|By PR Newswire||
|February 11, 2014 09:30 AM EST||
CHICAGO, Feb. 11, 2014 /PRNewswire/ -- Zacks Equity Research highlights Sprouts Farmers Market (Nasdaq:SFM-Free Report) as the Bull of the Day and Jabil Circuit (NYSE:JBL-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis onMondelez International, Inc. (Nasdaq:MDLZ-Free Report), Kraft Foods Group, Inc. (Nasdaq:KRFT-Free Report) and Starbucks (Nasdaq:SBUX-Free Report).
Here is a synopsis of all five stocks:
Sprouts Farmers Market (Nasdaq:SFM-Free Report) is a grocer that is looking to eat the lunch of an industry that seems to be on a race to the bottom. With Target and Walmart getting into the space, SFM is looking to a store layout that best suits the needs of its shoppers and leverages the local supply chain as well. It is a Zacks Rank #2 (Buy) and it is the Bull of the Day.
Your Best Grocery Option?
One of the reasons this stock caught my eye was the options action. I even went ahead and did a screen shot of the action to help everyone understand what I saw. The March 35 calls were seeing a huge amount of contracts coming in when there was basically no or tremendously light open interest. This means the buyer is paying nearly $3 for the $35 call and they expect the stock to be $38 in mid-March. That is a good sized move from right here, so following this big fish isn't that bad of an idea.
SFM is a grocer just like Whole Foods - but I like this idea better as they are not about the mega box stores. They are located primarily in the Southwest.
Jabil Circuit (NYSE:JBL-Free Report) has had a good recent history as far as earnings report go, but analysts have slashed estimates. That has impacted it Zacks Rank and to as a Zacks Rank #5 (Strong Sell) it is the Bear of the Day.
One of the reasons I don't like chip stocks is the analysts in that space have all sorts of ways to get information from suppliers that is not readily available in other industries. That nearly insider info becomes a crutch for the analysts who rely on it yet the industry is constantly evolving.
Then there is the idea of obsolescence and how quickly chips go from the factory floor / or the fab center to the trash heap. Of course they try their best to sell them first at greatly reduced prices and then factor those sales in at 100% gross margin, as they were going to be written off anyway.
Jabil Circuit makes electronic manufacturing services and solutions worldwide. The company offers electronics design, production, and product management services. The company's services include integrated design and engineering. Jabil Circuit, Inc. was founded in 1966 and is headquartered in St. Petersburg, Florida.
The last few reports for the company tell the tale of why investors need to be cautious with this stock. The company has beaten the estimate in each of the last two quarters, but the stock has traded off after each. The November 2013 earnings release on December 17 of that year was a beat of $0.16 or 34% ahead of expectations. One might think that would be good for the stock, but it ended up falling 20% in the session following the release.
Is Mondelez (MDLZ) Poised to Beat Earnings?
We expect food company, Mondelez International, Inc. (Nasdaq:MDLZ-Free Report), to beat expectations when it reports fourth-quarter and full-year 2013 results on Feb 12. Last quarter, it posted in-line results. Let's see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that Mondelez is likely to beat earnings because it has the right combination of the two key ingredients.
Positive Zacks ESP: Expected Surprise Prediction or Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +2.27%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.
Zacks Rank: Mondelez carries a Zacks Rank #3 (Hold) which, when combined with +2.27% ESP, makes us confident about a positive earnings beat.
Note that stocks with Zacks Ranks #1, 2 or 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.
What is Driving the Better-Than-Expected Earnings?
Mondelez has reported disappointing top-line results since its split from Kraft Foods Group, Inc. (Nasdaq:KRFT-Free Report) in Oct 2012. In the third quarter of 2013, slower global category growth, lower coffee pricing and weak China sales hurt the top line. These headwinds are expected to persist in the fourth quarter as well, thus putting pressure on the top line. Accordingly, net revenue for the fourth quarter is expected to decline in low single-digits while organic revenue is expected to increase about 3%.
However, Mondelez has tremendous margin expansion potential. In the fourth quarter, operating margins are expected to be above 13%, better than the third quarter and the full-year expectations. The top-line headwinds are expected to be partially offset by high cost savings and improved productivity.
Also, in Dec 2013, the company announced a massive $1.7 billion share buyback plan which will be funded by the net proceeds of the arbitration award that Starbucks (Nasdaq:SBUX-Free Report) will pay under a dispute settlement announced in November. The share buybacks should also boost earnings.
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.
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