Analysts revised their estimates significantly higher for both 2013 and 2014 off the Q1 beat, sending the stock to a Zacks Rank #1 (Strong Buy). Based on current consensus estimates, analysts expect excellent growth from Mohawk over the next couple of years. With valuation still at reasonable levels, shares of Mohawk offers strong upside potential.

Mohawk Industries is a global flooring manufacturer focused on the production of carpet, rugs, ceramic tile, laminate, wood, stone and vinyl flooring. Its brands include American Olean, Bigelow, Dal-Tile, Durkan, Karastan, Lees, Marazzi, Mohawk, Pergo, Unilin and Quick-Step.

First Quarter Results

Mohawk Industries delivered solid first quarter results on May 2. Adjusted earnings per share jumped 50% to 87 cents, beating the Zacks Consensus Estimate of 84 cents.

Net sales rose 6% to $1.487 billion, driven by strong gains in the Dal-Tile and Unilin segments. The gross profit margin did decline slightly from 25.5% to 25.4% of net sales.

However, the adjusted operating profit margin expanded 140 basis points to 6.5% of net sales as the company leveraged its selling, general and administrative expenses. This led to a stellar 34% increase in adjusted operating income.

Estimates Soaring

Although Mohawk reported a relatively modest 3 cent EPS beat for Q1, analysts revised their estimates significantly higher for both 2013 and 2014. This sent the stock to a Zacks Rank #1 (Strong Buy).

In fact, the 2013 Zacks Consensus Estimate has jumped from $5.16 to $5.80 over the last 60 days. And the 2014 consensus has increased from $6.24 to $7.05 over the same period. You can see these sharp increases in the company's 'Price & Consensus' chart:

Analysts expect strong growth from Mohawk over the next couple of years too. Based on current consensus estimates, analysts project 53% EPS growth this year and 22% growth next year.

The Zacks Industry Rank is also very bullish for Mohawk. The 'Textile - Home Furnishings' industry is the #1 ranked industry out of 265!

Valuation

Shares of Mohawk currently trade at 18x 12-month forward earnings, which is above its 10-year median of 15x. However, when you factor in the strong earnings growth projections and excellent earnings momentum, this premium seems reasonable.

The Bottom Line

With strong industry tailwinds, rising estimates and stellar earnings growth projections, Mohawk Industries offers attractive upside potential.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.

 
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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.

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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 ]]> 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.

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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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Zacks Investment Research ]]> Fri, 17 May 2013 11:00:01 GMT CEC Entertainment, Inc. (CEC) recently delivered a strong first quarter earnings beat as same-store sales increased 1.6%.

Management also provided 2013 earnings guidance ahead of consensus, prompting analysts to revise their estimates significantly higher. It is a Zacks Rank #1 (Strong Buy) stock.

Although shares have risen strongly since the Q1 report, valuation still looks reasonable with the stock trading at 13x forward earnings. So there is plenty of room for CEC to continue running higher.

CEC Entertainment and its franchisees operate 566 Chuck E. Cheese's stores located in 47 states and eight foreign countries and territories. Chuck E. Cheese's feature games, rides, play areas, musical and comic robotic entertainment, and several dining options including pizzas.

First Quarter Results

CEC reported first quarter results on May 2. Total revenues rose 3% to $255.3 million, ahead of the consensus of $250.0 million. This was driven by a 1.6% increase in same-store sales.

Meanwhile, total company store operating costs declined 110 basis points to 67.8% of sales. However, the operating profit margin declined 20 basis points to 22.0% of revenue due to higher advertising and general and administrative expenses.

Adjusted earnings per share increased 5% to $1.86, beating the Zacks Consensus Estimate of $1.80. Part of this was driven by a lower share count as the company continued to repurchase its own stock.

Estimates Rising

Following the company's solid Q1 beat, management provided strong guidance for the remainder of 2013. The company said that it expected to earn between $2.80 and $2.95 per share on same-store sales growth of 1.5-2.5%. This prompted analysts to revise their estiamtes significantly higher for both 2013 and 2014, sending the stock to a Zacks Rank #1 (Strong Buy).

The Zacks Consensus Estimate for 2013 jumped from $2.65 before the report to $2.90 after it. And the 2014 consensus jumped from $2.99 to $3.18 over the same period.

Reasonable Valuation

Shares of CEC are up more than 17% since the company's Q1 beat. But the valuation picture still looks reasonable with shares trading at 13x forward earnings, which is in-line with its historical median.

Additionally, its price to sales ratio is only 0.8, below its historical multiple of 1.0.

The Bottom Line

With rising sales and EPS, strong earnings momentum and reasonable valuation, CEC Entertainment offers attractive upside potential.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.

 
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Zacks Investment Research ]]> Thu, 16 May 2013 05:31:01 GMT

Remember the “original white meat?”  Yes, chicken and more specifically a Zacks Rank #1 stock called Sanderson Farms SAFM might be worth a look as part of your portfolio smorgasbord. 

Aside from my love for the meat itself, chicken and the companies that produce them have been on my radar for some time.  In 2011 I did quite a bit of research into the chicken industry titans such as Tyson, Pilgrim’s Pride and today’s bull, Sanderson Farms.  I have mentioned Sanderson as a favorite on Fox Business several times, including this appearance just ahead of the New Year (chicken comments start around 3:30).

Chicken producers including Sanderson went on a tear from late 2011 into mid 2012 and then took at bit of a beating late last year due to skyrocketing feed costs, plummeting chicken prices and reduced consumption.

Sanderson has resumed its bullish run over the last 6 months and despite the fact that shares are up nearly 40% since late December, Sanderson continues to prove why it still should be part of your portfolio.

Food Inc
Companies like Tyson Foods TSN, Hormel HRL, Sanderson Farms and Pilgrim’s Pride PPC, to name a few, actually grow or raise their own crops and livestock in addition to preparing and packaging and finally selling to distributors like Wal-Mart WMT, Kroger KR, Safeway SWY and other stores for our dining pleasure.

They produce immense quantities of food for a growing population that is demanding more and more proteins like chicken.  To achieve their more than 2 billion pounds of annual product shipments, Sanderson employs over 10,000 people, 700 independent growers and ships to nearly every state in the U.S. as well as many developed foreign nations.

They also have tight controls and automation when it comes to their hatcheries, feed mills, processing and distribution in an effort to maintain consistency and their products’ “natural” classification.

Chickens are big business; there are more chickens in the world than any other domesticated bird and more chickens in the world than there are people.

To keep up with demand, Sanderson’s most recent facility addition is a “big-bird” deboning facility in Waco, Texas that will process approximately 1,250,000 birds per week; obviously not a “fly by night” operation…

Earnings Comeback
2011 was a fairly tough year as earnings expectations tumbled for SAFM.  FY2012 and FY2013 estimates also dipped in mid 2012 with the sharp rise in commodity prices (feed) and a global economy mostly in recession, forcing chicken prices lower.

Sanderson dealt with low demand in 2012 by economizing their business and improving margins.

At their last report, Sanderson actually reported a loss of 31 cents per share for the quarter, on revenue of $605.43 million for the quarter, compared to the consensus estimate of $559.30 million.   The company’s revenue for the quarter was up 15.1% on a year-over-year basis.

Even though the company missed the Zacks consensus estimates for a 7 cent loss, the strong revenues and positive guidance carried the stock higher.  

We’ve seen the majority of analysts increase their estimates for the chicken producer.   Analysts at BMO Capital Markets raised their price target on shares of Sanderson Farms from $42.00 to $51.00 in a research note to investors on Thursday, April 11th. They now have a “market perform” rating on the stock.

Analysts at Sidoti and here at Zacks downgraded shares of Sanderson Farms because of its tremendous run recently and perhaps a slightly high valuation at 16 times forward earnings.

Current Zacks consensus estimates are for 72 cents in the current quarter, $1.59 for next quarter and $4.87 in FY2013, with expectations for an 8% increase in year over year sales.

Chickens and the Future
Sanderson and its peers are no doubt susceptible to commodity prices, chicken prices and chicken demand.

Late last year, we saw retail chicken prices hit all-time highs as producers continued to pass on the effects of this summer's sky-high corn prices. According to the USDA's retail broiler composite price, which measures the price paid for chicken parts and whole birds, chicken prices are not only much higher than last year (+17.63%), but stable and rising.

Mechanically separated chicken prices are also higher than last year and appear to be more stable at present.

On the grain front, we are seeing favorable conditions for corn planting and according to Peter Meyer of PIRA Energy Group, prices could go lower.  "Besides weather, the key for the summer will be the conditions that the seed was planted in.  For the most part they’ve been marginal at best. But, that all doesn’t matter with poor demand.  It will take a sub-$4.50 price to really get demand heated up. But, I’m not so sure we can get there.  We should be able to get down to $5.00 and then it’s a matter of consumers stepping up. If they don’t, it will lead to another leg lower" Meyer noted recently.

With high chicken prices, low input costs and increased consumer demand, the environment is almost what you would call a “chicken trifecta.”

Summary
There is no doubt that Sanderson’s success is dependent on several moving parts and that the stock has had a tremendous run, but if grain conditions are favorable and the U.S. and global economy stay stable at the very least, a 16 times valuation with a small 1.10% dividend is not a bad price to pay for a stock that is feeding the world’s growing desire for low-cost, healthy protein.

We will know more when the report earnings on May 21st; perhaps a “leg-in” strategy might be the best solution here, with a little long now and a little after the report.

Jared A Levy is one of the most highly sought after traders in the world and a former member of three major stock exchanges. That is why you will frequently see him appear on Fox Business, CNBC and Bloomberg providing his timely insights to other investors. He has written and published two tomes, “Your Options Handbook” and “The Bloomberg Visual Guide to Options”.  You can discover more of his insights and recommendations through his two portfolio recommendation services:

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Analysts also project strong growth for IAC over the next couple of years. Despite this, shares trade at just 13x forward earnings, well below their historical multiple.

IAC is an internet company with more than 150 brands and products focused in the areas of search, applications, online dating, local and media. Its portfolio of websites includes Ask.com, About.com, Match.com, HomeAdvisor.com and Vimeo.com.

Big Q1 Beat

IAC reported strong first quarter results on April 30. Earnings per share came in at 74 cents, well ahead of the Zacks Consensus Estimate of 53 cents.

Revenue rose 16% to $742.2 million, marking IAC's 13th consecutive quarter of double-digit revenue growth. The 'Search & Applications' segment saw top-line growth of 16% while Match.com rose 8%.

Meanwhile, operating income before amortization soared 24% as the operating margin expanded 90 basis points to 15.2% of revenue.

Rising Estimates

Earnings estimates have risen sharply for IAC since the company's big Q1 beat. The Zacks Consensus Estimate for 2013 is now $3.41, up from $3.00 before the report. And the 2014 consensus has risen from $3.76 to $4.08 over the same period.

This strong earnings momentum recently sent shares of IAC to a Zacks Rank #1 (Strong Buy). The Zacks Industry Rank for IAC also shows promise. The 'Internet Commerce' industry is ranked in the top 8% of all industries.

Growth at a Reasonable Price

Analysts project strong growth from IAC over the next couple of years. Based on current consensus estimates, analysts expect 80% EPS growth this year and 20% growth next year.

Despite this, shares trade at just 13x 12-month forward earnings, well below its 10-year median forward multiple of 23x.

Based on a consensus 5-year EPS growth rate of 16.6%, IAC's PEG ratio is an attractive 0.8.

The Bottom Line

With strong earnings momentum, attractive growth prospects and reasonable valuation, IAC offers investors a lot to like.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.

 
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Zacks Investment Research ]]> Tue, 14 May 2013 09:23:01 GMT

About the Company

Based in Lewisville, Texas, Nationstar is one of the leading residential mortgage services companies in the U.S., with a servicing portfolio of $312 billion. The company offers servicing, origination, and real estate services to financial institutions and consumers.

Excellent First Quarter Results and Improved Guidance

On May 7, 2013, Nationstar reported its first quarter 2013 results. Net income for the quarter came it at $62.6 million or $0.70 per share, up from $50.2 million or $0.67 per share in the first quarter 2012.

Pro-forma earnings excluding ramp-up expenses related BOA portfolio acquisition were $0.85 per share, substantially ahead of Zacks consensus estimate of $0.69 per share.

Revenue for the quarter was up 163% to $431.1 million from $164.1 million in the prior-year quarter. The company delivered an impressive 32% return on equity during the quarter.

The management improved its guidance for FY 2013 to $4.05–$4.75 per share from $3.70–$4.35 per share and for FY 2014 to $6.45–$7.50 per share from $5.60–$6.50 per share.

Nationstar also announced the acquisition of mortgage origination business of Greenlight Financial Services, a leading direct-to-consumer originator for up to $75 million in cash.

According the company, the acquisition is expected to close in the second quarter and to be immediately accretive.

Positive Earnings Estimates Revisions

As a result of excellent results and improved management guidance, analysts have been revising their estimates for current quarter and the fiscal year 2013. Zacks consensus estimates for the current quarter and the current year have soared to $1.01 and $4.52 per share, respectively up from $0.89 and $3.97 per share, seven days ago.

The company has delivered positive surprises in each of the last four quarters—with an average surprise of 18.58%.

Solid Industry Outlook

With a Zacks Industry Rank of 8 out of 265, Mortgage Servicing industry is expected to outperform significantly in the near-to-mid term. Rising home prices will lead to fewer losses for the delinquent loans that the company services. Further if the rates start to rise, the life of its servicing assets will get extended, leading to increased cash flows.

The Bottom Line

NSM is a Zacks Rank#1 (Strong Buy) stock. It also has a longer-term Zacks recommendation of “Outperform”. Further a Zacks Industry rank of 8 out of 265 indicates very strong likelihood of continued strength in the short to medium term, compared to other industries.

With a solid growth potential, I believe that this stock will be a nice addition to any portfolio.

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