For Immediate Release
Chicago, IL – January 24, 2017 –Zacks Equity Research highlightsFairmount Santrol Holdings (NYSE: FMSA- Free Report ) as the Bull of the Day and StoneMor Partners (NYSE: STON- Free Report ) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Goldman Sachs (NYSE: GS - Free Report ), Honda Motor (NYSE: HMC - Free Report ) and Posco (NYSE: PKX - Free Report ).
Here is a synopsis of all the five stocks:
Bull of the Day :
In 2013, there were approximately 1,400 active rigs drilling for U.S. shale oil, but that number has fallen to around 529 total rigs currently. The big decline in rigs was due to oil prices falling from around $107 per barrel in June of 2015 to $30 in January of 2016. During the decline, shale drillers concentrated on become more efficient, decreasing drilling times, and increasing the total amount of oil produced per well.
On January 10th the International Energy Agency (IEA) reported that, “ recent reports tell us that the productivity of shale activity has improved in leaps and bounds. Whether it be shorter drilling times or larger amounts of oil produced per well, there is no doubt that US shale industry has emerged from the $30/bbl oil world we lived in a year ago much leaner and fitter .” Further, the U.S. Energy Information Administration (EIA) increased their forecasts of U.S. oil production by 320,000 barrels per day because of, “ improved well completion techniques, longer lateral wells, and the use of more proppants that have increased recovery estimates .”
This data brings us to the Zacks Bull of the Day,Fairmount Santrol Holdings (NYSE: FMSA- Free Report ). This Zacks Ranked #1 (Strong Buy) company provides sand and sand-based products used by oil and gas exploration and production companies to enhance the productivity of their wells. Its operating segment consists of Proppant Solutions and Industrial and Recreational Products. Proppant Solutions segment provides sand-based proppants for use in hydraulic fracturing operations. I&R segment provides raw, coated and custom blended sands to the foundry, building products, glass, turf and landscape and filtration industries.
Recent Earnings Data
In November, management posted Q3 2016 results, and they met the Zacks consensus earnings estimate, and beat the Zacks consensus revenue estimate. Specifically, on a quarter over quarter basis, Fairmount saw gains in total volumes +24%, revenues +18%, oil & gas proppant volumes +36%, sales of raw frac sand +35%, and sales of resin coated proppant +61%.
According to Jenniffer Deckard, President and Chief Executive Officer, “ We are encouraged by the early signs of improvement we saw in the proppant market during the third quarter. Third-quarter volumes in our Proppant Solutions segment saw significant increases sequentially and over the prior-year period, as demand strengthened for both our raw frac sand and coated proppants. In addition, we instituted appropriate price increases on certain Northern White sand products late in the third quarter. As market conditions improve, we will continue to evaluate our operational footprint to ensure we are optimally positioned to quickly address upticks in demand and efficiently deliver product to both our Proppant Solutions and Industrial & Recreational customers. The third-quarter reopening of our Menomonie facility and the completed expansion of our Wedron facility earlier this year are expected to enable us to meet current demand for Northern White sand, which continues to grow .”
Bear of the Day :
Some may believe that once you identify a problem that it will be fixed in a short period of time, but that is not always the case. Our Zacks Bear of the Day, StoneMor Partners (NYSE: STON- Free Report ) has been struggling with the same persistent problem for almost two years, its sales force. In Q4 15, management began to restructure their sales force, but the issue still has not been resolved a year later.
This Zacks Rank #5 (Strong Sell) company is an owner and operator of cemeteries and funeral homes in the United States, with 224 cemeteries and 57 funeral homes in 27 states and Puerto Rico. StoneMor is the only publicly traded deathcare company structured as a partnership. StoneMor's cemetery products and services, which are sold on both a pre-need (before death) and at-need (at death) basis, include: burial lots, lawn and mausoleum crypts, burial vaults, caskets, memorials, and all services which provide for the installation of this merchandise.
Recent Earnings Announcement Data
In November STON announced Q3 16 results where they missed the Zacks consensus earnings estimate for the fourth consecutive quarter, and missed the Zacks consensus revenue estimate for the third consecutive quarter. The sales force issue remains the heavy drag on financial results as the pre-need side is not growing as much as desired. Specifically, the company saw year over year declines in revenues -4.0%, distributable cash flow -41.1%, distributable available cash -36.3%, and cash distributions -46.7%.
According to Larry Miller, President and CEO, “ As we indicated in our previous announcement, third quarter financial results were disappointing. We continue to work on upgrading the quality of our sales force through increased recruiting efforts and other initiatives. The pace of progress has been below our expectations, but we believe our recent results are the result of a lack of execution and not due to any broad changes in the industry. The fundamentals of our industry continue to be predictable death rates, favorable demographics and large barriers to entry in the cemetery space, of which StoneMor is one of only a few scale players. As we work on enhancing the quality and size of our sales force, we intend to provide updates on its expansion in an effort to provide visibility on our efforts and data points by which investors may monitor our progress .”
Deep Water Under an Agitated Surface
In the Global Week Ahead, the Trump administration kicks off its first 100 days.
Much like whitecaps hitting shore on a stormy lake, expect this President’s executive orders to land in a fast and furious fashion.
These could include: orders on immigration policy, withdrawing from the Trans-Pacific Partnership (the TPP), establishing a group to renegotiate NAFTA and firing off a letter to leaders in Canada and Mexico, approving the Keystone pipeline, boosting coal and repealing some gun control legislation.
Acting like another Loch Ness monster, the Brexit serpent agitates the political waters in the U.K.
On Tuesday, the U.K. Supreme Court should affirm a lower court ruling: The U.K. Parliament must vote to trigger Article 50. FX strategists write of any subsequent U.K. pound rally as “limited and short-lived.”
Despite strident political activism here and across the pond, a strengthening U.S. economy will endure. This is the deep water beneath the surface. On Friday in the U.S., the latest snapshot of real GDP growth hits the tape.
According to the Jan. 19th GDPNow forecast, real GDP growth should be supportive at +2.8% in Q4. This is down a bit from a +3.5% Q3 final rate. Mind you, Q4 data serves up a preliminary estimate. There are 2 revisions down the road.
All week long, stock traders also digest a steady diet of Q4 EPS reports.
More than 20% of S&P 500 companies report Q4 results this week. The list includes large-cap marquees -- Google-parent Alphabet, Yahoo, Intel, Microsoft, McDonald’s, Starbucks, Boeing, Lockheed Martin, Comcast, Verizon, Ford, 3M, Dow and Caterpillar.
Hint: Take Q4 U.S. real GDP growth – add +2% as a proxy inflation gain -- and compare the sum to nominal revenue growth reported by each U.S. company. That compare-and-contrast exercise should be provocative about where outperforming revenue growth can be found in the U.S. economy.
When writing this week’s column, I used the analogy of a stormy lake as a literary device. I use what I learned, spending summers as a boy in Northern Minnesota. Whitecaps from strong winds can churn the surface all they want. The deep lake beneath can remain relatively calm, moved only by hidden currents.
Top Zacks #1 Rank (STRONG BUY) Large Cap Stocks—
(1) Goldman Sachs (NYSE: GS - Free Report )
Goldman Sachs is a global investment banking and securities firm, providing a full range of investing, advisory and financing services worldwide to a substantial and diversified client base.
(2) Honda Motor (NYSE: HMC - Free Report )
Honda manufactures a wide range of products, including motorcycles, ATVs, generators, marine engines, lawn and garden equipment and automobiles. Historically, Honda has been a leader in fuel-efficiency and low-emission technology.
(3) Posco (NYSE: PKX - Free Report )
POSCO was formerly known as Pohang Iron & Steel Company Ltd. In South Korea, it manufactures hot and cold rolled steel products, heavy plate and other steel products for the construction and shipbuilding industries. It is the world’s 4th largest steelmaker, at 42 million tons of crude steel output in 2015.
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Fairmount Santrol Holdings Inc. (FMSA): Free Stock Analysis Report
StoneMor Partners L.P. (STON): Free Stock Analysis Report
Goldman Sachs Group, Inc. (The) (GS): Free Stock Analysis Report
Honda Motor Company, Ltd. (HMC): Free Stock Analysis Report
POSCO (PKX): Free Stock Analysis Report
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