Wells Fargo to Enter Federal Student Loans Refinancing Market (Revised)

Wells Fargo & Company (WFC Free Report) is aiming to enter the federal student loan refinancing market with a view to bolster its performance, which has of late been impacted by its involvement in a number of legal hassles. The news was reported by Bloomberg.

Eyeing opportunities in the student lending market, of which U.S. government is the major market share holder, Wells Fargo seeks to extend its current offerings to include federal student loans refinancing. The bank offers consolidation for private student loans that were originated from any source. Meaning, a borrower with multiple private student loans with a variety of lenders could consolidate them into one Wells Fargo private student loan.

In an interview with Bloomberg, head of personal lending at Wells Fargo, John Rasmussen said, “We continue to assess the needs of our customers on refinancing of federal loans into private.” He also added, “We’re sizing what that should look like, how we’d do that in a real customer-focused way.”

Earlier this month, Wells Fargo made the headlines after admitting of having wrongly foreclosed about 400 homes in the period between April 2010 and October 2015, due to an attorney fee-related “calculation error” caused by a mortgage underwriting tool. The bank mentioned that it has kept aside $8 million as provisions to repay the affected customers.

Wells Fargo continues encounter a horde of litigations due to its past wrongdoings. Despite undergoing an advertising campaign aimed at regaining lost image, the bank’s current disclosures brought back widespread criticism.

Shares of Wells Fargo have lost 1.4% over the past six months compared with 3.9% decline witnessed by the industry it belongs to.

Wells Fargo currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Comerica Incorporated (CMA Free Report) has witnessed 5.2% upward estimate revision over the last 60 days. Also, the company’s shares have risen above 30% in the past year. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

M&T Bank Corporation (MTB Free Report) has witnessed 2.5% upward estimate revision over the last 60 days. Additionally, the stock has jumped more than 8% in a year’s time. It currently carries a Zacks Rank #2 (Buy).

Northern Trust Corporation’s (NTRS Free Report) Zacks Consensus Estimate for current-year earnings has been revised 2.8% upward over the last 60 days. Also, the company’s shares have risen more than 20% in the past year. It carries a Zacks Rank of 2, at present.

(We are reissuing this article to correct a mistake. The original article, issued on August 14, 2018, should no longer be relied upon.)

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Atlas Air Worldwide Sees Hammer Chart Pattern: Time to Buy?

Atlas Air Worldwide Holdings (AAWW Free Report) has been struggling lately, but the selling pressure may be coming to an end soon. That is because AAWW recently saw a Hammer Chart Pattern which can signal that the stock is nearing a bottom.

What is a Hammer Chart Pattern?

A hammer chart pattern is a popular technical indicator that is used in candlestick charting. The hammer appears when a stock tumbles during the day, but then finds strength at some point in the session to close near or above its opening price. This forms a candlestick that resembles a hammer, and it can suggest that the market has found a low point in the stock, and that better days are ahead.

Other Factors

Plus, earnings estimates have been rising for this company, even despite the sluggish trading lately. In just the past 60 days alone 5 estimates have gone higher, compared to none lower, while the consensus estimate has also moved in the right direction.

Estimates have actually risen so much that the stock now has a Zacks Rank #1 (Strong Buy) suggesting this relatively unloved stock could be due for a breakout soon. This will be especially true if AAWW stock can build momentum from here and find a way to continue higher of off this encouraging trading development. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Vista Gold Corporation Sees Hammer Chart Pattern: Time to Buy?

Vista Gold Corporation (VGZ Free Report) has been struggling lately, but the selling pressure may be coming to an end soon. That is because VGZ recently saw a Hammer Chart Pattern which can signal that the stock is nearing a bottom.

What is a Hammer Chart Pattern?

A hammer chart pattern is a popular technical indicator that is used in candlestick charting. The hammer appears when a stock tumbles during the day, but then finds strength at some point in the session to close near or above its opening price. This forms a candlestick that resembles a hammer, and it can suggest that the market has found a low point in the stock, and that better days are ahead.

Other Factors

Plus, earnings estimates have been rising for this company, even despite the sluggish trading lately. In just the past 60 days alone 1 estimate has gone higher, compared to none lower, while the consensus estimate has also moved in the right direction.

Estimates have actually risen so much that the stock now has a Zacks Rank #2 (Buy) suggesting this relatively unloved stock could be due for a breakout soon. This will be especially true if VGZ stock can build momentum from here and find a way to continue higher of off this encouraging trading development. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

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Castlight Health Sees Hammer Chart Pattern: Time to Buy?

Castlight Health, inc. (CSLT Free Report) has been struggling lately, but the selling pressure may be coming to an end soon. That is because CSLT recently saw a Hammer Chart Pattern which can signal that the stock is nearing a bottom.

What is a Hammer Chart Pattern?

A hammer chart pattern is a popular technical indicator that is used in candlestick charting. The hammer appears when a stock tumbles during the day, but then finds strength at some point in the session to close near or above its opening price. This forms a candlestick that resembles a hammer, and it can suggest that the market has found a low point in the stock, and that better days are ahead.

Other Factors

Plus, earnings estimates have been rising for this company, even despite the sluggish trading lately. In just the past 60 days alone 3 estimates have gone higher, compared to 2 lower, while the consensus estimate has also moved in the right direction.

Estimates have actually risen so much that the stock now has a Zacks Rank #2 (Buy) suggesting this relatively unloved stock could be due for a breakout soon. This will be especially true if CSLT stock can build momentum from here and find a way to continue higher of off this encouraging trading development. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

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Yatra Online, Inc. (YTRA) Reports Q1 Loss, Misses Revenue Estimates

Yatra Online, Inc. (YTRA Free Report) came out with a quarterly loss of $0.23 per share versus the Zacks Consensus Estimate of a loss of $0.25. This compares to loss of $0.30 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of 8%. A quarter ago, it was expected that this company would post a loss of $0.30 per share when it actually produced a loss of $0.35, delivering a surprise of -16.67%.

Over the last four quarters, the company has surpassed consensus EPS estimates two times.

Yatra Online, Inc.Which belongs to the Zacks Internet – Services industry, posted revenues of $41.48 million for the quarter ended June 2018, missing the Zacks Consensus Estimate by 32%. This compares to year-ago revenues of $46.84 million. The company has topped consensus revenue estimates three times over the last four quarters.

The sustainability of the stock’s immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management’s commentary on the earnings call.

Yatra Online, Inc. Shares have lost about 31.8% since the beginning of the year versus the S&P 500’s gain of 6.3%.

What’s Next for Yatra Online, Inc.

While Yatra Online, Inc. Has underperformed the market so far this year, the question that comes to investors’ minds is: what’s next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company’s earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Yatra Online, Inc. Was mixed. While the magnitude and direction of estimate revisions could change following the company’s just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is -$0.12 on $45 million in revenues for the coming quarter and -$0.57 on $226 million in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Internet – Services is currently in the bottom 36% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

http://www.zacks.com/stock/news/318571/yatra-online-inc-ytra-reports-q1-loss-misses-revenue-estimates?cid=CS-ZC-FT-318571http://www.zacks.com/stock/news/318571/yatra-online-inc-ytra-reports-q1-loss-misses-revenue-estimates?cid=CS-ZC-FT-318571

Strong Retail Sector Earnings Performance

Wal-Mart (WMT Free Report) shares struggled this year, with the retail giant’s February 19th earnings release raising doubts about its online business as well as overall margins. The stock lost more than 10% of its value following the February earnings report, with the subsequent May 17th release doing little to ease those worries.

Those clouds appear to have finally lifted after this quarterly report, where the retailer seems to be checking all the appropriate boxes, from a ramp-up in online sales to comp growth and even market share gains. This is helping the stock finally enjoy some sunshine.

Wal-Mart is hardly alone in enjoying the market’s affections after coming out with better-than-expected results. The overall tone of Retail sector results in recent days has been positive, notwithstanding a few standout disappointments like Macy’s (M Free Report) .

The chart below shows the quarter-to-date stock market performance of Wal-Mart (blue line), Macy’s (green line), the Zacks Retail sector (red line) and the S&P 500 index (orange line). As you can see, while the market has punished Macy’s and Wal-Mart on their respective earnings reports, the sector as a whole has done marginally better than the index.

We have a number of major retailers like Kohl’s (KSS Free Report) , Target (TGT Free Report) and others coming out with Q2 results the week of the 20th, but the sector’s results thus far have been very good.

We now have Q2 results from 24 of the 38 retailers in the S&P 500 index that, combined, account for 85.1% of the sector’s total market cap in the index. Total earnings for these Retail sector companies that have reported results are up 34.9% from the same period last year on +9.7% higher revenues, with 91.7% beating EPS estimates and 75% beating revenue estimates.

The comparison charts below put the sector’s Q2 results in a historical context.

As you can see, this is better performance than we have seen from these same retailers in other recent periods. Please note that the sector’s Q2 performance compares favorably to historical periods even after we exclude Amazon’s (AMZN Free Report) impressive results, as the ex-Amazon growth comparison chart below shows.

Q2 Earnings Season Scorecard (as of August 17th, 2018)

We now have Q2 results from 467 S&P 500 members, or 93.4% of the index’s total market membership. Total earnings for these 467 companies are up 25.5% from the same period last year on +9.9% higher revenues, with 79.2% of the companies beating EPS estimates and 72.8% surpassing revenue estimates.

With another 17 index members on the docket to report quarterly results this week, we will have seen Q2 results from 484 S&P 500 members by the end of this week.

The comparison charts below put results from these 467 index members in a historical context.

As you can see, the earnings and revenue growth pace is above the other comparable periods in the left-hand chart. The 79.2% proportion of these companies beating EPS estimates is above what we had seen from the same group of companies in other periods while the proportion of revenue beats is below the preceding period but above the historical level.

For the quarter as a whole, total Q2 earnings for the index are expected to be up 24.9% from the same period last year on +9.7% higher revenues. This exceeds the 2018 Q1’s +24.6% earnings growth, which was the highest quarterly growth pace since 2010.

The chart below shows the Q2 growth pace in contrast to estimates for the following two quarters and the actual growth rate for the preceding four quarters.

The Q2 earnings growth pace likely represents peak growth in this cycle, with the growth pace expected to decelerate in the coming quarters. This is the case with revenues as well, as the chart below shows.

The Revisions Trend

The revisions trend has been the only area of somewhat weakness in an otherwise very strong corporate earnings picture. Estimates for the current period (2018 Q3) have modestly come down since the quarter got underway, in contrast to what we had been seeing in the comparable periods in the preceding three reporting cycles.

You can see this in the chart below that shows how 2018 Q3 estimates for the S&P 500 index have come down over the last four weeks.

Given the ongoing emerging market worries in the wake of the Turkey situation, strength in the U.S. dollar and global trade uncertainty, this negative revisions trend is likely a sign of things to come going forward. We don’t want to come across as overly alarmist on the revisions front, but it is nevertheless a negative development in an otherwise very strong Q2 reporting cycle.

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Oil and Gas – Canadian E&P Stock Outlook: Signs of Tailwind

While oil production is surging in Canada, the country’s exploration and production (E&P) sector has remained out of favor, primarily due to the scarcity of pipelines. In short, pipeline construction in Canada has failed to keep pace with rising domestic crude volumes – the heavier sour variety churned out of the oil sands – resulting in infrastructural bottlenecks.

This has forced producers to give away their products in the United States – Canada’s major market – at a discounted rate. In fact, the price gap between Alberta’s Western Canada Select and the New York-traded West Texas Intermediate recently rose to around $30 per barrel – the most in more than five years.

However, the encouraging progress on a number of crucial infrastructure projects and the broadly improving Western Canadian Select prices should benefit heavy oil producers and cause an inflection in the E&P space over time. A reduction in heavy oil coming out of Mexico and Venezuela is also expected to narrow the divergence between the two benchmarks.

Even within Canada, instead of investing in risky and costly oil sands projects, the companies are now looking to pump resources into two of the popular shale plays of the company — Duvernay in central Alberta and Montney in east central British Columbia.

Finally, throughout the downturn, Canadian energy producers, just like their American counterparts, worked tirelessly to cut costs to a bare minimum and look for innovative ways to churn out more oil and gas. And they managed to do just that by improving drilling techniques and extracting favorable terms from the beleaguered service producers. Moreover, driven by operational efficiencies, these entities have been able to reduce unit costs and live within their cash flows – priming them for upward pressure on both revenues and earnings.

Industry Underperforms on Shareholder Returns

Looking at shareholder returns over the past year, it is quite apparent that investors are not too confident about the industry’s prospects. Despite improving commodity prices and the subsequent strength in profit growth, the space still has a lot of uncertainty surrounding Canada’s regulatory/environmental policy framework, limited pipeline infrastructure, and the resulting large discount for crude priced at Alberta’s Western Canada Select compared to the New York-traded West Texas Intermediate oil benchmark. 

The Zacks Oil and Gas – Exploration and Production – Canadian industry, part of the broader Zacks Oil and Energy Sector, has underperformed the S&P 500 and has barely matched its own sector over the past year. While the stocks in this industry have collectively gained 13.3% – almost identical to the Zacks Oil and Energy Sector’s 13.2%, the Zacks S&P 500 Composite rallied 16.8%.

One-Year Price Performance

The Group Remains a Bargain Opportunity for Investors

Since upstream-focused oil and gas companies are debt-laden, it makes sense to value them based on the EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization) ratio. This is because the valuation metric takes into account not just equity but also the level of debt. For capital-intensive companies, EV/EBITDA is a better valuation metric because it is not influenced by changing capital structures and ignores the effect of noncash expenses.

Thanks to the industry underperformance over the past year, the valuation picture appears pretty attractive, in comparison to the market at large. The industry currently has a trailing 12-month EV/EBITDA ratio of 6.30, at a significant discount to the S&P 500’s EV/EBITDA ratio 11.57. Moreover, the group’s valuation leaves plenty of room for upside when compared with its highest level of 11.11 over the 12-month period.

Enterprise Value/EBITDA Ratio (TTM)

As the industry’s valuation multiple is closely corelated with crude prices, comparing the group’s EV/EBITDA ratio with that of its border sector may make better sense to many investors.

The parameter shows that the group’s EV/EBITDA ratio – at 6.30 – is slightly above that of its broader sector’s 6.14. While this might suggest little room to run further, investors should note that the industry has historically traded at a hefty premium to its sector.  

Enterprise Value/EBITDA Ratio (TTM)

Prospects Look Bright on Robust Earnings Outlook

With the OPEC meeting essentially putting a floor beneath crude, the commodity should continue to trade at a price that is well above the breakeven level for producers. Moreover, the tough three years for the industry forced operators to make cost control their primary focus.

And now, most of the companies are able to cover their investment and payouts with cash from operations – something that investors desperately want. In fact, riding on improving commodity prices, a stronger production outlook and healthier cash flows, the Canadian exploration and production stocks should continue generating positive shareholder returns in the near future.

But what really matters to investors is whether this group has the potential to perform better than the broader market in the quarters ahead. While the ratio analysis shows that there is a solid value-oriented path ahead, one should not really consider the current price levels as good entry points unless there are convincing reasons to predict a rebound in the near term.

One reliable measure that can help investors understand the industry’s prospects for a solid price performance is the earnings outlook for its member companies. Empirical research shows that a company’s earnings outlook significantly influences its stock performance.

The Price & Consensus chart for the industry shows the market’s evolving bottom-up earnings expectations for it as well as the industry’s aggregate stock market performance. The red line in the chart represents the Zacks measure of consensus earnings expectations for 2019 while the light blue line represents the same for 2018.

Price and Consensus: Zacks Canadian E&P Industry

This becomes even clearer by focusing on the aggregate bottom-up EPS revisions trend. The chart below shows the evolution of aggregate consensus expectations for 2018.

Please note that the 99 cents EPS estimate for the industry for 2018 is not the actual bottom-up dollar estimate for every company within the Zacks Canadian E&P industry but rather an illustrative aggregate number created by our proprietary analytics model. The key factor to keep in mind is not the industry’s earnings per share for 2018 but how this estimate has evolved recently.  

Current Fiscal Year EPS Estimate Revisions

As you can see here, the EPS estimate for 2018 is up from 79 cents at the end of March and 75 cents this time last year. In other words, the sell-side analysts covering the companies in the Zacks Canadian E&P industry have been steadily raising their estimates.

Zacks Industry Rank Confirms Growth Outlook

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates continued outperformance in the near term.

The Zacks Canadian E&P Industry currently carries a Zacks Industry Rank #59, placing it at the top 23% of more than 250 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

In fact, the basis of this bullish outlook could be the recovery in top line that Canadian oil producers have been showing since the beginning of 2017.

Revenues: Zacks Canadian E&P industry

Another important indication of bright future prospect is the improvement in the group’s free cash flow, which is a key metric for evaluating upstream oil and gas stocks. It’s quite clear that the companies are generating enough cash to pay off debt along with funding capex and dividend payments.

Free Cash Flow: Zacks Canadian E&P industry

Bottom Line

Crude has been crawling its way back up after falling sharply from $100 a barrel in 2014 and a low of $26 in 2016. Supply-side shocks out of Iran and Venezuela in the face of growing global consumption levels — especially in emerging markets such as China and India — have put the oil market in a fundamentally tight spot. This robust backdrop, which is expected to strengthen over the course of this year, has breathed life back into the sector.

Agreed, the crude pricing strength is not likely to lead to a proportionate increase in Canadian oil realizations because of the issues discussed above. However, as part of a strategic shift, Canadian oil companies are now looking to pump resources into two of the popular shale plays of the country — Duvernay in central Alberta and Montney – instead of investing in risky and costly oil sands projects.

The gradual uptick in crude prices along with efficient strides adopted by the companies during the slump are now encouraging producers to rev up development. As a result, most Canadian upstream players are off to a strong start in 2018, exceeding their production targets through a combination of a high level of operational execution, lower completion cycle times and impressive cost reductions.

Importantly, this provides investors with an excellent chance to accumulate some quality Canadian E&P names – more so the ones with strong earnings outlook.

Below are three stocks with positive earnings estimate revisions and a bullish Zacks Rank.

Canadian Natural Resources Ltd. (CNQ Free Report) is one of the largest independent energy companies in the country engaged in the exploration, development and production of oil and natural gas in Western Canada, the United Kingdom sector of the North Sea and offshore Africa.The stock of this Calgary-based explorer has gained 9.4% over the past year. The Zacks Consensus Estimate for the current-year EPS has been revised 19.3% upward over the last 60 days. Canadian Natural Resources flaunts a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Price and Consensus: CNQ

Baytex Energy Corporation (BTE Free Report) is an intermediate explorer and producer with primary focus on the Western Canadian Sedimentary Basin and in the Eagle Ford in the United States.The stock of this Calgary-based explorer has gained 9.7% over the past year. The Zacks Consensus Estimate for the current-year EPS has been revised 56% upward over the last 60 days. Baytex Energy carries a Zacks Rank of 2.

Price and Consensus: BTE

TransGlobe Energy Corporation (TGA Free Report) is an oil and gas exploration and production company with operations primarily focused in Canada and Egypt.The stock of this explorer, also based in Calgary, has gained 155.9% over the past year. The Zacks Consensus Estimate for the current-year EPS has been revised significantly upward (from 2 cents to 51 cents) over the last 60 days. TransGlobe Energy also has a Zacks Rank #2.

Price and Consensus: TGA

Will You Make a Fortune on the Shift to Electric Cars?

Here’s another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It’s not the one you think.

See This Ticker Free >>

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REIT – Other Industry Outlook: Rising Supply to Mute Growth

Even though the benchmark interest rate was kept unchanged in the latest FOMC meeting, the acknowledgement by Fed officials of continued expansion of economic activity, a strong job market environment and inflation nearing the target level indicates that a number of rate hikes are on course this year and in the next.

Amid this, short-term hiccups from rate hikes and movements of treasury yields are likely to prevail for REITs because of their traditional dependence on debt for business and consideration as bond substitutes for high and consistent dividend-paying nature.

Moreover, apart from rate hike issues, individual market dynamics of the underlying asset category plays a pivotal role in determining the performance of REITs. Therefore, if an improving economy, job market gains, corporate profits and tax cuts are spurring demand for a number of asset categories, rising supply, evolving trade policies and several such issues are softening fundamentals and limiting the scope of growing future cash flows from the properties of related REITs.

Therefore, the performance of the REIT Equity Trust – Other industry, which is basically a diversified group comprising REIT stocks from different asset categories like industrial, office, lodging, healthcare, self-storage, data centers and others, is guided by several factors.

For example, industrial REITs are gaining traction as high consumer spending, strengthening e-commerce market, and a healthy manufacturing environment amid a recovering economy and job market are spurring demand for this real estate category. However, any protectionist trade policies will have an adverse impact on economic growth, as well as this asset category’s business over the long term. Also, a whole lot of new buildings are slated to be completed and made available in the market in the near term, leading to lesser scope for rent and occupancy growth.

For the lodging/resort REITs, fundamentals are expected to be favorable in the near-to-mid term amid economic recovery. Particularly, business travel is likely to benefit from rising corporate profits and corporate tax cuts, as well as a healthy business investment, while leisure travel is expected to gain from low unemployment level and rising wages. Nevertheless, though supply growth was tepid in the past, it has gathered momentum in recent times and is expected to remain elevated in 2018 and 2019, thereby affecting pricing power.

Also, favorable demographic changes, improving job market and rising income, are fueling demand for space in the self-storage industry, but growth might be checked due to the development boom in many markets. In case of office REITs, although an improved economy, a healthy job market environment and growing corporate profit are raising expectations, there is a slowdown in gross asking rent growth, with a demand-and-supply balance.

For data center REITs, growth in cloud computing, Internet of Things and big data, and an increasing number of companies opting for third-party IT infrastructure are providing impetus for growth. However, aggressive pricing pressure and substantial debt burden are likely to limit that growth tempo.

Healthcare REITs are benefiting from the aging baby boomer population. Specifically, cost containment, less expensive delivery settings and new technologies are driving the demand for medical office buildings, outpatient facilities as well as urgent-care facilities.

However, lately there are areas of concern. Particularly, there is softness in seniors housing fundamentals as supply has escalated rapidly in recent times in this asset category. Moreover, skilled nursing facilities are becoming more susceptible to top-line pressure due to the gradual shift in the medical billing procedure that stresses more on the value of care provided rather than the volume of services offered. Also, healthcare REITs are more sensitive to rising interest rates than other asset classes, thanks to their long-term leases.

Industry Lags in Terms of Shareholder Returns

Looking at shareholder returns year to date, it appears that the broader economic recovery wasn’t enough for enhancing investors’ confidence in the industry’s growth prospects. Elevated supply, aggressive pricing pressure, government policy changes and rate hike issues have affected the performance of REIT – Others industry over the past quarters.

The REIT and Equity Trust – Other Industry, which is a group within the broader Zacks Finance Sector, has underperformed the S&P 500 but outperformed its own sector, year to date. While the stocks in this industry have collectively lost 0.8%, narrower than the 2.6% decline of the Zacks Finance Sector, the Zacks S&P 500 Composite has rallied 6.5%.

Year-To-Date Price Performance

However, it’s worth noting that there was a significant lack of synchronization in the performance of individual asset categories within the group. While REITs from industrial, lodging/resorts, self-storage registered decent gains, the same from office and diversified REITs remained subdued and affected the group’s returns.

Valuation Looks Reasonable

For REITs, price-to-FFO (funds from operations) multiple is a common measure for valuation. This is because FFO is a widely used metric to gauge the performance of REITs rather than net income, as it indicates cash flow from their operations.

FFO is obtained after adding depreciation and amortization to earnings and subtracting the gains on sales. This is done because although per GAAP accounting norms, REITs are required to depreciate their investment properties over time, in reality many properties experience value appreciation over time.

So, to offset that impact, depreciation and amortization are added back. Moreover, gains on sales of property are subtracted since such sales are considered nonrecurring in nature.

Despite the underperformance of the industry year to date, the valuation does not look cheap when compared to its median level of the range over this period. The industry currently has a trailing 12-month P/FFO of 16.18 and the median level is 15.71. However, considering the highest level of 16.21 year to date, there is some upside left.

On the other hand, the space also looks inexpensive when compared with the market at large as the trailing 12-month P/E ratio for the S&P 500 is 19.67 and the median level is 19.57.

Price-to-FFO (TTM)

Industry May Perform Better on Improving FFO per Share Outlook

Despite supply issues, evolving government policies and rate hike possibilities, prospects of a number of this special hybrid asset class are getting a boost with growth in economy, job market gains, high consumer confidence and tax cuts, which are translating into greater demand for real estate and resulting in higher occupancy levels.

But what really matters to investors is whether this group has the potential to perform better than the broader market in the quarters ahead. In fact, one should not really consider the current price levels as good entry points unless there are convincing reasons to predict a rebound in the near term.

One reliable measure that can help investors understand the industry’s prospects for a solid price performance going forward is its FFO per share outlook. FFO per share revisions trend for the constituent companies usually influences their stock market performance.

The Price & Consensus chart for the industry shows the market’s evolving bottom-up FFO per share expectations and the industry’s aggregate stock market performance. The red line in the chart represents the Zacks measure of consensus FFO per share expectations for 2019, while the light blue line represents the same for 2018.

Price and Consensus: Zacks REIT-Equity Trust – Other industry


 

This becomes even clearer if we focus on the aggregate bottom-up FFO per share revisions trend. The chart below shows the evolution of aggregate consensus expectations for 2018.

Please note that the $2.50 FFO per share estimate for the industry for 2018 is not the actual bottom-up dollar FFO per share estimate for every company in the REIT – Equity Trust – Other industry, but rather an illustrative aggregate created by our proprietary analytics model. The key factor to keep in mind is not the FFO per share of the industry for 2018, but how this value has evolved recently.

Current Fiscal Year FFO Per Share Estimate Revisions

As you can see here, the $2.50 FFO per share estimate for 2018 is marginally up from $2.49 at the end of July and $2.47 at the end of the month prior to that, but down from $2.55 this time last year. Looking at the aggregate FFO per share estimate revisions, it appears that although analysts became pessimistic about this group’s FFO per share potential earlier, they are now gaining confidence about the same.

Zacks Industry Rank Indicates Cloudy Prospects

However, the group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates continued underperformance in the near term.

The Zacks REIT and Equity Trust – Other industry currently carries a Zacks Industry Rank #164, which places it at the bottom 36% of more than 250 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

Revenue Trend of REIT – Other Shows Some Promise

While the near-term prospects look unwelcoming for investors, the uptrend in revenues over the past years appears promising. This might support long-term growth in FFO per share.

Bottom Line

Keeping the long-term expectations in mind, investors could take advantage of the cheap valuation compared with the market and bet on a few REIT – Other stocks that have a strong FFO per share outlook.

Moreover, REITs have extended the average maturity of their debt to longer terms, locking in previous low interest rates. This is encouraging down the line for their operational efficiencies as well as for investors because interest expense is expected to take a smaller bite out of REITs’ earnings. Consequently dividend yields and profitability for investors are expected to improve.

Here are the stocks that one can consider:  

Outfront Media Inc. (OUT Free Report) : The stock of this New York-based REIT, which provides out-of-home advertising space like billboard, transit and digital displays in key markets throughout the United States and Canada, has lost 4.2% of its value over the past three months. However, the stock now seems a good buying opportunity backed by its bright prospects.

The Zacks Consensus Estimate for the 2019 FFO per share has been revised 4% upward over the last 30 days. It has a Zacks Rank #1 (Strong Buy). (You can see the complete list of today’s Zacks #1 Rank stocks here.)

Price and Consensus: OUT

Park Hotels & Resorts Inc. (PK Free Report) : The consensus FFO per share estimate for this Tysons, VA-based lodging REIT has moved north 2.1% and 4.1%, respectively, for 2018 and 2019, over the last 30 days. The stock has appreciated 4.5% over the past three months. It has a Zacks Rank of 2 (Buy).

Price and Consensus: PK

PS Business Parks, Inc. (PSB Free Report) : The stock of this Glendale, CA- REIT, which is engaged in the acquisition, development, ownership and operation of commercial properties, primarily multi-tenant industrial, flex and office space, has gained 12.5% over the past three months. The consensus FFO per share estimate for the current year has been revised 0.3% upward over the last 30 days. It has a Zacks Rank of 2.

Price and Consensus: PSB

Will You Make a Fortune on the Shift to Electric Cars?

Here’s another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It’s not the one you think.

See This Ticker Free >>

http://www.zacks.com/commentary/176709/reit-other-industry-outlook-rising-supply-to-mute-growth?cid=CS-ZC-FT-176709http://www.zacks.com/commentary/176709/reit-other-industry-outlook-rising-supply-to-mute-growth?cid=CS-ZC-FT-176709

Semiconductor WFE Stock Outlook: Not Much Upside in the Cards

Researchers are divided on wafer fab equipment spending this year with Gartner projecting a 6% increase followed by cyclical correction in 2019 and 2020 after which the market is expected to return to growth. SEMI however sees 11.7% growth this year to $50.8 billion, with the front end growing stronger than the back-end.

Wafer fabrication is a process during which a silicon wafer (usually 200mm or 300mm in size) is treated with successive layers of conductive and semiconductive material using stencil-like structures called reticles. After each deposition of material on the surface, the excess material is etched away and the wafer exposed to a light source to implant the design. This is the front end process. The back end process is involved in cutting up the individual die, packaging for protection and use, attaching of electrical leads and sorting.

So wafer fab equipment demand is dependent on the level of the demand for semiconductors themselves on the one hand and the level of installed capacity on the other.

The last few years have seen the proliferation of smartphones and other consumer electronics gadgets, as well as cloud infrastructure buildouts. With smartphone demand moderating and IoT demand accelerating, both these segments are likely to be the most important drivers of semiconductor demand along with artificial intelligence, HPC and automotive. Communications infrastructure (5G) will jump on the bandwagon soon.

As far as installed capacity is concerned, memory manufacturers are likely to remain the biggest spenders although foundries are also expected to remain strong. Technology transitions, an important consideration for equipment purchases are also expected to remain a driver due to the move toward larger wafer sizes (fab upgrades to 300mm, continued demnd for 20mm and development starting for 300mm in 2018-19 according to Technavio), shrinking nodes (10nm and 7nm), memory chip advancements (3D NAND processes are maturing, driving down cost), denser packaging (MEMS) and so forth. Materials research, device complexities, the need for greater manufacturing integration and new applications are other drivers.

Industry Offers Solid Shareholder Returns

The Zacks Semiconductor-Wafer fab Equipment Industry, which is a stock group within the broader Zacks Computer And Technology Sector, has outperformed both the S&P 500 and its own sector over the past year.

So we see that the stocks in this industry have collectively gained 23.0% over the past year, while the Zacks S&P 500 Composite and Zacks Computer and Technology Sector have rallied 15.6% and 17.9%, respectively.

While the industry is small, players like KLA-Tencor, Applied Materials, Lam Research and ASML Holding NV are very important players. 

One-Year Price Performance

Wafer Fab Equipment Stocks Look Reasonably Valued

The strong run in share prices over the past year have however led to a relatively rich valuation.

Since the industry is made up of relatively mature companies, earnings flow is usually steady. So the industry’s 1.04X price to forward earnings growth (PEG) is well below the 1.76X for the S&P 500. At the moment, it also happens to be below the annual high of 1.17X as well as the 1.06X median.

Similar is the case when compared to the sector’s 1.78X.

But it probably makes more sense to value the industry based on sales and book value because this is a highly capital intensive business and success depends on the ability to provide the most advanced equipment and related customer service.  

The industry currently has a price to trailing 12 months’ sales ratio of 5.48X, which is below the annual high of 7.39X and the median level of 6.39X, suggesting the possibility of some upside. Comparing this with the S&P 500, we see that it is however ahead of its 3.40X (median 3.31X). 

Comparing the industry to the S&P 500 on the basis of price to trailing 12 months’ sales, we see that the industry’s 5.48X is ahead of the sector’s 3.72X.  

Comparing with the S&P 500 on the basis of price to trailing 12 months’ book value, we see that the industry’s 9.28X is just short of its annual high of 9.75X but ahead of the median 8.76X. It’s also ahead of the S&P 500’s 3.94X. 

It is also ahead of the sector’s 4.29X.

So while there appears to be some risk based on valuation, there may also be some opportunities as well.

The Earnings Outlook Is Not So Great

With semiconductor demand remaining strong on account of cloud computing, big data, IoT, auto and other mass market adoption, costs coming down for NAND makers (where demand is more elastic) coupled with increased supply from improved yields and foundries racing to meet customer demand amid stiff competition, the demand scenario appears robust.

However, the nature of the business necessitates heavy investments on the development of new technology as device complexities increase. The cost of development is so high that customers may at times finance development directly or through an equity purchase (as Intel, Samsung and TSM did in ASML).

The above ratio analysis shows that while there could be some risks, there may be some opportunities as well. A quarter-to-quarter analysis is not really meaningful for the industry. At the same time, investors will continue to question whether this group has the potential to perform better than the broader market in the quarters ahead.

One reliable measure that can help investors understand the industry’s prospects for a solid price performance going forward is the industry’s earnings outlook. Empirical research shows that earnings outlook for the industry, a reflection of the earnings revisions trend for the constituent companies, has a direct bearing on its stock market performance.

The Price & Consensus chart for the industry shows the market’s evolving bottom-up earnings expectations for the industry and the industry’s aggregate stock market performance. The red line in the chart represents the Zacks measure of consensus earnings expectations for 2019, while the light blue line represents the same for 2018. 

Price and Consensus: Wafer Fab Equipment Industry

This becomes even clearer by focusing on the aggregate bottom-up EPS revisions trend. The chart below shows the evolution of aggregate consensus expectations for 2018.

Please note that the $1.61 ‘EPS’ estimate for the industry for 2018 is not the actual bottom-up dollar EPS estimate for every company in the Zacks WFE industry, but rather an illustrative aggregate number created by our proprietary analytics model. The key factor to keep in mind is not the dollar earnings of $1.61 ‘per share’ of the industry for 2018, but how this dollar number has evolved recently.

Current Fiscal Year EPS Estimate Revisions

The Zacks Industry Rank Indicates Opportunities

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates continued outperformance in the near term.

The Zacks WFE industry currently carries a Zacks Industry Rank #37, which places it at the top 14% of more than 250 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

Our proprietary Heat Map shows significant fluctuation but ultimate improvement in the industry’s rank over the past five weeks.

Semi-WFE Stocks Promise Long-Term Growth

While near-term issues could bring varying results to investors, the estimated long-term (3-5 years) EPS growth for the Zacks WFE segment is attractive. Despite correction over the past year, the group’s mean estimated long-term EPS growth rate of 14.88% compares favorably with the 9.82% for the Zacks S&P 500 composite.

Mean Estimate of Long-Term EPS Growth Rate

The long-term growth is a continuation of strong performance over the past few years. Take revenue for example, which has gained momentum since 2016.

The net income before non-recurring items tells the same story.

While the debt level spiked in the beginning of 2017, the debt cap remains reasonable.

Bottom Line

As evident, the market is expected to get a bit worse before it gets better, as in all cyclical industries that go through periods of relative weakness. But underlying drivers are extremely strong, so for investors looking to invest for the longer term will make attractive gains.

Here’s a list of stocks that display the above characteristics-

KLA-Tencor (KLAC Free Report) : The stock has gained 27.4% over the past year. The Zacks Consensus Estimate for the current-year EPS is up 4.7% in the last 30 days.

Price and Consensus: KLAC

Applied Materials (AMAT Free Report) : The stock has gained 11.2% over the past year. The Zacks Consensus Estimate for the current-year EPS is down 3 cents in the last 60 days, of which the decline in the last 30 days was a cent.

Price and Consensus: AMAT

ASML Holding NV (ASML Free Report) : The stock has gained 34.7% over the past year. The Zacks Consensus Estimate for the current-year EPS is up a couple of cents in the last 60 days.

Price and Consensus: ASML

Today’s Stocks from Zacks’ Hottest Strategies

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See Them Free>>

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Argentina Hikes Rate for Fourth Time: ETFs in Focus

Like many other emerging economies, Argentina also took steps to counter its currency slump by raising its interest rate for the fourth time this year from 40% to 45%. The moves come as a surprise and in response to the panic which is widespread all around the globe in relation to weakening emerging market currencies, unresolved trade tensions and the strengthening of U.S. dollar (read: Dollar on a Bull Ride:ETFs to Buy/Avoid).
Cutting subsidies has increased utility bills and fueled inflation by 29.5% in the year through June. Argentina is not the only emerging market economy that is vulnerable right now, the circumstances are gloomy in the emerging market sector holistically. It has a history of hyperinflation, bank deposit confiscation, which has reduced the importance of the currency. Notably, Argentine peso hit an all-time low, tumbling 38% this year on corruption scandal and Turkey crisis. 

The country is in a tight grip as the graft scandal which broke this month has landed the former top government officials and construction company executives in jail and increased the uncertainty surrounding the country’s investment avenues. Turkey crisis pushed the peso further down, worsening the emerging market rout.  

Round Up On Rate Hike News

Anywhere in the world, 45% is the highest interest rate offered. This level is being planned to be held at least till October. The Central Bank announced that it will sell $500 million to support the peso. Lesser short-term debts will be issued. This measure has been applauded by the IMF which said this should remove an important source of vulnerability. In 2001, when the institution failed to rescue the country, Argentina went into a sovereign debt default. The government has also cut its full-year 2018 economic growth forecast to zero from 0.5%.

Impact on ETFs

ARGT

It tracks the MSCI All Argentina 25/50 Index. This fund invests in the largest and most-liquid securities with exposure to Argentina. There are 28 holdings in the basket with MERCADOLIBRE INC(MELI Free Report) occupying the top weight with 28.12%, the next best being TENARIS SA(TS Free Report) with 15.73%.The fund has recorded losses of 8.76% in the last one month. It has AUM of $120.3 million and an expense ratio of 59 bps. It has a Zacks ETF Rank #4 (Sell) with a Medium risk outlook (read:Guide to the  25 Cheapest ETFs).

AGT

It also tracks the MSCI All Argentina 25/50 Index abd provides broad access to stocks with exposure to Argentina. There are 28 holdings in the fund pool with MELI and TS having the top weights with 29.04% and 15.47%, respectively. The fund has recorded losses of 9.09% in the past one month. Its AUM is $25.9 million and expense ratio is 59 bps. It has a Zacks ETF Rank #3 (Hold).

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Why Is Deere (DE) Stock Up Despite Missing Earnings?

Deere & Company (DE Free Report) released its third-quarter earnings on August 17 before the market opened.  The major farm and construction equipment manufacturer missed profits for the quarter due to higher costs, but shares are still up 3.25% through late-afternoon hours Friday.

Deere & Co reported earnings of $2.59 per share, missing the Zacks Consensus Estimate of $2.77 per share. The company also stated it would deliver adjusted net income of $3.1 billion in the fiscal 2018. JP Morgan analysts said that would translate into an EPS of $9.45, lagging the current Zacks Consensus Estimate of $9.69.

Earnings were hurt by increased costs for raw materials and freight due to tariffs on steel and aluminum imports. In the post-earnings news release, CEO Samuel R. Allen mentioned the rise in costs.

“We have continued to face cost pressures for raw materials and freight, which are being addressed through a combination of cost management and pricing actions,” he said. “Other manufactures like Caterpillar (CAT Free Report) have also been affected by higher material costs.

Typically, missing earnings estimates would drive share prices down. However, that hasn’t been the case so far as other aspects of the report seem to have overshadowed the miss for investors.

To start, earnings of $2.59 per share did miss expectations, but it was the all-time highest third-quarter EPS for the company. Further, earnings grew 31% year-over year. That growth was driven by higher revenues from a year ago, despite the increased costs. Net Sales totaled nearly $9.3 billion, up 36% from one year ago. That beat the Zacks Consensus Estimate of $9.17 billion.

Deere & Co. specifically benefited from its construction and forestry division, which reported $2.9 billion in net sales, doubling the sales from the same quarter in 2017. Favorable market conditions, like higher housing starts in the United States, bode well for the construction and forestry industries as demand for equipment is elevated.

Moreover, the company acquired Wirtgen in December of 2017, a leading global road-construction equipment maker. Wirtgen added a significant 77% in construction and forestry sales for the quarter.

In addition to the growing construction division, the agriculture segment has a promising outlook as farmers continue to buy equipment, according to the company. CFO Raj Kalathur said Friday on the earnings call that overall global demand for grain is still growing and that the farm economics picture for 2019 may “actually be stronger” than realized.

Deere & Co. did miss its earnings expectation, but the overall picture appears to be positive. The market shares that optimism for now. 

Will You Make a Fortune on the Shift to Electric Cars?

 Here’s another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research. It’s not the one you think.

 See This Ticker Free >>

http://www.zacks.com/stock/news/318569/why-is-deere-de-stock-up-despite-missing-earnings?cid=CS-ZC-FT-318569http://www.zacks.com/stock/news/318569/why-is-deere-de-stock-up-despite-missing-earnings?cid=CS-ZC-FT-318569

Google Roundup: Back to China, YouTube Gains, Waymo Deals

Alphabet’s (GOOGL Free Report) Google is building a search app that will be acceptable to the Chinese government, its YouTube platform has become the second most visited website in the world and its Waymo self-driving unit is testing new use cases through a number of partnerships. Here are the details-

Google Going Back to China

A Google insider, concerned about the company’s planned re-entry into China has leaked news to the Intercept, which is saying that Google intends to launch a censored search engine app called Dragonfly targeting the Chinese market within the next 6-9 months.

The market represents 750 million Internet users, so it’s easy to see why Google’s current CEO thinks that’s too much opportunity to leave on the table. But Chinese people by and large prefer local player Baidu (BIDU Free Report) , especially for Chinese language search.

The company has built on its expertise over the years in the face of weak foreign players, government support and by playing on the nationalistic spirit of the Chinese people. So Google, Microsoft (MSFT Free Report) , and for a while, Yahoo saw only very limited success in the country.

Google may succeed in capturing a small share at best, but something that could help grow its revenue and perhaps allow synergistic gains in retail through JD.com (JD Free Report) and in cloud computing through partnerships with companies like Tencent.

China, which has thus far successfully prevented foreign intervention in its internal affairs in the garb of human rights violations through the creation of atrocity literature, is currently in a battle of wills with the U.S. government. Censoring the Internet is an important part of maintaining law and order in the country as well as its national security, so companies that want to do business in China will have to play by the rules. The Chinese government won’t tolerate any pretense to support the truth.

The Republicans under President Trump are calling for measures to contain China’s growing stature, but it’s an uphill battle given America’s dependence on the country and the fact that Xi Jinping isn’t heading for elections any time soon (if at all).

“We provide a number of mobile apps in China, such as Google Translate and Files Go, help Chinese developers, and have made significant investments in Chinese companies like JD.com. But we don’t comment on speculation about future plans,” is all Google would say despite drawing flak from lawmakers, human rights groups and its own employees.

YouTube Second Most Visited Site

According to a new study by market research firm SimilarWeb, YouTube has overtaken Facebook (FB Free Report) as the second most visited website this year. This is not only the result of YouTube’s own initiatives, but also because of declining popularity of Facebook where page visits have dropped from 8.5 billion to 4.7 billion in the last two years.

Moreover, the growth in Facebook’s app traffic hasn’t been enough to offset the decline in visits to its websites. The most visited websites are now Google (by far the leader), YouTube, Facebook, Yahoo and Amazon AMZN, which surpassed Yahoo during big spending months such as in December 2017 and July 2018. So Amazon is poised to move into the number four position.

Waymo Deals

Alphabet-owned Waymo signed a number of deals recently to test uses for its self-driving technology. Current plans include a ride-hailing service, self-driving trucks for logistics and licensing the technology to automakers selling directly to consumers.

With customers growing jittery following accidents involving self-driving cars (An American Automobile Association survey from April found that 73% of respondents fear riding in a self-driving vehicle, compared with 63% last year), testing its options seems like a wise thing to do. Besides, exploring options was always the plan.

The splashiest deal was with Walmart WMT, which will offer its customers a pick up and drop facility, so they can personally collect their groceries from a nearby Walmart store. It’s an interesting test for Walmart, which also has a variety of other partners taking care of last mile delivery.

Partnering with AutoNation, Avis and others in the Phoenix area, Waymo cars are offering to drop you to nearby businesses.

Also in Phoenix, it has partnered with Valley Metro to transport people to bus stops and train and light-rail stations. The goal for both parties is to study how people use public transit systems and unearth business opportunities.

Partners with News Organizations

Google intends to make data produced by news organizations more easily searchable. The news organizations will present the data they want to be displayed in response to specific queries in a tabular form that the search engine can easily read. Once indexed, it will receive prime placement on the search engine results page. Details about how much Google will make from the deals with 30 data journalists is unknown.

Recommendation

Alphabet shares carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Will You Make a Fortune on the Shift to Electric Cars?

Here’s another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It’s not the one you think.

See This Ticker Free >>

http://www.zacks.com/stock/news/318568/google-roundup-back-to-china-youtube-gains-waymo-deals?cid=CS-ZC-FT-318568http://www.zacks.com/stock/news/318568/google-roundup-back-to-china-youtube-gains-waymo-deals?cid=CS-ZC-FT-318568

Dow Springs Back: More Upside for ETFs?

After languishing for a few trading days on Turkey-induced threats, U.S. stocks bounced back on Aug 16, with the “Dow Jones having its best day in four months.” A host of factors made this recoil possible as the blue-chip index has recorded a downbeat performance this year among the key U.S. equity indices.

Dow Jones Industrial Average is up about 3% this year (as of Aug 16) while the S&P 500 has gained more than 5% and the Nasdaq Composite has added about 11.4%. The index has now been in the longest spell in correction territory — “132 trading sessions (as of Thursday’s close) — since the 223 sessions in 1961, according to Dow Jones Market Data”, as quoted on MarketWatch.

Let’s take a look what caused SPDR Dow Jones Industrial Average ETF (DIA Free Report) add about 1.7% on Aug 16, leaving its two other counterparts behind.SPDR S&P 500 ETF (SPY Free Report) has gained more than 0.8%, while Invesco QQQ Trust (QQQ Free Report) advanced about 0.3% on that day.

Strong Corporate Earnings

There was a flurry of solid corporate earnings and news from the Dow component. Walmart Inc. (WMT Free Report) shares gained over 9% after earnings and revenues beat expectations helped by 40% U.S. e-commerce sales growth. There was more footfall in the second quarter and shoppers spent more per trip, per CNBC. Same-store sales growth also breezed past expectations.

Plus, The Boeing Company (BA Free Report) shares jumped 4.3% on Aug 16, after Swiss bank UBS raised its 12-month target price (to $515) by more than 50% from their current level. Cisco Systems Inc. (CSCO Free Report) shares too gained about 3% on the day as the networking giant topped estimates on both revenues and earnings and provided an upbeat outlook, after the closing bell on Wednesday (read: ETFs to Soar on Robust Cisco Results).

U.S.-China to Recommence Trade Negotiation

The reason for which the Dow Jones took a beating this year was the trade truce between the United States and China. There is news that the United States and China are ready to restart trade talks or negotiations next week to prevent a full-blown trade war, “the first such meeting since July (read: 5 Sector ETFs Most Exposed to Trade Tensions).”

Oil’s Gains

Furthermore, it has been noticed lately that Dow Jones shares a deep relationship with oil price movement. Though the energy sector rally has spread optimism in the broader market as a whole, in most cases, on a particular day of oil surge, the spurt in the Dow Jones is steeper than that of the S&P 500 or vice versa. And oil prices have been on an uptrend this year. WTI fund United States Oil (USO Free Report) added about 10.5%, while United States Brent Oil (BNO Free Report) has advanced about 10.5% this year (as of Aug 16, 2018).

How Long Will the Rebound in Dow Last?

If there are positive developments related to Washington-Beijing trade deal in the coming days and in the oil price thanks to Trump’s re-imposition of sanctions on Iran, the Dow could surge higher (read: ETFs & Stocks in Focus as Trump Reimposes Sanction on Iran).

ETFs in Focus

So, investors intending a momentum play, can bet on DIA, Invesco Dow Jones Industrial Average Dividend ETF (DJD Free Report) and iShares Dow Jones US ETF (IYY Free Report) . Investors can also settle on leveraged Dow ETF plays as long as the trend favors them. Here, ProShares Ultra Dow30 (DDM Free Report) and ProShares UltraPro Dow30 (UDOW Free Report) are a couple of choices.

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>

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Nvidia Posts Sluggish Guidance, Retail Sector Sees Mixed Results

On today’s episode of the Zacks Friday Finish Line, Associate Stock Strategist Ryan McQueeney and Editor Maddy Johnson recap this week’s global macroeconomic headlines and highlight the latest earnings results from Nvidia (NVDA Free Report) , Walmart (WMT Free Report) , and the U.S. department store giants.

Make sure to subscribe and leave the show a rating on Apple Podcasts!

This week, investors grappled with a pair of major global headlines: ongoing economic tensions in Turkey and renewed trade talks between the U.S. and China. Stocks saw volatility on the back of fears that Turkey’s woes could spread to other European economies, but major indexes rebounded on Thursday after the two sides behind the so-called trade war said they would resume negotiations.

Meanwhile, Wall Street also digested a series of marquee earnings reports. Notably, Nvidia shares were down in morning trading Friday after the popular GPU maker issued sluggish guidance. Nvidia was able to notch remarkable growth and better-than-anticipated earnings and revenue, but the firm’s outlook for the ongoing quarter was muted because of negative trends in cryptocurrency.

But earlier this week, investors loved Walmart’s earnings report. The retail behemoth recorded its strong comps growth in over a decade, with e-commerce sales surging and programs like its online ordering, in-store pickup service taking off.

This week also saw the release of earnings reports from several major department store chains, including Macy’s (M Free Report) , Nordstrom (JWN Free Report) , and J.C. Penney (JCP Free Report) .

It was a mixed bag of results from these mall-based giants, with Macy’s shares tumbling on a revenue miss and JCP crashing on sluggish guidance—all while Nordstrom flexed the strength of its discounted stores and saw its stock pop.

Maddy and Ryan discuss all of these stories, filling investors in on the key facts they need to know and providing their own perspectives on the headlines.

Is J.C. Penney running out of time to turn things around? Should Nvidia investors be worried that the company’s insane run is over? Is Walmart winning the war against Amazon (AMZN Free Report) ?

Hear the Finish Line team’s answers to each of these questions, and more, only on today’s show!

As a reminder, if you feel that we missed something, or if you want us to cover a different story, shoot us an email at podcast@zacks.com. Make sure to check out all of our other audio content at zacks.com/podcasts, and remember to subscribe and leave us a rating on Apple Podcasts.

Will You Make a Fortune on the Shift to Electric Cars?

Here’s another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It’s not the one you think.

See This Ticker Free >>

http://www.zacks.com/stock/news/318566/nvidia-posts-sluggish-guidance-retail-sector-sees-mixed-results?cid=CS-ZC-FT-318566http://www.zacks.com/stock/news/318566/nvidia-posts-sluggish-guidance-retail-sector-sees-mixed-results?cid=CS-ZC-FT-318566

The Best Tech Stocks For Your Portfolio

Tech stocks have been among the best performing stocks over the last several years. That trend is likely to continue but the simple fact is that there are a handful of names that have dramatically outperformed the market while many names underperform.

Sector rotations in and out of microchips, software and hardware names send investors running for the hills. The volatility is hard to stomach for investors, let alone traders. Still, the sector spawns new hope of the next big thing or an emerging cash cow.

More recently, there have been confusing signals flashed by this market. As we prepare to look at which tech stocks have the best chances for future success, we have to look at some of the recent moves that have investors guessing which way the market will go.

FB slows, AAPL Grows

The most recent earnings season could be characterized by profit-taking near the top and a lack of bullish conviction. If the bulls wanted to chase stocks higher, then new highs would have been a near daily occurrence throughout the recent few months.

When we think of tech stocks, of course FANG comes to mind. In terms of recent earnings performance we see a mixed bag from that select group of names. Netflix led the way with disappointing user growth numbers and Facebook followed that with words of caution surrounding its future growth.

With two heavy hitters coming on the softer side of things, the market weakened. Apple came in with some strong numbers and reports of the higher end devices driving the quarter. This part of the overall signal is what I want to focus on through the rest of the year.

Importance of Earnings

Earnings are what drive stocks. Yes, the charts and timing all play a role in what happens, but at the end of the day it is all about the earnings. We at Zacks have developed a system to tell us which stocks are seeing the best earnings estimate revisions. The Zacks Rank will give you that heads up, but to find the truly best stocks, you have to do more homework than that.

A key to understanding why the estimates are moving up is found in analyst reports. The Rank looks at the estimate changes from all the major brokerages, but the devil is in the details.

Just like the recent moves in AAPL and FB and NFLX, we can make some broader assumptions about the tech space and therefore get into the best position possible to ride this market through year end.

Where Growth Is Great

Not all growth is valued the same by all investors. I know that is sort of a straightforward idea, but the concept really suggests that only the best type of growth is worth investing in. The recent swings in the market tell me that investors are really interested in the growth from only certain tech names.

Stocks with pricing power have seen stronger moves higher than those without. The concept is simply that demand is still very strong across the board, but that pricing power can help the company expand margins and those fatter margins lead to larger profits.

We really start to see the impact of pricing power and strong demand when tech names are more fully addressing the higher end of the customer base they serve. FB and NFLX are simply not in the group, as they look to maintain what they have as opposed to offering a higher end product. AAPL and its $1000 phone, which was panned by many at launch, now looks to be a margin driver for the company.

Be Conscious Of The Comps

Pricing power and addressing the higher end may not be enough to ensure that you have found a lasting investment in the tech space. As we wrap up the 2Q results and begin to look forward to what 3Q will bring, we are reminded of how strong that quarter was as well.

Headline after headline around that earnings season suggested that the bears had one less leg to stand on…and this was among their strongest arguments. The idea was that the solid earnings performance reduced valuations across the board, a long held battle cry of the shorts.

Those strong reports from the past have a way of being a problem in the future. They will present some tough comparisons in the coming quarter, so there could be some “headline shock” coming for multiple stocks. Finding good stocks that don’t have this roadblock will be critical to success.

How to Get Started

Over the last several years, some of the biggest gains have been in tech, and that looks like it will continue to be true thanks to strong industrial demand, consumer spending and new innovations in the tech space.

If you want to capitalize on one of the most profitable and fastest-growing S&P 500 sectors, now is a great time to get started.

To help you target promising tech stocks that appear poised for exceptional profits, I invite you to join the investors following my trades in Zacks Technology Innovators portfolio.

We look beyond the Facebooks, Amazons and Googles to find under-the-radar companies that are creating the world of tomorrow. Our goal is triple-digit long-term gains.

I’ve locked in on an exciting new stock that’s a perfect example. This cloud-based company beat Q2 earnings expectations by 240%, and management just announced stronger than expected guidance for Q3. With its fast-growing international client base, I believe this stock is poised for a big move higher.

I’ll be adding this new pick on Monday at 10:30 a.m. EST – and you can be among the first to see it.

In addition to checking out Technology Innovators, you are also invited to download our Special Report, Conducting the Future of Technology: Zacks’ 4 Best Stocks in the $386 Billion Semiconductor Market. The tech sector is hot, and this industry is the molten core.

Please note: Access to this Special Report ends midnight Sunday, August 19.

Look into Zacks Technology Innovators now >>

Good Investing,

Brian

Brian Bolan is our aggressive growth expert and the editor of the Zacks Technology Innovators portfolio.

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HP (HPQ) Q3 Earnings: What To Expect

Shares of HP Inc. (HPQ Free Report) have surged over 10% in the last month to inch near their five-year high, in a sign that investors might expect big things from the PC power’s upcoming quarterly earnings results. Plus, HP is coming off an impressive quarter of top and top bottom line growth. So let’s take a look at what to really expect from HP’s Q3 financial results.

Overview

Last quarter, HP saw its personal systems revenues jump 14%. The firm’s commercial net revenues surged 16%, with consumer revenues up 10%. Diving a bit deeper, HP’s total units sold popped 7%, with both desktops and notebooks up 7%. Meanwhile, HP’s printing revenues increased 11% from the year-ago period.

Overall, the PC giant’s fiscal second-quarter revenues surged 13% to roughly $14.0 billion. Investors will also likely be pleased to see that the company’s adjusted quarterly earnings hit $0.48 per share, which marked a 20% climb.

HP is known mostly for its PCs, printers, and laptops. But the company has launched some more new-age products recently that have the potential to be successful on a larger scale. One of those products is a “mixed reality” headset. Different from standard virtual reality, HP’s new offerings allow users to have real objects in their virtual world or virtual objects in the real world. The company also rolled out its HP Z VR Backpack, which it described as the “world’s first professional wearable VR PC.” 

Stock Movement & Valuation

Shares of HP have dipped by roughly 13% in the last three years. But HP has seen its stock price soar nearly 70% over the last 24 months, which outpaces its industry’s 57% climb—which includes IBM (IBM Free Report) , Cisco (CSCO Free Report) and others—and blows away the S&P 500’s 30% gains. More recently, shares of HP have climbed by 32% over the last year.

HP is currently trading at 11.6X forward 12-month Zacks Consensus EPS estimates, which marks a significant discount compared its industry’s 16.3X. The company is also currently trading right near its year-long median of 11.5X and below its 52-week high of 13.1X. HP is trading above its year-long low of 10.5X and does also look a bit stretched compared to where it has traded at during the last two years. 

Outlook

Our current Zacks Consensus Estimate is calling for HP to post quarterly earnings of $14.11 billion, which would mark an 8% climb from the year-ago period. Looking a little further ahead, the company is expected to see its fiscal year revenues jump by 10.5% to hit $57.51 billion.

At the other end of the income statement, HP’s adjusted quarterly earnings are projected to surge 16.3% to touch $0.50 per share. More impressively, the firm’s full-year EPS figure is expected to jump over 21% to $2.00 per share.

HP has seen its EPS projection climb by $0.01 over the duration of the quarter. The PC firm has also topped or matched our quarterly earnings estimates for 10 straight quarters. HP is currently a Zacks Rank #3 (Hold) and sports an “A” grade for Value and “Bs” for both Growth and Momentum in our Style Scores system.

HP is set to release its Q3 financial results on Thursday, August 23.

Will You Make a Fortune on the Shift to Electric Cars?

Here’s another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It’s not the one you think.

See This Ticker Free >>

http://www.zacks.com/stock/news/318564/hp-hpq-q3-earnings-what-to-expect?cid=CS-ZC-FT-318564http://www.zacks.com/stock/news/318564/hp-hpq-q3-earnings-what-to-expect?cid=CS-ZC-FT-318564

Is Fading Crypto Demand At All a Threat to Semiconductor ETFs?

The once-soaring semiconductor space had hit the wall this year with ETFs returning more-or-less 3% so far (as of Aug 16, 2018). Factors that thwarted growth in the space this year were news of Nvidia’s (NVDA Free Report) suspension of self-driving car tests on public roads in March, heightened trade war talks between the United States and China and the slump in cryptocurrency price (read: Should You Snap Up Downtrodden Semiconductor ETFs Now?).

Falling Crypto Demand

Semiconductor ETFs have been on a bumpy ride so far this year. And to make matters worse, Nvidia’s shareslost about 5% in after-hour trading on Aug 16 after the company indicated that cryptocurrency-fueled demand had dried out and its sales guidance was below Wall Street targets. Investors should note that mining of cryptocurrencies needs the usage of semiconductors.

Nvidia earlier guided sales for cryptocurrency chips for the fiscal second quarter ended Jul 29 to be about $100 million, while actual revenues came in at only $18 million. This is in stark contrast to $289 million (almost a 10th of Nvidia’s revenues) recorded in the prior quarter.

Investors should note that one of the key cryptocurrencies, bitcoin prices, have fallen about 67% this year to $6314 (as of Aug 16) from December’s high of $19,343, indicating trouble in the space.

Several regulatory agencies and central banks are doubtful about the merit of cryptocurrencies like bitcoin.The Securities and Exchange Commission (SEC) is tensed about the extreme price volatility in cryptocurrencies. Several central banks have also issued warnings against it (read: Bitcoin Falls After SEC Postpones ETF Decision).

Needless to say, such news is likely to weigh on semiconductor ETFs in the coming trading sessions. But should you be spooked by the falling crypto demand?

Areas That Can Bolster Semiconductor ETFs

Upbeat Sales Fundamentals

Global sales rose more than 20% year over year for 15 successive months. Also, upbeat data on personal computer (PC) shipments, which have been weak over the past several years, should boost investors’ confidence in the sector. This is especially true as global PC shipments had enjoyed the strongest quarter in six years with 2.7% growth in Q2, per the International Data Corp (IDC) and the first year-over-year increase of 1.4% since first-quarter 2012, according to Gartner (see: 5 Top-Ranked Tech ETFs to Buy on Strong PC Growth).

Rise of Artificial Intelligence

Artificial Intelligence is a hot theme now. The rapid adoption of advanced information technologies including cloud, Internet of Things, autonomous cars, gaming, wearables, drones and artificial intelligence should keep supporting semiconductor ETFs.

Amazon’s (AMZN Free Report) Amazon Web Services, Microsoft Corp’s (MSFT Free Report) Azure and Alphabet Inc’s (GOOGL Free Report) Google Cloud are purchasing chips to “power artificial intelligence and other functions”, per a source.

US-China to Recommence Trade Negotiations

One of the reasons why Semiconductor stocks took a beating this year was the trade truce between the United States and China. Per Morgan Stanley equity strategists, “semiconductor and semiconductor equipment companies have the highest revenue exposure to China at 52%” and are thus exposed to maximum risks on rising trade tensions.

Now,there is news that the United States and China are ready to restart trade talks or negotiations next week to prevent a full-blown trade war, “the first such meeting since July.” If trade tensions abate, these stocks could soar higher (read: 5 Sector ETFs Most Exposed to Trade Tensions).

Tax Reform Benefit

Trump’s tax reform is another tailwind for the space. Big semiconductor companies have huge cash piles overseas and are likely to bring that cash back thanks to the one-time repatriation tax and overall lower tax rate. After repatriation, this cash may be used to dole out dividends to shareholders and to buy back shares (read: Tax Bill: What ETF Investors Need to Know).

ETFs in Focus

Against this backdrop, investors can definitely play the downtrodden semiconductor ETFs. Below we highlight a few ETFs.

Semiconductor Vaneck Vectors ETF (SMH Free Report)

Invesco Dynamic Semiconductors Portfolio (PSI Free Report)

SPDR S&P Semiconductor (XSD Free Report)

iShares PHLX Semiconductor ETF (SOXX Free Report)

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>

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D or NEE: Which Utility Stock to Keep in Your Portfolio?

Since services provided by utilities are basic necessities of the society, we witness a steady demand for such services. Market for utility services is nonvolatile as electricity, gas and water fulfill basic needs. These companies are generally regulated, fundamentally strong and mature. Stable earnings and cash flow rewards through regular dividends to investors make these stocks attractive.

Currently, dividend yield of 3.25% from Zacks Utility – Electric Power industry is better than the S&P 500 composite’s 1.83%.

In this article, we run a comparative analysis on two prominent electric power utilities — Dominion Energy, Inc (D Free Report) and NextEra Energy, Inc (NEE Free Report) — to ascertain which one performed better and is a suitable investment option right now.

Earnings & Surprise Trend

Dominion Energy’s second-quarter 2018 operating earnings beat the Zacks Consensus Estimate by 10.26%. The company has surpassed the Zacks Consensus Estimate in all the trailing four trailing quarters, the average being 6.33%.

NextEra Energy’s second-quarter 2018 adjusted earnings beat the Zacks Consensus Estimate by 1.93%. The company has surpassed the Zacks Consensus Estimate in three of the trailing four quarters, the average being 3.01%.

Debt/Capital

Dominion Energy and NextEra Energy have higher debt/capital ratio than industry’s 50.28% and S&P 500 composite’s 41.69%. Dominion Energy has 61.58% debt/capital ratio while NextEra Energy has 43.94%.

Guidance

For third-quarter 2018, Dominion expects operating earnings between 95 cents to $1.15 per share compared with $1.04 in third-quarter 2017. Positive drivers include commercial operation of the Cove Point Liquefaction project and benefit from tax reform.

NextEra Energy reiterated adjusted earnings guidance in the range of $7.45-$7.95 for 2018. The company expects earnings to witness a compound annual growth rate (CAGR) of 6-8% per year through 2021, off its 2018 earnings midpoint of $7.70.

Estimates Movement

In the past 30 days, the Zacks Consensus Estimate for Dominion Energy’s 2018 earnings inched up 0.7% to $4.13 and year-over-year growth is pegged at 14.72%.

The Zacks Consensus Estimate for NextEra Energy’s 2018 earnings moved up by a penny to $7.74 in the past 30 days and year-over-year growth is pegged at 15.52%.

Zacks Rank

Dominion Energy carries a Zacks Rank #3 (Hold). The company has a market capitalization of around $45.93 billion.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

NextEra Energy holds a Zacks Rank #3. It has a market capitalization of $81.48 billion.

Price Movement

Shares of NextEra Energy have gained 16.5% and  shares of Dominion Energy have lost 9.6%, respectively, against the industry’s lossof 3.3% in the past 12 months.Price movement of NextEra Energy is better compared with the Dominion Energy’s price movement.


 

How Utilities Are Shaping Up for Q3

Regular investment on infrastructure will allow Utilities’ to maintain uninterrupted flow of service. Utilities are upgrading and strengthening existing infrastructure along with modernizing generation fleet. Monitoring and servicing on a day-to-day basis will heighten customers’ reliability and resiliency on the service providers.

Another undergoing aspect in the utility market specifically for electric utilities is transition. While replacing the primary fuel source, coal, companies are shifting focus toward renewables. Meanwhile, rising interest rates are making federal borrowings less profitable but more expensive for traders. Moreover, interest rates might rise twice in 2018 which is a major concern for utilities.

The Verdict

NextEra Energy and Dominion Energy are strong operators in the utility space and it is quite difficult to pick a clear winner, when analyzed in most of the parameters. The companies, holding a similar Zacks Rank, witnessed the Zacks Consensus Estimate for 2018 move up in the past 30 days.

However, NextEra Energy seems to have inched ahead, courtesy of lower debt-to-capital level and better year-over-year revision in earnings per share.

Despite a marginal difference between these high-quality utilities, our verdict tilts toward NextEra Energy.

Will You Make a Fortune on the Shift to Electric Cars?

Here’s another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It’s not the one you think.

See This Ticker Free >>

http://www.zacks.com/stock/news/318562/d-or-nee-which-utility-stock-to-keep-in-your-portfolio?cid=CS-ZC-FT-318562http://www.zacks.com/stock/news/318562/d-or-nee-which-utility-stock-to-keep-in-your-portfolio?cid=CS-ZC-FT-318562

Should iShares Morningstar Large-Cap Value ETF (JKF) Be on Your Investing Radar?

If you’re interested in broad exposure to the Large Cap Value segment of the US equity market, look no further than the iShares Morningstar Large-Cap Value ETF (JKF Free Report) , a passively managed exchange traded fund launched on 06/28/2004.

The fund is sponsored by Blackrock. It has amassed assets over $404.83 M, making it one of the average sized ETFs attempting to match the Large Cap Value segment of the US equity market.

Why Large Cap Value

Companies that fall in the large cap category tend to have a market capitalization above $10 billion. Considered a more stable option, large cap companies boast more predictable cash flows and are less volatile than their mid and small cap counterparts.

While value stocks have lower than average price-to-earnings and price-to-book ratios, they also have lower than average sales and earnings growth rates. Looking at their long-term performance, value stocks have outperformed growth stocks in almost all markets. They are however likely to underperform growth stocks in strong bull markets.

Costs

When considering an ETF’s total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.25%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 2.49%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund’s holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Financials sector–about 26.60% of the portfolio. Consumer Staples and Healthcare round out the top three.

Looking at individual holdings, Jpmorgan Chase & Co (JPM Free Report) accounts for about 5.91% of total assets, followed by Berkshire Hathaway Inc Class B (BRK.B Free Report) and Exxon Mobil Corp (XOM Free Report) .

The top 10 holdings account for about 40.19% of total assets under management.

Performance and Risk

JKF seeks to match the performance of the Morningstar Large Value Index before fees and expenses. The Morningstar Large Value Index measures the performance of stocks issued by large-capitalization comp that have exhibited value characteristics.

The ETF has added about 2.17% so far this year and was up about 12.50% in the last one year (as of 08/17/2018). In the past 52-week period, it has traded between $95.53 and $112.57.

The ETF has a beta of 0.94 and standard deviation of 13.04% for the trailing three-year period, making it a medium risk choice in the space. With about 77 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares Morningstar Large-Cap Value ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, JKF is a reasonable option for those seeking exposure to the Large Cap ETFs area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Russell 1000 Value ETF (IWD Free Report) and the Vanguard Value ETF (VTV Free Report) track a similar index. While iShares Russell 1000 Value ETF has $37.80 B in assets, Vanguard Value ETF has $42.36 B. IWD has an expense ratio of 0.20% and VTV charges 0.05%.

Bottom-Line

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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Adtalem (ATGE) Misses Q4 Earnings Estimates, Increases Y/Y

Adtalem Global Education Inc. (ATGE Free Report) reported fourth-quarter fiscal 2018 results, with both the top and bottom lines missing the Zacks Consensus Estimate. While adjusted earnings (excluding special items) of 86 cents missed the consensus mark of 90 cents by 4.4%, revenues of $319.8 million missed the same by 9.1%. Shares of Adtalem declined more than 8% in yesterday’s after-hour trading session following the earnings release.

Nonetheless, on a year-over-year basis, earnings increased 14.7%. Also, total revenues rose 1.5% from the year-ago figure backed by segmental growth in Medical and Healthcare, and Professional Education segments, partially offset by lower contribution from the Technology and Business segment.

Adtalem’s total operating cost and expenses contracted 3.4% year over year to $254.6 million in the quarter. Operating income was $65.2 million, reflecting an increase of 25.9% from the prior-year quarter.

On a year-to-date basis, Adtalem has outperformed the industry it belongs to. The stock has gained around 32.6% against its industry’s decline of 2.1% in the said period.

Streamlining of Portfolio

Investors should note that Adtalem had signed an agreement to transfer ownership of DeVry University to Cogswell Education LLC during the second quarter of 2018 and expects the completion of the same in early fiscal 2019. Also, during the fiscal fourth quarter of 2018, the company agreed to transfer ownership of Carrington College to San Joaquin Valley College, Inc., which is slated to close during mid fiscal 2019. These transactions would classify DeVry University and Carrington College as discontinued operations.

Adtalem Global Education Inc. Price, Consensus and EPS Surprise

Segment Details

Medical and Healthcare: In the fiscal fourth quarter, segmental revenues of $201 million increased 4.1% from the year-ago level, led by growth at Chamberlain University, and Medical and Veterinary schools.

Revenues from the Chamberlain University rose 2.7%, driven by higher new as well as total student enrollment. New student enrollment increased 3.1% and total student count grew 4.7% in the May 2018 session.

Meanwhile, new student enrollment grew 1% and total student enrollment increased 4.6% in the July 2018 session.

Revenues from Medical and Veterinary schools jumped 6% year over year. New student enrollment and total student enrollment increased 9% and 1.2%, respectively, in the May 2018 semester.

Adjusted operating income of the segment was $48.3 million, up 12.5% from the prior-year quarter.

Professional Education: The segment’s revenues of $45.3 million were up 13.6% year over year, primarily driven by revenue growth at Association of Certified Anti-Money Laundering Specialists (ACAMS) and better performance at Becker Professional Education.

Adjusted operating income was $13 million, 17.3% higher than the prior-year period.

Technology and Business: The segment recorded revenues of $74.3 million, down 10.3% year over year. However, the top line inched up 0.9% on a constant-currency basis.

Adjusted operating income declined 23% year over year to $14.9 million.

Notably, the U.S. Traditional Postsecondary segment has been reclassified into Home Office and Other segment.

Liquidity & Cash Flow

As of Jun 30, 2018, Adtalem’s cash and equivalents were $430.7 million, up from $240.4 million at the end of 2017.

Cash flow provided by operating activities totaled $239.2 million at the end of fiscal 2018, up from $230.9 million in fiscal 2017.

Fiscal 2018 Highlights

Revenues came in at $1,231.2 million, up 1.9% from fiscal 2017.

Adjusted earnings increased to $2.80 per share from $2.51 in fiscal 2017.

The company’s total operating cost and expenses, before special items, declined 4.5% to $1,023.7 million in fiscal 2018. Operating income was $207.5 million in the quarter, suggesting an increase of 53.1% from fiscal 2017.

Total student enrollments from continuing operations decreased 1.9%. However, new student enrollments rose 2.3%.

Fiscal First-Quarter Guidance

Revenues are expected to grow approximately 1% year over year, primarily on the back of solid contribution from the Medical and Healthcare segment.

Operating cost before special items is expected at approximately 0-1%.

Fiscal 2019 Guidance

Total revenues are anticipated to grow 3-4% for the year.

Capital spending is expected in the range of $70-$75 million. The effective income tax rate for the fiscal is likely to be around 18-19%.

Zacks Rank & Stocks to Consider

Currently, Adtalem carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the industry are Strategic Education, Inc. (STRA Free Report) , Bridgepoint Education, Inc. (BPI Free Report) and RYB Education, Inc. (RYB Free Report) . While Strategic Education and Bridgepoint sport a Zacks Rank #1 (Strong Buy), RYB carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Strategic Education’s earnings per share are expected to increase 44.8% in 2018.

Bridgepoint has an expected current-year earnings growth rate of 8.5%.

RYB is expected to register an EPS growth rate of 141.2% next year.

Will You Make a Fortune on the Shift to Electric Cars?

Here’s another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It’s not the one you think.

See This Ticker Free >>

http://www.zacks.com/stock/news/318560/adtalem-atge-misses-q4-earnings-estimates-increases-y-y?cid=CS-ZC-FT-318560http://www.zacks.com/stock/news/318560/adtalem-atge-misses-q4-earnings-estimates-increases-y-y?cid=CS-ZC-FT-318560