For Immediate Release
Chicago, IL – Dec 18, 2017 – Zacks Equity Research highlights Beacon Roofing Supply BECN as the Bull of the Day and Jack in the Box JACK as the Bear of the Day. In addition, Zacks Equity Research provides analysis on the Mercury General Corp. MCY, Selective Insurance Group, Inc. SIGI and Primerica, Inc. PRI.
Here is a synopsis of all five stocks:
Bull of the Day:
Beacon Roofing Supply, a Zacks Rank #1 (Strong Buy) is one of the largest distributors of residential and non-residential roofing materials in the United States and Canada. It also distributes other complementary exterior building products. It operate in several states and three Canadian provinces and is a leading distributor of roofing materials in key metropolitan markets in the Northeast, Mid-Atlantic, Southeast and Southwest regions of the United States and in Eastern Canada.
Recent Earnings Results
The company recently reported Q4 17 results where it posted record sales for the second consecutive year. Total sales rose by +9.8% YoY, with all three product lines growing in the quarter. On a year over year basis, residential roofing product sales were up +9.3%, non-residential roofing product sales rose by +5.3%, and complementary product sales improved by +20.7%. The recent need for roofing repair in the southern states (due to the hurricanes), and increase in both housing starts, and building permits acted as strong tailwinds for the company. To add to the impressive results, management also reported that existing markets same day sales were up by +8.2% in the quarter. Further management announced a 5% to 8% price increase across all product categories due to the swelling demand.
Paul Isabella, President and CEO, commented on the quarterly results, and 2018 outlook by stating, “Fiscal 2017 produced a second consecutive year of record sales, Adjusted EBITDA and Adjusted EPS. In addition, we saw robust operating cash flow generation of approximately $315 million, which is almost a threefold improvement over the prior year. We are pleased with our fourth quarter performance, and even more excited about the future, as monthly sales trends accelerated throughout the quarter and early 2018 visibility is supported by solid re-roofing trends and two meaningful storm events. Our residential roofing product line posted its 14th consecutive quarter of sales growth and remained our strongest performing sector. Overall sales growth was very balanced among our three categories as commercial roofing produced positive growth with a mid-single digit increase.”
Bear of the Day:
Jack in the Box, a Zacks Rank #5 (Strong Sell) is a restaurant company that operates and franchises Jack in the Box restaurants, one of the nation's largest hamburger chains, and Qdoba Mexican Eats, a leader in fast-casual dining. As the first major hamburger chain to develop and expand the concept of drive-thru dining, Jack in the Box has always emphasized on-the-go convenience, with approximately half-billion guests served annually buying food at the drive-thru or for take-out.
Recent Earnings Data
On November 30th, the company reported Q4 17 results that missed both the Zacks consensus earnings and revenue estimates for the second consecutive quarter. Further, this was their third miss of both top and bottom line expectations three out of the last four quarters. The company saw year over year declines in the following; earnings from continuing operations -7.1%, sales -14.8%, Jack in the Box same store sales -2.0%, and Qdoba same store sales -4.0%.
In May, management began to look into its options regarding Qdoba restaurants; which included selling the chain outright. Just before the last earnings report it was rumored that JACK had found a buyer, Apollo Global Management LLC, for a price of $300 million. But the poor earnings data, and management writing down the value of Qdoba, put the deal in limbo. Further, after the earnings announcement, management commented that that they would not give guidance for FY 18 until they figured out its plan for Qdoba. This created uncertainty for investors, which caused the stock price to drop.
According to Lenny Comma, Chairman and CEO, “Our fourth quarter operating results concluded a challenging year for both brands. Our key initiatives in 2018 will be focused on regaining momentum in a highly competitive environment. We continue to make significant progress on our Jack in the Box refranchising initiative, with the sale of 60 restaurants in the fourth quarter and 178 during the fiscal year. We currently have signed non-binding letters of intent with franchisees to sell 32 additional restaurants, and now anticipate the Jack in the Box franchise mix to approach the high end of our previous expected range.”
3 Insurance Stocks to Buy on Fed Rate Hike
The Fed has kept its promise of three rate hikes this year. With the latest hike of 25 basis points at its recently concluded FOMC (Federal Open Market Committee) meeting, the interest rate now stands at 1.25-1.50%. Previous rate increases were made in March and June, respectively.
On a positive note, Fed Chairperson Janet Yellen reiterated the expectation to raise rates thrice in 2018 and twice in 2019.
The Fed also provided an optimistic unemployment outlook. While the Fed officials expect the employment rate for 2017 at 4.1%, the same is expected to decline to 3.9% in 2018 and 2019. The employment data is also encouraging with 228,000 jobs added in November. Also, Trump’s tax reform policy, which lowers corporate tax burden once implemented, is likely to act as an impetus.
Further good news is that economic figures instill hopes. The Fed now estimates GDP to grow at 2.5% in both 2017 and 2018, reflecting an increase from 2.4% for 2017 and 2.1% for 2018, projected earlier. However, inflation is expected to remain below 2% through the next year. The same is estimated to be approximately 2% from 2019 onward.
With the improving rate environment, investment income — an important component of insurers’ top line — is also exhibiting improvement. Life insurers having suffered a spread compression on products like fixed annuities and universal life due to persistently low rates have started to benefit. In addition, investment yield is likely to have risen. Annuity sales, too, should have gained from higher rates.
Advantages of the improving rate could already be seen in the insurers’ results. Progressing economy, encouraging employment data, stringent underwriting standards as well as capital influx infuses confidence in investors.
Amid an improving macro backdrop, investors always look eagerly to add stocks with strong fundamentals, which are likely to generate better yields.
It’s every investor’s wish to invest in currently undervalued stocks with great growth potential. Value investors always yearn to put their money on stocks that tend to trade at a lower price or at a value, lower than the intrinsic one. Whereas, growth investors look for stocks with an earnings increase relatively better than the market. Therefore they ideally search for value stocks to reap better returns.
Choosing the Right Stocks
It’s a daunting task to zero in on stocks, currently undervalued yet with a high-growth offer. The Zacks Stock Screener makes this work relatively simpler. Back-tested results have shown that stocks with Value Scores of A or B combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer the best upside potential.
We have shortlisted six insurance stocks with a market capitalization of at least $1 billion and an expected long-term earnings growth rate of 9% or more. These stocks sport a Zacks Rank of 1 or 2 and carry a Value Score of A or B. You can see the complete list of today’s Zacks #1 Rank stocks here.
Based in Los Angeles, CA, Mercury General Corp. writes personal automobile insurance in the United States apart from homeowners, commercial automobile, commercial property, mechanical breakdown and umbrella insurance. With a market capitalization of $29.1 billion, the company’s expected long-term earnings growth rate is currently pegged at 26.5%. The stock carries a Value Score of B and is a Zacks #2 Ranked player.
Headquartered in Branchville, NJ, Selective Insurance Group, Inc. provides insurance products and services in the United States. The company has a market capitalization of $3.4 billion and its expected long-term earnings growth rate is pegged at 12.2%. The stock carries a Value Score of A and is a #2 Ranked player.
Headquartered in Duluth, GA Primerica, Inc. distributes financial products to middle income households in the United States and Canada. The company has a market capitalization of $4.6 billion and its expected long-term earnings growth rate currently stands at 10%. The stock carries a Value Score of B and the same bullish Zacks Rank as the above two.
Zacks Restaurant Recommendations:In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »
About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has more than doubled the market from 1988 through 2016. Its average gain has been a stellar +25% per year. See these high-potential stocks free >>
Follow us on Twitter: https://twitter.com/zacksresearch
Join us on Facebook: https://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks Investment Research
800-767-3771 ext. 9339
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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
Primerica, Inc. (PRI) : Free Stock Analysis Report
Beacon Roofing Supply, Inc. (BECN) : Free Stock Analysis Report
Mercury General Corporation (MCY) : Free Stock Analysis Report
Selective Insurance Group, Inc. (SIGI) : Free Stock Analysis Report
Jack In The Box Inc. (JACK) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research