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SOURCE Zacks Investment Research, Inc.
CHICAGO, Oct. 18, 2013 Zacks Equity Research highlights Brocade Communications Systems (Nasdaq:BRCD-Free Report) as the Bull of the Day and Regis Corporation (NYSE:RGS-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis ontheApache Corp. (NYSE:APA-Free Report), BP plc (NYSE:BP-Free Report) and Devon Energy Corp. (NYSE:DVN-Free Report).
Here is a synopsis of all five stocks:
Brocade Communications Systems (Nasdaq:BRCD-Free Report) recently delivered its 7th consecutive positive earnings surprise as it beat on both the top and bottom lines. Although Brocade experienced a decline in revenue year-over-year, profit margins expanded and net income surged as the company focused on efficiency.
Analysts also revised their estimates significantly higher for both 2013 and 2014 after the latest beat, sending the stock to a Zacks Rank #1 (Strong Buy). Although shares of Brocade have soared the last several weeks, the valuation picture still looks very reasonable with the stock trading at 13x forward earnings.
Brocade Communications Systems supplies networking equipment and software for all types of businesses and organizations. It primarily operates in two segments:
Brocade reported its fiscal 2013 third quarter results on August 13. Adjusted earnings per share came in at 15 cents, crushing the Zacks Consensus Estimate of 9 cents. It was a 25% increase over the same quarter last year. And this increase came in spite of a decline in revenue.
Analysts revised their estimates significantly lower for Regis after the latest miss, sending the stock to a Zacks Rank #5 (Strong Sell). Despite the negative earnings momentum, the valuation picture does not look attractive for Regis at this point. Investors should consider avoiding this stock until it can turn things around.
Regis Corporation is focused primarily on hair salons. It owns, franchises or holds ownership interests in approximately 10,000 locations across the globe under the brands Supercuts, Sassoon Salon, Regis Salons, MasterCuts and Cost Cutters, among others.
Regis Corporation reported disappointing results for the fourth quarter of its fiscal 2013 on August 27. Sales fell -5% to $502.3 million, which was below the Zacks Consensus Estimate of $514.0 million. This was driven by a -3.1% decline in same-store service sales as guest count fell -3.7%.
The adjusted cost of service and product as a percentage of revenues increased 180 basis points to 57.7%. This was driven in part by negative leverage of fixed expenses.
Adjusted earnings per share came in at 6 cents, missing the Zacks Consensus Estimate of 10 cents. It was below the 36 cents earned in the same quarter last year.
Apache Reaches 52-Week High
Shares of Apache Corp. (NYSE:APA-Free Report) hit a 52-week high of $90.74 on Oct 16. In fact, the Houston, TX-based energy explorer has seen its stock price climb some 26% during the past six months. This price appreciation can be attributed to its large geographically-diversified reserve base, balanced exposure to natural gas and crude oil, impressive growth in its onshore liquids production and portfolio rebalancing initiatives.
Why the Bullishness?
Apache is noted for growing through the acquisition and development of existing reserves. Long-term production growth visibility has significantly improved following the BP plc (NYSE:BP-Free Report) asset acquisition, the purchase of a portion of Devon Energy Corp.'s (NYSE:DVN-Free Report) Gulf of Mexico assets and the deal to acquire Mariner Energy. These new acreage positions further complement the company's diversified asset base.
Apache's international operations also continue to generate attractive returns. In particular, the company has been steadily building its asset base in Australia over the last few years. Apache expects to see meaningful growth in free cash flow in the coming years, stemming from project start-ups in that country.
Management has also not been shy of divesting assets, particularly those that do not fit into the company's long-term growth plan. Recently, Apache agreed to exit its operations in Kenya, following the sale of certain properties in Canada, and the divestment of 33% of its 'risky' Egypt business. In fact, the company has announced some $7 billion worth of asset dispositions year-to-date.
Finally, the oil and gas producer's cheap valuation and multiyear trends in reserve replacement are other positives in the Apache story.
Zacks Rank & Stock Picks
With Apache shares trading at 52-week high, any upside from here may be limited, as suggested by the company's Zacks Rank #3 (Hold).
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