Chicago, IL - May 12, 2015- Zacks Equity Research highlights Illumina (ILMN) as the Bull of the Day and US Silica Holdings ( SLCA ) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Shake Shack Inc. ( SHAK ), Red Robin Gourmet Burgers Inc. ( RRGB ) and Chuy's Holdings, Inc. ( CHUY ).
Here is a synopsis of all five stocks:
For years, the biotech sector has been an amazing place to be an investor. If we look at two of the most popular ETFs tracking the space, IBB and FBT, both have nearly doubled over the past two years compared to more modest gains of nearly 30% for the S&P 500.
Recent trading has been a bit rockier as concerns are starting to build over some growth stocks in the market. And with the kind of outperformance for the sector outlined above, it isn't too surprising to see that the biotech sector is among the biggest targets.
However, there are some companies out there in this space that may now be solid choices and this could be an excellent time to buy up a few well positioned ones after the recent dip. A great selection that fits this bill is Illumina (ILMN) as this biotech stock is underperforming from a three month look but it still has excellent long term potential.
Illumina is a leader in genetic analysis specifically in sequencing genomes and using that information to fight disease. The company has a near monopoly in the field as its machines now account for roughly 90% of all DNA data produced in what could quickly become a vital corner of the health market.
ILMN has already seen revenue growth of about 28% year-over-year for the most recent quarter, while operating margins are soaring and are now approaching nearly 40% too. And for the full year, the company expects 20% revenue growth and EPS between $3.36-$3.42/share, a nice 25% move higher than last year's $2.74/share.
The recent downtrend has been brutal for stocks in the fracking and broader energy industry. We have seen several companies lose their status as profitable companies, while others appear to be on the brink of not even surviving this difficult time.
But beyond the fracking and energy space, there have been plenty of other companies that are tangentially related to the sector and have also been dragged down by this sluggish oil price trend. And while many have managed to weather the storm and are looking more promising now that oil has stabilized, the same cannot be said for US Silica Holdings ( SLCA ) which could still be in trouble.
SLCA is a Maryland-based producer and seller of commercial silica (more or less sand) which is used in a variety of industrial applications as well as an oil & gas proppant. As you might guess given the crash in oil prices , the demand for these proppants has crumbled putting SLCA in a very difficult position.
In fact, in data from the most recent earnings report , sales for this segment have fallen 24%, while the average selling price per ton has lost 10% and the tons sold has fallen by over double digits quarter-over-quarter as well. And with little hope of a return to triple digit oil prices in the near term, it isn't looking very promising for SLCA right now.
So while SLCA may be up big so far in 2015, let's remember that is still down significantly from a one year look. And with its recent earnings report there is plenty of reason to believe that a return to painful trading is ahead for SLCA once more.
Will Shake Shack Beat Q1 Earnings Estimates?
We expect Shake Shack Inc. ( SHAK ) to beat expectations when it reports first-quarter 2015 results on May 13, after the market closes. Last quarter, the company posted a positive earnings surprise of 66.67%. Let's see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that Shake Shack is likely to beat earnings because it has the right combination of two key components.
Zacks ESP : Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +33.33%. This is a very meaningful and leading indicator of a likely positive earnings surprise.
Zacks Rank : Shake Shack has a Zacks Rank #3 (Hold). Note that stocks with Zacks Rank #1 (Strong Buy), #2 (Buy) and #3 have a significantly higher chance of beating earnings. Meanwhile, the Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement.
The combination of Shake Shack Zacks Rank #3 and +33.33% ESP makes us confident of an earnings beat on May 13.
Factors to Consider
Shake Shack, the New York City-based seller of burgers, crinkle-cut fries and custard shakes, began trading in Jan 2015. This is the second time the company will be reporting its quarterly results, after its immensely successful IPO.
The company's cult following and successful expansions into various cities around the world would boost its comps in the to-be-reported quarter. The company is positioned well to cash in on the surging popularity of the U.S. fast-casual market and grow earnings, with lucrative store economics, strong brand and a solid balance sheet.
However, challenges persist in the restaurant industry. Like other food chains, increasing food costs remain a concern for this fast casual restaurant. Food prices are expected to remain under pressure due to worldwide agricultural supply and demand imbalance and other macroeconomic factors. These factors are likely to affect the results. Moreover, a soft consumer discretionary spending environment and an immensely competitive environment in the U.S. could dent traffic to some extent.
Stocks to Consider
Some stocks in the restaurant industry that have both a positive Earnings ESP and a favorable Zacks Rank are:
Red Robin Gourmet Burgers Inc. ( RRGB ), with an Earnings ESP of +4.55% and a Zacks Rank #2.
Chuy's Holdings, Inc. ( CHUY ), with an Earnings ESP of +4.00% and a Zacks Rank #2.
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.
About the Analyst Blog
Updated throughout every trading day, the Analyst Blog provides analysis from Zacks Equity Research about the latest news and events impacting stocks and the financial markets.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
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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.
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