For Immediate Release
Chicago, IL – October 19, 2017 – Zacks Equity Research Huntsman Corp. (NYSE: (NYSE:HUN) – Free Report) as the Bull of the Day, Alaska Air (NYSE: (NYSE:ALK) – Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on United Air Lines (NYSE: (NYSE:UAL) – Free Report), American Express (NYSE: (NYSE:AXP) – Free Report) and eBay (Nasdaq: (NASDAQ:EBAY) – Free Report).
Here is a synopsis of all five stocks:
One of the world’s largest manufacturers of differentiated commodity chemical products, Huntsman Corp. (NYSE:HUN – Free Report) serves a broad range of consumer and industrial markets including transportation, construction, home life, energy and fuels, and clothing and footwear.
The Zacks Rank #1 (Strong Buy) stock recently agreed to merge with Clariant AG in a deal that will create a formidable industry player, helping both companies grow their footprint in high-growth markets, as well as cut operating costs and expand margins.
Strong Third Quarter Outlook
While operations in the Texas Gulf Coast were temporarily affected by Hurricane Harvey, Huntsman still expects strong third quarter results and raised its third quarter expectations not too long ago.
The specialty chemicals company is set to report earnings on October 27th before the bell, and expects total revenues of $2.06 billion on earnings of 50 cents per share. While sales are projected to decline about 12.8% during the quarter, earnings are estimated to grow over 32% for the period.
Huntsman expects its global Polyurethanes business and the continued recovery of its Performance Products business to be robust in Q3.
Impressive Growth Fundamentals
With projected EPS growth of nearly 44%, it’s no wonder HUN stock sports a Growth Score of ‘A.’ And, Huntsman has a ROE of 30%, surpassing the Chemical-Diversified industry average of 14.28% and showing that the company is efficiently utilizing its shareholder funds.
Another important thing to note is that the company has beaten earnings estimates in the last 10 quarters, and has an average earnings surprise of more than 26% (based on the past four consecutive earnings beats).
Shares are Surging
So far this year, HUN stock has gained well over 51% compared to its industry’s year-to-date return of almost 15% and the S&P 500’s gain of about 14.4%.
The travel industry has been battered by a series of unusually powerful tropical storms over the past few months, with Hurricanes Harvey and Irma causing billions of dollars in damage and creating massive headaches for several airlines.
Alaska Air’s (NYSE:ALK – Free Report) largest hubs are located on the West Coast, so this company hasn’t been particularly affected by these storms. Nevertheless, management has struggled with several other key challenges recently.
Alaska Air Group is currently a Zacks Rank #5 (Strong Sell). The company operates the Alaska Airlines and Horizon Air brands, as well as the recently-acquired Virgin America airline. Shares are down nearly 10% year-to-date, and on top of its weak Zacks Rank, Alaska Air is carrying an “F” grade in the Momentum category of our Style Scores system ahead of its report.
Recent Challenges
There doesn’t seem to be much positive momentum in the airline industry, and as mentioned, several hurricanes have devastated a handful of the biggest players. In fact, our “Transportation – Airline” group currently sits in the Bottom 6% of the Zacks Industry Rank. But what’s really interesting here is that Alaska Air is dealing with its own problems.
For one, a contractual dispute has led to a significant pay increase for pilots at the company’s Horizon Air subsidiary. Moreover, fuel cost per gallon in the third quarter is expected to come in nearly 12% higher than the year-ago period.
Alaska Air also recently released mixed September traffic results. The company’s total revenue passenger miles (RPMs) were up by nearly 8.4%, while its consolidated capacity gained 10.1%. What’s problematic is that load factor, or percentage of seats filled by passengers, fell nearly 1.5 percentage points year-over-year, underscoring the fact that capacity expansion has outpaced traffic growth.
Earnings Outlook
ALK is slated to release its full third-quarter financial results before the market opens on October 25. The company has seen significant negative revision activity, and estimates are down on near-universal analyst agreement across the board.
If these estimates hold up, Alaska Air’s results would represent earnings growth of 5.60% and revenue growth of 38.33%. This indicates that ALK is perhaps a more interesting growth pick than many others in the airline business, but it could present even more risk if the company fails to live up to expectations.
On that note, we should mention that Alaska Air currently sports an Earnings ESP of -3.40%. Zacks Earnings ESP (Expected Surprise Prediction) looks to find earnings surprises by focusing on the most recent analyst estimates.
Alaska Air’s negative Earnings ESP further proves that analyst sentiment has gotten worse during recent trading, which is not a great sign as we approach the company’s earnings report date.
Other Key Metrics
As mentioned above, ALK is currently sporting an “F” grade for Momentum. The stock has its negative estimate revision snapshot, as well as its weak share price movement over the past few months, to thank for this grade. In fact, the stock has underperformed the industry’s average gains throughout the past year, within 2017, and over the past three months.
On top of this, a few of Alaska Air’s valuation metrics might leave investors concerned. The company’s P/S ratio of 1.43 is well ahead of the industry average of 0.81, and its PEG ratio is at a significant premium to the industry’s 1.53. What’s more, ALK’s P/B and P/CF ratios are currently lagging behind their respective industry averages.
Better Options
Because of the aforementioned storms and rising fuel costs, investors will find very few surefire bets in the domestic airline industry right now. Instead, it might be a good idea to turn our attention to several foreign airliners.
Additional content:
Q3 Earnings Reports Follow Record Market Highs
After another stellar regular trading day this Wednesday, which saw new record closing highs for the Dow, Nasdaq and S&P 500, Q3 earnings results from several companies across a wide spectrum of industries hit the tape after the bell. United Air Lines (NYSE:UAL – Free Report), American Express (NYSE:AXP – Free Report) and eBay (Nasdaq:EBAY – Free Report) have all put out Q3 results this afternoon.
American Express shares are down upon the credit card major's latest quarterly beat: earnings per share of $1.50 topped the Zacks consensus estimate by 3 cents, representing 20% growth year over year. Revenues also bested expectations, bringing in $8.44 billion in the quarter, above the $8.32 billion anticipated. The company also raised full-year earnings guidance to $5.80 - 5.90. Yet shares dipped roughly 1% in the immediate aftermath of the quarterly release.
This likely has to do with the surprise announcement that AmEx's Ken Chenault will be retiring, stepping down as Chairman and CEO as of February 1st next year. Current Vice Chair Steven Squeri will assume both roles for AmEx. Also, company shares are up 24% year-to-date and 53% year over year.
United also surpassed expectations on both top and bottom lines today, with $2.22 per share on $9.88 billion both improvements over the $2.12 and $9.86 billion estimated, respectively. The airline major saw its shares sell off in late trading, as well, likely based on weaker-than-expected passenger revenues and higher costs related to fuel and labor. For more info on UAL's earnings, click here.
eBay, meanwhile, barely eked out a positive surprise on the top line after today's closing bell -- $2.4 billion as opposed to $2.37 billion in our estimate -- while just meeting bottom-line earnings of 48 cents per share. The company missed estimates for active buyer totals in the quarter by about 3 million (to 168 million actualized), even amid efforts to drive site traffic in the quarter. Shares fell 5% upon the Q3 release. For more info on EBAY's earnings report, click here.
About the Bull and Bear of the Day
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United Continental Holdings, Inc. (UAL): Free Stock Analysis Report
Alaska Air Group, Inc. (ALK): Free Stock Analysis Report
eBay Inc. (EBAY): Free Stock Analysis Report
Huntsman Corporation (HUN): Free Stock Analysis Report
American Express Company (AXP): Free Stock Analysis Report
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