For Immediate Release
Chicago, IL - October 20, 2015 - Zacks Equity Research highlights Federated National Holdings Company ( FNHC ) as the Bull of the Day and LSB Industries ( LXU ) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on IBM Corporation ( IBM ).
Here is a synopsis of all three stocks:
You typically don't hear exciting or ground breaking news out of the insurance world, but that does not mean there are not investment opportunities to be had in the sector. While underwriting, personal auto, and commercial general liability are very boring topics, they do tend generate tons of cash. Specifically, there is a company that has been ahead of the rest of the market and has produced improving gross premiums, and has increased its book value per share over the past year. This would be Federated National Holdings Company ( FNHC ), which is also the Zacks Bull of the Day.
This Zacks Ranked #1 (Strong Buy) company is an insurance holding company, which through its subsidiaries, controls all aspects of the insurance underwriting, distribution and claims processes. The Company underwrites homeowners' property and casualty, commercial general liability, commercial residential property, flood, personal automobile and commercial automobile. It is also licensed to and has the facilities to market and underwrite policies for other insurance carriers' lines of business such as, inland marine, workers' compensation and personal umbrella insurance. Federated National Holding Company, formerly known as 21st Century Holding Company, is based in Sunrise, Florida.
In its most recent quarter, Federated National Holdings produced year over year gains in gross premiums (+23%), book value per share (+19.4%), and Florida homeowner's policies (+39.2%). Also, over the past six months, total revenues have increased +4.6%. Also, the Board of Directors recently approved a 25% increase to its regular quarterly dividend, to $0.05 per common share as of November 2, 2015.
According to CEO Michael Braun, "I am pleased to announce that our business continues to demonstrate strong momentum with solid organic growth in both written premiums and policy count. In addition, Monarch National Insurance Company commenced operations during the quarter and was rolled out to our partner agents in a gradual controlled manner. We remain committed to growing and managing our business in a manner that produces consistent results over the long-term by working with our partner agents to write sustainable business. I am proud of this company, its exceptional management team and employees, and everything we are achieving for our insureds, partner agents and shareholders. We feel the Company is very well positioned for long-term growth and success."
Nothing hurts the top line like unplanned outages, and or the complete loss of a production facility. This is what has happened to LSB Industries; in May the chemical segment was adversely impacted by a 17 day unplanned outage, and then from September 3 to the 23 the same plant lost their ammonia production. The first issue hurt Q215 sales, which declined 9.4% y/y, and the second issue is expected to hurt Q3 operating income by between $9-$10 million. Due to these reasons, LSB Industries ( LXU ) is the Zacks Bear of the Day.
This Zacks Rank #5 (Strong Sell) company is a diversified holding company which is engaged, through its subsidiaries, in the manufacture and sale of chemical products for the explosives, agricultural and industrial acids markets; the manufacture and sale of a broad range of hydronic fan coils and water source heat pumps as well as other products used in commercial and residential air conditioning systems; and the manufacture or purchase and sale of certain automotive and industrial products, including automotive bearings and other automotive replacement parts.
In their most recent earnings report, the company saw sales decline 9.4%, EPS fell to $0.02 from $0.47 a year ago, Chemical sales fell 16.9% y/y, and a water main break which adversely impacted production at their chemical plant in Pryor, Oklahoma. Further, company management stated that it lost 35,000 to 40,000 tons of UAN (a solution of urea and ammonium nitrate in water used as a fertilizer) due to the shutdown at the ammonia plant in September. Moreover, the company stated that they lost 7,000 to 10,000 tons of ammonia as well.
IBM Misses Q3 Sales, Takes Guidance Lower
Tech behemoth IBM Corporation ( IBM ) reported Q3 earnings after the closing bell on Monday, with negatives outweighing the positives, at least at first blush. Earnings per share at "Big Blue" reached $3.34 in Q3, with revenues of $19.28 billion missing badly from the Zacks Consensus Estimate of $19.64 billion.
Further, IBM adjusted its fiscal 2015 guidance downward to a range of $14.75 - 15.75 per share, down from the $15.75 - $16.50 range submitted earlier. Hardware revenues were down 40 percent year and software revenues were down 10 percent year over year; much of this can be traced to IBM's global businesses, where its negative exposure to the stronger dollar hurt sales gains. That said, North American revenues were reported down in Q3, as well.
Earnings actually beat by a penny at IBM, which might be a surprise to those seeing IBM shares falling off in after-market trading today. So while this officially marks the 4th straight earnings beat for Big Blue, shares tumbled more than 4 percent immediately upon the earnings report. IBM stock has since buoyed closer to -3 percent.
Keep in mind IBM has had a rough 3 months of trading, where shares had fallen 9 percent (7 percent year-to-date, and -18 percent from a year ago). As the company positions itself for the future by divesting from lower-margin businesses and making acquisitions to enhance its "strategic imperatives" (cloud-based solutions, analytics, etc.), such M&A activity in the current economic environment is bound to present cost hindrances. Prior to the earnings report, IBM had Zacks style scores of Growth - C, Value - A and Momentum - F.
However, long-term IBM looks more solid than it has in a while, as its Big Data businesses (with margins now closing in on 50 percent from 40 percent previously) appear posed for steady growth in the coming quarters. For Q3 2015, IBM acquired no fewer than 5 companies; as we stated earlier, these types of deals in a zero-interest-rate environment show the company taking a big hit in the near term. To wit, IBM shares are now back beneath $150 per share.
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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