For Immediate Release
Chicago, IL – March 6, 2018 – Zacks Equity Research highlights Statoil ASA STO as the Bull of the Day and Signet Jewelers SIG as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Vale VALE, Nintendo NTDOY and Arcelor Mittal MT.
Here is a synopsis of all five stocks:
Commodity prices have been on the move in recent weeks. Part of that move can be attributed to a weakening US dollar but another big chunk of that is chalked up to increased global demand. With the world economy humming along on all cylinders, demand for energy is on the move. Not only has crude oil been on the move, but other energy prices have been increasing as well. The cold start to winter has natural gas on the move and that’s good news for producers like today’s Bull of the Day.
Statoil ASA is a Zacks Rank #1 (Strong Buy) in an industry which ranks in the Top 8% of our Zacks Industry Rank. Statoil ASA, an energy company, explores for, produces, transports, refines, and markets petroleum and petroleum-derived products, and other forms of energy in Norway and internationally. The company operates through Development and Production Norway; Development and Production International; Marketing, Midstream and Processing; and Other segments. The company also transports, processes, manufactures, markets, and trades oil and gas commodities, such as crude, condensate, gas liquids, products, natural gas, and liquefied natural gas (LNG); markets and trades electricity and emission rights; and operates refineries, gas processing plants, LNG plant, methanol plant, and crude oil terminals. In addition, the company develops offshore wind, and carbon capture and storage projects, as well as offers other renewable energy and low-carbon energy solutions.
A series of bullish earnings estimate revisions is the reason for the favorable rank. Over the last sixty days, 3 analysts have increased their estimates for the current year, while one has also done so for next year. The moves have had a very bullish effect on the Zacks Consensus Estimates for those periods. The current year consensus number has jumped up from $1.10 to $1.52 while next year’s number has gone from $1.07 all the way to $1.44.
The bullish moves have helped underpin a move in the stock. After ripping to a new 52-week high over $24 the stock sold off to find support after over-shooting the 50-day moving average. A recent spate of buying along the 50-day now has the stock up at $22.79. Another run at the highs could be in the cards as the weather warms and demand for crude heats up.
Today’s Bear of the Day is unique as it is a retail name but because it’s in the jewelry business it faces different risks. I’m talking about Signet Jewelers. Signet Jewelers Limited engages in the retail sale of diamond jewelry, watches, and other products in the United States, Canada, Puerto Rico, the United Kingdom, the Republic of Ireland, and the Channel Islands. Its Sterling Jewelers division operates stores in malls and off-mall locations primarily under the Kay Jewelers, Kay Jewelers Outlet, Jared The Galleria of Jewelry, Jared Vault, and various mall-based regional brands.
The bearish attitude in this stock isn’t centered on this upcoming quarter or even this year. It’s all about next year’s estimates. Our Zacks Consensus Estimate has come down from $6.52 to $6.18 for next year despite this year’s number looking strong. Estimates for this year have gone from $6.26 to $6.49. So while this upcoming earnings report may be solid, it’s the contraction next year down to $6.18 that should have investors worried.
The bearish news has put the stock under pressure. It’s traded south of its 50-day moving average since diving below it after the November earnings report. After making new lows under $48 in early February the stock has poked its head above $50. The 50-day is still providing upside resistance overhead at $53.36. A decent earnings report could break this stock out of its funk, but only if next year’s numbers start to improve.
King of the Hill: Global Week Ahead
This Global Week Ahead opens with a new worry to climb over.
Markets everywhere must address fallout from President Trump’s sudden (but not unexpected) decision: Steel and aluminum tariffs shall be set at 25% and 10%, respectively, sometime soon.
Note to traders: We do not (yet) have tariff specifics.
Mr. Trump stated those gritty details could be provided sometime this week. Given his past track record of backtracks and broken promises — and a failure to inform his staff of his plans — there is a very meaningful chance this takes longer. There is also a chance (albeit small) these tariffs never materialize.
However, Commerce Secretary Wilbur Ross has guided us. They will be broadly applied.
Dr. Peter Navarro — the President’s outspoken advisor on these trade matters —participated in the weekend U.S. political talk shows. We got tighter confirmation from him: No country exemptions will be provided. But there could be specific industry exceptions.
Assuming traders get tariff specifics this week, how could equities respond?
I identified two channels to watch for specific economic and political signals.
The U.S. response—
How steel and aluminum tariff duties resonate across the country matters a great deal.
On Tuesday, Texans go to the polls in that state’s primary. This vote will be a fresh test on building momentum for the opposition Democratic Party.
Memories of the Bush steel tariffs of 2002 linger. One study estimated 200K Americans lost their jobs due to those steel tariffs. A quarter of those lost jobs were in the metal manufacturing, machinery and transportation sectors like pipelines that heavily use one of these two metals.
More Americans lost jobs that year — due to the Bush tariffs — than the total number of employees in the U.S. steel industry. 2015 census data showed roughly 140K Americans were employed in steel mills, contributing $36 billion to the economy.
The Global response—
The dominant school of thought here centers on “Tit-for-Tat” counter-measures.
The U.S. imports 30% of its steel. The biggest steel exporters to the U.S.A. are Canada, Brazil, South Korea, Mexico and Russia.
Our top military allies (Canada, South Korea, Japan, and Europe) are among the biggest hit by this, despite this matter being taken up as a “U.S. national security issue.” This could lead to a new source of internal and external divisiveness.
These steel export sovereigns likely react with a set of rising tariffs themselves, and not necessarily tariffs on steel or aluminum. Think Wisconsin Harleys (Paul Ryan) and Kentucky Bourbon (Mitch McConnell) and California Blue Jeans (Kevin McCarthy). That was what the Europeans already announced.
Then, there are the frictions this applies to ongoing NAFTA talks, underway in Mexico this week.
There are already 160 U.S. protections on Chinese steel. So the Chinese are not likely to be the leaders of the counter-response movement.
This means stocks must broadly reckon with retaliatory tariffs, coming from any number of countries simultaneously, but not China.
In sum, “Trade War” worries are likely to be heaped onto equities, from
- A variety of metal-using manufacturers
- Voters and politicians in the U.S., and
- Exporters from abroad
Does that sound good?
This whole steel and aluminum tariff episode recalls the sitcom “King of the Hill.”
Set in Texas, this is an animated series that follows the life of propane salesman Hank Hill, who lives with his substitute-teacher wife Peggy, wannabe comedian son Bobby and deadbeat niece Luanne. Hank has strikingly stereotypical views about God and country, but is unpretentious and sees the world simply.The Best of "King of the Hill"
It’s simple! Yeah. Maybe, it’s too simple?
The deep simple answer, if you are looking for it, is to close the yawning U.S. Federal budget deficit. That WOULD shrink the huge U.S. trade deficit.
Top Zacks #1 Rank (STRONG BUY) Stocks—
Watch the trading activity closely on any number of momentum stocks out there, which benefit from ‘Synchronized Global Growth.’ Do they take a hit from this news? We shall see.
Here are three that look very attractive, from a Zacks Rank perspective.
Vale: This is the top Brazilian miner of iron ore and pellets, nickel, manganese and ferro-alloys, gold, nickel, copper, kaolin, bauxite, alumina, aluminum and potash. The Stock has a market cap of $69 billion and a long-term Zacks VGM score of F. The share price has been on a momentum run since bottoming with lots of other global growth related stocks in early 2016. The forward P/E is still attractive at 11.6.
Nintendo: Japanese stocks have been on a tear. This $65 billion market cap stock has joined the ride. The long-term Zacks VGM score is F. The momentum run for Japanese stocks started somewhere in early 2016 and this stock went from $15 a share to $57 now. Wow.
Arcelor Mittal: This is a very big global steel producer, with a presence in over 60 countries. It operates a balanced portfolio of cost competitive steel plants across both the developed and developing worlds. The stock is a $34 billion market cap stock. The long-term Zacks VGM score is a terrific A, with an A for both Value and Growth.
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.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report VALE S.A. (VALE): Free Stock Analysis Report Statoil ASA (STO): Free Stock Analysis Report Signet Jewelers Limited (SIG): Free Stock Analysis Report ArcelorMittal (MT): Free Stock Analysis Report Nintendo Co. (NTDOY): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research