RadioShack Meets Zacks Estimate – Analyst Blog
RadioShack Corp. (RSH) has declared second quarter 2010 financial results mostly in line with the Zacks Consensus Estimate. Comparable store sales for the company-operated stores and kiosks (stores and kiosks opened at least a year) grew 6.7% year over year. This is a key retail performance indicator measuring growth from existing sales locations.
GAAP net income, in the second quarter of 2010, was $53 million or 41 cents per share compared with a net income of $48.8 million or 39 cents per share in the year-ago quarter. Quarterly EPS of 41 cents was exactly in line with the Zacks Consensus Estimate. Management strategy to put emphasis on innovative mobile and technology products helps RadioShack to improve its bottom line.
Quarterly net revenue was $1,011.4 million, up 4.7% year over year, but slightly below the Zacks Consensus Estimate of $1,017 million. The year-over-year increase in revenue was primarily due to continued growth in the postpaid wireless segment and introduction of new products like Apple Inc’s (AAPL) iPhone 4.
Quarterly gross profit was $480.6 million compared with $444.8 million in the prior-year quarter. Gross margin was 47.5% in the reported quarter compared with 46.1% in the same quarter of the previous year. This was mainly due to favorable sales-mix for the high-margin products.
Quarterly Selling, General, and Administrative expenses were $365.5 million compared with $335.7 million in the year-ago quarter. Operating income in the second quarter was $96.3 million, or 9.5% of sales, compared with $87.7 million, or 9.1% of sales in the same quarter of the last year.
During the first half of 2010, RadioShack generated $42 million of cash for operations compared with a cash generation of $143.4 million in the prior-year period. Free cash flow (cash flow from operations less capital expenditures) in the reported period was $16.3 million compared with $99.5 million in the year-ago quarter.
At the end of the second quarter of 2010, RadioShack had $931.1 million of cash & cash equivalent compared with $930.8 million at the end of the prior-year quarter. Total debt, at the end of the same quarter was $680.4 million compared with $720.1 million at the end of the year-ago quarter. At the end of the second quarter of 2010, debt-to-capitalization ratio was 0.22 compared with 0.41 at the end of the year-ago quarter.
Segment Wise Results
Quarterly revenue from U.S. RadioShack Company-operated store segment was up 6.4% year over year to $873.9 million.
Within this segment, Wireless sales were up 61.4% primarily due to higher Sprint Nextel Corp. (S), AT&T (T), and T-Mobile postpaid wireless sales, higher prepaid wireless handset sales, offset by lower GPS sales. Service revenue was up 6.5% due to higher prepaid wireless airtime. Accessory sales were down 25.4% due significant sales decline of digital-to-analog TV converter boxes, and imaging accessories. However, wireless accessories sales increased. Modern Home sales declined 26.3%, Personal Electronics sales declined 19.8%, Power sales declined 5.1%, and Technical sales declined 3%.
Kiosks segment revenue declined 12.5% year over year to $55.5 million. This was primarily due to fewer kiosk locations and the closure of Sprint-branded kiosks in August 2009.
Revenue from Other services segment increased 1.4% year over year to $82 million. RadioShack de Mexico significantly contributed to this segment.
We maintain our Neutral recommendation for RadioShack. Currently, it is a Zacks #3 Rank (Hold) stock.
APPLE INC (AAPL): Free Stock Analysis Report
RADIOSHACK CORP (RSH): Free Stock Analysis Report
SPRINT NEXTEL (S): Free Stock Analysis Report
AT&T INC (T): Free Stock Analysis Report
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Vistaprint Records Mixed Results – Analyst Blog
Vistaprint N.V. (VPRT) recorded its fourth-quarter 2010 adjusted earnings of $17.3 million or 38 cents per share, which declined 12% year over year but surpassed the Zacks Consensus Estimate of 25 cents. Earnings were at the high end of the guidance range of 35 cents–38 cents.
VISTAPRINT NV (VPRT): Free Stock Analysis Report
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Stericycle Meets Zacks Estimate – Analyst Blog
Stericycle Inc. (SRCL) delivered earnings per share of 62 cents in its second quarter ended June 30, 2010, at par with the Zacks Consensus Estimate, and up 19% from 52 cents in the year-ago quarter. In addition to growth fueled by acquisitions, Stericycle also posted healthy internal growth figures in both domestic and international operations.The reported and year-ago quarters’ EPS excluded transactional expenses of 1 cent pertaining to acquisitions. In addition, the EPS in the quarter under review excluded restructuring costs, litigation settlement costs of 1 cent per share and a 2 cent gain on sale of assets. Including these items, EPS stood at 61 cents in the reported quarter and at 51 cents in the year-earlier quarter.
Revenues
Revenues climbed 20% to $347.7 million outpacing the Zacks Consensus Estimate of $339 million. Acquisitions less than 12 months old contributed approximately $29.2 million to the growth in revenues. Domestic internal growth excluding returns management was up 8.1%. Growth from small account customers and large account customers contributed 9% and 6%, respectively, to domestic internal growth. International internal growth (adjusted for foreign exchange) was up 9.4%. Regulated recalls and returns management services revenues were $25.4 million.
Stericycle reported 471,000 medical waste customers, of which 459,000 were small quantity (SQ), and the remaining 12,000 were large quantity (LQ) customers, up from 465,000 in the first quarter of fiscal 2010.
Cost & Margin Performance
Cost of sales spiked 21% to $185.5 million in the quarter and as a percentage of revenue, it increased 50 basis points to 53.3%. Even though adjusted gross profit went up 19% to $162.3 million, gross margin dipped 50 basis points to 46.7%. This, however, excluded the impact of restructuring costs of $726,000 for its regulated returns management services business. Including the effect of these costs, gross profit was $161.5 million with a gross margin of 46.5%.
Selling, general, administrative and engineering expenses soared 20% to $65 million in the quarter and as a percentage of sales remained flat at 18.7%. Stericycle’s operating income (excluding the above mentioned restructuring cost) was $95 million, up 17% year over year. However, operating margin contracted 66 basis points to 27.3%. Including the effect of the cost, operating income was $94.3 million with an operating margin of 27.1%.
Financial Position
As of June 30, 2010, Stericycle had cash and cash equivalents of $8.25 million, down from $22.9 million as of March 31, 2010. During the quarter, the company generated operating cash flow of $48.2 million compared with $49.9 million in the year-ago quarter.
As of June 30, 2010, debt-to-capitalization ratio dropped to 50% as of June 30, 2010, from 53% as of March 31, 2010 and 54% as of December 31, 2009.
On July 16, 2010, Stericycle received informal commitments from 22 institutional investors to purchase $175 million of 3.89% seven-year unsecured senior notes and $225 million of new ten-year 4.47% on secured senior notes. The company expects the note purchase agreement to be signed in August 2010, and the new senior notes to be issued in October 2010. The proceeds will be used to repay debt and a portion of its revolver.
During the quarter, Stericycle repurchased 235,436 shares of its common stock for $13 million. Till date, the company has authorization to purchase an additional 2.6 million shares.
Outlook
For fiscal 2010, Stericycle issued its net income guidance of $210 million to $213 million and EPS guidance of $2.42 to $2.46 driven by expected revenues in the range of $1.37 billion to $1.39 billion. Free cash flow is expected to range between $245 million and $255 million and capital expenditures are likely to fall in the $45 million to $50 million range.
Our Take
A significant portion of Stericycle’s historical growth came from the successful integration of acquisitions in both domestic and international markets. The company is continuously looking for strategic acquisitions that will further strengthen its existing market position and expand its geographic base.
In addition to the core medical waste disposal business, Stericycle has been successful in extending its footprint into ancillary services such as Steri-Safe for OSHA (Occupational Safety and Health Administration) compliance and the Bio Systems’ sharps management solution, which provides additional opportunities for revenue growth.
The company’s Steri-Safe program accounts for approximately 70% of Stericycle’s SQ revenue and remains a key driver of long-term cash flow growth, given its significant market potential and high incremental margins. Overall, less than one-third of all SQ clients currently purchasing Steri-Safe leave ample room to add services via new client additions as well as existing client upgrade to premium service offerings.
Further, only 20% of Stericycle’s LQ customers use its multiple services, leaving more than 80% of its large customer base available for adding services such as Sharps Management and RX Waste. By adding these multiple service offerings, the company will potentially triple the value of each account.
Lake Forest, Illinois-based Stericycle is a leading provider of regulated medical waste management as well as product recall and return services in the U.S. The company’s customers fall into two categories, small-account (outpatient clinics, medical and dental offices, long-term and sub-acute care facilities, and retail pharmacies) and large-account (hospitals, blood banks, and pharmaceutical manufacturers). The company caters to a wide clientele spread across the domestic and international markets.
Zacks Investment Research
Meredith Outpaces Zacks Estimate – Analyst Blog
Meredith Corporation (MDP), a leading media and marketing company, recently posted fourth-quarter 2010 results that exceeded the Zacks Estimate on the heels of improved advertising performance at its National and Local Media groups, increased readership and online traffic.The quarterly earnings of 70 cents a share outpaced the Zacks Consensus Estimate of 66 cents, and rose 27% from 55 cents delivered in the prior-year quarter. On a reported basis, including one-time items, earnings came in at 73 cents, reflecting a drastic improvement over a decline of $3.64 per share experienced in the year-earlier quarter.
Management now expects earnings for first-quarter 2011 in the range of 47 cents to 52 cents a share, and for fiscal year 2011 in the range of $2.40 to $2.75. The current Zacks Consensus Estimate for first-quarter and fiscal year 2011 are 51 cents and $2.52 per share, respectively.
Total revenue for the quarter jumped 6% year-on-year to $365.1 million, reflecting a 7% increase in total advertising revenue, a 2% rise in circulation revenue, and a 6% jump in other revenue. Meredith now expects total advertising revenue to increase between 6% and 7% in first-quarter 2011. Total revenue also comfortably surpassed the Zacks Consensus Revenue Estimate of $362 million.
Meredith’s National Media Group posted a 2% increase in revenue to $288 million, aided by a 1% jump in advertising revenue, and a 2% rise in circulation revenue. Management expects advertising revenue to remain flat or down slightly for first-quarter 2011. Operating profit of $47.5 million, excluding one-time items, remained almost flat compared with the prior-year quarter.
Meredith publishes magazines for women focusing on the home and family. Advertising revenue at Meredith magazines - Better Homes and Gardens, Family Circle and Parents - led the growth in advertising revenue. The company’s share in the overall magazine industry advertising revenue rose to 12.3% in fiscal 2010 from 9.5% two year ago.
During fiscal 2010, advertising revenue at Meredith Interactive Media soared 17% and both unique visitors and page views across Meredith's 60 Web sites climbed about 20%.
The sluggish economy prompted Meredith to diversify and add significant revenue streams beyond traditional advertising by leveraging its brands through strategic alliances. Meredith Integrated Marketing revenue climbed 5%, whereas Brand Licensing revenue surged about 50% led by a rise in sales of Better Homes and Gardens' branded products at Wal-Mart Stores Inc. (WMT) in the second-half of fiscal 2010.
Local Media Group’s revenue soared 23% to $77.1 million due to a rise in political and non-political advertising revenue. Political advertising was $3.9 million versus $398,000 in the year-ago quarter. Non-political advertising revenue rose 15% to $64 million. Management expects non-political advertising revenue to be up in the mid-to-high teens in first-quarter 2011.Meredith expects to book net political advertising revenue at its television stations between $25 and $30 million, with the majority being generated in second-quarter 2011.
Excluding one-time items, operating profit at Local Media Group was $20.2 million compared to $6.2 million in the prior-year quarter.
Meredith ended the quarter with cash and cash equivalents of $48.6 million, total long-term debt of $300 million, and shareholders’ equity of $688.3 million. The company’s leverage ratio (debt to EBITDA) was under existing debt covenants at 1.3 to 1 at the end of the quarter. The company lowered its debt load by $80 million during fiscal 2010.
The company generated net cash flows from operating activities of $52 million in the quarter and $191.7 million during fiscal 2010. Meredith also has a revolving credit facility of $150 million, which can be doubled under special circumstances.
Zacks Investment Research
Gentiva Beats, Ups Revenue Outlook – Analyst Blog
On July 29, 2010, Gentiva Health Services Inc. (GTIV) reported its second-quarter income from continuing operations of $22.7 million or $0.74 per share, well ahead of the Zacks Consensus Estimate of $0.68. This also compares favorably with the income of $17.8 million or earnings of $0.61 in the year-ago quarter. The earnings ramped up due to strong growth in Hospice with somewhat softer Home Health Episodic volumes and progressive operating margins.Gentiva’s income from continuing operations excludes net restructuring, legal settlement and merger and acquisition costs of $2.5 million or $0.08 per share in the reported quarter and $0.6 million or $0.02 per share of restructuring and merger and acquisition costs in the prior year quarter. The results also exclude after-tax losses on discontinuing operations of $1.3 million or $0.04 per share and $0.3 million or $0.01 per share in the reported and prior year quarters, respectively.
Including these one-time costs, Gentiva reported a net income of $18.9 million or $0.62 per share as opposed to $17.1 million or $0.58 per share.
Behind the Headlines
Total net revenues for the quarter climbed 4.0% year over year to $297.1 million as against $284.8 million in the prior year quarter. Revenues from the Home Health Episodic segment increased 7% year over year to $228.7 million in the reported quarter. Revenues in the Hospice segment came in at $20.9 million, which reflected a year-over-year increase of approximately 14%.
Gentiva witnessed selling, general and administrative expenses of $125.5 million in the reported quarter from $120.5 million in the year-ago quarter. Gentiva’s gross profit for the reported quarter climbed 7.4% year over year to $161.9 million.
Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) attributable to continuing operations increased 23.4% to $43.2 million from $35.0 million in the prior year quarter. Adjusted EBITDA as a percentage of net revenues improved to 14.5% as against 12.3% in the prior-year period. Adjusted EBITDA excludes net charges associated with restructuring, legal settlements and merger and acquisition activities.
Gentiva exited the quarter ending July 4 with cash and cash equivalents of approximately $191.1 million and outstanding debt under its credit agreement of $232.0 million. Cash and cash equivalents of Gentiva were $152.4 million and outstanding debt under its credit agreement were $232.0 million at the end of January 3, 2010.
As of July 4, 2010, Gentiva had total assets of $1.1 billion and shareholders’ equity of $604.8 million.
Outlook for Fiscal 2010
On July 20, Gentiva released its preliminary results and reiterated its fiscal 2010 outlook for adjusted income from continuing operations and reduced the revenue guidance for fiscal 2010.
Gentiva continues to expect adjusted income from continuing operations in the range of $2.67-$2.75 per share for fiscal 2010, excluding the costs of restructuring, legal settlements and merger and acquisition activities, the results of discontinued operations and the impact of pending and future acquisitions.
However, Gentiva has slashed its full-year revenue guidance due to slower-than-anticipated growth in home health episodic volumes and the expected seasonality in third quarter volumes. Gentiva now provides a revenue outlook in the range of $1.20 billion-$1.23 billion, down from $1.23 billion-$1.26 billion, projected previously.
Gentiva, however, expects to further revise its fiscal 2010 outlook after the completion of the Odyssey Healthcare Inc. (ODSY) acquisition expected during the third quarter of 2010.
Following the acquisition, the combined firm is projected to earn about $1.8 billion in annual revenues, dramatically up from $1.15 billion earned by Gentiva alone in 2009.
Further, management expects 60% of revenues to come from home healthcare and the remainder from hospice care. Going forward, Gentiva anticipates the impact of the deal to be accretive to operating earnings within the first year, although certain one-time charges are also projected.
Gentiva also acquired the assets of United Home Care Group, a Medicare certified home health services business in May to expand its presence in Louisiana.
However, this deal is projected to have a neutral impact on Gentiva’s earnings in 2010 but beyond 2010, it is expected to be accretive to earnings.
Our Take
The health care providing industry is consolidating through a flood of mergers and acquisitions (M&A) of home health and hospice providers. Gentiva has acquired United Home and we now expect more M&A activities in this space, particularly after the reimbursement rate cuts that are being introduced under healthcare reforms.
Gentiva’s diversified product portfolio is impressive and its history of generating significant leverage on acquisitions and modestly strong fundamentals inspire our optimism about the stock.
The quantitative Zacks #3 Rank for Gentiva denotes a short-term Hold rating, indicating no clear directional pressure on the shares over the near term.
Zacks Investment Research
Cerner Tops, Profit Sails – Analyst Blog
Cerner Corp. (CERN), a leading provider of healthcare information technology (HCIT) services, announced better-than-expected second-quarter results with adjusted earnings per share of 69 cents, topping the Zacks Consensus Estimate of 64 cents and the year-ago earnings of 55 cents.Adjusted earnings exclude stock-based compensation expenses of $3.6 million (or 4 cents per share). Net income soared 27% year-over-year to $55.5 million (or 65 cents a share). The results were driven by higher revenues and healthy booking growth.
Revenues
Revenues climbed 13% year-over-year to $456 million, beating the Zacks Consensus Estimate of $450 million, on the back of incremental revenues across all segments. System sales rose 19% to $135.9 million, driven by healthy license software sales which more than offset depressed hardware revenues. Revenues from Support, Maintenance and Services leapt 11% to $311.6 million while Reimbursed Travel sales grew roughly 6% to $8.5 million.
Bookings
New client additions and the federal Stimulus package drove bookings in the quarter, which grew 19% year-over-year to $467.8 million. Bookings from new footprints, which include several hospitals, were strong in the quarter.
Optimism about the growth prospects of HCIT service providers has improved under the Obama Administration, which passed the Stimulus package in May 2009, aimed at increasing the use of electronic health record (EHR) systems by medical practitioners. The recently released “meaningful use” rule that enables hospitals to qualify for federal incentive program will boost business opportunities for Cerner in the long-run.
Margins
Gross margin dipped 60 basis points (bps) year-over-year to 82.8% in the quarter, attributable to lower system sales margin (resulting from weak hardware margins). Operating margin (excluding stock-based compensation) came in at 20.2%, up 290 bps year-over-year.
Balance Sheet & Cash Flow
Cerner ended first-half fiscal 2010 with cash and cash equivalents of $255.8 million, down 28% year-over-year. Total debt declined 22% year-over-year to $116.3 million. The company posted record cash flows from operation in the quarter which surged 62% year-over-year to $110.2 million. This has led to solid growth in free cash flows, which more than doubled year-over-year to $65.6 million.
Outlook
Cerner expects third quarter revenues between $455 million and $470 million and adjusted earnings in the range of 71 cents to 76 cents per share. New business booking for the quarter is expected between $450 million and $480 million.
The company has lifted its revenues and earnings guidance for fiscal 2010. It now anticipates revenues in the range of $1.83 billion and $1.875 billion, up from the earlier projection of $1.80 billion to $1.875 billion. Likewise, adjusted earnings guidance has been raised to $2.85 - $2.92 from $2.80 - $2.90.
Cerner expects stock-based compensation costs to dilute third quarter and fiscal 2010 earnings by roughly 4 cents to 5 cents and 17 cents to 18 cents, respectively. The company remains confident of achieving its full year operating margin target of 20%.
Missouri-based Cerner is a leader in HCIT solutions, serving hospitals and healthcare providers, primarily in the U.S. These solutions, which can be implemented as standalone, combined, or enterprise-wide systems, are created to provide clinical, financial and information management tools for the healthcare marketplace.
CERNER CORP (CERN): Free Stock Analysis Report
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Noble Energy Jumps on Volume Growth – Analyst Blog
Noble Energy Inc. (NBL) reported adjusted earnings per share of $1.07 for the second quarter of 2010, which surpassed the Zacks Consensus Estimate of 74 cents as well as year-ago earnings of 66 cents. The outperformance was mainly driven by robust volume growth across the company's businesses.
Net revenue of $751 million in the quarter was above the Zacks Consensus Estimate of $732 million and grew 53% from the second quarter of 2009. This was mainly due to higher hydrocarbon production along with improved price realizations. Revenues from oil, natural gas and natural gas liquids (NGL) were $460 million (up 55%), $202 million (up 41%) and $48 million (up 129%), respectively.
Operational Results
Consolidated sales volumes rose 5.2% to 20 million barrels of oil equivalent (BOE), or 219,000 BOE per day, primarily due to higher volumes in the U.S., Israel and the North Sea, partially offset by volume declines in Equatorial Guinea. Volume increases primarily stemmed from volume growth in the U.S. Onshore region (ongoing development work at Wattenberg and the acquisition of Central DJ Basin asset) coupled with higher natural gas sales in Israel.
Realized prices for oil, natural gas and NGL averaged $75.36 per barrel (up 45%), $2.91 per thousand cubic feet (up 37%) and $39.37 per barrel (up 64%), respectively.
Noble's operating expenses increased 25.5% year over year to $521 million, primarily due to higher lease operating, production, transportation and exploration expenses coupled with a modest rise in general & administrative expenses. Despite this, the company reported an operating income of $230 million, substantially above $76 million in the year-ago quarter.
Balance Sheet and Cash Flows
Noble ended the quarter with cash and cash equivalents of $1.0 billion and long-term debt of $2.6 billion. During the quarter, the company generated $256 million of cash from operations and deployed $519 million towards capital expenditure. Discretionary cash flow for the second quarter 2010 was $480 million.
Guidance
Moving forward, Noble expects third quarter 2010 volumes to average 212,000−220,000 BOE per day. For all of 2010, volumes are likely to range between 211,000−217,000 BOE per day. Moreover, the company lowered its 2010 lease operating expense guidance to between $4.80 and $5.10 per BOE. Also, it slashed its exploration expense guidance for 2010 to a range of $265 - $325 million.
Noble cut its 2010 capital expenditure guidance to $2.2 billion from the previous guidance of $2.5 billion.
NOBLE ENERGY (NBL): Free Stock Analysis Report
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CME Beats on Higher Top Line – Analyst Blog
CME Group Inc.’s (CME) second quarter operating earnings of $4.43 per share were substantially ahead of the Zacks Consensus Estimate of $4.30. Earnings for the reported quarter excluded a $20.5 million writedown of goodwill in relation to the company's subsidiary, Credit Market Analysis Limited (CMA).GAAP earnings came in at $271.2 million or $4.11 per share, compared to $221.8 million or $3.33 in the year-ago quarter.
CME Group’s total revenue for the reported quarter increased 25.6% year over year to $813.9 million. The increase in revenues was due primarily to increases in average daily volumes and a 27.5% increase in clearing and transaction fees to $684.2 million, along with market data and information services revenue that grew 24.2% year over year to $102.0 million.
However, this was partially offset by revenue earned from access and communication fee that declined 2.6% year over year to $11.2 million and other revenue that decreased 5.2% year over year to $16.5 million.
Total expenses increased by 20% year over year to $298.8 million. The increase was due primarily to higher compensation and benefits, and increased professional fees. Non-operating expenses were $35.0 million, driven primarily by interest expense and borrowing costs of $37.9 million, and equity losses of $1.5 million, which were partially offset by $4.4 million in investment income. Non-operating expenses were up 46.0% from the year-ago quarter.
CME Group’s average daily volume was 13.5 million contracts, up 30.7% from the year-ago quarter. However, total average rate per contract decreased 4.0% from the year-ago quarter to 79 cents due to a larger volume coming from the interest rate product area, which has the lowest average rate per contract.
As of June 30, 2010, CME Group had $409.0 million of cash and marketable securities and $2.8 billion in long-term debt. The company paid back $300.0 million of its debt during the reported quarter.
Dividend Update
On May 6, the board of CME Group declared a second-quarter dividend of $1.15 per share, which was paid on June 25, 2010, to shareholders of record as on June 10, 2010.
Overall, we believe that the gradual economic recovery is exerting positive influences on CME Group’s volume. Moreover, the company’s internal efforts to promote, expand and cross-sell its core exchange-traded business through meaningful acquisitions, a diverse and strong portfolio along with its global presence will continue to generate decent growth in the longer term. However, increasing expenses and reducing rate per contract remain a cause of concern.
CME GROUP INC (CME): Free Stock Analysis Report
Zacks Investment Research
Zacks Sell List Highlights: PetMed Express, Rambus, Compass Minerals International and athenahealth – Press Releases
For Immediate Release
Chicago, IL – July 29, 2010 – Zacks.com releases details on a group of stocks that are currently members of the exclusive Zacks #5 Rank List – Stocks to Sell Now. These stocks are currently rated as a Zacks Rank #5 (Strong Sell): PetMed Express (PETS) and Rambus Inc. (RMBS). Further, Zacks announced #4 Rankings (Sell) on two other widely held stocks: Compass Minerals International, Inc (CMP) and athenahealth, Inc (ATHN). To see the full Zacks #5 Rank List - Stocks to Sell Now visit: http://at.zacks.com/?id=5522
Since inception in 1988, the S&P 500 has outperformed the Zacks #5 Rank List of Stocks to Sell Now by 80% annually (+2% vs. +10%). While the rest of Wall Street continued to tout stocks during the market declines of the last few years, Zacks told investors which stocks to sell or avoid.
Here is a synopsis of why PETS and RMBS have a Zacks Rank of #5 (Strong Sell) and should most likely be sold or avoided for the next one to three months. Note that a #5 Strong Sell rating is applied to 5% of all the stocks in the Zacks Rank universe:
PetMed Express (PETS) announced first-quarter earnings of 32 cents per share on July 19 that missed analysts’ expectations by nearly 16%. Total sales fell 3.6% to $74.4 million. The Zacks Consensus Estimate for the current year slipped 5 cents to $1.08 per share in the last 30 days as all the 9 covering analysts reduced estimates. Next year’s estimate dipped 22 cents to $1.17 per share in that time span.
Rambus Inc. (RMBS) posted a second-quarter loss of 17 cents per share on July 22, which came in 10 cents wider than the average forecast. The Zacks Consensus Estimate for the full year fell to a profit of 98 cents per share from $1.30 over the past week as both the covering analysts slashed forecasts. For 2011, analysts expect a loss of 17 cents per share, compared to last month’s projection for a profit of 31 cents.
Here is a synopsis of why CMP and ATHN have a Zacks Rank of 4 (Sell) and should also most likely be sold or avoided for the next one to three months. Note that a #4 Sell rating is applied to 15% of all the stocks ranked by Zacks;
Compass Minerals International, Inc's (CMP) second-quarter earnings of 34 cents per share, posted on July 27, lagged analysts’ projections by 22%. For 2010, the Zacks Consensus Estimate moved down 3 cents to $5.34 per share in the last 7 days as one analyst out of 7 cut back on forecasts. Estimate for next year slid 4 cents to $6.30 per share during that time period.
athenahealth, Inc (ATHN) reported a second-quarter profit of 4 cents per share on July 22 that fell 33% short of the Zacks Consensus Estimate. The full-year average forecast is currently 29 cents per share, compared with last week’s projection for a profit of 32 cents. During that time, 2 analysts out of 10 revised downward. Next year’s forecast dropped 10 cents to 54 cents per share in the same period.
Truly taking advantage of the Zacks Rank requires the understanding of how it works. The free special report; “Zacks Rank Guide: Harnessing the Power of Earnings Estimate Revisions” is available to provide this insightful background. Download a free copy now to prosper in the years to come at http://at.zacks.com/?id=5523
Since 1988, the Zacks Rank has proven that "Earnings estimate revisions are the most powerful force impacting stock prices." Since inception in 1988, #1 Rank Stocks have generated an average annual return of +28%. During the 2000-2002 bear market, Zacks #1 Rank stocks gained +43.8%, while the S&P 500 tumbled -37.6%. Also note that the Zacks Rank system has just as many Strong Sell recommendations (Rank #5) as Strong Buy recommendations (Rank #1). Since 1988, Zacks Rank #5 stocks have significantly underperformed the S&P 500 (+2% versus +10%). Thus, the Zacks Rank system allows investors to truly manage portfolio trading effectively.
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ATHENAHEALTH IN (ATHN): Free Stock Analysis Report
COMPASS MINERLS (CMP): Free Stock Analysis Report
PETMED EXPRESS (PETS): Free Stock Analysis Report
RAMBUS INC (RMBS): Free Stock Analysis Report
Zacks Investment Research
Visa Beats on Strong Top Line – Analyst Blog
Visa Inc.'s (V) fiscal third-quarter earnings of 97 cents per share were substantially ahead of the Zacks Consensus Estimate of 93 cents.
Visa's GAAP net income for the quarter came in at $716 million, marginally down 1.8% from $729 million in the year-ago quarter. However, operating income substantially increased 38.3% year over year to $1.14 billion. Total operating revenues for the reported quarter were $2.03 billion, up 23.3% from $1.65 billion in the year-ago quarter.
Service revenues increased 13.5% year over year to $873 million and are recognized based on payments volume in the prior quarter. All other revenue categories are recognized based on current quarter activity. Data processing revenues rose 30.9% over the prior year period to $792 million.
International transaction revenues, which are driven by cross-border payments volume, grew 25.3% over the prior year quarter to $574 million. Other revenues, which include the Visa Europe licensing fee, were $183 million, up 15.8% over the year-ago quarter. Volume and support incentives were $393 million, representing 16% of gross revenue.
On a constant dollar basis, payments volume increased 14% year over year to $803 billion. Total processed transactions carrying the Visa brand increased 14% year over year to 11.7 billion. Cross border volume, on a constant dollar basis, grew 17% year over year.
Total GAAP operating expenses for the reported quarter increased 8% year over year to $892 million. The increase was primarily a result of rising communication, marketing, depreciation and personnel expenses.
As of June 30, 2010, cash and equivalents, restricted cash and available-for-sale investment securities were $7.4 billion, which includes $1.9 billion of restricted cash for litigation escrow. Visa's operating cash flow substantially improved to $1.8 billion while total shareholders' equity was recorded at $24.68 billion.
Business Update
On July 21 2010, Visa closed the acquisition of CyberSource Corporation, a leading provider of electronic payment, risk management and payment security solutions to online merchants, for a cash payment of approximately $2.0 billion, valuing at $26 per share. With over 295,000 merchants and clients (including British Airways, Home Depot, Facebook, Google Inc. (GOOG)), CyberSource processes approximately 25% of all eCommerce dollars transacted in the U.S.
Guidance
For fiscal 2010, Visa reiterated its annual net revenue growth projections in the range of 11-15%; annual operating margin in the mid to high 50% range; the GAAP tax rate was revised to be in the range of 37-38%; and capital expenditures of about $200 million. Further, the company re-affirmed its volume and support incentives to be in the range of 16-17% of gross revenue; advertising, marketing and promotional expenses to be less than $1 billion; annual earnings per share growth of greater than 20% and annual free cash flow to exceed $2 billion in fiscal 2010.
For fiscal 2011, Visa continues to project that annual earnings per share growth will exceed 20% and annual free cash flow to surpass $2 billion.
Dividend Update
On July 22, the Board of Visa announced a quarterly dividend of $0.125 per share of class A common stock (determined in the case of class B and class C common stock on an as-converted basis), which will be paid on September 1, 2010 to all holders of record as of August 13, 2010.
Our Take
The results for the reported quarter primarily benefited from transaction growth, driven by Visa's payments network and processing capabilities. Also, the ongoing economic recovery and new U.S. regulations have led to increased use of debit cards along with the improvement in the credit card industry. As a result, revenue and operating income rose across all categories. Growth in data processing and international transaction revenues was significant during the reported quarter. In addition, Visa has delivered growth by generating strong cash flow and maintaining a healthy capital position.
However, Visa is being challenged by higher expenses and the new regulatory compliances for debit cards, compelling Visa to snip its debit processing fees, as a result of the ongoing financial overhaul reform in the U.S. The impact of the new regulation is expected to be more severe on Visa than its peers such as MasterCard Inc. (MA) since the former is more exposed to the debit processing market and generates a chunk of the revenue from there. Hence, it is likely to put Visa through a bumpy ride in the upcoming quarters.
Nevertheless, the recent CyberSource acquisition is a part of Visa's long-term growth strategy, which would provide greater exposure in the rapidly-developing eCommerce industry. This is not only expected to boost revenue growth but will also increase the company's merchant and clientele base across the globe, ensuring reduction in monetary loss from fraud. It would also provide them with fast and efficient connectivity to multiple payment networks. Hence, CyberSource is expected to be a feather in Visa's cap in the long run.
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