For Immediate Release
Chicago, IL – May 23, 2016– Zacks Equity Research highlights Cincinnati Financial (NASDAQ:CINF) (CINF) as the Bull of the Day and 3D Systems Corp (DDD) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Ford (F), Alphabet (NASDAQ:GOOGL) (GOOGL) and General Motors Co (NYSE:GM). (GM).
Here is a synopsis of all five stocks:
It is time for investors to face the facts.
An interest rate hike is coming sooner rather than later, with some speculating that a hike could come as early as next month. While the market is still pricing a low chance of this happening, investors are starting to think that one could happen this summer, with recent readings of the CME FedWatch suggesting we are more likely than not to see a hike in July.
However, it has been a long time since we were in a rising rate environment, so some investors might not remember what the best sectors are in this scenario. One sector that tends to benefit is the financial space, with the insurance industry often leading the pack. That is why I am looking to a top ranked stock in this sector, Cincinnati Financial (CINF), as one to keep on your radar in the short-term.
Why Insurance?
Cincinnati Financial, like other companies in the insurance segment, takes in premiums from clients and then invests that cash in securities. The idea here is that the income or return earned on the investment portfolio more than makes up for any losses from the insurance policies written, allowing companies to profit from the spread between the two.
CINF and others in the space usually invest a large portion of their portfolio in bonds, so a rate hike would be great news for companies in this space. After all, any future premiums invested in bonds will have higher payouts once rates start to rise, directly contributing to insurance companies' bottom line. This makes insurance a great place to be in a rising rate environment, but why look to CINF in particular?
Why CINF
Cincinnati Financial has been seeing rising earnings estimates as of late, for both the short term and the long term. In fact, we haven't witnessed any revisions lower for the current quarter or the current year in the past sixty days, while we see a similar trend for the next year too.
But it isn't just that we have been seeing rising estimates lately, the pace of these increases has also been impressive as well. In just the past month, the current quarter estimate has increased by over 12%, while the full year and next year estimates have both moved higher by over 7.4%.
And while some might worry about a company living up to lofty expectations, this shouldn't be too much of a concern for CINF. The company has a great track record at earnings season including four straight beats and only two misses in the past five years. Clearly, they know how to manage expectations.
The next biggest thing ever comes around once every six months or so. These shifts in market sentiment can provide opportunities to profit in the short term for sure, but not many of them pan out to live up to the hype. Still, it’s a blast trying to find the next “story stock” that’s going to revolutionize an industry or change our daily lives.
Not too long ago, the hot topic was 3D printing. The technology was set to change manufacturing in the future. Rather than having to go to the store to pick something up, we’d just download the instructions and print what we needed right there in the comfort of our own home. Personally, I understood the technology but I didn’t really buy into the idea. It may change how manufacturing is done but I doubt it’s going to change my daily life in any way.
So I’ve never been very bullish on the consumer 3D printing market. Judging by the recent analyst earnings estimate revisions on today’sBear of the Day it looks like I’m not the only one to share the sentiment. 3D Systems Corp (DDD) is a leading provider of 3D modeling, rapid prototyping and manufacturing solutions. Its systems and materials reduce the time and cost of designing products and facilitate direct and indirect manufacturing by creating actual parts directly from digital input. That’s a fancy way of saying the company makes 3D printers.
Here at Zacks, we’ve got a Zacks Rank #5 (Strong Sell) rating on the stock with Value and Momentum Style Scores of F. Negative earnings estimate revisions for the stock are coming on the heels of a disappointing earnings report where the company reported a 5 cent loss for the quarter versus consensus calling for a penny loss. Over the last 30 days, two analysts have dropped their earnings estimates for the current year. The revisions have dropped our Zacks Consensus Estimate from a 16 cent gain for the year down to just 7 cents. The current quarter, which analysts originally saw coming in at 2 cents looks to be a breakeven quarter now.
Additional content:
Forget Lawsuits -- Uber Drivers' Days Are Numbered
Ride-sharing giant Uber Technologies Inc. recently settled a class-action lawsuit by Uber drivers for $100 million. The suit was focused on whether or not to classify Uber drivers as full-time workers (where they would be entitled to benefits) or freelancers. In addition to the monetary cost, it was decided that Uber drivers will not be classified as employees of Uber, nor would they be allowed to unionize.
Despite the significant amount of money settled upon, Douglas O’Connor, the driver originally named in the lawsuit, believes the agreement is not in his interest or that of other drivers, and that he felt “utterly betrayed and sold-out by an unjust settlement result that only benefits Uber.”
O’Connor’s protest follows those from other drivers who also believe the settlement does not provide enough monetary compensation for mileage and other expenses. And they have a point. The $100 million is actually an initial payment of $84 million across 385,000 drivers, in addition to the likely cut the attorneys will take; the other $16 million will be paid in the event Uber goes public or is acquired at a price 1.5 times higher than its most recent valuation. With these numbers, the settlement equals about $218 per driver (insert grimace emoji here).
No More Drivers
This is not the first lawsuit filed against Uber, nor is it likely to be the last. But the ride-hailing company may have found the perfect way to combat any future lawsuits: just make its drivers disappear.
In Pittsburgh, Uber is testing a specially designed Ford (F) Fusion that will be on the streets collecting mapping data, and most importantly, practicing its self-driving capabilities. The company said there will be a trained driver in the driver’s seat keeping an eye on operations while the car is in self-driving mode.
Uber partnered with Carnegie Mellon University to further develop its driverless car dreams; the two entities opened the Uber Advanced Technologies Center in Pittsburgh, and are preparing to launch autonomous vehicles in to its fleet by 2020.
"While Uber is still in the early days of our self-driving efforts, every day of testing leads to improvements," the company said in a blog post. "Right now we’re focused on getting the technology right and ensuring it’s safe for everyone on the road — pedestrians, cyclists and other drivers."
Self-driving and autonomous vehicles are not new concepts. Alphabet’s ( GOOGL) Google division has been designing and testing driverless cars for a while now, and one of Uber’s biggest competitors, Lyft, has recently partnered with General Motors Co. ( GM) in order to test a fleet of self-driving electric taxis on public roads.
Uber Still Rules
A $100 million settlement is nothing to a company who is worth over $50 billion. It’s an annoyance, really, a small hurdle to overcome. And the settlement, in a way, validates Uber’s business model, a model in which it broke new ground in terms of both tech innovation and regulation.
If, and it’s looking like when, Uber’s self-driving car ventures become a success, there will be no need for drivers at all. Just imagine: you open the Uber app, request a car, and minutes later, a fully autonomous vehicle arrives at your location, ready to take you anywhere. No drivers could significantly reduce the number of lawsuits filed against Uber, and greatly cut down on both costs and headaches for the company.
Had the lawsuit not worked out in their favor, the implications of the settlement would have reached far beyond Uber, but to the entire on-demand, we-commerce culture. The companies that operate in this space—think TaskRabbit—would undoubtedly have been hit hard, more so than they already are.
But thankfully for Uber, and all of its users and investors, it did. Now we can focus on imagining just what these driverless car rides will be like. Will they feel normal? Will there be music or awkward silence?
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CINCINNATI FINL (CINF): Free Stock Analysis Report
3D SYSTEMS CORP (DDD): Free Stock Analysis Report
FORD MOTOR CO (F): Free Stock Analysis Report
ALPHABET INC-A (GOOGL): Free Stock Analysis Report
GENERAL MOTORS (GM): Free Stock Analysis Report
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