Gentex, Crocs, NRG Energy, PG&E and Edison International highlighted as Zacks
Bull and Bear of the Day
CHICAGO, Aug. 8, 2013
CHICAGO, Aug. 8, 2013 /PRNewswire/ --Zacks Equity Research highlights Gentex
(Nasdaq:GNTX-Free Report) as the Bull of the Day and Crocs (Nasdaq:CROX-Free
Report) as the Bear of the Day. In addition, Zacks Equity Research provides
analysis onthe NRG Energy Inc. (NYSE:NRG-Free Report), PG&E Corporation
(NYSE:PCG-Free Report) and Edison International (NYSE:EIX-Free Report).
Here is a synopsis of all five stocks:
Bull of the Day:
If you are looking to play for strength in the auto market, Gentex
(Nasdaq:GNTX-Free Report), Zacks Rank #1 (Strong Buy) may be your ride. R.L.
Polk recently reported that the average age of a vehicle on U.S. roads is a
record 11.4 years. The average age has increased eleven consecutive years.
Although auto manufactures have improved the quality and longevity of vehicles
and fuel prices are historically high, replacement needs should be a
supportive factor for auto parts manufactures. The need to replace an aging
vehicle fleet played out in July vehicle sales which rose 10.9% year over year
to a 16.1 mlu rate. Before the Great Recession, U.S. vehicle sales were able
to touch an 18.0 mlu rate.
Simply put, Gentex manufactures rear view and side view mirrors which enhance
the safety of driving. Furthermore, it recently purchased Homelink to enable
drivers to communicate with their home security systems, lightening, door
locks, and other radio frequency products. Gentex also has operations which
manufacture dimming windows for the aerospace industry and fire protection
products. These operations are very small sources of revenue at 2%, but they
have shown extremely fast growth over the last year.
Analyst earnings estimate revisions are trending upward. Analysts have revised
earnings estimates higher for 2013 and 2014 seven times over the past 30 days,
and no analyst has cut an estimate.
The Zacks Consensus Earnings per Share Estimate for 2013 and 2014 have risen 9
cents to $1.34 and $0.10 cents to $1.45 respectively over the past 30 days.
Additionally, the most accurate forecaster is looking for a positive surprise
with projections for 2013 and 2014 EPS of $1.36 and $1.55 respectively.
Valuation looks reasonable with the 12 month forward PE ratio of 16.5 compared
to a 10 year median of 21.3.
Gentex has a dividend yield of 2.46% and a history of solid free cash flow to
support the payment. The yield is very competitive to cash and most of the
treasury yield curve.
Bear of the Day:
Crocs (Nasdaq:CROX-Free Report), Zacks Rank #5 (Strong Sell), manufactures and
markets footwear products. The company recently disappointed investors
reporting June quarterly profits of 48 cents per share against a Zacks
Consensus Earnings Estimate of 64 cents. The 25% negative earnings surprise
contributed to a sharp price decline, and has left the stock struggling near a
six month low.
Earnings estimates for Crocs have declined sharply over the past thirty days
and paint a negative picture. The Zacks Consensus EPS Forecast for 2013 has
declined 37 cents to $1.02, while Zacks Consensus EPS Forecast for 2014 has
dropped 39 cents to $1.22. The graphic displays the downward trend in analyst
There have been no estimate increases for either 2013 or 2014 over the past 30
days and seven estimate decreases over the same period.
Gross margin has been eroding in recent quarters. It has declined from 54.6%
in the quarter ending September 2012 to 53.7% in the quarter ending June 2013.
Gross margins were the lowest since 2010.
A decline in the order book of 6.7% and a weak consumer environment in the
U.S. and Europe look to be generating headwinds to the outlook for sales and
Will NRG Energy Beat Earnings?
We expect utility company NRG Energy Inc. (NYSE:NRG-Free Report) to beat
expectations when it reports second-quarter 2013 results before the market
opens on Aug 9, 2013.
Why a Likely Positive Surprise?
Our proven model shows that NRG Energy is likely to beat earnings because it
has the right combination of key factors.
Positive Zacks ESP: Expected Surprise Prediction or ESP (Read:Zacks Earnings
ESP: A Better Method), which represents the difference between the Most
Accurate estimate and the Zacks Consensus Estimate, is +3.33%. This is
meaningful and a leading indicator of a likely positive earnings surprise for
Zacks #3 Rank (Hold): The stocks with Zacks Ranks of #1, 2 and 3 have a
significantly higher chance of beating earnings. The Sell rated stocks (#4 and
5) should never be considered going into an earnings announcement.
The combination of NRG Energy's Zacks Rank #3 (Hold) and +3.33% ESP make us
confident of a positive earnings beat on Aug 9.
What is Driving Better-than-Expected Earnings?
We believe that the positive impact from the GenOn-acquisition, in terms of
enhancement in operational efficiencies and cost synergies, will play a vital
role in improving NRG Energy's performance. In 2013, the company expects to
realize $150 million of cost and operational synergies from this transaction.
Recently, NRG Energy entered into a contract-extension agreement with two
clients - Houston Technology Center and St. Tammany Electric and Claiborne
Electric co-operatives, to provide power services. The company also signed two
new long-term power supply commitments with Comcast and the city of Houston.
We believe these initiatives will help to provide a secured earnings flow in
the near future.
In addition, NRG Energy's two solar photovoltaic (PV) facilities - Kansas
South and TA-High Desert projects – have started commercial operation. These
two projects have power generation capacity of 20 megawatts (MW) each. NRG
Energy will sell the output to PG&E Corporation's (NYSE:PCG-Free Report)
subsidiary Pacific Gas and Electric Company and Edison International's
(NYSE:EIX-Free Report) unit Southern California Edison.
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