Chicago, IL - June 09, 2015- Zacks Equity Research highlights Marriott Vacations Worldwide Corporation ( VAC ) as the Bull of the Day and Lands' End, Inc. ( LE ) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Access National Corporation ( ANCX ), WisdomTree Investments, Inc. ( WETF ) and E*TRADE Financial Corporation ( ETFC ).
Here is a synopsis of all five stocks:
Marriott Vacations Worldwide Corporation ( VAC ) is cashing in on a return to travel. This Zacks Rank #1 (Strong Buy) recently raised its 2015 guidance.
Marriott Vacations is a timeshare company which manages 58 resorts with about 415,000 owners and member worldwide. Its brands include Marriott Vacation Club, The Ritz-Carlton Destination Club and Grand Residences by Marriott.
It was spun off from Marriott International in 2011.
On Apr 30, Marriott Vacations reported its first quarter results and blew by the Zacks Consensus Estimate by 23%. Earnings were $0.85 compared to the consensus of $0.69.
Tourists are still traveling in North America. Company vacation ownership contract sales, excluding residential sales, rose 9.5% to $170 million year over year but North America was strong, with vacation ownership contract sales jumping 11% to $156 million.
North American volume per guest (VPG) grew 4.7% year over year with North America tours also rising 5.3%.
Momentum accelerated into 2015 after a solid 2014.
Marriott Vacations raised its estimates for company contracts sales growth, excluding residential, to a range of 5% to 8% from 4% to 7%.
Earnings were also boosted to between $3.29 - $3.48 from $3.16 - $3.35.
The analysts are even more bullish as the 2015 Zacks Consensus Estimate now stands at $3.47, or at the very high end of the company's range. That is earnings growth of 18.3% over 2014.
Lands' End, Inc. ( LE ) has joined the ranks of struggling retailers as its products aren't connecting with consumers. This Zacks Rank #5 (Strong Sell) is expected to see declining earnings in 2015.
Lands' End is a Wisconsin-based retailer that was formerly owned by Sears. Founded in 1963 as a catalog for yachtsmen, the company now offers clothing, accessories, and footwear for men, women and children through catalogs, its online web site, and in retail stores primarily located in Sears and some standalone Lands' End Inlet stores.
It is especially well known for its winter apparel, swimsuits and footwear.
As of May 1, 2015 it operated 235 Lands' End Shops at Sears, 14 global Lands' End Inlet stores and 5 international shop-in-shops.
On June 4, Lands End reported its first quarter results and beat the Zacks Consensus by 2 cents. Earnings were $0.05 compared to the Zacks Consensus of $0.03.
But the earnings surprise doesn't tell you the whole story with the retailers. It's all about sales and inventories.
Merchandise sales and services fell 9.4% to $299.4 million from a year ago, with currency translation impacting by $9 million.
The Direct segment fell 8.2% to $253.4 million while Retail fell 15.5% to $46 million.
Being associated with Sears doesn't appear to be helping the brand.
3 Soaring Financials to Gain Further from Rate Hike
Analysts and economists have widely discussed the impending interest rate hike by the Federal Reserve. While there is still no definite time frame, the market expects the Fed to increase rates in September or October this year.
The possible rise in interest rates, which have been near zero since the 2008 financial crisis, indicates stronger U.S. economic growth. Though the economy witnessed real GDP declining 0.7% in the first quarter versus 2.2% growth in fourth quarter 2014 (per the "second" estimate released by the Bureau of Economic Analysis) primarily due to a severe winter, major disputes in ports and a stronger U.S. dollar that adversely affected export-oriented companies, we believe these concerns are likely to be dwarfed by a number of encouraging traits.
Favorable job statistics in April and May as well as moderate wage growth indicate that the economy is again on track for a steady recovery. Further, as per the U.S. Bureau of Labor Statistics, the unemployment rate has remained essentially unchanged at 5.5%.
Finance Sector - A Good Bet
It is now time for investors to re-adjust their investment portfolios in order to benefit from the potential interest rate rising environment. The finance sector, in this regard, seems to be a good bet, as several industries including insurance, banking, brokerage and asset managers tend to benefit from the rising rates.
Banks derive benefits from a steep yield curve, i.e. when the spread between long-term and short-term rates is wide. The interest rates on deposits are usually tied to short-term rates while loans are often tied to long-term rates. This means that the potential rise in rates will enable the banks to charge more for loans, leading to an increase in the spread between lending rates and the rates paid on deposits.
So once the Fed finally decides to hike rates, the two major criteria - improving economy and inflation at 2% - must have been satisfied. Notably, both these scenarios also drive long-term interest rates, in all probability more than the Fed raises short-term rates. Moreover, an improving economy means that credit quality will likely improve, which will also aid banks' profitability.
Insurance companies invest majority of the premium income received from policyholders in government and corporate bonds to earn investment income. They utilize this investment income in meeting their future commitments to policy holders. The potential rise in rates will allow the insurance firms to invest their new premium income in higher yielding securities, thereby leading to higher future returns.
With a rise in rates, brokerage firms are likely to engage in more investment activity. Brokerage firms earn interest income on un-invested cash in customer accounts. The rise in rates will allow the brokerage firms to invest at higher rates.
Further, asset managers can position themselves favorably with the rise in rates. In the fixed income sector, default rates are likely to decline and higher interest rates will enable reinvestment at higher yields, which ultimately will boost portfolio returns. The benefit can be achieved by positioning fixed income portfolios strategically through proper management of duration, diversification of sources of yield and maximize the reinvestment of income.
How to Select the Right Stocks?
We have selected 3 finance stocks that have been showing an uptrend and are currently well positioned to gain from a rate hike. For selecting these stocks we have used our style score system . The attractiveness of these stocks as an investment option at this stage is confirmed by their Momentum Style Score of 'A' or 'B.' Also, they carry a favorable Zacks Rank.
Access National Corporation ( ANCX ), headquartered in Reston, Virginia, is a bank holding company for Access National Bank. It is primarily engaged in offering a wide range of financial services including credit, deposit, mortgage, and wealth management services to small and medium sized businesses and professionals, in the greater Washington, D.C. Metropolitan Area.
- Zacks Rank #2 (Buy)
- Momentum Score: B
- P/E multiple: 16.75%
- Price Change in the Past 4 Weeks: 15.81%
Based in New York, WisdomTree Investments, Inc. ( WETF ) is an exchange traded fund ("ETF") and exchange-traded product ("ETP") sponsor and asset manager. It operates through its subsidiaries in the U.S. and Europe.
- Zacks Rank #2 (Buy)
- Momentum Score: A
- P/E multiple: 32.24%
- Price Change in the Past 4 Weeks: 13.28%
New York-based E*TRADE Financial Corporation ( ETFC ) is a financial services company, primarily providing brokerage and related products and services to individual retail investors under the brand - E*TRADE Financial.
- Zacks Rank #2 (Buy)
- Momentum Score: B
- P/E multiple: 26.02%
- Price Change in the Past 4 Weeks: 6.27%
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