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Genpact, BHP Billiton, O'Reilly Automotive, VCA and Cognizant Technology Solutions highlighted as Zacks Bull and Bear of the Day

Chicago, IL - November 10, 2015- Zacks Equity Research highlights Genpact Ltd. ( G ) as the Bull of the Day and BHP Billiton( BHP ) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on O'Reilly Automotive ( ORLY ), VCA ( WOOF ) and Cognizant Technology Solutions ( CTSH ).

Here is a synopsis of all five stocks:

Bull of the Day :

Genpact Ltd. ( G ) is a Business Process Services provider-providing business process outsourcing (BPO) and IT services-mainly to financial services and manufacturing industries.

Their focus is on analytics, data management, and risk management services. Genpact-which stands for "generating business impact"--began as a unit of GE in 1997, was spun-off in 2005 and listed on the NYSE in 2007.

Headquartered in New York City, the company now has more than 70, 000 employees worldwide and global operations in 25 countries. With more than 800 clients, including more than 25% of Fortune Global 500, Genpact is one of largest analytics providers in their industry.

Solid Third Quarter Results

The company reported its third quarter results on November 4. Total revenue for the quarter came in at $617.8 million, up 5% year over year and up 7% on a constant currency basis. Adjusted income from operations was $97.1 million, up 10% from the same quarter a year ago.

Adjusted earnings were $0.33 per share (per Zacks calculations), beating the Zacks Consensus Estimate of $0.28 per share. The company has delivered a beat in three out of last four quarters, with an average positive quarterly surprise of 8.4%.

During the quarter, they signed three new large deals, including one with Boeing, bringing the total for the year to seven.

The management now expects 2015 total revenue to be ~ $2.46 billion and adjusted income from operations margin to be in the range of 15.1% to 15.3%.

Returning Cash to Shareholders

During the quarter, Genpact repurchased 3.5 million of its common shares for a total of $78 million under its $250 million share repurchase program.

Industry Outlook Remains Strong

According to Genpact , Business Process Services industry is expected to continue to grow in low teens and reach ~$430 billion TAM (total addressable market) by 2019. The market has low penetration currently with no single market leader. They plan to capture high value opportunities through strategic investing in order to grow their market leadership.

Estimates Rising

As a result of continued solid performance, analysts have started raising the estimates for the company after results. Zacks Consensus Estimates for current quarter and year have increased to $0.30 per share and $1.12 per share, up from $0.29 per share and $1.09 per share, before the results. Rising earnings estimates sent the stock back to a Zacks Rank #1 (Strong Buy).

The Bottom Line

In the current age of increasing regulatory oversight and all-time high shareholder activism, companies need to be nimble to transform and leverage new technology. This has created an excellent opportunity for Genpact to grow their market leadership using their more than 17 years of business domain expertise and experience running complex operations for more than 800 large companies.

Further, with a diversified client base of blue chip companies and favorable industry trends, the company seems to be well positioned to reward its investors. The stock was earlier featured as the "Bull of the day" on August 20, it is up almost 12% since then and we expect this uptrend to continue in the coming months.

Bear of the Day :

Falling commodity prices and a slowdown in China have created a very challenging environment for mining and energy companies like BHP. However, the latest troubles for the company are emanating from a deadly dam spill in an iron ore mine jointly owned by them with Vale.

About the Company

Headquartered in Melbourne, Australia, BHP Billiton ( BHP ) is one of the world's largest producers of major commodities, including iron ore, metallurgical coal, copper and uranium, and has substantial interests in conventional and unconventional oil and gas and energy coal.

Commodity Prices Continue to Fall

Iron ore prices recently fell to their lowest level since July on account of fresh worries regarding declining demand from China. The company also expects the pricing picture for coal to continue to be weak for some time to come. BHP is one of the world's largest exporters of metallurgical coal.

BrazilDam Spill

Last week, it was reported that a pair of dams burst in an iron ore mine in Brazil, submerging the surrounding area in water and mineral waste. According to BHP, Samarco, a 50-50 joint venture between BHP Billiton and Vale, was responsible for operations of the mine.

Analysts estimated Samarco to account for about 3.5% of BHP's revenue. The mine is expected to remain shut at least until 2019 fiscal year and cost of cleaning is estimated to exceed $1 billion. The spill has already claimed at least three lives.

Falling Estimates

Due to weak outlook, analysts have revised their estimates for the company sharply downwards. Zacks Consensus Estimates for the current and the next fiscal year $0.89 per share and $1.46 per share, respectively, down from $1.53 per share and $2.10 per share 60 days ago.

The Bottom Line

Mining-Misc industry is currently ranked 222 out of 265 (Bottom 16%) Zacks industries. Further, uncertainty related to financial implications of the Brazil dam spill will continue to weigh on the shares. It is safer to avoid investing in this stock for the time being.

Additional content:

Buyers Pile into Consumer Stocks

U.S.Market Outlook

I wrote last month the U.S. bull is old, but not dead. Boy was I right! We saw a big +7.5% surge in stocks in October.

Maintain a long-term perspective. Fall markets like to rally. 2013 saw +32% returns. Fed QE bond buying was huge. In 2014, U.S. stocks rose +12% on a last pop from U.S. QE. 2015? Low rates via Europe strengthened the USD.

Stocks had to see some major profit taking, after 3 years rising on a trend. The Fed? It hikes rates 25 bps in Dec and 25-50 bps in 2016. Remember: In an election year, the Fed likes to stay sidelined.

What compels my U.S. optimism? Plentiful U.S. job hiring is first and foremost. The recent rise in indexes sows stock wealth, and it stokes discretionary spending. Structural demand builds in Health Care, Housing and Consumer spaces.

How about my pessimism? I see strong dollar issues, and global growth weakness implied by Nov. WTI oil trading around $45 a barrel. Analysts forecast a rise on oil prices to $60 late next year as a base case. Yet overcapacity in Energy, Materials and Industrials means cutbacks now.

The net? Flat growth.

Is it time to buy the U.S. in early November?

You missed your broad alpha opportunity last month. This month, be selective. The S&P 500 should be able to finish the year between 2100 and 2200.

Zacks Sector/Industry/Company Telescope

If you think cyclical sectors are dead fish, think again. They are leading the way.

Strength seen in the November Zacks Ranks for Consumer Discretionary hasn't been this clear a signal all year. Not one Discretionary industry is Unattractive. That is saying something about U.S. stocks. Stay bullish on cyclicals! However, November Zacks Ranks also say 'stay away' from Energy and Materials stocks.

(1) Consumer Discretionary tops the list. The sector is Very Attractive across the board. Look at the industries of Apparel, Consumer Electronics and Other Consumer Disc. They are very strong. Non-food retail, Publishing, Leisure & Appliances are strong.

Zacks #1 Rank stock to look at: O'Reilly Automotive ( ORLY )

O'Reilly Automotive, Inc. is a specialty retailer and supplier of automotive aftermarket parts, tools, supplies, equipment and accessories to both do-it-yourself customers and professional mechanics or service technicians.

(2) Health Care falls to Attractive from Very Attractive. The Drugs and Medical Care companies are the big areas to look for stocks.

Zacks #2 Rank stock to look at: VCA ( WOOF )

VCA Inc. is a national animal healthcare company operating primarily in the United States and Canada. It owns, operates and manages veterinary hospitals and veterinary-exclusive clinical laboratories in the country, supplies diagnostic imaging equipment and other medical technology products and related services to the veterinary industry, and provides various communication, professional education and marketing solutions to the veterinary community.

(3) Info Tech stays Attractive. Look at the Semiconductors first and foremost, followed by Computer-Software Services and Electronics.

Zacks #2 Rank stock to look at: Cognizant Technology Solutions ( CTSH )

Cognizant Technology Solutions delivers high-quality, cost-effective, full life cycle solutions to complex software development and maintenance problems that companies face as they transition to e-business. These services are delivered through the use of a seamless on-site and offshore consulting project team.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days . Click to get this free report >>

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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GENPACT LTD (G): Free Stock Analysis Report

BHP BILLITN LTD (BHP): Free Stock Analysis Report

O REILLY AUTO (ORLY): Free Stock Analysis Report

VCA INC (WOOF): Free Stock Analysis Report

COGNIZANT TECH (CTSH): Free Stock Analysis Report

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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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