Chicago, IL – July 01, 2015– Zacks Equity Research highlights LyondellBasell (LYB) as the Bull of the Day and EPAM Systems (EPAM) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Barclays PLC (BCS), Prudential plc (PUK) and WPP plc ( WPPGY).
Here is a synopsis of all five stocks:
Bull of the Day:
LyondellBasell (LYB) delivered a big positive earnings surprise for Q1, driven by huge increases in its profit margins. This prompted analysts to revise their estimates significantly higher for both 2015 and 2016, sending the stock to a Zacks Rank #1 (Strong Buy).
Shares look attractively priced too at just 10x forward earnings. The Zacks Value Style Score for LYB is an 'A'.
LyondellBasell Industries is a plastics, chemicals and refining company. It manufactures ethylene, polyethylene, propylene, polypropylene, propylene oxide, oxygenated fuels and acetyls. The company also produces gasoline, diesel and gasoline blending components. Its products serve various end markets, including packaging, electronics, automotive parts, home furnishings, medical supplies, construction materials and biofuels.
LyondellBasell reports its results in five segments:
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Olefins and Polyolefins - Americas (55% of total EBITDA): produces and markets olefins, including ethylene and ethylene co-products, and polyolefins.
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Olefins and Polyolefins - Europe, Asia, International (19%): produces and markets olefins, including ethylene and ethylene co-products, polyolefins and specialty products, including polybutene-1 and polypropylene compounds.
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Intermediates and Derivatives (21%): produces and markets propylene oxide and its co-products and derivatives, acetyls including methanol, ethylene oxide and its derivatives, ethanol and oxygenated fuels, or oxyfuels.
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Refining (1%): refines heavy, high-sulfur crude oil and other crude oils of varied types and sources available on the U.S. Gulf Coast.
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Technology (3%): develops and licenses chemical and polyolefin process technologies and manufactures and sells polyolefin catalysts.
LyondellBasell delivered better-than-expected first quarter results on April 24. Adjusted earnings per share came in at $2.54, crushing the Zacks Consensus Estimate of $1.94. It was a 56% increase over the same quarter last year.
Revenue declined 26% year-over-year to $8.185 billion. This was due to the drop in crude oil prices, which pressured product prices. However, as CEO Bob Patel stated "the abundance of low cost natural gas-based raw materials, supply and demand tightness in several products, and our flexible portfolio provided balance to offset the impact of lower prices."
This can be seen in the gross profit margin, which expanded from 14.0% of revenue in the first quarter of 2014 to 22.1%. Meanwhile, operating income soared from 12.0% of revenues to 19.2%.
Bear of the Day :
Earnings estimates have been dropping for EPAM Systems ( EPAM) after the company delivered an earnings miss for the first quarter. The decline in estimates has been significant enough to send shares of EPAM to a Zacks Rank of 5 (Strong Sell), placing it in the bottom 5% of all stocks that Zacks ranks based on earnings momentum.
Meanwhile, shares do not look cheap with a Zacks Value Style Score of 'F.'
EPAM provides complex software engineering solutions and information technology services to clients around the globe. Its customers are primarily Fortune Global 2000 companies in a variety of industries, but its main focus is Independent Software Vendors and technology (22% of total revenue), financial services (28%), business information and media (13%), and travel and hospitality (22%) firms.
Approximately 50% of total revenue comes from North America.
Its five largest customers accounted for 36% of total revenue in the first quarter of 2015. Just one customer -- UBS -- accounted for more than 15% of total revenue.
EPAM reported its first quarter results on May 6. Adjusted earnings per share (but including stock-based compensation expense) came in at $0.32, missing the Zacks Consensus Estimate by 11 cents. It was a 16% decrease from adjusted EPS of $0.38 in the same quarter last year.
Additional content:
UK Bucks Trend: 3 Stock Picks
At this moment, continental Europe, China, Japan and major Southeast Asian economies are combating multiple concerns. Among emerging markets, India is showing some promise of growth. But for the U.S., the situation remains worrisome for other developed economies. However, the UK has bucked the trend, emerging as a beacon of hope.
GDP Revised Upward
According to official data, GDP rose by 0.4% for the Jan-Mar period. This is higher than the previous estimate of 0.3%. Additionally, year-over-year growth for the first quarter was also revised upward to 2.9% from the earlier estimate of 2.5%. GDP growth for 2014 was revised up to 3% from 2.8%.
The major driver of growth during the first quarter of 2015 was the substantial increase in disposable income. Real disposable income increased 4.5% on a year-over-year basis. This is the sharpest pace of growth since 2001. The increase in consumer spending also helped to neutralize the negative impact of a slump in trade.
Consumer Confidence Peaks
Another report released earlier this week showed that consumer confidence has increased to its highest point in 15 years. Market research company GfK’s consumer confidence index increased by six points in June. This takes its total score to seven, a level which not been regularly posted since the end of the 90’s.
The report also indicated that items requiring significantly high levels of expenditure were witnessing great demand. This includes the likes of televisions and furniture. Such a pattern was a result of a low level of inflation and a steady increase in wage growth.
Wage Growth, Low Inflation
Data released this month revealed that wage growth increased to 2.7% in April. This was the fastest pace of growth recorded in four years. It was also higher than the expected rate of 2.1%. In March, wages had grown at 2.3%.
Meanwhile, private jobs increased 3.3% in April while the public sector posted a 0.3% increase. Unemployment rate was flat at 5.5% for three-month period ending April, identical to the period til March. As of today, joblessness has declined in the U.K. for nearly six years.
Additionally, core inflation declined to 0.8% in April, its lowest level in 14 years. This metric inched up to 0.9% in May but the effect of inflation has remained limited. The CPI contracted by 0.1% in April and rebounded to post a 0.1% increase in May. However, prices of food and fuel remained lower on a year-over-year basis.
Our Choices
A report by Moody’s released earlier in the month had predicted that the U.K. would post robust growth this year as well as in 2016. This is being borne out by several economic indicators. Below we present three stocks set to gain from these trends, which also have a favorable Zacks Rank.
Finding a great value stock can be a tough task. But thanks to our new style score system , we have been able to identify growth stocks which have terrific potential in the near term.
Our research shows that stocks with Value Style Scores of ‘A’ or ‘B’ when combined with Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy) offer the best investment opportunities in the value investing space.
Barclays PLC (BCS) is a major global banking and financial services company, with over £1.42 trillion ($2.36 trillion) in assets as of Mar 31, 2015. Barclays is headquartered in London.
Barclays holds a Zacks Rank #2 (Buy) and has a Value Style Score of ‘B.’ The company has expected earnings growth of 61.3% for the current year. The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 9.65.
Prudential plc (PUK) provides retail financial products and services and fund management to many millions of customers worldwide. It has operations across the U.K., U.S. and Asia.
Apart from a Zacks Rank #2 (Buy), Prudential has a Value Style Score of ‘B.’ The company has expected earnings growth of 17.6% for the current year and a P/E (F1) of 14.60x.
WPP plc (WPPGY) together with its subsidiaries, provides advertising and communication services worldwide. The company operates in North America, the UK, Europe, the Asia Pacific, Latin America, Africa and the Middle East.
WPP plc holds a Zacks Rank #2 (Buy) and has a Value Style Score of ‘B.’ The company has expected earnings growth of 14.2% for the current year and a P/E (F1) of 15.97x.
The UK is emerging as one of the best bets among developed economies. This is why these stocks would make prudent additions to your portfolio.
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LYONDELLBASEL-A (LYB): Free Stock Analysis Report
EPAM SYSTEMS (EPAM): Free Stock Analysis Report
BARCLAY PLC-ADR (BCS): Free Stock Analysis Report
PRUDENTIAL PLC (PUK): Free Stock Analysis Report
WPP PLC (WPPGY): Free Stock Analysis Report
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