The keyboard has been specially designed for classroom environment with added advantages of spill resistance and enhanced durability, which gives it a key lifespan of more than five million strokes. In recent times, more schools are purchasing iPads for use in smart classrooms. Teachers often faced technical hitches while simultaneously pairing multiple iPads with multiple wireless Bluetooth keyboards. LOGI’s new wired Keyboard for iPad is a likely solution to this problem. This easy plug-in keyboard has full size keys with other familiar short cut keys and a Home button that make it a perfect substitute and advancement over the normal keyboards.

The keyboard is planned to be available for sale in the U.S. from Aug 2013. There will be two varieties for this product - one with an integrated Lightning Connector and the other with a 30-pin Connector. Both the variations will be priced at $59.99.

Given the increasing popularity of smart phones and tablets, Logitech intends to tap this high potential market, which is still under-penetrated in terms of accessories. Recently, Logitech launched a number of other new and innovative products. The mort recent lineup includes Logitech Keyboard Folio and Logitech Keyboard Folio mini. These new tablet and gaming accessories are expected to benefit the company in the long run. In the last reported quarter (4Q13), tablet accessories represented the best-performing retail product category with sales increasing a robust 332% year over year to $30.8 million.

Logitech has a Zacks Rank #3 (Hold) while other industry participants Synaptics Inc. (SYNA ) and Electronics for Imaging, Inc. (EFII) both have Zacks Rank #1 (Strong Buy). However another industry player eMagin Corp. (EMAN) carry a Zacks Rank # 2 (Buy).

The FCC highlighted its efforts to expand high-speed Internet services to rural areas over the next six years (2012–2018). It will reduce access and compensation rates charged by CenturyLink over the next six years, resulting in significant decline in the company’s access revenues.

CenturyLink, which operates with other market players like Leap Wireless International Inc. (LEAP), Clearwire Corporation (CLWR) and Frontier Communications Corporation (FTR) has a Zacks Rank #3 (Hold).

In addition, the Tampa-St. Pete metropolitan area added approximately 36,000 jobs in the last year. In addition, the government issued over 4,800 single-family building permits in Tampa Electric's service territory in the last one year.

We believe the drop in the unemployment rate, housing market recovery and creation of higher number of new jobs in Florida will influence the consumers to spend more and pay the utility bills on time. These factors will subsequently fuel TECO Energy’s forthcoming performance.

To strengthen domestic operations, TECO Energy entirely discontinued its international operations and sold its unit TECO Guatemala for $227.5 million. The company intends to utilize a major part of the sale-proceeds to strengthen the assets of Tampa Electric. This initiative brings stability to TECO Energy’s operating flexibility by assuring to provide better services to the higher number of customers.

TECO Energy currently has a Zacks Rank #3 (Hold). Apart from the company, other stocks in the industry that are worth considering include CPFL Energia S.A. (CPL) and Empresa Nacional de Electricidad S.A. (EOC) with a Zacks Rank #1 (Strong Buy) and ALLETE, Inc. (ALE) with a Zacks Rank #2 (Buy).

Peregrine Pharma is evaluating bavituximab for the second-line treatment of non-small cell lung cancer (NSCLC). Data from a phase IIb trial in patients treated with bavituximab plus Sanofi’s (SNY) Taxotere (docetaxel) helped determine the phase III trial design.

The randomized, double-blind, placebo-controlled phase III trial (n=600) will be conducted across the world among stage IIIB/IV non-squamous NSCLC patients, whose disease progressed after standard front-line treatment, with the primary endpoint being overall survival. The study will compare bavituximab plus Taxotere to Taxotere alone.

We note that bavituximab is a key pipeline candidate at Peregrine Pharma. In addition to second-line NSCLC, bavituximab is being studied for other indications including front-line NSCLC, front-line pancreatic cancer, breast, liver and rectal cancers.

The agreement of a phase III trial design by the FDA is a major relief for Peregrine Pharma considering the controversy surrounding bavituximab’s phase II results. Last year, the company had presented results on bavituximab from a phase II study for second-line non-small cell lung cancer. However, later on, Peregrine Pharma had said that the data could not be relied on due to certain discrepancies between some patient sample test results and patient treatment code assignments.

Then, earlier this year, Peregrine Pharma provided an update on the situation and gave information from an internal review of the discrepancies and said that discrepancies were isolated to the placebo and 1 mg/kg treatment arms of the trial with no evidence of discrepancies in the 3 mg/kg treatment arm of the trial.

We expect investor focus to remain on updates on the future development path for bavituximab. The successful development and commercialization of bavituximab would be a major positive for Peregrine Pharma which currently has no approved drug.

Peregrine Pharma currently carries a Zacks Rank #3 (Hold). Right now, Anika Therapeutics, Inc. (ANIK) looks attractive with a Zacks Rank #1 (Strong Buy).Celgene Corporation (CELG) also looks well placed with a Zacks Rank #2 (Buy).

The randomized, open-label, two-arm phase III study was being conducted in patients suffering from relapsed or refractory CD22+ aggressive non-Hodgkin lymphoma (NHL) who are not eligible for intensive high-dose chemotherapy. A once-monthly dose of inotuzumab plus Rituxan (rituximab) was evaluated for safety and efficacy versus an active comparator arm (Treanda + Rituxan or Gemzar + Rituxan).

Based on a scheduled interim analysis, an independent Data Monitoring Committee (DMC) said that the inotuzumab arm was not likely to achieve the primary endpoint of overall survival. Pfizer said that no new safety issues were observed.

Pfizer said that it has informed the study investigators as well regulatory authorities about the discontinuation of the study. The company, however, intends to continue studying inotuzumab for hematologic cancers.

Inotuzumab is currently in an open-label, randomized phase III study (INO-VATE ALL) that is being conducted in adult patients with acute lymphoblastic leukemia.

The discontinuation of the phase III study is disappointing as inotuzumab is a key pipeline candidate at Pfizer.

Pfizer currently carries a Zacks Rank #3 (Hold). The company’s pipeline needs to deliver given the Lipitor loss of exclusivity and the upcoming loss of exclusivity on additional products in the next few years. In addition to genericization, revenues will be hit by the expiration of a few co-promotion agreements as well.

Companies that currently look well-positioned include Salix Pharmaceuticals, Ltd. (SLXP), Jazz Pharmaceuticals (JAZZ) and Santarus, Inc. (SNTS). All three are Zacks Rank #1 (Strong Buy) stocks.

In 2013, the company expects to have LTE coverage for approximately 200 million customers, 170 additional markets, depending upon backhaul availability. Sprint completed 32,000 sites and leased 31,000 sites at the end of Mar 2013. Further, the company also intends to provide 6-8 Mb network speed for downlink and uplink speed of 2-3 Mb to enhance data usage experience.  

Going forward, the company also proposes to buy Clearwire Corporation (CLWR) to enhance spectrum capacity for LTE expansion. If this $2.2 billion deal materializes, gaining full rights over Clearwire would allow Sprint the access to radio frequency spectrum ranging 2.5 GHz, utilized in providing services using 4G 802.16e mobile WiMAX standards.

Sprint, which competes with telecom giants like AT&T Inc. (T) and Verizon Communications (VZ) currently has a Zacks Rank #3 (Hold).

Boeing had last handed over a 787 to an airline company before Jan 16, 2013, when regulators halted all Dreamliners after two battery overheating incidents in that month. This incident compelled Boeing to ground all 50 Boeing 787 airplanes.

The company remains on-track to meet its goal of delivering more than 60 787s this year. Boeing has also boosted its production as it carried out the first 787 made at the new rate of 7 per month, up from 5 per month previously. It expects to increase the rate to 10 per month by 2013-end and will make the first delivery with this new rate by 2014.

The company has also increased the production rate for 737 from 35 to 38 airplanes per month in Mar 2013. It plans to increase this number to 42 airplanes per month in 2014. The company expects to make the first delivery of the 737 MAX in 2017.

Meanwhile, the company indicated that its move to deploy more cash will not reduce its cash balance of approximately $11 billion as it expects its operating cash flow before pension contributions to be utilized for the purpose. It expects cash flow to be more than 8 billion in 2013.

Of late, the company has been following a cash deployment strategy. In Dec 2012, Boeing raised its quarterly dividend by 10% to 48.5 cents per share from the previous payout of 44 cents per share. Boeing also announced the resumption of its stock buyback program with repurchases expected to total between $1.5 billion and $2.0 billion in 2013.

Boeing is the largest aircraft manufacturer in the world in terms of revenues, orders and deliveries, and one of the largest aerospace and defense contractors. While on one hand the efficiency of Boeing planes is increasing, on the other the production rate is increasing due to improvement in production methods.

However, a large percentage of Boeing’s business is generated within the U.S., and government sale that makes the company prone to budget deficits and political uncertainty. The company presently retains a Zacks Rank #3 (Hold).

However, stocks worth considering at present are Erickson Air-Crane Inc. (EAC), Wesco Aircraft Holdings, Inc. (WAIR) and Alliant Techsystems Inc. (ATK). While Erickson Air-Crane carries a Zacks Rank #1 (Strong Buy), Wesco Aircraft and Alliant Techsystems hold a Zacks Rank #2 (Buy).

In a bid to cover over-allotments, the company provided a 30-day option to underwriters for purchasing an additional 975,000 shares at the same price (less the underwriting discount). The transaction is expected to close by May 24, 2013.

This real estate investment trust (REIT) expects to generate net proceeds of roughly $91.1 million from the transaction, excluding the underwriting discount and estimated offering costs. The net proceeds will be utilized mainly for paying off the outstanding debt under secured term loans and part of the outstanding debt under its unsecured revolving credit facility. First Potomac also intends to use the amount for general corporate purposes.

A consortium of banking giants supported First Potomac in the equity offering. Wells Fargo Securities of Wells Fargo & Company (WFC) and KeyBanc Capital Markets of KeyCorp (KEY) acted as joint book-running managers. On the other hand, Morgan Stanley (MS), BMO Capital Markets, PNC Capital Markets LLC, RBC Capital Markets and Raymond Jamesacted as co-lead managers.

Though this public offering will result in share dilution for First Potomac, the payment of debt is encouraging as it will reduce interest expenses. Moreover, it will help in achieving financial flexibility and will position it favorably for investment opportunities and acquisitions, which will consequently go a long way in enhancing top-line growth.

Notably, as of Mar 31, 2013, First Potomac had cash and cash equivalents of $17.8 million, up from $9.4 million as of Dec 31, 2012. Also, the company had outstanding debt of $954.9 million, of which $355.4 million was fixed-rate debt and $350.0 million was variable-rate debt (that had been switched to a fixed interest rate) at the end of first quarter 2013. The remaining $249.5 million was variable-rate debt, which comprised one mortgage loan and borrowings under its secured term loans and unsecured revolving credit facility.

Currently, First Potomac carries a Zacks Rank #3 (Hold).

Zomig is approved for the acute treatment of migraine with or without aura in adults. According to IMS Health, Zomig (2.5 mg and 5 mg) and orally disintegrating tablets generated US revenues of approximately $196 million for the 12 months ending Apr 2013.

Impax has a distribution, license, development and supply agreement with AstraZanaca.

Meanwhile, the company is currently working with the US Food and Drug Administration (FDA) on the appropriate next steps for its lead candidate, Rytary. We remind investors that a New Drug Application (NDA) for Rytary was filed in Dec 2011. However, in Jan 2013, the FDA issued a complete response letter for Rytary.

The company is looking to get Rytary approved for the symptomatic treatment of adults suffering from idiopathic Parkinson’s diseases. In Mar 2013, when the FDA completed its re-inspection of the company’s manufacturing facility at Hayward, it issued a new Form 483 with 12 observations. Impax is working diligently on the issues noted by the FDAand expects to resolve the matter quickly. However, the new Form 483 remains a major overhang on the stock.

We remind investors that GlaxoSmithKline (GSK) recently terminated its Rytary agreement with Impax. As per the terms of the agreement, Glaxo was responsible for the development and commercialization of the candidate outside the US and Taiwan. Glaxo decided to return those rights to Impax, effective end Jul 2013, due to delays in regulatory approval and launch dates in countries that Glaxo has rights to.

Following Glaxo’s decision, Impax will be responsible for the development of the candidate across the globe. The company will look for a partner in ex-US markets.

Impax carries a Zacks Rank #3 (Hold). Other generic players also carry a Zacks Rank #3. Currently, Santarus, Inc. (SNTS) in the pharma space looks more attractive with a Zacks Rank #1 (Strong Buy).

Naloxegol, a peripherally-acting mu-opioid receptor antagonist, is being developed for the treatment of opioid-induced constipation (OIC).

The randomized, double-blind, placebo-controlled studies evaluated two doses -- 12.5 mg and 25 mg -- of naloxegol. The 25 mg dose met both its primary and secondary endpoints.

In KODIAC-04, both naloxegol doses (12.5 mg and 25 mg) achieved the primary endpoint. However, in KODIAC-05, although the 25 mg dose attained the primary endpoint, the 12.5 mg dose failed to do so. The candidate was found to be safe.

Further plans will be finalized in the coming months.

AstraZeneca had licensed the candidate from Nektar Therapeutics (NKTR) in Sep 2009.

In Feb 2013, AstraZeneca reported long-term safety data from a phase III study (KODIAC-08) evaluating the use of naloxegol (25 mg once daily) in patients with non-cancer related pain and OIC.

The open-label, randomized, 52-week, long-term safety study, compared naloxegol with the usual care, a currently available laxative for OIC. No significant difference was found between naloxegol and the usual care in terms of serious side effects. However, adverse side effects like abdominal pain, diarrhea, nausea and headache were found to be more frequent in patients on naloxegol.

AstraZeneca carries a Zacks Rank #3 (Hold). Currently, companies like Santarus, Inc. (SNTS) and Salix Pharmaceuticals Ltd. (SLXP) look more attractive with a Zacks Rank #1 (Strong Buy).

As per the agreement, Gerry Inglis, who was previously engaged in assisting Speedy Creek to manage Chili’s restaurants, is now appointed as the president of Brinker's operating unit in Canada. Moreover, the company will continue to deploy Speedy Creek’s operational strategy to strengthen its brand’s position in the region.

These 11 Alberta-based Chili’s restaurants generated revenues of nearly $35.0 million annually. We believe that the strong growth prospects and solid revenues make these restaurants a lucrative acquisition target. Post acquisition, both the sales and the profit from these 11 acquired units will go to Brinker rather than only the franchisee royalty fees.

In 1991, Brinker’s Chili’s restaurant stepped into Canada through its first international franchise partner, Speedy Creek. Over the past 20 years, Chili’s restaurant with its lowest per person average check and one of the highest average unit volumes in the industry is growing rapidly in the Canadian market. With its flexible price structure, the brand has become popular with consumers, making it a solid value proposition. This acquisition is expected to further boost the company’s Canadian presence.

While most of the other restaurateurs such as McDonald's Corp. (MCD), Yum! Brands Inc. (YUM) and Domino's Pizza, Inc. (DPZ) are concentrating on the transition to a franchisee-based model, this Zacks Rank #3 (Hold) company is shifting toward company-owned operations. This transition affirms management’s confidence in its core business model.

DDR intends to utilize a major share of net proceeds from the notes offering to finance part of the cash expenses associated with the recently inked acquisition deal. Notably, on May 15, DDR agreed to buy 30 of 44 shopping centers from its existing joint venture with The Blackstone Group L.P. (BX) for $1.46 billion. In addition, the company plans to use the remaining amount to pay off debt and for other corporate purposes.

Several banking giants such as – UBS Securities LLC, Jefferies LLC, RBS Securities Inc. of The Royal Bank of Scotland Group plc (RBS), Scotia Capital (USA) Inc. and U.S. Bancorp Investments, Inc. of U.S. Bancorp (USB) – served as joint book-running managers for the offering. 

We expect this underwritten public offering to enable DDR to attain financial flexibility and position it favorably to pursue investment opportunities and acquisitions, which will go a long way in enhancing top-line growth.

Last month, DDR reported first-quarter 2013 operating FFO (funds from operations) per share of 27 cents. This was in line with the Zacks Consensus Estimate and surpassed the year-ago figure of 24 cents.

Strategic acquisitions made in the past 2 years aided the year-over-year growth. Moreover, as of Mar 31, 2013, DDR had $18.9 million of cash compared with $31.2 million as of Dec 31, 2012.

Currently, DDR carries a Zacks Rank #3 (Hold).

Note: FFO, a widely accepted and reported measure of the performance of REITs is derived by adding depreciation, amortization and other non-cash expenses to net income.

The FDA has recommended one-year pivotal studies for Proellex-V in uterine fibroids indication. Repros plans to conduct a one-year safety study as well and submit regulatory application for the drug to the FDA in 2016.

We note that in Jan 2013, the company reported top line results from a phase II trial evaluating the use of Proellex-V for the treatment of symptomatic fibroids. The results from the study suggested that Proellex-V at 12 mg dose may provide benefit to the patients.

Repors carries a Zacks Rank #4 (Sell). In the pharma/biopharma space, companies that currently look well-positioned include Salix Pharmaceuticals, Ltd. (SLXP), Santarus, Inc. (SNTS) and Jazz Pharmaceuticals (JAZZ). All three are Zacks Rank #1 (Strong Buy) stocks.

This transaction allows U.S. Cellular to continue operations in these areas and add customers for the next two years after the deal closure and Sprint to disburse costs incurred on such operations.

U.S. Cellular is focused on data service expansion by incorporating the 4G LTE technology. In Mar 2012, the company rolled out its first LTE services and now plans to cover approximately 87% of its subscriber base by year-end 2013. In context to this, the company has been persuading several strategic deals that allow it to leverage its network operation by optimizing spectrum requirement.

Prior to the Sprint deal, U.S. Cellular rolled out similar arrangements with Verizon Communications (VZ) in Sep 2011. The company underwent a spectrum swap with Verizon Communications that provided it with eighteen 700 MHz spectrum licenses covering eight states.

We believe these spectrum deals allow the company to improve cost and profitability while managing network efficiency and data delivery cost.

Following this news, the company’s board of directors approved a special dividend of $5.75 per share, amounting to $481 million, payable on Jun 25 to shareholders of record as of Jun 11.

Currently, U.S. Cellular has a Zacks Rank #3 (Hold).

But small cap companies are different. There's an air of mystery about many of them. They're usually not in the news much. Few analysts tend to cover them. Most average people on the street have never heard of them. They seem scary and risky.

So why buy them?

Because the returns can be far greater on a fast growing small cap company than a stodgy, slow growing big cap.

But you have to know where to look because not all small cap stocks are created the same. Some companies aren't profitable. Some consistently miss earnings estimates. Others aren't growing as quickly as they should be.

It's easy to get sucked into a small cap nightmare.

Finding the Best Small Cap Stocks

To reduce the risk, I came up with a list of criteria for my "dream" small caps.

1. It must be a Zacks #1 Rank (Strong Buy)- which means that there is at least one analyst covering the company and the estimates are likely rising.

2. It has to be profitable. Show me the money!

3. There must be double digit earnings growth forecast for 2013. If I'm going to buy a small cap, I want to be able to cash in its explosive growth.

I then screened stocks using Zacks Research Wizard to find the best stocks that matched my criteria. I had several dozen stocks to choose from but I also wanted companies in different industries that also had good stories. Here's what I found.

3 Dream Small Cap Stocks

• Hooker Furniture
• Big 5 Sporting Goods
• Tower International

1. Hooker Furniture (HOFT)

Hooker Furniture makes wood furniture including home entertainment, home office, accent, dining and bedroom furniture in the upper-medium price points under the Hooker brand and in the moderate price point under the Envision Lifestyle Collections brand. In business sine 1924, the Virginia-based company has seen a lot of different business cycles.

The furniture industry is picking up momentum as housing picks up momentum. In April, the company reported fiscal 2013 results which saw net income rise 71% compared to fiscal 2012. The upholstery segment, for example, returned to profitability in fiscal 2013 after reporting operating losses all the way back to the second quarter of fiscal 2009. In the fiscal fourth quarter of 2013, sales in the upholstery segment rose 10.4%.

The company has $26.3 million case on hand as of Feb 3, 2013, which is down $15.7 million from a year ago due to an increase in inventories. Hooker is making sure it has its best sellers in stock as momentum increases. More impressively, the company had no long-term debt. $13.2 million was also still available on its $15 million revolving credit facility with $1.8 million reserved for standby letters of credit.

"We're encouraged by the sustained improvement in housing sales, new home construction, rising housing prices, reduced housing inventories, historically low mortgage rates and the best housing affordability in years. All of this bodes well for our industry," said Paul B. Toms Jr., chairman and CEO in April.

Zacks Rank = #1 (Strong Buy)
Expected earnings growth for fiscal 2014 = 18.8%
Forward P/E =18.1
Market Cap = $184 million

The housing plays aren't a secret anymore. Hooker shares are trading near multi-year highs.

2. Big Five Sporting Goods Corporation (BGFV)

The consumer is alive and well in America. Big 5 Sporting Goods operates 414 stores in 12 western states that sell sporting goods and accessories including athletic equipment for team sports, fitness, camping, hunting, fishing, snowboarding and in-line skating.

On Apr 30, the company reported fiscal 2013 first quarter results and blew by the Zacks Consensus by 62%. Same store sales jumped 10.5% even though they were negatively affected by the Easter holiday, which was in Q2 last year. The company shuts its stores on that day.

"We believe these results for the quarter reflect the ongoing enhancements to our merchandise and marketing programs, the continued benefit from the national increase in demand for firearms and ammunition products and more favorable weather conditions in a majority of our markets versus the prior year. Our positive sales trends have continued into the second quarter and we feel well positioned to deliver strong results as we move through the spring and into the summer season," said Steven G. Miller, Chairman, President and CEO in April.

Zacks Rank = #1 (Strong Buy)
Expected earnings growth for fiscal 2013 = 77%
Forward P/E = 16.2
Market Cap = $450 million

As an added bonus, investors get a dividend which is currently yielding 1.9%. It's unusual to see a small cap company pay a dividend, let alone one that is this hefty.

3. Tower International (TOWR)

The auto industry has staged a powerful rebound from its Great Recession lows. Tower International has been able to cash in on the turnaround as it makes body-structure stampings, frames and other chassis structures, as well as welded assemblies for cars, crossovers, pickups and SUVs in 29 locations around the world.

On May 2, the company blew away the Zacks Consensus Estimate for the first quarter by 256%. Earnings were 32 cents compared to the consensus of just 9 cents. Revenue was up just 1% however as a struggling Europe saw lower industry production. All other regions were higher in the quarter however.

It also completed an early debt tender and re-financing which is projected to improve ongoing free cash flow by about 75 cents per share annually.

Tower raised full year guidance by 40 cents. As a result, 3 estimates have moved higher.

Zacks Rank = #1 (Strong Buy)
Expected earnings growth for 2013: 52%
Forward P/E = 12.2
Market Cap = $399 million

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Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec.

 
BIG 5 SPORTING (BGFV): Free Stock Analysis Report
 
HOOKER FURNITUR (HOFT): Free Stock Analysis Report
 
TOWER INTL INC (TOWR): Free Stock Analysis Report
 
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Zacks Investment Research ]]> Thu, 23 May 2013 08:56:01 GMT

As a result, estimates have been on the uptrend and the company has maintained its Zacks rank #1 (Strong Buy) since March this year.

About the Company

Headquartered in Thomasville, GA, Flowers Foods is the second largest producer and marketer of packaged bakery foods in the country. The company operates 44 bakeries that produce breads, buns, rolls, snack cakes, and pastries, which are distributed fresh to foodservice and retail customers in the Southeastern, Southwestern, mid-Atlantic states and frozen to national foodservice and retail customers.

Flowers' top brands include Nature's Own, Whitewheat, Cobblestone Mill, Tastykake, Mrs. Freshley's, European Bakers, BlueBird, and Mi Casa. Additionally they have a number of regional brands.

Flowers Foods operates though two segments—the Direct Store Delivery Segment handles fresh breads, buns, rolls, and snack cakes that are sold regionally through a system of regional distributors and the Warehouse Segment that is responsible for nationwide distribution.

Excellent First Quarter Results

The company reported its first quarter results on May 16, 2013. Sales for the quarter increased by 25.9% to $1.13 billion—mainly a result of increased volumes and contributions from the acquisitions.

Diluted EPS for the quarter was $0.46, up 64.3% from the prior-year quarter, and ahead of the Zacks consensus estimate of $0.43 per share. The company has either met or exceeded expectations during the last four quarters, with an average positive surprise of 9.49%.

Bid for the Hostess Brands

During the first quarter, the company announced that its stalking horse bid for Hostess brands was declared the highest and the best bid. The bid was approved by the bankruptcy court and is currently under regulatory review. The company expects the process to be completed in the second half of fiscal 2013.

Estimates Revisions

As a result of strong results, four analysts have revised the earnings estimates upwards in the last 30 days. Zacks consensus estimate for the current quarter now stand at $0.34 per share up from $0.31 per share, 30 days ago. Estimates for the current year are also up to $1.43 per share from $1.35 per share earlier.

Stock Split and Hike in Dividend

Yesterday, the company announced a three-for-two stock split by means of a 50% stock dividend and also increased the annual cash dividend by $.035 or 5.5% to $0.45 per share.

The Bottom Line

With its excellent history of integrating acquisitions, I believe that Flower Foods will be able to maintain its strong growth going forward, resulting from margin expansion and gain in market share, with Hostess’ acquisition.

Further, the company continues to be one of the lowest cost producers in the industry and currently appears to be well ahead of schedule on its goal to make its products available to at least 75% of US population by 2016.

FLO is a Zacks Rank#1 (Strong Buy) stock. It also has a Zacks recommendation of “Outperform”.  Additionally with a dividend yield of ~2.0%, I believe that this stock will be an excellent long-term addition to any portfolio.

 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 >>

As you know, you can get started in options with only a fraction of the amount of money you would normally need to invest in the stock itself.

But if you put in too little, it will hardly make a difference in your account if you're right. Put in too much and it'll put a big dent in your account if you're wrong.

How Much Should You Invest in Each Option?

Determining the right position size is critical for successful investing. Here's how you can determine the right position size for you.

For example: Let's say you would normally invest $10,000 in a stock. If stock XYZ was trading at $50 per share, that means you could buy 200 shares. And let's also say you were willing to risk 10% on the trade or $1,000.

Here's how to figure out your option size. One option essentially equals 100 shares. Two options equal 200 shares. If you buy one option at $500, under the worst case scenario, your maximum risk would be what you paid for the option or $500. Two options would be $1,000. And that's the equivalent of risking 10% had you invested $10,000 in the stock.

Of course, that's assuming the worst case scenario. Nobody intends to lose their entire premium. But it's a good idea to keep the worst case scenario in mind when determining your position size as this is a foolproof way to manage your risk.

Sometimes you may need to buy a few different strikes to stay within that dollar amount. Instead of buying two $45 calls, maybe you buy one $45 and one $47.50 call.

Of course, there will be times when you find yourself 'needing' to spend a little more on quality options. That's OK, as long as you have plenty of time.

In other words, if the stock collapses for whatever reason, your option will take a drubbing. But, if there's lots of time on it, it will not go to zero overnight. So as long as you're disciplined enough to pull the plug at a specified dollar loss, then you can still keep your losses to your preferred worst case scenario amount.

For example, if you purchased two great options for $700 each, that means your total cost/investment is $1,400. If those options ever lose a combined total of $1,000 (loss of -$500 on each), you'd sell them. And by doing this you're account would never get into trouble.

It takes discipline. But discipline is probably the most important skill in options trading. And if you can manage your downside, the profits will take care of themselves.

Put this method into practice on your next option purchase for a stress-free trade.

You can learn more about different types of option strategies by downloading our free options booklet: 3 Smart Ways to Make Money with Options (Two of Which You Probably Never Heard About). Just click here.

And be sure to check out our new Zacks Options Trader.

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

 
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Zacks Investment Research ]]> Thu, 23 May 2013 08:32:01 GMT
Well, the pursuit is still on. The path to recovery has not been an easy one with ever-present headwinds hindering growth, the most disconcerting of which was the Eurozone debt crisis that significantly slowed down the overall growth pace in 2011 and 2012.

According to the International Monetary Fund’s (IMF) World Economic Outlook published in Apr 2013, promising signs to growth are expected from the world’s emerging and developing nations, while advanced economies are expected to exhibit slow but appreciable growth.

Projections by the IMF suggest that the world economy will likely grow by 3.3% in 2013 and 4.0% in 2014. Growth in advanced economies and emerging and developing countries are projected at 1.2% and 5.3% in 2013 while the same for 2014 are estimated at 2.2% and 5.7%, respectively.

No doubt obstacles still persist in the form of an unstable European economy and slowly reviving advanced countries; nevertheless, the overall growth picture may not materially deteriorate from the IMF’s Apr 2013 forecast.

Regarding the Machinery industry, increasing economic activities spur demand for industrial products, which in turn also boosts the need for new/advanced machinery. Based on this direct correlation, anticipation of improvement in global economic growth is a positive sign for the future prospects of the machinery industry.

The major end-markets for the machinery industry include agriculture, construction, mining and energy industries, among others. A brief discussion providing a glimpse of the future prospects of the machinery industry in different nations is provided below.

Machinery Industry Prospects in the U.S.

The IMF expects the United States to grow 1.9% in 2013 as against 2.1% predicted earlier and roughly 3.0% expected in 2014. High unemployment still seems to be a disturbing factor, though there is a glimmer of hope emanating from evidence of strengthening demands in the housing as well as durable goods markets. Conditions in the credit markets are also improving slowly.   

The Machinery industry is one of the most attractive industries in the country. Growth prospects for this industry can be deduced from the indicators to the performances in the recent past. In the first quarter of 2013 (Jan-Mar), industrial production in the United States rose by an annual rate of 5.0%, while the same in the month of April rose by 1.9% as compared with the year-ago period. Manufacturing output grew 5.3% in the quarter.

According to the US Census Bureau report published in May 2013, machinery shipments in the first quarter 2013 increased 6.0% year over year while new machinery orders grew 3.6%. However, machinery order backlog at the end of the quarter was down 12.5%. Shipments for construction and industrial machinery rose by 40.0% and 18.2%, respectively, while that for mining equipment and farm machinery dipped 3.7% and 8.0%, respectively.

Export demand has been considered crucial for the future growth prospects of the U.S. machinery industry. According to a report published by the Association of Equipment Manufacturers (AEM) in Feb 2013, the United States’ construction equipment exports rose 13% in year 2012, while agricultural equipment exports registered a 16% increase.

For the years to come, international demand for technologically advanced construction and agriculture equipment are expected to improve for the United States. In this respect, it is worth mentioning that the US-Russia trade bill will boost U.S. exports of construction equipment to Russia, the 11th-largest export market for U.S. construction equipment.

Japanese Markets

According to the latest report published by Japan’s Cabinet Office, on a monthly basis, core machinery orders in March 2013 grew a whopping 14.2%. Recovery in capital spending and higher orders from the shipping and electric power companies were the main drivers of the growth. Also, overseas demand for machinery grew 27.5% in March, indicating prospects of a solid demand growth in the months ahead.

According to the IMF, the Japanese economy is projected to grow 1.6% in 2013 and 1.4% in 2014.

Emerging Nations

China and India, the two major emerging/developing nations, are expected to show signs of tangible growth in the years ahead. According to the IMF, the Chinese economy is projected to grow 8.0% in 2013 and 8.2% in 2014.

Looser fiscal and monetary measures by Chinese authorities -- their efforts in increasing fixed asset investments along the lines of interest rate cut by the Chinese central bank -- are expected to boost growth. Domestic demand is strong as both consumption and investments have increased while exports are also on the rising trend.

Industrial production in India seems to have revived in the month of March 2013, registering an increase of 2.5% over the same month a year-ago. This also represents an increase from 0.5% growth registered in the month of February 2013.

According to the IMF, the country is projected to grow 5.7% in 2013 and 6.2% in 2014 fuelled largely by rise in domestic and external demand, expectation of policy improvements and less severe weather conditions.

Korea’s industrial production recorded a 0.3% decline in the month of March 2013 over the same month a year ago, according to the latest data released by Statistics Korea. Despite the decline, the country seems to be recovering slowly from the impacts of weak exports due to global uncertainties, especially the Eurozone crisis.

Thailand seems to be recovering fast from the ravages of its floods; reconstruction activities are perceptible in the region to spur demand in the machinery industry. According to the data released by the Office of Industrial Economics of Thailand, industrial production in March 2013 spurred 0.5% year over year. This upsurge, despite weak economic conditions around the globe, especially of the Eurozone, is likely to impact the overall growth in the country.

Other Major Players

Talking of other important players worldwide, upcoming sporting events to be held in Brazil -- which call for rising government spending to improve the country’s infrastructure, growing trade relations with other economies, as well as huge foreign direct investments -- all bode well for the economy. According to the IMF, the country is expected to grow 3.0% in 2013 and 4.0% in 2014.

South Africa is also making progress and is expected to grow 2.8% in 2013 and 3.3% in 2014, as projected by the IMF. The government is focused on improving its mining, manufacturing and agricultural sectors. Moreover, huge public investments in the infrastructure development programs remain in the forefront.

Eurozone - A Hurdle

The Eurozone debt crisis has slowed down the overall growth pace in the region as well as of the global economy. According to a report published by Eurostat in May 2013, industrial production (excluding construction), on a monthly basis, in the Eurozone grew by 1.0% in March 2013.

On a year-over-year basis, industrial production in March dropped 1.7%, including a 6.9% in Luxembourg, 5.2% fall in Italy and 4.1% in Ireland.

Construction output, on a monthly basis, fell 1.7% in Mar 2013. On an annual basis, production dropped 7.9% in Mar, including a 31.8% decline in Slovenia, 16.7% in Portugal and 16.9% in Poland.

According to the VDMA Machine Makers’ Association, German machine tool orders in March 2013 plummeted 4.0% year over year, with domestic orders down by 15% and international orders slightly increasing by 1.0%.

Important Players of the Machinery Industry

Deere & Company’s (DE) fiscal second quarter 2013 (ended Apr 2013) results were impressive. For the quarter, equipment sales rose roughly 9%, with price realization contributing 3%. The agricultural and forestry equipment provider is expanding globally to leverage benefits from the growing global farm industry. For fiscal year 2013, equipment sales are expected to grow 5% year over year and for the third quarter by 3%. Net earnings for 2013 are projected to be approximately $3.3 billion.

Caterpillar Inc. (CAT) posted an 18% decline in Machinery and Power Systems sales in the first quarter of 2013. For the year 2013, the company expects revenue to range within the $57-$61 billion range as against $60-$68 billion expected earlier due primarily to the expectation of weak demand for mining equipment.

Italy-based CNH Global NV (CNH) posted a year-over-year increase of 1% or 3% on a constant currency basis in its equipment sales (agricultural and construction) in the first quarter 2013.

Other top players in the agricultural, construction and mining industry includes: AGCO Corporation (AGCO), Toro Co. (TTC), Terex Corp. (TEX) and Kubota Corporation (KUB), among others.

Prime companies operating in machinery industries other than agricultural, construction and mining, are Rockwell Automation Inc. (ROK), Illinois Tool Works, Inc. (ITW), Manitowoc Company, Inc. (MTW), among others.

OPPORTUNITIES

Fiscal government expenditures play a counter-cyclical role curbing the ill effects of slower economic developments and a tight credit market. China’s structural stimulus package, government spending on social welfare, construction of low-cost housing, completion of infrastructure projects on agriculture, forestry and water resources received special attention.

Also, the U.S. Congress had a stimulus package designed in 2009 that had money flowing into infrastructure spending. Also, The American Energy & Infrastructure Jobs Act (H.R. 7) will boost spending in the infrastructure projects. Approximately $260 billion will be allocated to fund roads, bridges and highway projects over five years.

Russia, which became a World Trade Organization (WTO) member in 2012, will open the gates for companies worldwide to benefit from the growing needs for modernizing the agricultural, transport and infrastructure sectors of the economy.

WEAKNESSES

We remain wary of the rising raw material costs of some of the major players of the machinery industry. Steel prices along with energy, especially coal and fuel prices, remain the prime causes of concern.

Research and development costs are on the rise for machine makers in their pursuit of manufacturing more sophisticated and technologically advanced machinery. Availability of funds remains a stumbling block as some major nations are still struggling to bring stability to their own economies.

Favorable commodity prices are a boon, although government policies affecting prices along with export and import policies and trade relations with other countries impact the machinery industry.

Conclusion: Prospects Bright

Despite the prevailing global uncertainties, rising needs of better infrastructure, modernized methods of agriculture and growing complexity of mining/manufacturing methods will boost demand for technologically advanced equipment in these industries. Moreover, looking ahead, the growth path widens for the emerging and developing nations, which will inevitably be attractive destinations for machine makers worldwide.
 
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To read this article on Zacks.com click here. ]]> Thu, 23 May 2013 08:32:01 GMT
Well, the pursuit is still on. The path to recovery has not been an easy one with ever-present headwinds hindering growth, the most disconcerting of which was the Eurozone debt crisis that significantly slowed down the overall growth pace in 2011 and 2012.

According to the International Monetary Fund’s (IMF) World Economic Outlook published in Apr 2013, promising signs to growth are expected from the world’s emerging and developing nations, while advanced economies are expected to exhibit slow but appreciable growth.

Projections by the IMF suggest that the world economy will likely grow by 3.3% in 2013 and 4.0% in 2014. Growth in advanced economies and emerging and developing countries are projected at 1.2% and 5.3% in 2013 while the same for 2014 are estimated at 2.2% and 5.7%, respectively.

No doubt obstacles still persist in the form of an unstable European economy and slowly reviving advanced countries; nevertheless, the overall growth picture may not materially deteriorate from the IMF’s Apr 2013 forecast.

Regarding the Machinery industry, increasing economic activities spur demand for industrial products, which in turn also boosts the need for new/advanced machinery. Based on this direct correlation, anticipation of improvement in global economic growth is a positive sign for the future prospects of the machinery industry.

The major end-markets for the machinery industry include agriculture, construction, mining and energy industries, among others. A brief discussion providing a glimpse of the future prospects of the machinery industry in different nations is provided below.

Machinery Industry Prospects in the U.S.

The IMF expects the United States to grow 1.9% in 2013 as against 2.1% predicted earlier and roughly 3.0% expected in 2014. High unemployment still seems to be a disturbing factor, though there is a glimmer of hope emanating from evidence of strengthening demands in the housing as well as durable goods markets. Conditions in the credit markets are also improving slowly.   

The Machinery industry is one of the most attractive industries in the country. Growth prospects for this industry can be deduced from the indicators to the performances in the recent past. In the first quarter of 2013 (Jan-Mar), industrial production in the United States rose by an annual rate of 5.0%, while the same in the month of April rose by 1.9% as compared with the year-ago period. Manufacturing output grew 5.3% in the quarter.

According to the US Census Bureau report published in May 2013, machinery shipments in the first quarter 2013 increased 6.0% year over year while new machinery orders grew 3.6%. However, machinery order backlog at the end of the quarter was down 12.5%. Shipments for construction and industrial machinery rose by 40.0% and 18.2%, respectively, while that for mining equipment and farm machinery dipped 3.7% and 8.0%, respectively.

Export demand has been considered crucial for the future growth prospects of the U.S. machinery industry. According to a report published by the Association of Equipment Manufacturers (AEM) in Feb 2013, the United States’ construction equipment exports rose 13% in year 2012, while agricultural equipment exports registered a 16% increase.

For the years to come, international demand for technologically advanced construction and agriculture equipment are expected to improve for the United States. In this respect, it is worth mentioning that the US-Russia trade bill will boost U.S. exports of construction equipment to Russia, the 11th-largest export market for U.S. construction equipment.

Japanese Markets

According to the latest report published by Japan’s Cabinet Office, on a monthly basis, core machinery orders in March 2013 grew a whopping 14.2%. Recovery in capital spending and higher orders from the shipping and electric power companies were the main drivers of the growth. Also, overseas demand for machinery grew 27.5% in March, indicating prospects of a solid demand growth in the months ahead.

According to the IMF, the Japanese economy is projected to grow 1.6% in 2013 and 1.4% in 2014.

Emerging Nations

China and India, the two major emerging/developing nations, are expected to show signs of tangible growth in the years ahead. According to the IMF, the Chinese economy is projected to grow 8.0% in 2013 and 8.2% in 2014.

Looser fiscal and monetary measures by Chinese authorities -- their efforts in increasing fixed asset investments along the lines of interest rate cut by the Chinese central bank -- are expected to boost growth. Domestic demand is strong as both consumption and investments have increased while exports are also on the rising trend.

Industrial production in India seems to have revived in the month of March 2013, registering an increase of 2.5% over the same month a year-ago. This also represents an increase from 0.5% growth registered in the month of February 2013.

According to the IMF, the country is projected to grow 5.7% in 2013 and 6.2% in 2014 fuelled largely by rise in domestic and external demand, expectation of policy improvements and less severe weather conditions.

Korea’s industrial production recorded a 0.3% decline in the month of March 2013 over the same month a year ago, according to the latest data released by Statistics Korea. Despite the decline, the country seems to be recovering slowly from the impacts of weak exports due to global uncertainties, especially the Eurozone crisis.

Thailand seems to be recovering fast from the ravages of its floods; reconstruction activities are perceptible in the region to spur demand in the machinery industry. According to the data released by the Office of Industrial Economics of Thailand, industrial production in March 2013 spurred 0.5% year over year. This upsurge, despite weak economic conditions around the globe, especially of the Eurozone, is likely to impact the overall growth in the country.

Other Major Players

Talking of other important players worldwide, upcoming sporting events to be held in Brazil -- which call for rising government spending to improve the country’s infrastructure, growing trade relations with other economies, as well as huge foreign direct investments -- all bode well for the economy. According to the IMF, the country is expected to grow 3.0% in 2013 and 4.0% in 2014.

South Africa is also making progress and is expected to grow 2.8% in 2013 and 3.3% in 2014, as projected by the IMF. The government is focused on improving its mining, manufacturing and agricultural sectors. Moreover, huge public investments in the infrastructure development programs remain in the forefront.

Eurozone - A Hurdle

The Eurozone debt crisis has slowed down the overall growth pace in the region as well as of the global economy. According to a report published by Eurostat in May 2013, industrial production (excluding construction), on a monthly basis, in the Eurozone grew by 1.0% in March 2013.

On a year-over-year basis, industrial production in March dropped 1.7%, including a 6.9% in Luxembourg, 5.2% fall in Italy and 4.1% in Ireland.

Construction output, on a monthly basis, fell 1.7% in Mar 2013. On an annual basis, production dropped 7.9% in Mar, including a 31.8% decline in Slovenia, 16.7% in Portugal and 16.9% in Poland.

According to the VDMA Machine Makers’ Association, German machine tool orders in March 2013 plummeted 4.0% year over year, with domestic orders down by 15% and international orders slightly increasing by 1.0%.

Important Players of the Machinery Industry

Deere & Company’s (DE) fiscal second quarter 2013 (ended Apr 2013) results were impressive. For the quarter, equipment sales rose roughly 9%, with price realization contributing 3%. The agricultural and forestry equipment provider is expanding globally to leverage benefits from the growing global farm industry. For fiscal year 2013, equipment sales are expected to grow 5% year over year and for the third quarter by 3%. Net earnings for 2013 are projected to be approximately $3.3 billion.

Caterpillar Inc. (CAT) posted an 18% decline in Machinery and Power Systems sales in the first quarter of 2013. For the year 2013, the company expects revenue to range within the $57-$61 billion range as against $60-$68 billion expected earlier due primarily to the expectation of weak demand for mining equipment.

Italy-based CNH Global NV (CNH) posted a year-over-year increase of 1% or 3% on a constant currency basis in its equipment sales (agricultural and construction) in the first quarter 2013.

Other top players in the agricultural, construction and mining industry includes: AGCO Corporation (AGCO), Toro Co. (TTC), Terex Corp. (TEX) and Kubota Corporation (KUB), among others.

Prime companies operating in machinery industries other than agricultural, construction and mining, are Rockwell Automation Inc. (ROK), Illinois Tool Works, Inc. (ITW), Manitowoc Company, Inc. (MTW), among others.

OPPORTUNITIES

Fiscal government expenditures play a counter-cyclical role curbing the ill effects of slower economic developments and a tight credit market. China’s structural stimulus package, government spending on social welfare, construction of low-cost housing, completion of infrastructure projects on agriculture, forestry and water resources received special attention.

Also, the U.S. Congress had a stimulus package designed in 2009 that had money flowing into infrastructure spending. Also, The American Energy & Infrastructure Jobs Act (H.R. 7) will boost spending in the infrastructure projects. Approximately $260 billion will be allocated to fund roads, bridges and highway projects over five years.

Russia, which became a World Trade Organization (WTO) member in 2012, will open the gates for companies worldwide to benefit from the growing needs for modernizing the agricultural, transport and infrastructure sectors of the economy.

WEAKNESSES

We remain wary of the rising raw material costs of some of the major players of the machinery industry. Steel prices along with energy, especially coal and fuel prices, remain the prime causes of concern.

Research and development costs are on the rise for machine makers in their pursuit of manufacturing more sophisticated and technologically advanced machinery. Availability of funds remains a stumbling block as some major nations are still struggling to bring stability to their own economies.

Favorable commodity prices are a boon, although government policies affecting prices along with export and import policies and trade relations with other countries impact the machinery industry.

Conclusion: Prospects Bright

Despite the prevailing global uncertainties, rising needs of better infrastructure, modernized methods of agriculture and growing complexity of mining/manufacturing methods will boost demand for technologically advanced equipment in these industries. Moreover, looking ahead, the growth path widens for the emerging and developing nations, which will inevitably be attractive destinations for machine makers worldwide.
 
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Zacks Investment Research ]]> Thu, 23 May 2013 06:31:01 GMT

About the Company

Headquartered in Highland Heights, Kentucky, General Cable develops, designs, manufactures, markets and distributes copper, aluminum and fiber optic wire and cable products for the energy, industrial, specialty and communications markets around the world.

Disappointing Results and Guidance

The company has disappointed its investors with negative earnings surprises in each of the last four quarters. 

Last quarter’s results were hurt mainly by foreign currency transaction losses and a higher-than-expected effective tax rate. Weakness in Europe and Latin America operations also impacted the performance. While condition in Europe and Mediterranean region remained challenging, continued political and economic uncertainly hurt operations in Venezuela.

However, results in the company’s North America business were stable despite the impact of declining metal prices 

Debt increased sharply from the previous quarter, leading to a relatively higher debt to equity ratio compared with the industry peers.

The company also revised down their current quarter and full year outlook. They now expect adjusted operating income in the range of $70 million to $80 million and adjusted earnings of 0.50 to $0.60 per share.  Lower guidance was a result of higher inventory costs and weaker metal prices.

Downwards Revisions

Due to disappointing results, quarterly and annual estimates have been revised sharply downwards in the past few days by analysts.

Zacks consensus estimate for the current quarter now stands at $0.56 per share versus $0.82 per share, 30 days ago, while the full-year consensus estimate is $2.56 per share now, down from $2.70 per share.

The Bottom Line

We expected that company’s results for the second and the third quarter will continue to be impacted by lower metal prices and weakness in Europe.

BGC is currently Zacks Rank # 5 (Strong Sell) stock and it also has a longer-term recommendation of “Underperform”.  

Given above reasons, we would advise the investors to stay away from this stock for the time being.

Better Play

Investors looking for exposure to the industry (Wire and Cable Products) can consider Insteel Industries (IIIN)—a Zacks rank #1(Strong Buy) stock. The company has delivered strong positive surprises in the last two quarters.

Want the latest recommendations from Zacks Investment Research? Today, you can download7 Best Stocks for the Next 30 Days.Click to get this free report >>

And its 2QFY13 results, unexpectedly reported on April 30, didn't help their cause any. The company was unable to offer any clearer guidance about the state of their turnaround.

And while many investors stepped aside from the muddy December quarter and were rewarded for doing so in the March one (check out my price chart below), one giant among them accumulated a 10% stake.

I am speaking, of course, of Carl Icahn who reported in an SEC filing on April 30 he was the holder of nearly 34 million shares. Clearly, he sees something that the analysts don't as earnings estimates continue to head down.

Can You Hear Me Now?

Nuance is a leading provider of speech recognition technology and voice interface software that enable the information and services of enterprises, telecommunications networks and the Internet to be accessed from any telephone. You find their technology everywhere from corporate call centers to consumer devices.

The company's solutions enable voice transcription and automation within the healthcare, mobile, and desktop verticals. Nuance is also a leading provider of imaging solutions for businesses and consumers. Its technologies, applications and services make the user experience more compelling by transforming the way people interact with information and how they create, share and use documents.

Here's a look at how the analysts are having trouble speaking the same language as either the company, or Icahn...

Is All the Bad News Priced-In?

But Carl isn't completely alone in seeing a silver lining here. One Wall Street house, Wedbush Securities, recently initiated coverage of Nuance with an Outperform rating and a $23 price target.

"While the company clearly has issues to resolve (sales execution, better managing the shift to recurring revenue sources), we view the risk/reward as favorable at current levels."

To join this optimistic view, you have to believe that company (or Carl) can turn things around. Not knowing what or how long that will take, I think we can safely wait to see if those earnings estimates turn around first.

Kevin Cook is a Senior Stock Strategist with Zacks.com
 
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Zacks Investment Research ]]> Wed, 22 May 2013 09:31:01 GMT Santarus Inc (SNTS) became a Zacks #1 Rank Strong Buy on May 7. Since then, shares have climbed over 5%.

Santarus is a specialty pharmaceutical company focused on acquiring, developing and commercializing proprietary products for the prevention and treatment of gastrointestinal diseases and disorders. Founded in 1996, they are based in San Diego, CA.

The company markets CYCLOSET tablets, and is working to commercialize GLUMETZA, drugs designed as adjuncts to diet and exercise to improve glycemic control in adults with type 2 diabetes. They've even got a drug for the treatment of travelers' diarrhea.

The Big Beat

On May 6, Santarus reported 1Q2013 EPS of $0.25 when the Street was looking for only 12 cents. The big surprise was primarily due to higher Zegerid (gastric reflux) and Uceris (ulcerative colitis) sales of $24.6M and $6.6M, respectively, vs lower analyst estimates, especially for the newer drug Uceris.

Santarus also raised full-year revenue guidance to $330M to $340M, from $320M to $325M, previously. Analysts responded very positively to the early results for Uceris and most expect revenues to exceed the upward-revised guidance.

Here's how they turned around their views on a stock that has run quite a bit already...

Biotech Fortunes Are All About the Pipeline

After the massive price run in this stock -- from $11 to $22 this year for a double -- investors should be aware of some of the risks the company faces which could be near-term headwinds.

About 85% of current revenues face patent expiry or generic launch by settlement in 2015-16. And some analysts feel that while the company's late-stage pipeline has good revenue potential, it is unclear right now whether this will fully replace revenue lost from the "generic-ization" of key franchises.

I would look to buy SNTS on pullbacks to support above $19. And I would keep an eye on the analyst earnings estimates going into their Q2 report to see if sales expectations are being guided even higher.

Biotech Stocks Are In High Demand

Another recent brightspot for the stock was how well it survived the offering of 7.9 million shares by a subsidiary of Italian drug-maker Cosmo Pharmaceuticals. The company issued 6 million shares to Cosmo in December 2008 as part of a licensing agreement for Uceris and rifamycin SV MMX and additional stock was issued as SNTS reached certain milestones.

And according to SEC documents I read today, Cosmo let go of about 4.8 million shares on May 10. They still hold about 2.9 million shares, or 4.6% of the company.

The fact that the stock gapped down to $19 and has rallied strongly since is evidence of strong demand for the shares of the $1.4 billion company among institutions. They obviously have a strong stomach for the Santarus gastrointestinal pipeline.

Now this name may be hard to buy after its big run this year. But since healthcare in general, and biotech in particular, have been the strongest drivers of the market's rally to new highs, you want to continue to trade those with a high Zacks Rank.

In my research on biotech stocks and institutional investors, I've found that the small and mid-cap names are still in high demand.

Kevin Cook is a Senior Stock Strategist with Zacks.com
 
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Zacks Investment Research ]]> Wed, 22 May 2013 09:17:01 GMT This is a feeling I rarely, if ever, get on the field or at the tee box, but when it comes to investing, hitting home runs is a constant goal. I often hear of investors that have hit home runs that turn into ground rule doubles, and sometimes worse than that. But there are also times when a home run can turn into a grand slam!

How can you protect the big gains you have made in stocks like BBY, NFLX or TSLA? Which one is most likely to turn into a grand slam?

Wait For Your Pitch

Before you have your big return, you have to be able to locate the stocks that are in the sweet spot for a potential double. Too often I have seen investors swing at stocks that are restructuring and end up fouling the ball off their foot. Even worse are the times when investors look to catch a falling knife and ground into a double or triple play.

Experience has shown that the stocks with the best chance to become home runs are the smaller companies. A company having a market capitalization less than $7 billion gives you the best chance to see the value of your initial investment double.

Avoiding the stocks that are falling knives gives you added insurance against the risk of that stock continuing to move lower. The same can be said of restructuring stories that rarely give home run returns.

More . . .

--------------------------------------------------------------------------------------------------------------------

Home Run Stocks from Zacks

Only a few companies have great potential to increase their earnings and stock prices far beyond the normal 1 to 3-month Zacks Rank profit zone. These under-the-radar small and mid caps are primed to rack up positive earnings surprises quarter after quarter.

We'll ride them for 6, even 18 months to realize their exceptional upsides. Our home run strategy is already riding more than a dozen double-digit-plus gains, including one company that shot up +135% in just 3 months.

See these special stocks now >>

--------------------------------------------------------------------------------------------------------------------

Run It Out

It's inevitable that some stocks will just be grounders to short. Learning why your stock didn't get out of the infield is an important lesson to learn. Sometimes it's a CEO scandal or a deal gone bad, but most of the time it's all due to earnings. Give the stocks the chance to be homers by letting the winners win, and don't be discouraged by the occasional soft grounder that goes back to the pitcher. Make sure the earnings picture continues to not only be good, but look for stocks that are seeing improving earnings potential.

Don't Let Them Throw It Back

A homer hit by the opposing team in Wrigley Field generally ends up with the ball being thrown back by the fans. In baseball the homer still counts, but we know that sometimes stocks that seem to be hit out of the park can fly back in even faster.

One method to capture large gains is to use stops, which will ensure that positions don't turn into "loud outs" instead of the homers they are. The use of stops need to carry its own word of caution, as often times stocks will pull back just enough to hit stops before moving even higher.

Keeping an eye on the earnings prospects of the stocks that have become home runs is one of the best ways to ensure that the ball stays in the seats. The difficulty comes into play when you manage a portfolio of 25 stocks and you focus too much on one stock and allow the others to be thrown out while leading off at first. A balance of focus across the entire market, portfolio as whole and individual stocks is necessary.

Grand Slams

There are a few times when a home run is more than just a home run. The grand slam is what we all look for, and I am not talking about a breakfast special. The problem is how can you tell when it's time to take profits or let it ride to potentially be a grand slam?

A key to a home run that can keep going is knowing where the company is in its life cycle. A retailer that is still experiencing growth in the number of stores, margins and sales indicates a company that is still expanding. This means it has a higher chance of continuing its run. A technology company with little or no new technology that was once out of favor might be a good candidate to sell and take profits. The younger (more expansion potential) the company is, the more likely it is to continue to grow.

Box Score

Grand Slams are rare, and to uncover them takes serious dedication to research, lots of patience and of course the willingness to strike out every once in a while. Looking for smaller companies that have great earnings potential and are relatively young in their life cycle can give you a head start to helping your portfolio not only hit more singles, doubles and triples, but also home runs.

Step Up To The Plate

You can build a portfolio of great names that have a Zacks Rank #1 and Zacks Rank #2 and watch them daily. You can monitor research reports from the big brokerages to get some deeper insights into the industries you have invested in. You can then stay even closer to your investments by listening to earnings conference calls to hear for yourself what the prospects are. You can do all of that on your own.

Or, you can look into our Zacks Home Run Investor. service that will help you find stocks with the potential to rack up impressive gains.

This long-term investment approach narrows down strong Zacks Rank stocks to the few that have exceptional potential to blast through our normal 1 to 3-month profit zones. These are companies that could continue to generate positive earnings surprises quarter after quarter.

Since 2011, our strategy has substantially outperformed the market and currently is riding 14 stocks well into the double digits. One has boomed +135% in just 3 months.

In the next few days, I am preparing to add a stock with that kind of potential upside. Check below for more details:

Learn more about Home Run Investor now >>

All the best,

Brian Bolan

Brian is our aggressive growth expert and one of the hottest hands at Zacks who specializes in double-digit stock gains. He is the editor of the Zacks Home Run Investor.

 
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Zacks Investment Research ]]> Tue, 21 May 2013 08:42:01 GMT
The sector seems to be reaching a favorable pricing cycle and its near-term outlook for pricing power remains upbeat in the wake of rising demand from economically recovering American households. But a dearth of positive catalysts is delaying the recovery process of the insurers. Among the fundamental challenges, weak underwriting gains and low investment yields stand out.

Climate change further adds to the concerns. The ravages of Superstorm Sandy resulted in billions of insured losses last year. Notably, insured property losses due to Sandy were much higher than the average over the last decade.

Though insurers are preparing themselves better to withstand significant losses, an increasing probability of natural catastrophes due to growing global warming will continue to raise concerns. This is without mentioning the tornado devastation in Moore, Oklahoma this week, which, although nowhere near as concentrated as the East Coast, will nonetheless result in further losses for insurers.

The events outside the country such as continued debt crisis in the Eurozone will further limit the industry’s growth prospects.

However, the overall health of the industry has improved somewhat in the recent past riding on an economic recovery, after enduring pricing pressures and reduced insured exposure since the latest recession.

Rising premium rates should ultimately translate into margin expansion and mitigate the negative impact of the ongoing low interest rate environment on insurers’ investment income. Further, increasing awareness on the risk of catastrophe, strong underwriting discipline and favorable reserve development in the recent quarters should place the industry at least one step ahead.

That said, though the market condition doesn’t remain soft anymore, reasonable hardening is not expected at least until the end of 2013. Moreover, a stressed balance sheet, lack of real employment growth and legislative challenges are threatening insurers’ ability to rebound to the historical growth rate.

Also, limited organic growth opportunities and strict regulatory capital requirements will push the industry more toward consolidation. Insurers are seeking structural economies of scale through mergers and acquisitions to enhance market share. While this will help insurers stay afloat, inter-segment competition will alleviate. So, increasing profitability after complying with the regulatory requirements and coping with the challenges of climate change could prove difficult.

Zacks Industry Rank

Within the Zacks Industry classification, insurers are broadly grouped in the Finance sector (one of 16 Zacks sectors) and are further sub-divided into five industries at the expanded level: Insurance-Accident & Health, Insurance-Brokers, Insurance-Life, Insurance-Multiline and Insurance-Property & Casualty. The level of sensitivity and exposure to different stages of the economic cycle vary for each industry.

We rank all the 260 plus industries in the 16 Zacks sectors based on the earnings outlook and fundamental strength of the constituent companies in each industry. To learn more visit: About Zacks Industry Rank.

As a guideline, the outlook for industries with Zacks Industry Rank of #88 and lower is 'Positive,' between #89 and #176 is 'Neutral' and #177 and higher is 'Negative.'

The Zacks Industry Rank for Insurance-Property & Casualty is #6, Insurance-Multiline is #13, Insurance-Accident & Health is #50, Insurance-Brokers is #60 and Insurance-Life is #71. Looking at the Zacks Industry Rank of the five insurance industries, one could certainly say that the near-term outlook for the group is 'Positive.'

Life Insurers

A reduction in underwriting expenses and a modest increase in premiums have been helping life insurers increase net income in the last few quarters. But downward pressure on investment yields due to a low interest rates, higher hedging costs, lower income from the variable annuity business and more burdensome capital requirements will continue to mar profitability going forward. Also, low rates are spoiling life insurers’ efforts to grow fixed annuities and universal life insurance sales.

As the Federal Reserve plans to hold interest rates at low levels through mid-2015, life insurers will have to seek alternative asset classes to optimize return from investments. However, the addition of any risky asset class in their investment portfolios with hopes of better yield may lead to further losses.

As the industry’s statutory capital level fell sharply during the recession, life insurers will need to optimize their capital levels to address the ensuing challenges. In the short term, traditional sources of capital are expected to fulfill most of what life insurers need in order to stay in good shape. However, non-traditional sources of capital will take years to strengthen financials.

The underlying trends amid a recovering economy indicate stability in the sector over the medium term with respect to credit profile and financial prospects. However, higher-than-average asset losses, primarily resulting from their real estate exposure, will remain a major concern.

Further, the sluggish pace of economic recovery is making it difficult for life insurers to expand their customer base. In fact, insurers are struggling to even retain their existing clientele. Narrowed disposable income owing to high unemployment and huge credit card debt has made it difficult for Americans to invest in retirement products such as life insurance. Americans, primarily the youth, have significantly reduced expenditures on life insurance products, and are instead choosing alternative investments that promise better returns.

Though the carriers are transforming their products and businesses to make them attractive and profitable for customers, significant improvement in demand is not expected in the near term.

In December, Fitch Ratings has affirmed the credit outlook for the U.S. life insurance industry at stable for 2013. This action was primarily based on the expectation of insurers’ improved liquidity and balance sheet strength.

However, the rating agency expects statutory capital growth to be moderate in 2013 given subdued earnings growth due to the low interest rate environment. Also, the agency does not expect a significant improvement in portfolio credit quality due to the expected weakness in investment income.

Currently, the life insurers with favorable Zacks Ranks worth considering include Protective Life Corporation (PL) and StanCorp Financial Group Inc. (SFG) with a Zacks Rank #1 (Strong Buy), and China Life Insurance Co. Ltd. (LFC) with a Zacks Rank #2 (Buy).

Health Insurers

As U.S. health insurers are preparing themselves to comply with the mandates of the health care reform, their financials are expected to remain strong. Broad-based moderation in utilization has been primarily boosting the bottom line of health insurers. Also, increased access to capital and better retention opportunities are helping them grow consistently despite tardy economic growth.

Moreover, the carriers have been witnessing better credit quality in the recent quarters, reflecting a moderate industry risk.

In 2010, the historic health care reform legislation – The Patient Protection and Affordable Care Act (PPACA) – was passed by the Congress with the intension of making health care facilities more affordable, preventing private health insurers from continuing with the pre-existing condition clause and at the same time reducing the number of uninsured by bringing in 32 million more people under coverage by 2019.

The legislation had many detractors who contested several of its stated benefits and considered it another entitlement program that the country can ill afford. Finally, in Jun 2012, the U.S. Supreme Court ruled in favor of the reform, rejuvenating the industry by removing major uncertainties. Further, Obama's re-election in Nov 2012 essentially ensured a future to the law.

While the legislative overhaul brings more regulatory scrutiny for private insurers such as WellPoint Inc. (WLP) and UnitedHealth Group, Inc. (UNH), the net negative effect is expected to be far softer than was initially feared.

Although the full implementation of PPACA will be in 2014, the industry is expected to see gradual changes through the reminder of 2013. While bringing more people under coverage will add prospects for growth, the requirement to reduce health care costs will lead to margin compression.

Also, while the reform will provide more cross-selling opportunities for health insurers, their overall profitability will be limited over the long run as the negative impact of Medicare Advantage payment cuts, industry taxes and restrictions on underwriting practices will more than offset the benefits of bringing more people under the umbrella.

Consequently, substantial growth in industry revenue is not expected until 2015 as insurers will be forced to adjust the benefits to comply with the health care legislation. Among others, providing coverage to everyone regardless of an expensive pre-existing condition would put their top lines at stake.

(Want to know more about the future prospects of health insurers? Read our Health Insurance Stock Outlook)

Property & Casualty Insurers

Market hardening has been the key to improvement for property-casualty insurers in the recent quarters. After struggling with falling prices for years, insurers seem to finally reach a period of better premium rates. However, property-casualty insurers are still feeling the pressure on their investment portfolios due to the prevailing low interest rate environment. This has been continuously reducing the capital adequacy of most carriers.

Along with continually improving pricing power, better preparation to withstand catastrophe-related losses should help insurers perform better in the upcoming quarters despite the pressure on investment income.

As property-casualty insurers hold about two-thirds of the invested assets in the form of bonds, their capacity is highly sensitive to changes in credit market conditions. And with credit markets remaining weak plus bond prices hovering at low levels due to persisting concerns over defaults, insurers may incur significant realized and unrealized capital losses on their portfolios in the upcoming quarters. Moreover, catastrophe losses continue to keep the balance sheets of a number of carriers under pressure.

However, the ongoing recovery in the credit and equity markets is leading to a reduction in unrealized investment losses. Also, once the economic recovery gains momentum, insurance volume will grow rapidly. With growing employment in the private sector and recovery in the housing markets, a number of carriers have already started seeing growth in insurance sales.

The recent quarters have been increasingly witnessing a rebound in claims-paying capacity (as measured by policyholders’ surpluses), which reflects the industry’s resilience over the prior years. Conservative investment strategies and capital restructuring efforts will continue to help property-casualty insurers improve their financial footing in the upcoming quarters.

Currently, ProAssurance Corporation (PRA), XL Group plc (XL), Hilltop Holdings Inc. (HTH) and AXIS Capital Holdings Limited (AXS) with a Zacks Rank #1 are worth a look in the property-casualty industry.

OPPORTUNITIES

The industry has been undertaking several structural changes that will make underwriting and pricing schemes even more attractive to consumers. Also, improving financial fundamentals on the back of favorable macroeconomic trends make the stocks of a number of industry participants appear attractive.

We remain positive on Alleghany Corporation (Y), American Safety Insurance Holdings Ltd. (ASI), White Mountains Insurance Group, Ltd. (WTM), Assured Guaranty Ltd. (AGO) and Eastern Insurance Holdings, Inc. (EIHI) with a Zacks Rank #1.

Other insurers that we like with a Zacks Rank #2 (Buy) include The Chubb Corporation (CB), Cincinnati Financial Corp. (CINF), Everest Re Group Ltd. (RE), PartnerRe Ltd. (PRE), American International Group, Inc. (AIG), Cigna Corp. (CI), The Hartford Financial Services Group, Inc. (HIG), MetLife, Inc. (MET), Prudential Financial, Inc. (PRU) and Amerisafe, Inc. (AMSF).

WEAKNESSES

We expect continued pressure on investment yield and lower income from the variable annuity business to restrict the earnings growth rate of life insurers. Also, reduced financial flexibility and weak underwriting will hurt the earnings of many property-casualty insurers. Moreover, the overall industry is vulnerable to the ever-increasing threat of natural disasters.

Among the Zacks covered U.S. insurers, we prefer to stay away from the Zacks Rank #4 (Sell) stocks: ING Groep NV (ING), AFLAC Inc. (AFL), Loews Corporation (L), Meadowbrook Insurance Group Inc. (MIG) and Stewart Information Services Corporation (STC). Currently, there are no stocks with a Zacks Rank #5 (Strong Sell).
 
AFLAC INC (AFL): Free Stock Analysis Report
 
ASSURED GUARNTY (AGO): Free Stock Analysis Report
 
AMER INTL GRP (AIG): Free Stock Analysis Report
 
AMERISAFE INC (AMSF): Free Stock Analysis Report
 
AMER SAFETY INS (ASI): Free Stock Analysis Report
 
AXIS CAP HLDGS (AXS): Free Stock Analysis Report
 
CHUBB CORP (CB): Free Stock Analysis Report
 
CIGNA CORP (CI): Free Stock Analysis Report
 
EASTERN INSURNC (EIHI): Free Stock Analysis Report
 
HARTFORD FIN SV (HIG): Free Stock Analysis Report
 
HILLTOP HLDGS (HTH): Free Stock Analysis Report
 
ING GROEP-ADR (ING): Free Stock Analysis Report
 
LOEWS CORP (L): Free Stock Analysis Report
 
CHINA LIFE INS (LFC): Free Stock Analysis Report
 
METLIFE INC (MET): Free Stock Analysis Report
 
MEADOWBROOK INS (MIG): Free Stock Analysis Report
 
PROTECTIVE LIFE (PL): Free Stock Analysis Report
 
PROASSURANCE CP (PRA): Free Stock Analysis Report
 
PARTNERRE LTD (PRE): Free Stock Analysis Report
 
PRUDENTIAL FINL (PRU): Free Stock Analysis Report
 
EVEREST RE LTD (RE): Free Stock Analysis Report
 
STANCORP FNL CP (SFG): Free Stock Analysis Report
 
STEWART INFO SV (STC): Free Stock Analysis Report
 
UNITEDHEALTH GP (UNH): Free Stock Analysis Report
 
WELLPOINT INC (WLP): Free Stock Analysis Report
 
WHITE MTN INS (WTM): Free Stock Analysis Report
 
XL GROUP PLC (XL): Free Stock Analysis Report
 
ALLEGHANY CORP (Y): Free Stock Analysis Report
 
To read this article on Zacks.com click here. ]]> Tue, 21 May 2013 08:42:01 GMT
The sector seems to be reaching a favorable pricing cycle and its near-term outlook for pricing power remains upbeat in the wake of rising demand from economically recovering American households. But a dearth of positive catalysts is delaying the recovery process of the insurers. Among the fundamental challenges, weak underwriting gains and low investment yields stand out.

Climate change further adds to the concerns. The ravages of Superstorm Sandy resulted in billions of insured losses last year. Notably, insured property losses due to Sandy were much higher than the average over the last decade.

Though insurers are preparing themselves better to withstand significant losses, an increasing probability of natural catastrophes due to growing global warming will continue to raise concerns. This is without mentioning the tornado devastation in Moore, Oklahoma this week, which, although nowhere near as concentrated as the East Coast, will nonetheless result in further losses for insurers.

The events outside the country such as continued debt crisis in the Eurozone will further limit the industry’s growth prospects.

However, the overall health of the industry has improved somewhat in the recent past riding on an economic recovery, after enduring pricing pressures and reduced insured exposure since the latest recession.

Rising premium rates should ultimately translate into margin expansion and mitigate the negative impact of the ongoing low interest rate environment on insurers’ investment income. Further, increasing awareness on the risk of catastrophe, strong underwriting discipline and favorable reserve development in the recent quarters should place the industry at least one step ahead.

That said, though the market condition doesn’t remain soft anymore, reasonable hardening is not expected at least until the end of 2013. Moreover, a stressed balance sheet, lack of real employment growth and legislative challenges are threatening insurers’ ability to rebound to the historical growth rate.

Also, limited organic growth opportunities and strict regulatory capital requirements will push the industry more toward consolidation. Insurers are seeking structural economies of scale through mergers and acquisitions to enhance market share. While this will help insurers stay afloat, inter-segment competition will alleviate. So, increasing profitability after complying with the regulatory requirements and coping with the challenges of climate change could prove difficult.

Zacks Industry Rank

Within the Zacks Industry classification, insurers are broadly grouped in the Finance sector (one of 16 Zacks sectors) and are further sub-divided into five industries at the expanded level: Insurance-Accident & Health, Insurance-Brokers, Insurance-Life, Insurance-Multiline and Insurance-Property & Casualty. The level of sensitivity and exposure to different stages of the economic cycle vary for each industry.

We rank all the 260 plus industries in the 16 Zacks sectors based on the earnings outlook and fundamental strength of the constituent companies in each industry. To learn more visit: About Zacks Industry Rank.

As a guideline, the outlook for industries with Zacks Industry Rank of #88 and lower is 'Positive,' between #89 and #176 is 'Neutral' and #177 and higher is 'Negative.'

The Zacks Industry Rank for Insurance-Property & Casualty is #6, Insurance-Multiline is #13, Insurance-Accident & Health is #50, Insurance-Brokers is #60 and Insurance-Life is #71. Looking at the Zacks Industry Rank of the five insurance industries, one could certainly say that the near-term outlook for the group is 'Positive.'

Life Insurers

A reduction in underwriting expenses and a modest increase in premiums have been helping life insurers increase net income in the last few quarters. But downward pressure on investment yields due to a low interest rates, higher hedging costs, lower income from the variable annuity business and more burdensome capital requirements will continue to mar profitability going forward. Also, low rates are spoiling life insurers’ efforts to grow fixed annuities and universal life insurance sales.

As the Federal Reserve plans to hold interest rates at low levels through mid-2015, life insurers will have to seek alternative asset classes to optimize return from investments. However, the addition of any risky asset class in their investment portfolios with hopes of better yield may lead to further losses.

As the industry’s statutory capital level fell sharply during the recession, life insurers will need to optimize their capital levels to address the ensuing challenges. In the short term, traditional sources of capital are expected to fulfill most of what life insurers need in order to stay in good shape. However, non-traditional sources of capital will take years to strengthen financials.

The underlying trends amid a recovering economy indicate stability in the sector over the medium term with respect to credit profile and financial prospects. However, higher-than-average asset losses, primarily resulting from their real estate exposure, will remain a major concern.

Further, the sluggish pace of economic recovery is making it difficult for life insurers to expand their customer base. In fact, insurers are struggling to even retain their existing clientele. Narrowed disposable income owing to high unemployment and huge credit card debt has made it difficult for Americans to invest in retirement products such as life insurance. Americans, primarily the youth, have significantly reduced expenditures on life insurance products, and are instead choosing alternative investments that promise better returns.

Though the carriers are transforming their products and businesses to make them attractive and profitable for customers, significant improvement in demand is not expected in the near term.

In December, Fitch Ratings has affirmed the credit outlook for the U.S. life insurance industry at stable for 2013. This action was primarily based on the expectation of insurers’ improved liquidity and balance sheet strength.

However, the rating agency expects statutory capital growth to be moderate in 2013 given subdued earnings growth due to the low interest rate environment. Also, the agency does not expect a significant improvement in portfolio credit quality due to the expected weakness in investment income.

Currently, the life insurers with favorable Zacks Ranks worth considering include Protective Life Corporation (PL) and StanCorp Financial Group Inc. (SFG) with a Zacks Rank #1 (Strong Buy), and China Life Insurance Co. Ltd. (LFC) with a Zacks Rank #2 (Buy).

Health Insurers

As U.S. health insurers are preparing themselves to comply with the mandates of the health care reform, their financials are expected to remain strong. Broad-based moderation in utilization has been primarily boosting the bottom line of health insurers. Also, increased access to capital and better retention opportunities are helping them grow consistently despite tardy economic growth.

Moreover, the carriers have been witnessing better credit quality in the recent quarters, reflecting a moderate industry risk.

In 2010, the historic health care reform legislation – The Patient Protection and Affordable Care Act (PPACA) – was passed by the Congress with the intension of making health care facilities more affordable, preventing private health insurers from continuing with the pre-existing condition clause and at the same time reducing the number of uninsured by bringing in 32 million more people under coverage by 2019.

The legislation had many detractors who contested several of its stated benefits and considered it another entitlement program that the country can ill afford. Finally, in Jun 2012, the U.S. Supreme Court ruled in favor of the reform, rejuvenating the industry by removing major uncertainties. Further, Obama's re-election in Nov 2012 essentially ensured a future to the law.

While the legislative overhaul brings more regulatory scrutiny for private insurers such as WellPoint Inc. (WLP) and UnitedHealth Group, Inc. (UNH), the net negative effect is expected to be far softer than was initially feared.

Although the full implementation of PPACA will be in 2014, the industry is expected to see gradual changes through the reminder of 2013. While bringing more people under coverage will add prospects for growth, the requirement to reduce health care costs will lead to margin compression.

Also, while the reform will provide more cross-selling opportunities for health insurers, their overall profitability will be limited over the long run as the negative impact of Medicare Advantage payment cuts, industry taxes and restrictions on underwriting practices will more than offset the benefits of bringing more people under the umbrella.

Consequently, substantial growth in industry revenue is not expected until 2015 as insurers will be forced to adjust the benefits to comply with the health care legislation. Among others, providing coverage to everyone regardless of an expensive pre-existing condition would put their top lines at stake.

(Want to know more about the future prospects of health insurers? Read our Health Insurance Stock Outlook)

Property & Casualty Insurers

Market hardening has been the key to improvement for property-casualty insurers in the recent quarters. After struggling with falling prices for years, insurers seem to finally reach a period of better premium rates. However, property-casualty insurers are still feeling the pressure on their investment portfolios due to the prevailing low interest rate environment. This has been continuously reducing the capital adequacy of most carriers.

Along with continually improving pricing power, better preparation to withstand catastrophe-related losses should help insurers perform better in the upcoming quarters despite the pressure on investment income.

As property-casualty insurers hold about two-thirds of the invested assets in the form of bonds, their capacity is highly sensitive to changes in credit market conditions. And with credit markets remaining weak plus bond prices hovering at low levels due to persisting concerns over defaults, insurers may incur significant realized and unrealized capital losses on their portfolios in the upcoming quarters. Moreover, catastrophe losses continue to keep the balance sheets of a number of carriers under pressure.

However, the ongoing recovery in the credit and equity markets is leading to a reduction in unrealized investment losses. Also, once the economic recovery gains momentum, insurance volume will grow rapidly. With growing employment in the private sector and recovery in the housing markets, a number of carriers have already started seeing growth in insurance sales.

The recent quarters have been increasingly witnessing a rebound in claims-paying capacity (as measured by policyholders’ surpluses), which reflects the industry’s resilience over the prior years. Conservative investment strategies and capital restructuring efforts will continue to help property-casualty insurers improve their financial footing in the upcoming quarters.

Currently, ProAssurance Corporation (PRA), XL Group plc (XL), Hilltop Holdings Inc. (HTH) and AXIS Capital Holdings Limited (AXS) with a Zacks Rank #1 are worth a look in the property-casualty industry.

OPPORTUNITIES

The industry has been undertaking several structural changes that will make underwriting and pricing schemes even more attractive to consumers. Also, improving financial fundamentals on the back of favorable macroeconomic trends make the stocks of a number of industry participants appear attractive.

We remain positive on Alleghany Corporation (Y), American Safety Insurance Holdings Ltd. (ASI), White Mountains Insurance Group, Ltd. (WTM), Assured Guaranty Ltd. (AGO) and Eastern Insurance Holdings, Inc. (EIHI) with a Zacks Rank #1.

Other insurers that we like with a Zacks Rank #2 (Buy) include The Chubb Corporation (CB), Cincinnati Financial Corp. (CINF), Everest Re Group Ltd. (RE), PartnerRe Ltd. (PRE), American International Group, Inc. (AIG), Cigna Corp. (CI), The Hartford Financial Services Group, Inc. (HIG), MetLife, Inc. (MET), Prudential Financial, Inc. (PRU) and Amerisafe, Inc. (AMSF).

WEAKNESSES

We expect continued pressure on investment yield and lower income from the variable annuity business to restrict the earnings growth rate of life insurers. Also, reduced financial flexibility and weak underwriting will hurt the earnings of many property-casualty insurers. Moreover, the overall industry is vulnerable to the ever-increasing threat of natural disasters.

Among the Zacks covered U.S. insurers, we prefer to stay away from the Zacks Rank #4 (Sell) stocks: ING Groep NV (ING), AFLAC Inc. (AFL), Loews Corporation (L), Meadowbrook Insurance Group Inc. (MIG) and Stewart Information Services Corporation (STC). Currently, there are no stocks with a Zacks Rank #5 (Strong Sell).
 
AFLAC INC (AFL): Free Stock Analysis Report
 
ASSURED GUARNTY (AGO): Free Stock Analysis Report
 
AMER INTL GRP (AIG): Free Stock Analysis Report
 
AMERISAFE INC (AMSF): Free Stock Analysis Report
 
AMER SAFETY INS (ASI): Free Stock Analysis Report
 
AXIS CAP HLDGS (AXS): Free Stock Analysis Report
 
CHUBB CORP (CB): Free Stock Analysis Report
 
CIGNA CORP (CI): Free Stock Analysis Report
 
EASTERN INSURNC (EIHI): Free Stock Analysis Report
 
HARTFORD FIN SV (HIG): Free Stock Analysis Report
 
HILLTOP HLDGS (HTH): Free Stock Analysis Report
 
ING GROEP-ADR (ING): Free Stock Analysis Report
 
LOEWS CORP (L): Free Stock Analysis Report
 
CHINA LIFE INS (LFC): Free Stock Analysis Report
 
METLIFE INC (MET): Free Stock Analysis Report
 
MEADOWBROOK INS (MIG): Free Stock Analysis Report
 
PROTECTIVE LIFE (PL): Free Stock Analysis Report
 
PROASSURANCE CP (PRA): Free Stock Analysis Report
 
PARTNERRE LTD (PRE): Free Stock Analysis Report
 
PRUDENTIAL FINL (PRU): Free Stock Analysis Report
 
EVEREST RE LTD (RE): Free Stock Analysis Report
 
STANCORP FNL CP (SFG): Free Stock Analysis Report
 
STEWART INFO SV (STC): Free Stock Analysis Report
 
UNITEDHEALTH GP (UNH): Free Stock Analysis Report
 
WELLPOINT INC (WLP): Free Stock Analysis Report
 
WHITE MTN INS (WTM): Free Stock Analysis Report
 
XL GROUP PLC (XL): Free Stock Analysis Report
 
ALLEGHANY CORP (Y): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research ]]> Tue, 21 May 2013 07:44:01 GMT Heartware International (HTWR) Has seen analysts pump their estimates higher, giving love to this medical device company love and not heartache. As a Zacks Rank #2 (Buy), it is the Bull of the Day.

Be Still My Heart

Heart failure is a degenerative, terminal disease affecting more than 20 million patients worldwide and causing more than 7.25 million deaths each year. Approximately 1 million patients suffer from Class IV heart failure, the most severe stage of the disease. Heart transplantation is a proven treatment option for Class IV heart failure patients, but a limited number of donor hearts become available each year.

Company Description

HeartWare International Inc. is a global medical device company dedicated to delivering safe, high-performing and transformative therapies that enable patients with heart failure to get back to life. The company’s innovative technologies are creating advances in the miniaturization of Ventricular Assist Devices (VADs) leading to less invasive surgical procedures and increasing the patient population who may be suitable for VAD therapy.

HTWR Beats Estimates In Each Of the Last Two Quarters

Dating back to the December 2012 quarter, Heartware has beaten the Zacks Consensus Estimate in two consecutive quarters. The December 2012 quarter saw the company post a positive earnings surprise of 10.4%. The following quarter saw an even larger surprise of 24.35%. The increases in the beats means that the company is outperforming the increased expectations creating some solid earnings momentum.

Price Targets Move Higher

Normally, you won't find me talking about how price targets have influenced a stock. The fact is that price targets are made up numbers that have a formula that ends up justifying them. So while they are made up numbers, the chart below shows how the stock price has been impacted by recent changes in the average price target for the stock.

Projected Growth is Impressive

Topline growth has been fairly impressive but the pumps are looking like they are going to be working overtime in 2013. Revenue grew at a 34% annual rate in 2012 but is expected to balloon to 82% in 2013. When compared to an industry average of top line growth of -1.6% in 2012 and 4.3% in 2013, its clear this company ranks among the top in growth. The story doesn't have any blockage for 2014 as the topline is expected to grow by another 27% vs the industry average of 6.2%.

Most investor care most about how the top line growth flows through to the bottom line. While 2012 was a hard year for HTWR with -56% earnings growth, good things are expected in each of the next two fiscal years. 47% growth in 2013 and 56% bottom line growth in 2014 are outpacing the industry average in a significant way.

Valuation

The valuation picture for HTWR is a challenging one due to the negative earnings. The stand by valuation metrics like Price to Earnings are all not meaningful due to the negative earnings. Price to book of 8x is double that of the industry average. The price to sales metric also shows a significant premium as well. The big idea on valuation is not what the company is worth now, but what it will be worth at this point next year after it posts 81% revenue growth and 47% earnings growth... that is when the story becomes interesting.

The Chart

A quick look at the two year chart shows the stock has recently reached new highs. Stocks that are and have been hitting new highs over the last 5 months have turned out to be great investments. The idea with that is that you stick with what works, and HTWR is clearly working.

Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor in charge of the Zacks Home Run Investor service, a Buy and Hold service where he recommends the stocks in the portfolio.

Brian is also the editor of Breakout GrowthTrader a trading service that focuses on small cap stocks and also carries a risk limiting strategy. Subscribers get daily emails along with buy, and sell alerts.

Follow Brian Bolan on twitter at @BBolan1

Like Brian Bolan on Facebook

 
HEARTWARE INTL (HTWR): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research ]]> Tue, 21 May 2013 06:42:01 GMT Jive Software (JIVE) isn't jiving with analysts as they see earnings to continue to move lower. As a Zacks Rank #4 (Sell), it is the Bull of the Day.

Do We Have Enough Social Networks?

Jive is looking to get businesses use their software to increase collaboration, content movement and enterprise portals / intranets. Jive's mission is to change the way work gets done, but with nearly 1 billion Facebook users, 175M LinkedIn members and about 400 million tweets a day, are they late to the game?

Company Description

Jive Software, Inc. provides a social business software platform to businesses, government agencies, and other enterprises. Its Jive Engage Platform enables collaboration across two principal communities and employees within the enterprise, and customers and partners outside the enterprise. The company's Jive Engage Platform is used as a communications tool and collaborative workspace that supports and enhances knowledge sharing, facilitates communication within and across organizational boundaries, and enables individuals to work together to achieve common business goals.

JIVE Hasn't Beat Over The Last Year

Dating back to the December 2011 quarter, which was the last time that the company posted a positive earnings surprise. Of the five quarters since that time, there have been two meets and 3 negative earnings surprises.

Losses Increase as Revenues Grow

When you see a stock that has revenues increase and earnings per share decrease you start to scratch your head. Jive has posted revenue of $27M, $29M, $33M and $34M in each of the last four quarters respectively. Over the same period reported earnings per share fell from -$0.18, -$0.17, -$0.23, -$0.24. So the losses are getting bigger as revenues increase.

Projected Earnings Growth Drops

Topline growth has shown up, but the bottom line is projected to only see extended losses in 2013 and 2014. Just in the last six months, the Zacks Consensus Estimate for 2013 has moved from a loss of $0.47 to a loss of $1.06, a significant drop. At the same time, 2014 is not getting any better. In November 2012, the 2014 estimate moved from -$0.29 to the current level of a loss of $1.00.

Valuation

The valuation picture for JIVE is a challenging one due to the negative earnings. The stand by valuation metrics like Price to Earnings are all not meaningful due to the negative earnings. Price to book of 8.3x is almost double that of the industry average. The price to sales metric also shows a significant premium as well. Still the company is projected to see revenue growth of 33% this year and 29% next year. Earnings growth of -47% for 2013 is a major detractor, but 5.7% growth in earnings for 2014 shows that there is light at the end of the tunnel. The problem is the tunnel is awfully long.

The Chart

A quick look at the price and consensus shows that the young company debuted with some high expectations. Since that time analysts have continued to move their earnings estimates lower and lower. With the stock comfortably in the teens, shareholders are more than likely going to stick with it until single digits appear imminent.

Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor in charge of the Zacks Home Run Investor service, a Buy and Hold service where he recommends the stocks in the portfolio.

Brian is also the editor of Breakout GrowthTrader a trading service that focuses on small cap stocks and also carries a risk limiting strategy. Subscribers get daily emails along with buy, and sell alerts.

Follow Brian Bolan on twitter at @BBolan1

Like Brian Bolan on Facebook

 
JIVE SOFTWARE (JIVE): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research ]]> Mon, 20 May 2013 11:00:01 GMT Haverty Furniture Companies, Inc. (HVT) is looking to cash in on the housing recovery. This Zacks Rank #1 (Strong Buy) is expected to grow earnings by 63% in 2013.

Havertys has seen it all. The company was founded in 1885 in Atlanta and used to make deliveries in horse and buggy. It now has showrooms in 16 Southern and Midwest states. Havertys went public in 1929 during dark economic times, but it has survived each of the big economic shocks.

The impact of the recent housing bust is obvious in Havertys multi-year earnings history. Earnings plunged 88.7% in 2007 to just 8 cents before the rest of the country went into recession and took Haverty's even lower.

The company didn't make money in either 2008 or 2009. Even 2010 and 2011 were still a struggle. But in 2012, the turnaround in the housing market, and the consumer, began to take hold. Havertys made 67 cents that year and it has seen rising earnings ever since.

As Housing Improves, So Does Havertys Business

On May 1, Havertys reported its first quarter results which easily beat the Zacks Consensus by 33%. Consumers were in the mood to shop to start the year as sales jumped 13.8% to $186.1 million while same store sales rose 11.5%.

It's not surprising that house sales and median home prices were rising throughout the quarter and Havertys business remained solid.

Gross profit margins were up 130 basis point to 53.5% from 52.2%.

Gains To Continue

The company also said that the total delivered sales to date for the second quarter were already running 14% higher over the same period a year ago.

It did try to temper expectations for the full year, though, saying that gross profit margins for the year, while improving, won't be as hot as the first quarter.

Housing Recovery Play Not a Secret

Investors have been all over the housing recovery stocks for the last year. The improvement in the housing market isn't exactly a secret anymore.

Shares of Havertys have soared since last summer to multi-year highs.

But, its valuation still isn't excessive. It's trading with a forward P/E of 22 and a price-to-book of just 2.0.

Consumer sentiment is finally reaching pre-recession levels which means that people believe the economy, and their own personal fortunes, are improving. The rise in stock and housing prices have a lot to do with that.

During times that you're feeling better about your financial situation, that's when you're likely to buy big ticket items like new furniture.

For investors looking for a way to play the housing recovery outside of the homebuilders, Havertys is one stock worth checking out.

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Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec.

 
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