Chicago, IL – January 11, 2016– Zacks Equity Research highlights Magellan Health (MGLN) as the Bull of the Day and ConocoPhillips (COP) as the Bear of the Day. In addition, Zacks Equity Research provides analysis onWal-Mart Stores Inc. (WMT), Chevron Corp. (CVX) and Exxon Mobil Corp. ( XOM). Here is a synopsis of all five stocks: Bull of the Day: The Healthcare segment has seen solid gains in many subcategories over the past few quarters. Specifically, the pharmacy benefits management (PBM) and healthcare plans segments have been outperforming the markets of late. One such company has reduced costs, increased their healthcare business opportunities, has had their PBM exceed expectations, and has increased their profit guidance by more than $30 million for 2016. This company is Magellan Health (MGLN), and they are the Zacks Bull of the Day. This Zacks Ranked #1 (Strong Buy) is a leader in managing the fastest growing, most complex areas of health, including special populations, complete pharmacy benefits and other specialty areas of healthcare. Magellan develops innovative solutions that combine advanced analytics, agile technology and clinical excellence to drive better decision making, positively impact health outcomes and optimize the cost of care for the members we serve all within a customer-first culture. Magellan’s customers include health plans and other managed care organizations, employers, labor unions, various military and governmental agencies and third-party administrators.
In their most recent quarter, the company posted net revenues of $1.19 billion, up 28.9% from the year ago quarter. According to Chairman and CEO Barry Smith, “The results in our Pharmacy Management segment have been very strong, and we continue to grow both the top and bottom line, while maintaining our focus on key initiatives to further expand our services and capabilities as a full-service pharmacy benefit manager. However, with cost-of-care pressures in the government sector, Healthcare’s financial results did not meet our expectations. We have strengthened our multi-pronged plan to improve performance in the Healthcare business, focusing on network recontracting, fraud, waste and abuse, and increased care management initiatives. I am confident that we have the appropriate plan in place to address the underlying issues.”
Due to the strong performance in the Pharmacy business, and the growth of their commercial healthcare business, management increased their profit guidance to a range of $260-280 million, ahead of the expected $235 million consensus. Management reiterated their guidance for the remainder of 2015 which stands at a range of $250-265 million. Further, due to cost management strategy, the company revised their Cost of Care + Cost of Goods Sold guidance down from the estimate of $3.6 billion to a range of $3.28-3.48 billion. Lastly, management recently announced a $200 million share repurchase program that is expected to be completed by 2018. Bear of the Day : As oil continues to get hammered, many exploration and production (E&P) companies have seen big downgrades as the overall sentiment for future oil prices has declined significantly. While oil prices have fell, U.S. oil inventories have risen to levels not seen in over 80 years, and natural gas inventories are 15% higher than the 5 year average putting further pressure to E&P companies. For these reasons, ConocoPhillips ( COP) is the Zacks Bear of the Day.
This Zacks Rank #5 (Strong Sell) world’s largest independent Exploration and Production company, based on proved reserves and production of liquids and natural gas. They explore for, develop, and produce crude oil and natural gas globally. A commitment to safety, operating excellence and environmental stewardship guide their operations.
In their most recent earnings report, the company posted their third consecutive miss of the Zacks Consensus Revenue Estimate, and the company posted an EPS of -$0.38 compared to $1.29 in the year ago quarter. Further, cash flow estimates have plummeted and has put the possibility of a dividend reduction on the table for 2016. Lastly, Conoco’s capital budget for 2016 shows a 25% year over year reduction in their spending, and management stated they aimed to have cash flow neutrality by 2017.
As you can see from the graph below, the company’s price and earnings consensus have dropped precipitously. Declining Estimates
Over the past 60 days, earnings estimates have dropped for Q4 15, Q1 16, FY 15, and FY 16; Q4 15 fell from -$0.14 to -$0.27, Q1 16 plummeted from $0.15 to -$0.42, FY 15 slipped from -$0.58 to -$0.79, and FY 16 collapsed from $1.03 to $0.03.
Bottom Line
With persistently low oil prices, and high inventory levels, many E&P companies are facing difficult decisions. Unfortunately for this segment, oil prices are expected to remain low throughout the entirety of 2016. Additional content: Dow 30 Stock Roundup: Pre-Q4 Earnings Season The Dow endured a dismal start to the New Year, dragged down by concerns over China’s economy and the oil price slump. Stocks suffered a severe decline on the first trading day of 2016 following disappointing Chinese economic reports which led to concerns about global growth. The Dow staged a strong rebound on Tuesday following a fall in crude prices. The index suffered heavy losses on Wednesday due to familiar concerns about China’s economy and the oil price slump. The Dow slumped again on Thursday as concerns about China’s economy continued to haunt investors. The Dow nosedived during the first four trading days, declining 5.2%. Last Week’s Performance Stocks suffered a severe decline on the first trading day of 2016 following disappointing Chinese economic reports which led to concerns about global growth. The index lost 276.09 points or 1.6% on Monday as increasing tensions in the Middle East further dampened investor sentiment. This was the Dow’s poorest start to a year in nearly a decade. Dismal manufacturing data from China was the primarily responsible for the day’s losses. The Caixin manufacturing PMI declined from 48.6 in November to 48.2 in December. This marks the 10th consecutive month when the index has declined below 50. Following this report, the benchmark Shanghai Composite nosedived, losing around 7%. The fall activated the newly implemented circuit breaker mechanism, leading to an end to trading for the day. Additionally, growing tensions between Saudi Arabia and Iran led to a sudden jump in oil prices, though they declined thereafter. On the domestic front, the ISM Manufacturing Index slipped to 48.2% in December from November’s level of 48.6%. This was the lowest level recorded since the last month of the recession which occurred in 2008. Additionally, construction spending moved 0.4% lower to a seasonally adjusted rate of $1.12 trillion. The Dow increased around 1% on Tuesday following a fall in crude prices. Prices of oil fell after investors seemed unfazed by heightened tensions in the Middle East. Instead, they chose to focus on the strength of the U.S. dollar and an increase in crude inventories. Additionally, concerns about a slump in China’s growth receded. These developments helped defensive stocks such as utilities and consumer staples led to the day’s gains for the index. The country’s central bank introduced further liquidity into the financial system in an attempt to boost the economy. However, Apple’s shares lost 2.5% after the Nikkei reported that the company will cut production of the iPhone 6S and 6S Plus models. These losses were negated by a 2.4% increase in shares of Wal-Mart Stores Inc. (WMT). Meanwhile, gun maker stocks moved upward following President Obama’s announcement of enforcing stricter gun control measures. Additionally, U.S. light-vehicle sales rose 5.7% on a yearly basis to 17.47 million units over last year, the highest level ever recorded. The index lost 252.15 points or 1.5% on Wednesday due to familiar concerns about China’s economy and the oil price slump. The Caixin services PMI for the world’s second largest economy declined from November’s level of 51.2 to 50.2 for last month. This compounded the concerns raised by weak manufacturing data released earlier this week. Also, the People’s Bank of China (PBOC) lowered the off shore yuan exchange rate to its lowest level in five years. This development heightened fears about the country’s economy. China’s economic data and related developments led to a fall in oil prices. The price of Brent crude moved below the $35 a barrel level, the first such decline in 11 years. This dragged energy shares lower and Chevron Corp. (CVX) and Exxon Mobil Corp. (XOM) fell 3.9% and 0.8%, respectively. Meanwhile, North Korea’s claims about testing a thermonuclear device also dampened investor sentiment. On the economic front, the ISM Services Index fell from 55.9% in November to 55.3% in December. The Dow suffered heavy losses on Thursday, declining by 392.41 points or 2.3%, as concerns about China’s economy continued to haunt investors. China’s central bank undertook the heaviest cut in the yuan’s exchange rate in more than four months. The PBOC reduced the daily yuan reference-exchange rate versus the U.S dollar 0.5% lower. This moved heightened concerns about the country’s economy and led to fears about a flight of capital. Additionally, China’s benchmark index slumped, losing in excess of 7%. This set off the newly installed circuit breaker mechanism and trading stopped after the first half an hour of trading on Thursday. This was the shortest trading day for China’s markets ever. It was also the second time that trading was halted this week. The circuit breaker mechanism has been criticized for increasing volatility. As a result, the country’s securities regulator has decided to suspend the mechanism. Oil prices declined to their lowest level in 12 years following concerns about China’s demand for the commodity going forward. Oversupply remains a matter of concern as major producers refuse to cut output. Exxon Mobil and Chevron declined 1.6% and 3.5%, respectively. Other commodities such as base metals were also affected. 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. 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 MAGELLAN HLTH (MGLN): Free Stock Analysis Report CONOCOPHILLIPS (COP): Free Stock Analysis Report WAL-MART STORES (WMT): Free Stock Analysis Report CHEVRON CORP (CVX): Free Stock Analysis Report EXXON MOBIL CRP (XOM): Free Stock Analysis Report To read this article on Zacks.com click here.
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