Chicago, IL – December 29, 2015– Zacks Equity Research highlights Bojangles', Inc. ( BOJA ) as the Bull of the Day and Joy Global Inc. (JOY) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Plains All American Pipeline, L.P. ( PAA ), EV Energy Partners, L.P. ( EVEP ) and Warren Resources, Inc. ( WRES ). Here is a synopsis of all five stocks: Bull of the Day: Bojangles', Inc. ( BOJA ) was one of many restaurant chains to go IPO in 2015. This Zacks Rank #1 (Strong Buy) didn't disappoint in the third quarter as it beat the Zacks Consensus and raised full year guidance. Bojangles is familiar to those who live in the Southeastern part of the United States. Founded in North Carolina in 1977, the chicken chain is famous for its freshly baked, made-from-scratch buttermilk biscuits. As of Sept 2015, Bojangles' had 657 system-wide restaurants, of which 274 were company-operated and 383 were franchised restaurants. Even though it is expanding rapidly, the only time this Chicagoan has been able to try out its famous food was while in Washington DC. The closest Bojangles to Chicago appears to be in Tennessee. Third Beat in a Row On Nov 4, Bojangles reported its third quarter results and beat the Zacks Consensus by 5 cents. Earnings were $0.23 compared to the consensus of $0.18. The company has beat the Zacks Consensus in the first three quarters it has reported as a public company. Comparable restaurant sales, which is the key metric for restaurant chains, rose 4.1% year over year. Comparables had risen 5.3% in the third quarter of 2014. It has grown comparable restaurant sales for 22 consecutive quarters. Total revenue grew 12.7%. The company is also in the midst of a growth spurt. It expects to grow its restaurant count by 8% in 2015. Raised Full Year Guidance With gasoline prices hitting new multi-year lows, it's a good time to be a restaurant owner. Consumers are spending more eating out. In November, Bojangles liked the trends it was seeing as it raised full year guidance. Total revenues are now expected to be in the range of $486 to $488 million, up from its prior guidance of $482.5 to $487.5 million. Restaurant contribution margin is forecase to rise to a range of 17.7% to 18% from previous guidance of 17.3% to 17.7%. Comparable restaurant sales growth is expected in the low to mid-single digits. Analysts are equally bullish about the future. Not only are 2015 estimates rising, but 7 estimates were raised in the last 60 days pushing the 2016 Zacks Consensus Estimate up to $0.89 from $0.85. That is 2016 earnings growth of 9.9%. Bear of the Day : Joy Global Inc. (JOY) continues to feel the pain of the worst commodity sell off in history. This Zacks Rank #5 (Strong Sell) recently slashed its dividend to almost nothing. Joy Global makes mining equipment for surface and underground mining. Joy Global Cuts Its Dividend to Just 1 Cent a Quarter On Dec 16, when it reported its fourth quarter results, Joy Global also announced it was slashing its dividend due the "significant downturn in commodity prices" and the impact it has had on the company's revenue and cash flow. It cut it to just $0.01 a quarter, which is a yield of 0.3%. It had previously paid $0.20 a quarter, its highest dividend payout since 2003. This was the company's first dividend cut since 2003. It didn't even cut the dividend during the Great Recession. But this commodity downturn is more severe than even 2008. It is lasting longer. Joy Global has no choice but to conserve cash. The company said that if the 1 cent dividend is maintained for the year it would reduce cash outlays by $75 million. Joy Global also conserved cash by not repurchasing any shares in the fourth quarter How Bad Was It in 2015? The commodities downturn is not for the faint of heart. Yes, it's really that bad. For Joy Global, it meant fourth quarter bookings fell 21% to $617 million. For the full year, bookings were down 25% to $2.7 billion. The company lost $13.43 per share in the quarter compared to making $1.31 a year ago. For the year, it lost $12.02 per share. Fiscal 2016 earnings are expected to fall 84.9%. The analysts have been busy slashing their estimates. 8 were cut in the last 30 days pushing the Zacks Consensus down to $0.29 from $1.30 over the last 3 months. That is a dramatic reduction. But it's the new reality. "With global mining capital expenditures expected to step down again in 2016, we remain intensely focused on cost reduction and cash generation," said Ted Doheny, President and CEO. Additional content: 3 Oil Stocks that Crashed More than 50% in 2015 The year 2015 was clearly rough for oil. While the year is drawing to a close, a recap reveals mostly anguish for all players, both major and minor, across the sector. Crude prices are downhill for quite some time now. The commodity has sunk from around $110 per barrel just 18 months ago to around $38 now. Recently, it even touched a 7-year low of $34.29 a barrel. In fact, crude woes aren't ending with prices slipping to the multi-year low mark. The loss is being felt more acutely by the oilfield services industry, while the exploration and production (E&P) industry has also felt the sting.
2015: A Year of Big Busts and Little Pops
Oil has been the most perplexing commodity of 2015 with big busts and occasional rises seen in a very short period of time. In particular, oil tanked to a seven-year low on Dec 7 after the Organization of the Petroleum Exporting Countries (OPEC) failed to address the growing supply glut.
The rout of 2015 turned oil-dominated upstream firms the biggest losers, with most of their profits being wiped off by the fall in the commodity’s price. Panic-selling by investors – precipitated by mounting oversupply and sluggish demand – spared neither the big integrated oil companies nor the more focused oil exploration and production firms. With the price of the commodity continuing to nosedive, we expect the carnage to continue with the fourth-quarter numbers and be a nightmare for oil investors.
Year to date, the big oil players on average have lost approximately 15% of their market capitalization. Of this, the biggest loser is Royal Dutch Shell plc, which has shed more than 30%, followed closely by ConocoPhillips, which witnessed a drop of 29.6%. Other major losers include Chevron Corp. and BP Plc, which have lost 17.9% and 14.2%, respectively.
However, without the saving grace of downstream operations, the picture would have been bleaker for the integrated majors. This is because the downstream players have to pay less for the commodity, which they buy from E&P companies, for producing end products like gasoline or petrol and jet fuel or aviation turbine fuel. Ultimately, the extent of the relief will depend on whether oil prices stabilize and, if so, at what level, or retreat to levels even lower.
Now What?
The question that now comes first to the minds of investors ravaged by the year-long crude carnage is, pertains to the end of this rout. U.S. crude futures witnessed a fall from the skies from Jun 2014 ($107 per barrel) to the deep pit of around $34 per barrel until recently. The cascade was due to bearish comments from the International Energy Agency (IEA) that sees global oil glut as aggravating next year in the face of slowing demand growth. Oil was also undone by The Organization of the Petroleum Exporting Countries (OPEC) – the international cartel of oil producers. Notably, OPEC’s latest monthly report showed that the oil cartel’s November production rose to a 3-year high.
Lastly, credit ratings agency Moody’s Corp. slashed its 2016 Brent crude oil estimate from $53 per barrel to $43. The bearish revision comes in the wake of the outlook for prolonged oversupply as additional production from Iran would offset any slowdown in U.S. output.
Fed to Play Grinch
The role played by the Federal Reserve also comes under spotlight. Crude oil prices may again be troubled by potential multiple Fed rate hikes next year. Renewed rate hike jitters came right after a strong U.S. GDP recovery in the third quarter. Per the U.S. Department of Commerce, GDP expanded at 2.0% in the quarter versus the expected 1.9%.
In this backdrop, we have identified three stocks that have paid a bitter price irrespective of their underlying fundamentals and have suffered heavy losses at the bourses.
Plains All American Pipeline, L.P. (PAA )
Houston-based Plains All American Pipeline, L.P., a master limited partnership (MLP), is involved in the transportation, storage, terminalling and marketing of crude oil, natural gas, natural gas liquids and refined products in the U.S. and Canada. The partnership has operations in the Permian Basin, South Texas/Eagle Ford area, Rocky Mountain and Gulf Coast in the U.S., and Manito, South Saskatchewan, Rainbow in Canada.
The stock is down more than 52% year to date – feeling the deep pain of analysts’ pessimism – curtailing the Zacks Consensus Estimate for 2015 by 20 cents over the past three months to $1.02. The stock has delivered positive earnings surprises in only one of the last four quarters, with an average beat of -0.85%.
EV Energy Partners, L.P. ( EVEP )
EV Energy Partners L.P., based in Houston, is a master limited partnership (MLP) created by EnerVest Management Partners, Ltd. and Encap Investments L.P. The MLP is focused on acquiring, developing, and producing from oil and gas properties primarily in the Appalachian Basin, Michigan, Mid-Continent and Permian Basin regions. Proved reserves as of year-end 2014 were 1.0 trillion cubic feet equivalents (71% gas and 84% developed).
The partnership with $129 million of investor wealth has lost more than 86% of its value year to date. Ironically, the stock has delivered positive earnings surprises in three of the last four quarters, with an average miss of -78.06%. However, over the last 90 days, two estimates for full-year 2015 have been slashed, that has lowered the Zacks Consensus Estimate by 52 cents to $2.38.
Warren Resources, Inc. ( WRES )
Warren Resources is an independent energy company engaged in the acquisition, exploration, development and production of domestic oil and natural gas reserves. Warren’s activities are primarily focused on oil in the Wilmington field in the Los Angeles Basin in California, natural gas in the Marcellus Shale in Pennsylvania and the Washakie Basin of Wyoming.
Oil price shocks have been pronounced for this domestic stock, which has lost more than 90% of its value year to date. Over the past three months, the Zacks Consensus Estimate for 2015 has fallen by 17 cents to a loss of 92 cents. The stock delivered positive earnings surprises in two of the last four quarters, with an average beat of 18.35%.
Will Oil Weigh on the Markets?
The question that crops up in the final days of 2015 is whether the bourses would follow the crude trends in the year to come. Our apprehension stems from the fact that lower crude prices do not automatically result in higher consumption.
Moreover, faltering demand is a clear sign that deflation is on the horizon. Add to it the sharp drop in crude prices over the past six months that has brought a host of highly leveraged energy players near the precipice. If this phenomenon continues, these companies will be unable to roll over their debts resulting in a terrible impact on the bourses in particular and the economy in general. Want to find the best stocks for 2016? Find out more information about the market-crushing Zacks Top 10 list here >>> 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 the Analyst Blog Updated throughout every trading day, the Analyst Blog provides analysis from Zacks Equity Research about the latest news and events impacting stocks and the financial markets. 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. Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today. Find out What is happening in the stock market today on zacks.com.
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