Chicago, IL - May 05, 2015- Zacks Equity Research highlights LyondellBasell ( LYB ) as the Bull of the Day and Container Store ( TCS ) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on GlaxoSmithKline ( GSK ), Novartis ( NVS ) and Genocea Biosciences, Inc. ( GNCA ).
Here is a synopsis of all five stocks:
LyondellBasell ( LYB ) recently delivered better-than-expected first quarter results, prompting analysts to revise their estimates significantly higher for both 2015 and 2016. This sent the stock to a Zacks Rank #1 (Strong Buy).
In addition to strong earnings momentum, the valuation picture looks attractive with a Zacks Value Style Score of 'A'.
LyondellBasell is a plastics, chemicals and refining company that manufactures ethylene, polyethylene, propylene, polypropylene, propylene oxide, oxygenated fuels and acetyls used in packaging, electronics, automotive parts, home furnishings, medical supplies, construction materials and biofuels.
LyondellBasell delivered better-than-expected Q1 results on April 24. Adjusted earnings per share came in at $2.54, crushing the Zacks Consensus Estimate of $1.94. It was a 56% increase over the same quarter last year.
Total revenues declined 26% year-over-year to $8.185 billion due in part to the lower product prices, many of which are correlated with oil prices . However, adjusted operating income surged 30% as the operating margin expanded from 8.5% to 15.0% of revenues. This was due in part to significantly lower input costs and supply and demand tightness in several of its products, which more than offset the impact of lower prices.
Meanwhile, the company spent nearly $1.4 billion in the quarter buying back 15.7 million of its stock, or more than 3% of its outstanding shares.
Following better-than-expected Q1 results, analysts revised their estimates significantly higher for both 2015 and 2016. This sent the stock to a Zacks Rank #1 (Strong Buy).
Earnings estimates have fallen sharply for The Container Store ( TCS ) following disappointing Q4 results. The decline 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 The Container Store don't exactly look attractively priced here with a Zacks Value Style Score of 'D'.
The Container Store is a specialty retailer focused on storage and organization products. It has 70 stores across the U.S.
The Container Store reported its fourth quarter results on April 27. Adjusted earnings per share came in at $0.24, missing the Zacks Consensus Estimate of $0.31.
Net sales rose 3% year-over-year to $224.3 million, missing the consensus of $233.0 million. Same-store sales slid 0.8%. The company blamed bad weather for the soft revenue (although weather was also bad in the same quarter last year). The company also blamed foreign currency headwinds for weakness in its Elfa subsidiary.
Gross profit as a percentage of net sales declined 40 basis points to 57.8%.
Following disappointing Q4 results, management provided guidance for fiscal 2015, citing it as an "investment year". The company expects same-stores in the range of -2% to 0% and adjusted EPS of $0.30-$0.38. This was well below consensus at the time and prompted analysts to unanimously revise their estimates significantly lower for both this year and next.
This sent the stock to a Zacks Rank #5 (Strong Sell).
Will Glaxo Beat Earnings Estimates This Season?
GlaxoSmithKline ( GSK ) is scheduled to report first-quarter 2015 results on May 6. Glaxo's performance has been disappointing in 2014 with the company missing earnings expectations in three out of the four trailing quarters with an average miss of 0.49%.
In the last reported quarter, Glaxo recorded a negative earnings surprise of 4.65%. Let's see how things are shaping up for this announcement.
Factors Influencing this Quarter
In its fourth-quarter earnings release, Glaxo had mentioned that headwinds like increasing competition, genericization and pricing pressure, which impacted the company's results in 2014, will continue to affect results in 2015 as well. A greater impact will be felt in the first half of the year with the company expected to deliver stronger results in the latter half. Meanwhile, unfavorable currency movement is expected to impact first-quarter 2015 sales by about 1%.
However, the company has resolved most of the supply issues that it was facing over the last few quarters. Moreover, it continues to pursue restructuring and cost-cutting initiatives.
We note that Glaxo has been struggling to deliver top-line growth in the face of genericization. Products like Valtrex, Seroxat/Paxil, Zeffix, Combivir, Lovaza and Trizivir are facing declining sales due to intense generic competition.
In addition to facing generic competition, most of Glaxo's products are up against stiff competition. Advair, one of its top revenue grossers (which generated over 27% of Glaxo's Pharmaceuticals revenues in 2014), is facing tough competition in the chronic obstructive pulmonary disease (COPD) and asthma market. Moreover, primary care contracting and pricing dynamics will continue to impact the performance of the respiratory segment.
Glaxo expects its total global respiratory sales to return to growth in 2016. Increased formulary coverage and launch of new respiratory drugs like Incruse Elllipta for COPD and Arnuity Ellipta for asthma in the U.S. should help Glaxo regain market share in the respiratory segment.
During the first quarter, Glaxo completed a three part agreement with Novartis ( NVS ) under which Glaxo acquired the latter's vaccines business (excluding flu vaccines), sold off its oncology business and created a consumer healthcare joint venture. The first quarter will include a month's contribution to sales and profits from the Novartis Vaccines and OTC business.
On the first quarter call, the focus will be on the company's performance and on the Investor Meeting, scheduled to be held on the same day where Glaxo is expected to provide its earnings guidance for 2015 along with other details.
Our proven model shows that Glaxo is likely to beat earnings because it has the right combination of two key ingredients.
Positive Zacks ESP:Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +1.82%. This is a meaningful and leading indicator of a likely positive earnings surprise for the shares.
Zacks Rank #3 (Hold): Note that stocks with a Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and #5) should never be considered going into an earnings announcement.
The combination of Glaxo's Zacks Rank #3 and +1.82% ESP makes us confident of an earnings beat.
Stocks That Warrant a Look
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat.
Genocea Biosciences, Inc. ( GNCA ) has an earnings ESP of +22.81% and carries a Zacks Rank #3. The company is scheduled to release first-quarter 2015 results on May 7.
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.
Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Click here to subscribe to this free newsletter today .
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
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.