For Immediate Release
Chicago, IL – April 06, 2016– Zacks Equity Research highlightsJC Penney (JCP) as the Bull of the Day and Citigroup (C) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Hallmark Financial Services, Inc. (HALL), Fidelity National Title Group, Inc. (FNF) and Selective Insurance Group Inc. (SIGI).
Here is a synopsis of all five stocks:
Bull of the Day :
I try not to fall on my own sword. What I mean by that is, I don’t take long term positions and ignore what the market is telling me. I don’t have that need to be right all the time. If I’m wrong, I take my licking and keep on ticking. Essentially, I’m not afraid to admit when I’m wrong about a stock. In the case of today’s Bull of the Day I used to be a big bear. But a lot of earnings momentum and some bullish revisions have collectively changed my mind.
Admittedly, I called JC Penney (JCP) “JC Penniless” in a video Tracey Ryniec and I did late last year. At the time, nothing was going right for the company. Since then, things may have turned around. JC Penny, of course, is one of America’s leading retailers, operating department stores throughout the US and Puerto Rico. They also have one of the largest apparel and home furnishing sites with jcp.com.
The department store has struggled to reinvent itself and stay profitable as the traditional mall attendance continues to drop year over year. As internet retailers like Amazon demand greater market share the stress only increases for the brick and mortar retailers. This past Black Fridaymarked the first Black Friday where online orders trumped the physical store locations. This trend is likely to continue and the gap is expected to widen.
We’ve got them as a Zacks Rank #1 (Strong Buy) along with Growth, Value, and Momentum Style Scores of A. A big reason for the favorable rank is the aggressive earnings estimate revisions we’ve seen over the last sixty days. Eight analysts have increased their estimates for the current year while only one has dropped their number. The result has increased our Zacks Consensus Estimate from a 28 cent loss to a 4 cent gain. The most recent earnings estimate revision saw one analyst jack up their number to a 12 cent gain for the current year.
Bear of the Day:
You don’t have to be a rocket scientist to figure out the difficulty banks are facing right now. The headwinds are really making it tough, especially for the big banks. Not only do you have a regulatory environment that is less than favorable, but you also have trading desks shrinking and razor thin net interest margins. Add that up with the stigma of the bailout and the mortgage crisis and it’s no wonder that the big banks are having trouble.
The story is the same here with Zacks Rank #5 (Strong Sell) Citigroup (C). Citigroup is a diversified financial services holding company that provides various financial products and services for consumers, corporations, governments and institutions worldwide. It operates through two segments, Citicorp and Citi Holdings. The Citicorp segment offers traditional banking services to retail customers through Citibank. Citi Holdings provides consumer loans, portfolio securities, loans and other assets and retail alternative investment services.
Citi is all set to report earnings before the market open on April 15th. The Zacks Consensus Estimate for the quarter has dropped considerably over the last sixty days. Five analysts have decreased their earnings estimates for the current quarter while six have done so for the current year. The bearish sentiment has brought the Zacks Consensus Estimate from $1.52 all the way down to $1.19 for the current quarter. The current year number has dropped from $5.70 to $4.95. Citigroup has managed to beat the consensus each of the previous four quarters. The average beat was by 7 cents.
Shares of Citi have retreated since peaking above $60 in July. They found support near $47.50 and managed to rally into November highs at $56.46 before dipping again to fresh lows below $35. The last push higher stalled out shy of $45 and currently the stock has dipped below its 20 day moving average. That’s a bearish sign for an already bearish situation. If shares of C get below $40.50 it could be a slippery slope all the way back down to the lows.
Additional content:
3 Insurance Stocks to Buy Instead of Berkshire Hathaway
There is hardly an investor who doesn’t want to hold shares of Berkshire Hathaway. The holding not only gives a feel of investing in mutual funds but also rewards investors with higher returns at the same time. But above all, the company has Warren Buffett at the helm.
As the chairman and CEO, Buffett has spearheaded in creating tremendous value for the company’s shareholders over the past several years. Berkshire Hathaway, a conglomerate with nearly 90 subsidiaries, engages in business ranging from ice-cream to insurance.
Though the company runs heterogeneous activities, its property and casualty insurance business remains the frontrunner generating maximum return on equity. However, the company failed to beat expectation in two of the last four reported quarters, the average surprise being negative 3.42%.
Also, this Zacks Rank #5 (Strong Sell) stock did not witness any positive earnings estimate revision in the last 60 days. The Zacks Consensus Estimate lost 5.6% for 2016 and 7.9% for 2017 over the last 8 weeks. Additionally, shares of Berkshire Hathaway seem expensive as its P/E is 19.3% higher than the industry average of 16.2%.
Should an astute investor look beyond the over-hyped Berkshire Hathaway?
Well, there are other attractive stocks in the property & casualty (P&C) insurance industry that may not be as big a name as Berkshire Hathaway but promise greater returns.
Market uncertainties characterized by volatile oil prices, China growth worries and terror attacks (like the one that hit Brussels in March) dealt a blow to most stocks. But the P&C insurance space remains somewhat insulated from these vagaries. This industry is more impacted by catastrophe activities. Accordingly, a benign catastrophe environment, continued influx of capital in an already well-capitalized industry, price strengthening and a still soft interest rate environment presently makes the property and casualty insurance industry attractive.
While the Federal Open Market Committee (FOMC) maintained the federal funds rate of 0.25–0.50% at its March meeting, it also reduced the median forecast for the number of rate hikes this year to two from four projected at its meeting last December.
Though a rate hike will positively impact investment results, it is to be noted that insurance companies stand to benefit from a low interest rate regime. This is because insurance companies hold a considerable amount in bonds, which would see a decline in their value if rates rise. Nonetheless, an increase in the rate will drive investment results, driving earnings even further.
Assured Picks
Since insurance stocks are poised for growth no matter what the Fed chooses to do, the space is bound to attract attention. Here, we always look to maximize our return on investment, with Berkshire or Warren Buffet being the guiding star. Taking nothing away from Berkshire, we have picked some solid operators in the space that have the potential to boost one’s portfolio even more.
We refine our search using the VGM score, a solid Zacks Rank and attractive price-to-earnings (P/E). Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Also, these stocks posted positive earnings surprises over the past four quarters.
Based in Fort Worth, TX, Hallmark Financial Services, Inc. (HALL), with its wholly owned subsidiaries is engaged in the sale of property and casualty insurance products. Hallmark Financial has a Zacks Rank #1 (Strong Buy) and a VGM Score of B. The company has expected earnings growth of 6.19% for the current year.
The forward P/E ratio is 9.7, which is lower than the industry average of 16.5. The company delivered positive surprises in three of the last four quarters, with an average beat of 110.7%. Notably, the stock is witnessing upward estimate revisions (up 20% for 2016 and 19% for 2017 over the last 60 days).
Headquartered in Jacksonville, FL, Fidelity National Title Group, Inc. (FNF) is a leading provider of title insurance, specialty insurance and claims management services. Fidelity National has a Zacks Rank #2 (Buy) and a VGM Score of B. The company has expected long-term earnings growth of 16.3%. For the current year, earnings are expected to grow 16.0%. The forward P/E ratio is 13.5, which is lower than the industry average of 16.5. The company delivered positive surprises in three of the last four quarters, with an average beat of 4.05%.
Branchville, NJ-based Selective Insurance Group Inc. (SIGI) through its insurance subsidiaries offers a broad range of property and casualty insurance products. Selective Insurance has a Zacks Rank #2 and a VGM Score of B. The company has expected long-term earnings growth of 2.9%. The current year earnings growth is estimated at 3.7%. The forward P/E ratio is 13.2, which is lower than the industry average of 16.5. The company delivered positive surprises in three of the last four quarters, with an average beat of 10.3%.
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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.
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PENNEY (JC) INC (JCP): Free Stock Analysis Report
CITIGROUP INC (C): Free Stock Analysis Report
HALLMARK FINL (HALL): Free Stock Analysis Report
FNF GROUP (FNF): Free Stock Analysis Report
SELECT INS GRP (SIGI): Free Stock Analysis Report
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