For Immediate Release
Chicago, IL – August 15, 2016 – Zacks Equity Research highlights MasTec, Inc. (MTZ) as the Bull of the Day and Agrium Inc. ( AGU) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Alibaba (NYSE:BABA) (BABA),Amazon (NASDAQ:AMZN) (AMZN) and Facebook (NASDAQ:FB) ( FB).
Here is a synopsis of all five stocks:
MasTec, Inc. (MTZ) recently raised full year guidance as its oil and gas business is surging. This Zacks Rank #1 (Strong Buy) is expected to grow earnings by the triple digits this year.
MasTec handles engineering and construction for electrical transmission, cross continental oil and natural gas pipelines, renewable energy and wireless networks.
Beat and Raise in the Second Quarter
Nothing is slowing down this engineering and construction firm, not even the energy crash.
On Aug 4, MasTec reported second quarter results which blew by the Zacks Consensus by 65%. Earnings were $0.33 compared to the Zacks Consensus of just $0.20.
Revenue jumped 15.5% to $1.2 billion from $1.1 billion in the year ago quarter due to improved productivity in its Oil & Gas segment.
Despite the energy downturn, it expects record levels of Oil & Gas revenue during the second half of 2016 as the large Dakota Access project has gotten underway and as it ramps up execution on other projects initiated at various times during the year.
It also has the visibility to forecast that Oil & Gas will continue to be strong into 2017.
But it's not a one-trick wonder as it saw significant growth in its Communications segment in the quarter and began to see improvement in its Electrical Transmission segment.
Its backlog jumped 31% to $5.3 billion from $4.1 billion at the end of the second quarter of 2015.
Big Guidance Increase
Given its growing backlog and its visibility on its Oil & Gas segment, MasTec raised full year EPS guidance to $1.57 from a range of $1.37 to $1.47.
7 estimates were revised higher for 2016 since the earnings report.
The 2016 Zacks Consensus Estimate has jumped to $1.46 from $1.31 in that period. That is earnings growth of 170% as the company made just $0.54 in 2015.
Analysts also raised estimates for 2017, with the 2017 Zacks Consensus Estimate soaring to $1.82 from $1.56. That's another 25% jump in earnings.
Agrium Inc. (AGU) recently cut full year earnings guidance as crop prices stay in the cellar. This Zacks Rank #5 (Strong Sell) is expected to see a double digit earnings decline in 2016.
Agrium produces all three major fertilizers, including nitrogen, phosphates and potash. It is also a retail supplier of agricultural products such as crop protection and seeds in North America, South America and Australia.
It's headquartered in Calgary.
A Second Quarter Beat But...
On Aug 3, Agrium reported its second quarter earnings and actually beat the Zacks Consensus Estimate by 4 cents. Earnings were $4.09 compared to the Zacks Consensus of $4.05.
The good news was that the retail side of the business is doing well. The earnings were the second highest in history due to strong margins and lower costs.
Agrium acquired 33 retail locations with expected annual sales in excess of $230 million. It's also working on the 18-store deal with Cargill and another deal which would add 12 more locations. These deals represent another $300 million in expected sales.
What's the bad news?
Crop prices remain at multi-year lows which means farmers aren't buying as much product.
Fertilizer prices, including potash and nitrogen, also both remain weak. Additionally, rising natural gas prices will mean tighter margins on the nitrogen side.
Guidance Cut
Agrium cut its full year guidance to a range of $5.00 to $5.35 from its prior guidance of $5.25 to $6.25. It's original guidance for 2016 had a high range of $7.00, so you can see just how tough the fertilizer industry has gotten over the past year.
Potash prices are expected to bottom by the end of the year, however.
Given the guidance cut, analysts had to cut full year estimates to get in line. 2 estimates have been cut in the last week for 2016.
The 2016 Zacks Consensus Estimate fell to $5.26 from $5.86 just 90 days ago.
That's a 25% drop in earnings from 2015 when the company earned $6.99.
Additional content:
Alibaba Cloud Can Help Defy Economic Slowdown
Alibaba (BABA) reported strong first quarter 2017 results wherein it broke out core commerce, media, cloud and other growth initiatives for the first time. So the strong revenue growth in the non-commerce areas is no more a matter of conjecture, but information published by the company.
Alibaba has often been referred to as the Amazon (AMZN) of China and it certainly appears to be following in the footsteps of its American peer. Despite being the leading ecommerce player in the country, it has been out to other areas, particularly cloud and media. While these efforts may be humble numbers compared to what Amazon does but Alibaba has some unique advantages that should enable it to grow at sustainably stronger rates.
Alibaba’s Unique Advantages
The most significant of these advantages is of course the fact that it is a Chinese company operating in China, the kind of place in fact that the government does everything possible to support. Alibaba may have IPO-ed in the U.S. but the company’s operations, methods and employees are all primarily Chinese. Not just that: founder Jack Ma has said that it accounts for around 80% of the Chinese retail ecommerce market, which is huge because according to him, urban China does most of its sales online.
Alibaba can also bank on favorable demographics (growing middle class) and this group’s seemingly insatiable demand for goods manufactured internationally. China’s population is attractive for multi-national companies looking for growth, so it creates a win-win situation (if you can ignore the counterfeiting problems for a moment).
So what all this means is that this is one company that has a significant impact on the economy and therefore some leverage in its dealings with the government. The flip side to that is that when the Chinese economy doesn’t do so well, the company is likely to feel the pinch.
Recent China Data
So for instance, when fresh data coming out of China tells us that the economy continues to slow down, there is always the fear that its growth will be affected. China’s National Bureau of Statistics (NBS) says that that there is continued deceleration in industrial output (which grew 6.0% from July 2015), retail sales (which grew 10.2% from July 2015) and fixed asset investment (which grew 8.1% from January to July this year). The last of these is probably most concerning because lower investment seems to indicate that the trend will continue.
To make matters worse, James Daniel, IMF Mission Chief for China has said that China's corporate debt is still manageable, but at approximately 145% of GDP, it is high by any measure. The reason is unsustainably high growth targets coupled with very little control on local governments and state-owned enterprises (SOEs). These SOEs account for half the credit and only a fifth of the industrial output. putting undue pressure on the credit situation.
Beating Chinese Growth Concerns
Alibaba has been focused on developing rural business, international expansion, logistics synergies and branching into high-growth areas like cloud computing.
In the last quarter, the company’s cloud revenues grew 156% year over year to 1.2 billion RMB with paying customers growing 119% to 577K. Moreover, losses narrowed significantly, so the business is likely to turn profitable soon.
The company is now tying up with international players like SAP to get them to use its cloud to reach Chinese customers. Since the Chinese market is largely untapped while developed markets are relatively mature, Ma has already started playing up Alibaba’s position as a platform for these firms to reach customers in China.
It also recently entered into a first-of-its-kind deal with HTC, according to which they will build necessary data center infrastructure to deliver virtual reality content to HTC’s VR customers. The goal is to speed up VR content creation in the country so the struggling phone maker can diversify into other things. It already sells the Vive VR headset and just like Facebook (FB) it figures that increased VR content will definitely help sales.
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MASTEC INC (MTZ): Free Stock Analysis Report
AGRIUM INC (AGU): Free Stock Analysis Report
ALIBABA GROUP (BABA): Free Stock Analysis Report
AMAZON.COM INC (AMZN): Free Stock Analysis Report
FACEBOOK INC-A (FB): Free Stock Analysis Report
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