Chicago, IL – January 22, 2016– Zacks Equity Research highlights Codexis (CDXS) as the Bull of the Day and Morgan Stanley (MS) as the Bear of the Day. In addition, Zacks Equity Research provides analysis onGoldcorp Inc. (GG),Turquoise Hill Resources Ltd. (TRQ) and Franco-Nevada Corporation (FNV). Here is a synopsis of all five stocks: Bull of the Day: Codexis (CDXS) is a micro cap with a platform that few investor have heard of. Biocatalysts might not be on the tip of your tongue, but analysts have recently been moving estimates higher for this company and those revisions have helped push the stock to a Zacks Rank #1 (Strong Buy). Today it is the Bull of the Day and worth a deeper look. Helping Big Brands CDXS makes novel proteins and they may do it faster and better than anyone else. Some examples of what they have done with big partners include Atorvastatin (Lipitor) with a 4,000x improvement in enzyme performance. Another example would be Simcastatin or better known as Zocor. CDXS has helped reduce the cost of manufacturing these drugs through protein engineering. In July of of 2014 it was GlaxoSmithKline signing a deal for use the CodeEvolver platform and in August of 2015 it was Merck. This are not up and coming drug companies, these are the big players in the industry. Description Codexis develops biocatalysts for the pharmaceutical and fine chemicals markets. The company offers Codex biocatalyst panels and kits to pharmaceutical companies that are engaged in drug development and the marketing of approved drugs to allow them to screen and identify possible enzymatic manufacturing processes for their drug candidates and their marketed products. Codexis was founded in 2002 and is headquartered in Redwood City, California. Earnings History There was a lapse in coverage of CDXS over 2013 and 2014 in which the Zacks Research System (ZRS) does not have estimate data. That said, we do have data on the three most recent reports and I see two beats and one meet of the Zacks Consensus Estimate. The March 2015 quarter saw a surprise of 1 cent or 7.7% above the Zacks Consensus Estimate. Revenue was inline with expectations for that quarter. The June 2015 release was a meet of the Zacks Consensus Estimate on the bottom line, but there was miss on the topline. The most recent quarter, the September 2015 quarter was huge. The company posted earnings per share of $0.13 when the Zacks Consensus Estimate was looking for a loss of $0.11. That means CDXS posted a beat of 24 cents for a positive earnings surprise of 218%. The beat was driven by a huge out-performance on the topline with the company reporting $17M in revenues when the Zacks Consensus Estimate was calling for $8M. That $9M difference is a 117% positive revenue surprise. Estimates Earnings estimate movements are the foundation of the Zacks Rank. CDXS has seen some recent increases in estimates for 2015. The Zacks Consensus Estimate for 2015 was calling for a loss of 27 cents in October of last year, but moved to a loss of 20 cents in November and has since improved to a loss of 19 cents as of January of 2016. Bear of the Day : Morgan Stanley (MS) recently beat the Zacks Consensus Estimate by $0.08 for a 22% positive earnings surprise. Problem is, estimates has move lower and that has pushed the stock down to a Zacks Rank #5 (Strong Sell) and it is the Bear of the Day today. Earnings Beat On January 19, the company reported earnings of $0.43 per share, with the Zacks Consensus Estimate calling for $0.35. That $0.08 beat translates into a 22% positive earnings surprise. Despite the beat, estimates have moved lower - and future earnings estimates are the foundation of the Zacks Rank. Description Morgan Stanley is a financial holding company. The Company provides a variety of products and financial services to a group of clients and customers, including corporations, governments, financial institutions and individuals. Earnings History MS has a so-so earnings history, missing the Zacks Consensus Estimate in two of the last five quarters. The other reports were beats of the Zacks Consensus Estimate. It should be noted that the stock has not had a positive move in the session following any of the last 5 earnings reports. The best result was following the March 2015 quarter when the company beat the number by 6 cents (7.6% positive earnings surprise) and the stock finished unchanged in the session following the release. Earnings Estimates The Zacks Consensus Estimate for 2016 has been falling for some time. It was $3.75 in August of last year and fell to $3.53 in November. The Zacks Consensus Estimate for 2016 currently stands at $3.42. Additional content: Strike Gold This Earnings Season with These 3 Stocks Gold seems to have found its groove, gaining 3% so far this year. As investors flocked to this safe haven metal amid a stock market meltdown in China and heightened geopolitical tensions, gold prices revived from their six-year lows. Moreover, growing expectations of a slowdown in the Fed’s rate hike program this year played in favour of gold.
Last year, a stronger greenback, slump in oil prices and the climb in U.S. equities led to a more than 11% decline in gold’s value, the third consecutive year of loss for the metal. With the Fed finally hiking interest rates in December, thus ending an era of zero interest rates, gold slouched to six-year lows.
What Turned the Tables for Gold This Year?
Tensions between Saudi Arabia and Iran combined with an unexpected nuclear test from North Korea boosted appetite for gold.
But it was mainly about China
China's stock market has been shaken by the slowdown in the country's economy and Beijing's failed efforts to stabilize its financial markets. China’s GDP moderated to 6.8% for the fourth quarter, its lowest reading since the financial crisis. The 6.9% growth for 2015 was a marked deceleration from the 7.3% gain last year and its weakest in 25 years.
The International Monetary Fund (IMF) projects growth in China to moderate to 6.3% in 2016 and 6% in 2017, reflecting weaker investment growth as the economy continues to rebalance. Given the gloom in China, the international organization trimmed its 2016 world growth outlook to 3.4% from its earlier estimate of 3.6%. Global stocks are edging lower amid lingering concerns about China’s economy and a fresh bout of volatility in oil prices.
U.S Data Disappoints
A slew of disappointing data from the U.S. also helped prop up gold prices this year. U.S. retail sales fell 0.1% in December and were just up 2.1% in 2015, the weakest since the end of the recession in 2009. Industrial production declined 0.4% in December, falling for the third consecutive month. For the fourth quarter, industrial production fell at an annual rate of 3.4%. On top of this, yesterday’s data showed a 2.5% drop in housing starts and a 3.9% decline in building permits in December.
Signs of renewed weakness in the world's top economy raise questions about whether the Federal Reserve will be able to hike interest rates as per its earlier plans. This is a positive for non-interest bearing assets like gold.
This led gold for February delivery on the Comex division of the New York Mercantile Exchange to rise $17.10 closing at $1,106.20 per ounce. In fact, the yellow metal has been the best-performing non-agricultural commodity of 2016.
Another factor that will eventually be a tailwind for gold is that the supply of the precious metal has already attained peak levels as per reports. Global production of gold is likely to decline by 3% in 2016, thus ending a 7-year stint of rising output. Lower mined gold supply could help prices navigate north.
Performance in the Fourth Quarter So far
As per the Zacks classification, the gold-mining industry comes under the broader Basic Materials sector. Only 10% of the companies in the sector have reported their fourth-quarter numbers so far, with a 98% drop in earnings on the scoreboard. Taking into account all the companies that are yet to report, a 31.6% drop is projected for the fourth quarter.
The scenario will improve somewhat in the first half of 2016, with expected declines of 9.5% in the first and 5.7% in the second, still in negative territory. However, a dramatic recovery is projected for the latter half of the year with 9.5% growth in the third and 30.6% in the fourth. (For a detailed look at the earnings outlook for this sector and others, please read our Earnings Trends report.)
At the onset of the fourth quarter earnings season, it makes sense to bet on a few gold miners that have the potential to beat earnings in their upcoming releases. An earnings beat backed by the strong growth outlook for the sector would reinstate investor confidence in the stocks leading to immediate price appreciation.
How to Make a Choice?
With a number of players in the industry, picking the right stocks is a daunting task. However, the Zacks proprietary methodology makes it easier. One can narrow down the list with the combination of a favorable Zacks Rank – Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) – and a positive Earnings ESP, which is the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. It helps in picking stocks that have high chances of delivering earnings surprises in their next earnings announcement. Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.
Here are three gold mining stocks that have this compelling combination and are set to surprise this earnings season.
Goldcorp Inc. (GG)
Headquartered in Vancouver, Canada, Goldcorp is a leading gold producer engaged in gold mining and related activities across Canada, the U.S., Mexico and Central and South America.
The company with a market capitalization of $8.18 billion has a long-term expected earnings growth rate of 0.90%. This Zacks Rank #3 stock has an Earnings ESP of +75.00%. The Zacks Consensus Estimate has moved up 33% over the last 30 days and is currently pegged at 4 cents.
Goldcorp’s growth drivers lie in its vast array of development and exploration projects. The company expects production for 2015 to be at the top end of its guidance range of 3.3 million and 3.6 million ounces. Goldcorp continues to focus on cost management, successful replacement of mined gold reserves and the prudent allocation of free cash flow.
Goldcorp will report fourth-quarter results after the market closes on Feb 25.
Turquoise Hill Resources Ltd. (TRQ)
Turquoise Hill Resources is an international mining company with copper-gold and coal mines in the Asia-Pacific region. Its principal asset is its 66% interest in the Oyu Tolgoi mine in southern Mongolia, one of the world's largest copper-gold-silver mines. It has a market capitalization of $3.5 billion.
Turquoise Hill Resources has announced that its annual gold production of 653,000 ounces is in line with its guidance. The Oyu Tolgoi mine is expected to produce 210,000 to 260,000 ounces of gold in concentrates in 2016. In Dec 2015, Oyu Tolgoi signed a $4.4 billion project finance facility, which is regarded as an unprecedented milestone for Turquoise Hill. Work on the feasibility study and securing necessary permits for the development of the underground mine is on track. Once these steps are completed, the company expects a formal 'notice to proceed' decision in early second quarter 2016.
This Zacks Rank #3 stock has an Earnings ESP of +66.67%. The Zacks Consensus Estimate for the fourth quarter is at 3 cents and the company has delivered an average earnings surprise of 25.60% in the past four quarters.
Turquoise Hill Resources is expected to report fourth-quarter results on Mar 22.
Franco-Nevada Corporation (FNV)
Headquartered in Toronto, Canada, Franco-Nevada Corporation operates as a gold-focused royalty and stream company in the United States, Canada, Latin America, and internationally. It has a market capitalization of $6.67 billion.
In Oct 2015, Franco-Nevada closed the acquisition of Antamina silver stream from Teck Resources Limited (TCK). Antamina is expected to contribute 12,300 to 15,000 gold equivalent ounces from the fourth quarter of 2015. In Nov 2015, Franco-Nevada began funding its gold and silver stream investment in the Cobre Panama project which will be ramping up production in 2018.
This Zacks Rank #3 stock has an Earnings ESP of +8.33%. The Zacks Consensus Estimate for the fourth quarter is at 12 cents.
Franco-Nevada Corporation is expected to report fourth-quarter results on March 23.
What Next? After years of languishing gold prices, declining output from existing mines, geopolitical tensions, a stock market rout, China worries and a possible delay in further rate hikes will work in favor of gold. At this juncture, these possible winners backed by a solid Zacks Rank and a positive Earnings ESP could be a great idea for investors to gain from this earnings season. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >> 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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CODEXIS INC (CDXS): Free Stock Analysis Report
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FRANCO NV CP (FNV): Free Stock Analysis Report
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