For Immediate Release
Chicago, IL - August 11, 2016 - Zacks Equity Research highlights Rio Tinto ( RIO ) as the Bull of the Day and TripAdvisor ( TRIP ) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Wellcare Health ( WCG ), Qorvo ( QRVO ) and Cliffs Natural ( CLF ).
Here is a synopsis of all five stocks:
When you see the word 'Rio' you probably think of the Olympics these days. But stock investors would be better off thinking about Rio Tinto ( RIO ) instead, thanks to its impressive turnaround story and potential for additional gains in the future.
This is largely thanks to a big turnaround in not only commodity prices, but general sentiment over the space too. Due to these trends, RIO has managed to add about 32% in the past six months, easily trouncing not only the market at large, but the broader materials sector too. Let's take a quick look at some of the company's fundamentals below and discuss why this might be a promising pick for the future too.
Rio Tinto in Focus
Rio Tinto is one of the world's largest miners and processors of metals and minerals. The company has massive operations around the globe, and mines everything from aluminum and copper, to precious metals and diamonds.
Many of these markets have bottomed out in recent months, allowing for RIO shares to bottom out too. And with a more bullish environment for commodities these days, analysts have begun to take notice and are upgrading their estimates for RIO stock.
In fact, if we look to full year estimates, we can see a pretty incredible estimate revision trend taking place over the past few months.
Just sixty days ago, RIO was expected to earn $1.18/share in earnings, but today it is looking to post earnings of $1.76/share for the full year. And with a positive earnings ESP, it suggests that the most recent estimates have been the most bullish on the company's prospects.
Obviously, this represents a huge sea-change for RIO prospects, as estimates have increased by nearly one percent a day in the past two months. No wonder the stock has earned itself a Zacks Rank #1 (Strong Buy) and why we are looking for more outperformance from this name in the near future.
It has been an extremely difficult period for companies in the travel market. Concerns over Zika and terrorism are making those that would otherwise travel stay home, hitting a number of companies in the airline, hotel, and cruise markets.
But another area that has also been impacted is the online travel review market, with companies like TripAdvisor ( TRIP ) being prime examples. After all, why would you review things-or look at reviews-for a trip that you aren't going to make anytime soon?
Don't believe me? Well, take a look at how TRIP has done in its recent earnings reports as a guide.
For both of TRIP's most recent earnings reports the company missed earnings estimates. The company saw a 40% miss two quarters ago, and it followed it up with a 9.6% miss in the most recently completed quarter.
Investors sold off the stock as a result, and shares of TRIP are approaching 2016 lows as a result of these recent sell-offs. And with some of the recent earnings estimate revisions, it is hard to have an optimistic look on TRIP stock these days, suggesting TRIP may test those 2016 lows before long.
Following the most recent miss for TRIP, analysts have been racing to downgrade their expectations for the stock in both the near term and the long term. Who can blame these analysts given the rough overall travel environment, and the fact that TRIP has had great difficulty in living up to earnings expectations?
It is also worth noting that analysts haven't just been giving a slight reduction in estimates lately, as shares have seen nearly double digit percentage Consensus estimate reductions for the current quarter, while the full year has seen a 10.2% reduction in the Consensus.
Keep Your Eyes on the Road Ahead: Zacks Market Strategy
Welcome to Zacks Market Strategy for August 2016. Here are three key things that matter to the stock markets.
A Forward Look on S&P 500 Earnings - It's All-Important
Consensus sees a -0.3% in EPS growth for 2016 and a hockey stick +13.3% for 2017. In 2015, the S&P 500 saw -0.8%. In 2014, it saw +5.1%. Consensus uses +1.8% for 2016 and +5.9% for 2017 as fresh revenue growth comps.
Second, Keep an Eye on the Small Caps
Russell 2000 stocks lead as markets go "Risk-on." Fast-growing small U.S. companies beat consensus more easily. A 2016 "risk-on" rally remains my call into the fall, after two years of poor performance.
Finally, Keep an Eye on Manufacturing
The U.S. ISM manufacturing PMI is strengthening. At 52.6 in July and 53.2 in June, a big lift took place from the 50.7 in May, 50.8 in April, 51.5 in March, and 51.3 in Feb. Companies have benefited from a mild pullback in the value of the U.S. dollar that makes U.S. goods less expensive. Consumer demand at home has also been steady. Higher oil prices ease pressure on energy firms to slash investment.
The global manufacturing sector showed a little life too. At 51 in July, the J.P. Morgan Global Manufacturing PMI™ registered a better reading to signal an early bounce to industry growth. Japan remains weakest among developed areas. China is flat. Brazil looks worst at 46, but that PMI read is bouncing. Russia broke 50.
Zacks Sector/Industry/Company Telescope for August
Winners: The usual strong sector plays -- Health Care and Info Tech -- showed up again. That means hot Medical Care and Drugs for Health Care industries and the hot Semiconductor industry for Info Tech.
Noted upgrades to Metals-non-Ferrous and Steel industries speak for themselves. Those upgrades led to Materials getting back to Attractive in August. In Industrials, note a pull for service business spending on cap-ex.
Losers: Clearly, there are issues of overconsumption/satiation playing out here. Apparel, Autos/Tires/Trucks and Home Furnishings/Appliances don't have any more lift in them, it appears lately. Consumer Discretionary is the big loser.
(1) Health Care remains the perennial Very Attractive sector. Medical Care is tops here, followed by Drugs.
Hot Stock #1:Wellcare Health ( WCG ) is a Zacks #1 Rank (STRONG BUY)
WellCare Health Plans, Inc . provides managed care services targeted exclusively to government-sponsored healthcare programs, focusing on Medicaid and Medicare.
(2) Info Tech remains Very Attractive. The Semiconductors lead the way again. Misc. Tech looks good too.
Hot stock #2: Qorvo ( QRVO ) is a Zacks #1 Rank (STRONG BUY)
Qorvo is a provider of technologies and RF solutions for mobile, infrastructure and aerospace/defense applications. The company operates through two subsidiaries: RF Micro Devices and TriQuint Semiconductor.
(3) Materials are Attractive. Metals-Non-Ferrous and Steel are leading the way now. Building Products/Construction Materials also looks good.
Hot Stock #3: Cliffs Natural ( CLF ) is a Zacks #2 Rank (BUY)
Cliffs Natural Resources , formerly Cleveland-Cliffs is an international mining company, a producer of iron ore pellets in North America and a supplier of metallurgical coal to the global steelmaking industry.
(4) Industrials are Market Weight. This was a noted sector UPGRADE. The Industrial Products-Services, Business Products and Business Services industries show the way. Cap-ex in service businesses are expanding.
(5) Energy stayed a Market Weight. The Oil E&P guys and Oil & Gas Integrated are doing well. The Drillers, Coal, and Energy-Alternates, and Oil Misc. are doing poorly. The recent WTI oil price decline to $40 and below is not good news.
(6) Telcos remain a Market Weight
(7) Utilities remain a Market Weight.
(8) Consumer Staples fell to Unattractive. Food/Drug Retail and Food, Soaps & Cosmetics, Beverages, all look poor. Agri-business looks terrible.
(9) Financials remain Unattractive. The best industries are Real Estate and Banks & Thrifts.
(10) Consumer Discretionary stayed at Very Unattractive. Apparel, Autos/Tires/Trucks and Home Furnishing/Appliances industries all looked poor.
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