For Immediate Release
Chicago, IL – October 03, 2016 – Zacks Equity Research highlights Energy Recovery (NASDAQ:ERII - Free Report) as the Bull of the Day and Actuant (NYSE: ATU - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Mylan (NASDAQ:MYL) (NASDAQ:MYL -Free Report),Wells Fargo (NYSE:WFC) (NYSE:WFC -Free Report) and Leucadia National (NYSE:LUK) (NYSE:LUK - Free Report).
Here is a synopsis of all five stocks:
Energy Recovery (NASDAQ: ERII - Free Report) is an energy solutions provider to industrial fluid flow markets. The stock is a Zacks Rank #1 (Strong Buy) and today it is the Bull of the Day.
Why I Like It
This is a small cap stock in a "risk on" environment.
Small cap stocks have been out-performing of late.
Consistent monthly increases in the Zacks Consensus Estimate for 2016 and 2017
Potential return to favor sector following recent OPEC news.
Follow Brian Bolan on twitter at @BBolan1 and on StockTwits at the same address.
The Recent Numbers
I like to do a review of the most recent quarter for stocks that I highlight as Bulls of the Day. ERII reported the June 2016 quarter back in early August, so we are a month away from the company reporting the September quarter.
The most recent quarter was a beat on bottom. The company posted EPS of $0.01 when the Zacks Consensus Estimate was calling for a loss of $0.01. Revenue came in $1M below expectations for a 1.2% negative revenue surprise. As a result, the stock was bid up by 12.5% in the session following the report.
Description
Energy Recovery is an energy solutions provider to industrial fluid flow markets. The Company's solutions convert wasted pressure energy into a reusable asset and preserve or eliminate pumping technology in hostile processing environments. It operates through two segments: Water, and Oil & Gas. Its Water Segment focuses on products sold for use in reverse osmosis water desalination. Its Oil & Gas Segment consists of products sold for use in gas processing, chemical processing, and hydraulic fracturing.
Earnings History
The company has a good history of beating the Zacks Consensus Estimate. There has been one miss, one meet and three beats in the last five reports.
Estimates
The estimate picture is a thing of beauty, with the Zacks Consensus Estimate for 2016 moving higher in each of the last four months. The 2016 number moved from $0.43 in June to $0.50 in July. Then two cents were added in August and another three cents in September to bring the current estimate to $0.55.
The 2017 number also moved higher with the 2016 estimate, jumping up from $0.38 in June to the current reading of $0.47.
Valuation
Investors have to pay up for growth like this. Keep in mind that ERII is slated to show earnings growth of nearly 600% and revenue growth of more than 115% this year. This has driven the forward PE to more than 29x while the industry average is at 22x. The price to book multiple of 14x seems out of whack, but the 5x industry average is also looking rather high. Finally, the 16x price to sales number should adjust lower when this year is over and the growth is in place.
Actuant (NYSE: ATU - Free Report) keeps beating the Zacks Consensus Estimate on top and on bottom. It is now a Zacks Rank #5 (Strong Sell) and is the Bear of the Day. Let's take a look at why this is the case.
Description
Actuant, headquartered in Milwaukee, Wisconsin, is a diversified industrial company with operations in 15 countries. Actuant offers products under such established brand names as Enerpac, Gardner Bender, Milwaukee Cylinder, Nielsen Sessions, Power-Packer, and Power Gear.
Recent Earnings
ATU beat the Zacks Consensus Estimate of $0.29 by a penny. Revenue came in at $276M while the Zacks Consensus Estimate was looking for $278M.
Estimates
The Zacks Consensus Estimate has been falling over the last few months. The FY16 estimate stood at $1.58 in December of last year and then fell to $1.36 in April. The estimate currently states at $1.08.
Next year has also seen a move lower in estimates with the 2017 Zacks Consensus Estimate moving from $1.90 to $1.36 over the same time period.
The decline in estimates is the main reason this is a Zacks Rank #5 (Strong Sell) and the Bear of the Day.
Additional content:
Here’s What an Investment Bank CEO Told His Employees About Inequality
After the recent controversies that resulted in the CEOs of Mylan (NASDAQ:MYL -Free Report) and Wells Fargo (NYSE:WFC - Free Report) testifying before Congress, the American public is understandably skeptical of corporate leadership. Richard Handler, the CEO of investment bank Jefferies and its parent company Leucadia National (NYSE:LUK - Free Report), is trying to make sure his clients trust his company.
Handler’s method of ensuring trust in his company came in the form of an open letter to his clients reminding them to be understanding about the income divide in this country. Handler’s note pointed out that the gap between the “haves” and the “have nots” has grown, and he highlighted the frustration of many people struggling in this country.
“The massive infusion of bailout money, low interest rates, and resulting stock market and real estate advances have helped those with the most assets, but have done little to directly improve the lives of the hard-working every day middle class families who are the bedrock of society,” he said.
Handler’s note seemed to be a direct response to the recent fraudulent account-opening scandal at Wells Fargo, but he was careful to mention that his company was not specifically “judging any company that is currently in the news concerning congressional hearings.”
Nevertheless, Handler made it clear that Jefferies would not stand for this type of behavior in its own ranks:
“Bad behavior has no place in our firm and, when identified and factually proven, we have no choice but to deal swiftly and with regard only for our other thousands of employee-partners, shareholders, bondholders and clients that depend on us every day to do the right thing,” he said.
A full version of the letter can be found on the company’s website.
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ENERGY RECOVERY (ERII): Free Stock Analysis Report
ACTUANT CORP (ATU): Free Stock Analysis Report
MYLAN NV (MYL): Free Stock Analysis Report
WELLS FARGO-NEW (WFC): Free Stock Analysis Report
LEUCADIA NATL (LUK): Free Stock Analysis Report
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