Magellan Midstream Partners, Jos. A. Bank, Triumph Group, United Technologies
and Precision Castparts highlighted as Zacks Bull and Bear of the Day
CHICAGO, Aug. 19, 2013
CHICAGO, Aug. 19, 2013 /PRNewswire/ --Zacks Equity Research highlights
Magellan Midstream Partners(NYSE:MMP-Free Report) as the Bull of the Day and
Jos. A. Bank(Nasdaq:JOSB-Free Report) as the Bear of the Day. In addition,
Zacks Equity Research provides analysis on theTriumph Group,
Inc.(NYSE:TGI-Free Report) United Technologies Corp.(NYSE:UTX-Free Report),
Precision Castparts Corp.(NYSE:PCP-Free Report).
Here is a synopsis of all five stocks:
Bull of the Day:
Magellan Midstream Partners(NYSE:MMP-Free Report), Zacks Rank #1 (Strong
Buy), is a publically traded partnership which stores, transports, and
distributes petroleum products. This stock is worth exploring given the
political chaos in the Middle East, the hunt for yield in the face of rising
treasury yields, and the North American energy boom. Further, Magellan is
showing strong upward earnings revisions momentum.
The social unrest in Egypt and Syria has the chance of spilling into the
broader Middle East and supporting a risk premium in the crude oil market.
Investing in an energy based asset may help to insult your portfolio against
geopolitical risk and higher energy prices. Moreover, the events in the
Middle East put a spotlight on the importance of North American energy
production and transport. Strong and growing U.S. energy activity is a
national security issue.
Magellan has a deep history of distribution growth with 44 quarterly increases
and a compounded annual growth rate in distribution of 12% between 2001 and Q1
2013. At the same time, it has an attractive distribution yield just below
4.0%. The company recently raised its fiscal year 2013 distributable cash
flow by $50 mln to $630 mln.
Over the last 30 days, the 2013 Zacks Consensus Earnings per Share Estimate
has risen 10% to $2.49, while the 2014 Zacks Consensus Earnings per Share
Estimate has increased 5.5% to $2.66. In the past 30 days, estimates have been
raised nine times for 2013 and ten times for 2014. There have been no
estimate reductions. Magellan is worth exploring given its strong growth in
earnings, healthy payout, and operation in a business with supportive macro
fundamentals. You don't have to travel the earth to find a good investment
prospect with Magellan.
Bear of the Day:
Jos. A. Bank(Nasdaq:JOSB-Free Report), Zacks Rank #5 (Strong Sell), is an
apparel retailer specializing in menswear. Although their clothes can help
make a fashion statement, the stock is not likely to look good in your
portfolio. On August 15^th, the company guided its Q2 profit outlook lower.
Earnings per share were seen somewhere between $0.49 and $0.53 compared to a
Zacks Consensus Estimate of $0.66. In the press release, Jos. A. Bank noted
that customers did not respond well to promotion and total sales declined 11%
in the quarter.
The profit warning comes in the wake of a longer term downtrend in gross
margin. Gross margin peaked at 62.93% in the April 2011 quarter and has since
fallen to 57.78% in the April 2013 quarter. Margins have compressed to levels
last seen in 2004.
Over the last ten quarters, the company has posted four positive earnings
surprises and five negative earnings surprises meeting estimates one time.
The inconsistent track record is unappealing for investors and highlights
execution risk in a competitive industry. Earnings estimates have been
steadily declining, and the downtrend is unlikely to stall given the company's
The stock is trading about 13.7 times expected 12 month forward earnings per
share. This is about 1.0 above the ten year median. The stock is not cheap
at a time when there are questions around the future earnings outlook.
Triumph Group to Buy General Donlee
Triumph Group, Inc.(NYSE:TGI-Free Report) has struck an agreement with
General Donlee Canada Inc. (GDI.TO), as per which the former will acquire the
latter for $110 million in cash. This amount will be utilized to acquire
General Donlee's outstanding equity and retirement of its existing debt.
General Donlee is a leading manufacturer of flight critical complex machined
components. The company's primary product lines include engine shafts, thrust
links, rotorcraft masts and landing gear applications. The acquisition will
improve the product capabilities of Triumph Group. Besides enhancing the
relationship with the existing customers, the acquisition will further
diversify the customer base.
Post acquisition, the acquired firm will be a part of Triumph Group's
Aerospace Systems Group. Subject to customary closing conditions, the
transaction is expected to be completed in the third quarter of fiscal year
2014. The company expects the transaction to add $60 million annually to the
top line and be accretive to earnings immediately.
Currently, Triumph Group seems to be busy acquiring and adding value to its
portfolio. Recently, the company completed the acquisition of the pump and
engine control systems business of Goodrich Corporation fromUnited
Technologies Corp.(NYSE:UTX-Free Report). Prior to that, it took over Primus
Composites fromPrecision Castparts Corp.(NYSE:PCP-Free Report) for an
Triumph Group's organic growth has also been reasonably strong based on the
addition of products and services, expansion of operating capacity and
marketing of a complete product portfolio. Last month, the company posted
encouraging fiscal first quarter 2014, which surpassed the Zacks Consensus
Estimate on the back of solid execution and lower costs. Specifically,
Aerospace Systems revenue grew 56.2% year over year to $219.5 million.
However, we remain concerned about the uncertainty related to defense budgets
as the demand for Triumph Group's military and defense products is largely
tied to government defense spending. The company presently retains a
short-term Zacks Rank #3 (Hold).
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