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Analog Devices, Southwest Airlines, Amazon And Expedia Highlighted As Zacks Bull And Bear Of The Day

Published 10/26/2016, 09:30 PM
Updated 07/09/2023, 06:31 AM

For Immediate Release

Chicago, IL – October 27, 2016 – Zacks Equity Research highlights definitely Analog Devices (NASDAQ:ADIFree Report) as the Bull of the Day and Southwest Airlines (NYSE:LUVFree Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Amazon (NASDAQ:AMZNFree Report) and Expedia (NASDAQ:EXPE) (NASDAQ:EXPEFree Report).

Here is a synopsis of all four stocks:

Bull of the Day:

Based in Norwood, Massachusetts, Analog Devices (NASDAQ:ADIFree Report) is an original equipment manufacturer of semiconductor devices, specifically, analog, mixed signal and digital signal processing (DSP) integrated circuits. They are the second largest producer of analog chips after Texas Instruments (NASDAQ:TXN).
Analog chips are used primarily in smartphones for managing radio signals and other purposes. These chips convert real world signals into digital signals. Apple (NASDAQ:AAPL) is one of their biggest customers.

Solid Quarterly Results and Upgraded Guidance

The company reported excellent results for its third quarter fiscal 2016, beating on both the top and bottom lines, and also raised its guidance for the current quarter.

Adjusted earnings for the quarter were $0.82 per share, ahead of the Zacks Consensus Estimate of $0.76 per share, thanks to strong growth in its automotive and communications businesses.

The management expects EPS of $0.84 to $0.94 and revenue of $910 million to $970 million for Q4.

Acquisition of Linear Technologies

In August, the company announced the acquisition of another analog chipmaker Linear Technology (NASDAQ:LLTC) for about $14.8 billion. Linear Technology produces power management, data conversion, signal conditioning, RF and interface ICs, uModule(R) subsystems, and wireless sensor network products.

Recently the two companies announced that they had obtained antitrust clearances in the US and Germany and expect the deal to completed in the first half of 2017, subject to receipt of remaining regulatory approvals.

The merger is expected to reduce Analog’s reliance on Apple while adding product categories like power-management chips for handsets, which are one of the market’s fastest-growing areas per RBC Capital. It will create a stronger rival to Texas Instruments.

Rising Estimates

Analysts have raised their estimates for the company after strong earnings and raised guidance. Zacks Consensus Estimates for the current and next year are now $2.91 per share and $3.33 per share, up from $2.90 and $3.31, 30 days ago.

The company has a pretty good record at beating estimates. They have beaten consistently for the last 13 quarters; the average quarterly beat for the last four quarters was 10.22%.

Bear of the Day :

Southwest shares plunged more than 8% yesterday after Q3 results as the airline provided a downbeat guidance for unit revenue, which is important metric in the industry. What lies ahead for this low cost carrier?

About the Company

Dallas-based Southwest Airlines (NYSE:LUVFree Report) is the nation's largest carrier in terms of originating domestic passengers boarded. They serve 77 of the top 100 domestic airports, focusing primarily on short-haul, high frequency, point-to-point and low-fare services.

Third Quarter Results

The company beat earnings estimates and delivered better-than-expected revenues. The carrier’s earnings per share (on an adjusted basis) of 93 cents beat the Zacks Consensus Estimate of 88 cents.

Southwest Airlines reported revenues of $5,139 million, which edged past the Zacks Consensus Estimate of $5,132 million. Revenues inched up 3.4% year over year.

While low fuel prices benefit airlines’ earnings, they also put pressure on pricing, particularly due to heavy discounting mainly by low-cost carriers. Many airlines expanded capacity in the wake of lower fuel prices, which has now led to a fare war,

Airlines industry is currently ranked 242 out of 265 Zacks industries (bottom 9%). Investors looking to play this industry could look at Copa Holdings (CPA) which carries a Zacks Rank #1 (Strong Buy).

More Stocks to Sell. Now.

Beyond our Bear Stock of the Day, today's list of 220 Zacks Rank #5 Strong Sells demand even more urgent attention. If any are lurking in your portfolio or Watch List, they should be removed immediately. Many appear to be sound investments but, since 1988, such stocks have actually performed more than 11X worse than the S&P 500.

Additional content:

E-commerce Stocks to Watch for Earnings Thursday

The Q3 earnings season is in full swing, with as many as 800 companies, including 171 S&P 500 members, scheduled to post their financial numbers this week.

The third-quarter reporting cycle has kept investors glued to earnings releases in the lookout for companies that are poised to beat. The results so far have been encouraging, with companies recording better earnings and revenue growth than in the past few quarters.

The Q3 earnings season is thus on track to be the first quarter to move into the positive territory, following five back-to-back quarters of decline for the S&P 500 Index. In fact, the latest Earnings Preview report (released on Oct 21, 2016) projects a 0.1% year-over-year increase in third-quarter earnings, with revenues likely to clock 1.5% growth. We note that overall Q3 earnings for the technology sector are expected to be up 1.1% year over year on a revenue decrease of 1.0%.

E-commerce is one of the most important components of the technology sector. The online trend continues to gather steam as the younger generation is rapidly adopting fast-advancing technology. Also, improvements in the mobile device segment have led the online companies to deliver strong numbers.

Here, we take a sneak peek into two major e-commerce providers like Amazon (NASDAQ:AMZNFree Report) and Expedia (NASDAQ:EXPEFree Report) that are lined up to report third-quarter earnings results on Oct 27:

Amazon , the world's largest Internet retailer, recorded a positive earnings surprise of 56.14% last quarter. In fact, Amazon outperformed the Zacks Consensus Estimate thrice in the last four quarters, with an average positive surprise of 90.92%.

Notably, our proven model shows that Amazon is likely to beat the Zacks Consensus Estimate as it has the right combination of a favorable Zacks Rank (Zacks Rank #3 (Hold) or better) and a positive Earnings ESP. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

The Earnings ESP for Amazon is +10.47%. This is because the Most Accurate estimate stands at 95 cents while the Zacks Consensus Estimate is pegged at 86 cents. Meanwhile, the company has a Zacks Rank #1 (Strong Buy), which increases the predictive power of ESP. Therefore, we are reasonably confident in looking for an earnings beat. (Read more: Amazon.com (NASDAQ:AMZN) Q3 Earnings: Poised to Top Estimates? )

AMAZON.COM INC Price and EPS Surprise | AMAZON.COM INC Quote

Expedia, a leading online travel companies in the world, however, is unlikely to beat third-quarter 2016 earnings estimates as it has an Earnings ESP of negative 4.91% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here .

We also note that Expedia missed the consensus mark in the preceding three quarters out of four, resulting in a negative average surprise of 4.01%.(Read more: What's in the Cards for Expedia in Q3 Earnings? )

EXPEDIA INC Price and EPS Surprise | EXPEDIA INC Quote

Stay tuned! Check back on our full write-up on earnings releases of these stocks.

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About the Bull and Bear of the Day

Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Strong Stocks that Should Be in the News

Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year. See these high-potential stocks free >>.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.



ANALOG DEVICES (ADI): Free Stock Analysis Report

SOUTHWEST AIR (LUV): Free Stock Analysis Report

AMAZON.COM INC (AMZN): Free Stock Analysis Report

EXPEDIA INC (EXPE): Free Stock Analysis Report

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