For Immediate Release
Chicago, IL – January 31, 2012 – Today, Zacks Investment Ideas
feature highlights Features: Arctic Cat
(ACAT), Caterpillar
(CAT), Apple
(AAPL), United Rentals, Inc.
(URI) and CA Technologies
(CA).
5 Stocks That Turned a Triple Play
For the first time in a long time, earnings season has been a
bit of a disappointment.
The typical earnings season will have a surprise ratio
(#beat/#miss) around 3:1 with a median surprise of about 3.0%. So
far this season, the surprise ratio is 1.81 and the median surprise
is 1.9%.
According to Zacks' Chief Equity Strategist Dirk Van Dijk, this
is the weakest start to an earnings season since the depths of the
Great Recession.
As for estimate revision activity, the ratio of S&P 500
companies with rising to falling estimates is 0.61 for 2012 - not a
very bullish indicator.
And excluding financials, the year-over-year increase in net
income is 11.8% - down from 16.1% in the third quarter.
Not All Bad
This earnings season may not be that hot so far, but there are
several companies that have reported exceptionally strong quarters.
You just have to hunt a little harder to find them. I've
highlighted 5 companies below that delivered the coveted 'triple
play' this earnings season:
- A positive earnings surprise
- A positive revenue surprise, and
- Guidance from management above the Zacks Consensus
Estimate
While some of these stocks have already moved higher after their
earnings announcement, I believe there is still room for each of
them to run higher.
For one, each stock is reasonably valued. Secondly, the
well-documented "post-earnings announcement drift" suggests that
companies with positive earnings surprises can see upward stock
price movements for several weeks, or even months.
5 Triple Plays:
Arctic Cat (ACAT)
EPS Surprise: 59%
Sales Surprise: 14%
Arctic Cat manufactures ATVs and snowmobiles. Although this
winter has been extremely mild, the company delivered a huge
quarter on January 26.
In addition to crushing the Zacks Consensus Estimates on sales
and EPS, management raised its EPS guidance to a range of
$1.60-$1.70 on sales growth of 22%-24%. This is up from previous
guidance of $1.10-$1.15 and well above the consensus of $1.22
before the announcement.
Analysts raised their estimates for both 2012 and 2013
significantly higher after the beat, sending the stock to a Zacks
#1 Rank (Strong Buy) stock. And although shares jumped 20% on the
day of the announcement, valuation is still reasonable with shares
trading at just 17x forward earnings.
Caterpillar (CAT)
EPS Surprise: 34%
Sales Surprise: 10%
A different kind of "cat" delivered a big quarter too. The
Peoria, Illionis based maker of construction and mining equipment
reported record sales and profit for the fourth quarter of 2011 on
January 26.
Management initiated 2012 EPS guidance of $9.25, well above the
Zacks Consensus Estimate of the time at $9.08. Now the consensus is
$9.42. The 2013 consensus estimate also increased. CAT is Zacks #2
Rank (Buy) stock.
And the valuation picture still looks attractive for CAT. Shares
trade at just 12x the 2012 consensus estimate.
Apple (AAPL)
EPS Surprise: 38%
Sales Surprise: 19%
Following its first EPS miss in more than 7 years last quarter,
Apple delivered blowout results this quarter on January
24. Known for its conservative guidance, the company said that it
expects EPS of about $8.50 next quarter, which was well above the
Zacks Consensus Estimate of $8.01 at the time (its $9.36 now). It
is a Zacks #1 Rank (Strong Buy) stock.
Shares jumped to a new all-time high after the excellent
quarter, but the valuation picture still looks very attractive.
Shares trade at a ridiculously low 10x 12-month forward earnings,
and the company has a whopping $103.66 per share in cash and
securities.
United Rentals, Inc. (URI)
EPS Surprise: 34%
Sales Surprise: 9%
United Rentals is the largest equipment rental company in the
world, with locations throughout the United States and Canada. It
offers approximately 3,000 classes of equipment, ranging from heavy
machinery to hand tools.
Despite a sluggish economy, the company delivered outstanding Q4
results on January 25, and management gave a bullish outlook for
2012. Although it did not give specific EPS guidance, the company
expects a 5% increase in rental rates year-over-year. And CEO
Michael Kneeland stated that he expects 2012 to be a
"transformative year" for the company and that URI is in an
excellent position to capitalize on the emerging up-cycle as well
as the broader secular shift toward equipment rental.
Analysts revised their estimates significantly higher for both
2012 and 2013, sending the stock to a Zacks #1 Rank (Strong Buy).
Shares jumped 9% after the announcement, but valuation is still
very reasonable at 15x forward earnings.
CA Technologies (CA)
EPS Surprise: 18%
Sales Surprise: 5%
CA Technologies provides enterprise IT management software. The
company delivered very solid results for the third quarter of its
fiscal 2012 on January 24. On top of its sales and EPS beats,
management raised guidance for the remainder of 2012 to a range of
$2.21-$2.25.
This prompted analysts to revise their estimates significantly
higher for both 2012 and 2013, sending the stock to a Zacks #1 Rank
(Strong Buy) stock.
Shares popped 10% on the announcement. But valuation still looks
attractive for CA with shares trading at just 11x 12-month forward
earnings.
Conclusion This earnings season may not be off
to a great start. But these five companies each reported
outstanding quarters and have plenty of room to run higher over the
coming weeks and months.
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APPLE INC (AAPL): Free Stock Analysis Report
ARCTIC CAT INC (ACAT): Free Stock Analysis Report
CA INC (CA): Free Stock Analysis Report
CATERPILLAR INC (CAT): Free Stock Analysis Report
UTD RENTALS INC (URI): Free Stock Analysis Report
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