Canadian Pacific Railway, PriceSmart, Visa, FTI Consulting and Iron Mountain highlighted as Zacks Bull and Bear of the Day
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Here is a synopsis of all five stocks:
Canadian Pacific Railway Limited (NYSE:CP-Free Report) recently reported a record second quarter as North American rails remain hot. This Zacks Rank #1 (Strong Buy) is expected to see double digit earnings growth in both 2014 and 2015.
Canadian Pacific is a Canadian transcontinental railroad with links to 8 major ports including
On
Canadian Pacific saw revenue growth across several segments. Canadian Grain was up 32%, US Grain rose 26%, Crude gained 18%, Domestic Intermodal jumped 17% and even coal rose 10%.
While the energy business is jumping, as an overall percentage of Canadian Pacific's revenues it still only accounts for 7%. It remains diverse in its revenue streams.
Despite the slight miss on the earnings, the analysts are still bullish on the longer-term outlook for this railroad.
In the week since the earnings report, 6 estimates have been adjusted higher for 2014 pushing the 2014 Zacks Consensus Estimate up by
That is earnings growth of 38.8%.
PriceSmart Inc. (Nasdaq:PSMT-Free Report) recently reported fiscal third quarter results where sales were less than inspiring. As a result, analysts have slashed earnings estimates on this Zacks Rank #5 (Strong Sell).
PriceSmart is considered to be the "Costco of
On
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Additional content:
3 Business Service Stocks to Top Q2 Earnings
As geopolitical tension seems to cast a shadow on the high-flying equity markets across the globe, a weak home construction report further sank domestic stock markets to their recent lows over the last week. With investors contemplating taking the money out of the volatile equity market for investment in safe-haven assets like the U.S Treasury and gold, stakes of a mini market crash are significantly high.
Markets have an innate tendency to move from order to disorder. Will the second-quarter corporate releases follow a similar trend? The season was kicked off by a solid performance from the Banking sector on the back of modest improvements in lending and investment banking. However, will these early signs of strength merely be a mirage as more and more earnings releases come up?
Q2 Earnings Season: As it is Shaping Up
The current expected second-quarter earnings growth for the S&P 500 is pegged at +4.8% with revenues anticipated to rise by +2.2%. This include a double-digit earnings improvement in the Construction sector (+11.9%), Business Services (+11.0%) and Utilities (+10.6%).
So far, about 73 S&P 500 companies have already reported earnings. With a 'beat ratio' of 68.5% and a median surprise of +3.5%, total earnings for these companies are up +5.5% year over year. Top-line growth has aggregated +3.8% compared with the year-ago period, with a healthy revenue 'beat ratio' of 50.7% and a median surprise of +1.4%.
Most of this growth is attributable to a steady yet improving U.S. job market as the unemployment rate declined to 6.1% in June with total non-farm payroll employment increasing by 288,000. The GDP growth estimates for the second quarter are currently pegged at around +3%. For 2014, the U.S. GDP growth is expected to be +2.0 – 2.2% following an unexpected contraction of 2.9% in the first quarter. Commensurate with these expectations, earnings for the S&P 500 are expected to be up 7.1% in 2014 and a further 11.7% in 2015.
Amid these mixed market feelers, most companies in the Business Services industry would aim to hold their purse strings until at least a clearer picture of the economic policy unravels. The primary growth drivers in this highly fragmented industry hinge on a healthy economy with decent job growth prospects, higher disposable income and new business initiatives. An ideal mix of services, effective marketing strategies and ability to retain and attract new customers make the perfect recipe for profitability for most of these companies.
However, as the current market conditions remain highly unpredictable with a clouded economic scenario, most companies have curtailed their operating costs, reduced marketing expenses and have deferred new business initiatives. Despite these factors, the Business Services sector is expected to outperform the overall equity market with a double-digit earnings growth expectation in the second quarter versus 4.8% for the S&P 500 index.
Given the promising forecast, it might be a good idea to zero-in on a handful of Business Services stocks that are poised to beat earnings estimates this quarter. An earnings surprise should help these stocks outperform in the near term.
How to Take Your Pick?
The Business Services sector covers an array of services that include marketing, consulting, staffing, security, telecommunications, Internet services, logistics and waste handling. Amid a diverse range of companies in the Business Services arena, picking the right stock for your portfolio could appear to be a colossal task. An easy way to narrow down the list is to look at stocks that have a solid Zacks Rank and a favorable Zacks Earnings ESP.
Earnings ESP is our proprietary methodology for determining which stocks have the best chance to surprise with their next earnings announcement. The Earnings ESP shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate.
The combination of a Zacks Rank #1 (Strong Buy) or #2 (Buy) or #3 (Hold) and a positive Earnings ESP is usually a harbinger of earnings beat and serves a perfect success formula on platter in this challenging macroeconomic environment. For investors seeking to benefit by applying this strategy to their portfolios, we have mentioned three Business Services stocks below which match these criteria, and thus may be potential winners this earnings season.
Visa Inc. (NYSE:V-Free Report): Based in
The company is anticipating strong quarterly earnings, which is expected to be up 11.2% year over year with the current Zacks Consensus Estimate being pegged at
Visa currently carries Zacks Rank #2 along with an Earnings ESP of +0.96%. The company is expected to report its third quarter fiscal 2014 results after the closing bell on
FTI Consulting, Inc. (NYSE:FCN-Free Report): Based in
The company has a long-term earnings growth expectation of 12.0%. Analysts have been moving their second quarter and full year estimates higher for the stock, further implying a healthy earnings momentum in the imminent quarters.
FTI Consulting currently has Zacks Rank #2 along with an Earnings
Iron Mountain Inc. (NYSE:IRM-Free Report): Headquartered in
The company is anticipating strong second-quarter earnings, which is expected to increase 25.0% year over year with the current Zacks Consensus Estimate pegged at
Iron Mountain currently has Zacks Rank #2 along with an Earning ESP of +13.89%. The company is expected to report its second-quarter 2014 results before the market opens on
Moving Forward
The ramifications of a potential crisis due to a geopolitical impasse may severely affect the economy unless a balanced fiscal policy is etched out. As the U.S. stocks look to gain solidarity amid the inconsistencies, a sneak peek to the space for some possible outperformers backed by a solid Zacks Rank and a positive Zacks Earnings ESP could be a great idea for investors to gain from this earnings season.
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