent the stock to a Zacks Rank #1 (Strong Buy).

The 2015 Zacks Consensus Estimate has increased from $3.91 before the report to $4.29. The 2016 consensus has increased from $4.21 to $4.42 over the same period.

Valuation

Shares of CASY currently trade around 20x 12-month forward earnings and 13x enterprise value / cash flow. And its price to sales ratio is 0.4.

The Value Style Score for Casey's is currently an 'A'.

The Bottom Line

With expanding profit margins, rising earnings estimates and reasonable valuation, Casey's offers investors a lot to like.

Bear of the Day :

Earnings estimates have fallen sharply for MercadoLibre ( MELI - Free Report ) following a big earnings miss in late February. The declines in consensus estimates for both this year and next have been significant enough to send the stock to a Zacks Rank #5 (Strong Sell).

Additionally, shares of MercadoLibre doesn't exactly look attractively priced here with a Zacks Value Style Score of 'F'.

MercadoLibre operates an e-commerce ecosystem in Latin America that provides buyers and sellers an online trading environment. It operates in 13 countries including Argentina, Brazil, Chile, Colombia, Mexico, Peru, and Venezuela.

Fourth Quarter Results

MercadoLibre reported its fourth quarter results on February 25. Earnings per share came in at $0.76, missing the Zacks Consensus Estimate of $0.83.

Net revenues increased 20% year-over-year to $161.4 million. Gross merchandise volume plunged 16% year-over-year to $1.797 billion, but this was primarily driven by foreign currency headwinds.

Meanwhile, total operating expenses increased from 34.4% to 42.4% of net revenues. This was due in part by an increase in marketing expenses. Operating income declined 13% year-over-year as a result of the operating margin falling from 38.7% to 28.0% of net revenues.

Estimates Falling

Following the Q4 report, analysts lowered their earnings estimates for both fiscal 2015 and 2016. This sent the stock to a Zacks Rank #5 (Strong Sell).

The 2015 Zacks Consensus Estimate has fallen from $3.32 to $2.77 over the last 60 days. And the 2016 consensus has dropped from $4.33 to $3.82 over the same period.

That clearly is not a favorable trend.

Lofty Valuation

Shares of MercadoLibre do not look like much of a value here. In fact, the Zacks Style Score grades MELI an 'F' for Value. It's easy to see why. Shares trade at a lofty 40x 12-month forward earnings, and its enterprise value to cash flow ratio is a staggering 57x.

The Bottom Line

With negative earnings momentum and lofty valuation, investors should consider looking elsewhere for now.

Additional content:

3 Top-Ranked Stocks Likely to Beat Earnings This Quarter

As the first quarter earnings season unfolds, investors will stop obsessing about what the Fed's going to do for some time, and confront the ground reality of the performance of the companies. The first-quarter earnings season is carting along with it a gloomy shroud of declining earnings estimates. While negative estimate revisions have been a recurring theme for several quarters now, the sheer magnitude of this quarter's revisions is something that the market hasn't seen since the Great Recession.

Current estimates for the S&P 500 stocks are portending consecutive negative earnings "growth" for the first two quarters of 2015. Two back-to-back quarters of negative growth is what we call an "earnings recession" - something the market hasn't seen in quite some time.

Never-Ending Negative Revisions

Till the very end of 2014, analysts were expecting earnings growth of 4.3% in the first quarter of this year. In a matter of a few months, that projection has slumped to -4.6%. Even more alarming is the markdown in the second-quarter expectations. S&P 500 companies that were expected to deliver earnings growth of 5.3% are now expected to chart negative growth of 1.9%. What's more, there is still ample amount of time left for more downward revisions, which could potentially push the full-year 2015 growth rate into the negative territory.

For the first quarter, a significant part of the drag comes from the energy sector, as it grapples with relentlessly plunging oil prices. However, almost all sectors are expected to be impacted by a strong dollar, a fragile global economy and the recent flurry of sub-standard data back home. The few sectors that look somewhat buffered are Healthcare, Financials, Utilities and Telecoms.

Sifting out the Winners

There could be another, slightly warped reason for the disappointing estimate revisions as well. Recent trends suggest that management teams have shown a penchant for the art of expectations management - by under-promising and over-delivering. To that end, they consistently provide weak earnings guidance, thus dragging estimates down.

Be that as it may, it is indisputable that there will be plenty of companies that will conquer all odds and emerge as winners this season. Although not all companies that post positive earnings surprises see their stock price appreciate, studies indicate that on an average, earnings beats drive strong returns in share prices for several weeks following the report. This is what we call the post-earnings-announcement drift . Picking out and investing in such stocks before they report earnings can substantially boost your portfolio returns.

The Zacks Advantage

While it is impossible to know with complete conviction which stocks have the potential to beat estimates this earnings season and which ones will disappoint, our proprietary Earnings ESP (Expected Surprise Prediction) system makes it a relatively easy ride.

Earnings ESP - the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate - is our proprietary methodology for distinguishing stocks that have a high chance of beating estimates in their next earnings reports.

A straightforward way to narrow down such stocks is to screen them with a favorable Zacks Rank - Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) - and a positive Earnings ESP. The combination of a favorable Zacks Rank and a positive Earnings ESP usually heralds an earnings beat. Our research shows that the chance of a positive earnings surprise for such stocks is as high as 70%.

To refine our screen further, we are considering only those stocks that have an impressive history of beating estimates in the past four quarters. Also, these champions have been seeing positive estimate revisions of late, flying in the face of the general trend.

Our Potential Outperformers

Valero Energy Corporation ( VLO - Free Report ) is based in San Antonio, TX, and is the largest independent refiner and marketer of petroleum products in the U.S. Valero is also benefiting from the negative correlation of the refining business with crude oil prices .

This Zacks Rank #1 company has an Earnings ESP of +7.36%. The Most Accurate estimate for the company is currently at $1.75, ahead of the Zacks Consensus Estimate, which is pegged at $1.63 for the first quarter.

Furthermore, the company belongs to the Oil Refining & Marketing industry, which presently lies in the top 4% of industries, per the Zacks Industry ranking system.

The company has beaten estimates in each of the last four quarters, registering an average quarterly beat of nearly 24%. With its impressive combination of the top Zacks Rank and a positive earnings ESP, this company looks set to continue its winning streak in the upcoming earnings report.

Mallinckrodt public limited company ( MNK - Free Report ) is a specialty biopharmaceutical and medical imaging company based in Dublin, Ireland. This Zacks Rank #1 company has an Earnings ESP of +7.90%. The Most Accurate estimate for the company is currently at $1.64, ahead of the Zacks Consensus Estimate, which is pegged at $1.52 for the first quarter.

Additionally, the company belongs to the Medical - Generic Drugs industry, which currently lies in the top 25% of industries, per the Zacks Industry ranking system.

The company has beaten estimates in each of the last four quarters, registering an average quarterly beat of nearly 26%. With its impressive combination of the top Zacks Rank and a positive earnings ESP, this company looks confident of continuing its winning streak in the upcoming earnings report.

Marathon Petroleum Corporation ( MPC - Free Report ) is engaged in the refining, transportation and marketing of petroleum products, and is the fourth largest refiner in the U.S. Tumbling crude prices are a significant tailwind to this company as it translates to higher refining margins.

This Zacks Rank #1 company has an Earnings ESP of +4.43%. The Most Accurate estimate for the company is currently at $2.83, ahead of the Zacks Consensus Estimate, which is pegged at $2.71 for the first quarter.

Moreover, the company belongs to the Oil Refining & Marketing industry, which at present lies in the top 4% of industries, per the Zacks Industry ranking system.

The company has registered an average quarterly beat of over 24%, and with its impressive combination of the top Zacks Rank and a positive earnings ESP, looks well poised to continue its winning streak in the upcoming earnings report.

A Winning Strategy

The first quarter earnings season is just taking off, and it looks to be capricious at best. Companies are facing crucial headwinds, including some which affect their bottom line directly, like crude oil prices and the U.S. dollar.

However, like always, there will be some companies that will trump these challenges and stand out with great earnings surprises. Employing the Zacks' Earnings ESP system can significantly increase your odds of discovering these winners before they report and riding on the potential stock appreciation that follows.

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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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CASEYS GEN STRS (CASY): Get Free Report

MERCADOLIBRE IN (MELI): Get Free Report

VALERO ENERGY (VLO): Free Stock Analysis Report

MALLINCKRODT PL (MNK): Free Stock Analysis Report

MARATHON PETROL (MPC): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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