The Zacks Analyst Blog Highlights: ICICI Bank, HDFC Bank, Tata Motors, Infosys and Ventas
For Immediate Release
Chicago, IL – September 30, 2014 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the ICICI Bank Ltd. (IBN-Free Report), HDFC Bank Ltd. (HDB-Free Report), Tata Motors Ltd. (TTM-Free Report), Infosys Ltd. (INFY-Free Report) and Ventas Inc. (VTR-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Monday’s Analyst Blog:
S&P Ups India’s Credit Outlook: 3 ADRs to Buy
On Friday, ratings agency Standard and Poor’s raised India’s credit outlook to "stable" from "negative." The agency said that the impressive mandate received by Prime Minister Narendra Modi has created an atmosphere which is favorable to economic reforms and fiscal prudence. Markets reacted positive to this announcement, snapping a three-day series of losses to post impressive gains.
Credit Outlook Upgraded
More than two years ago, the ratings firm had reduced India’s outlook to “negative.” This had left the country extremely close to receiving a junk rating. This was an indication of the loss of investor confidence in the country’s economy, primarily due to allegations of corruption. India was also suffering from perception problems given the lack of decisiveness by the earlier Congress-led government.
However, the new government seems to have sparked off hopes of an economic recovery. According to S&P, the new government "will remedy, to varying degrees, the growth impediments-policy paralysis, energy supply bottlenecks, and administrative obstacles. The government's actions will likely add momentum to the incipient cyclical upswing evident in the economy."
This is of course far from an actual ratings upgrade. However, Standard and Poor’s also said it “could raise the rating if the economy reverts to a real per capita GDP trend growth of 5.5 per cent per year and fiscal, external, or inflation metrics improve.”
Economic Indicators Improve
These perceptions have been borne out by an upswing in economic indicators. Data released in late August showed India’s gross domestic product expanded at 5.7% in three months ended Jun 30. This was the strongest rate of growth in over two years. It is likely that as early as 2016, India could move ahead of China. According to a senior economist in Singapore with CLSA, India is likely to register a 7.2% growth rate in 2016. China is expected to grow at 7.1% during this period.
India also seems to be tiding over its inflationary woes. Last month, consumer prices increased by 7.8%, a marginal improvement from the 7.96% recorded in July. On the other hand, wholesale prices move up 3.74% in August, the slowest pace since 2009. This is a significant decline from the 5.19% increase witnessed in July. Analysts believe that the decline was triggered by a drop in fuel and vegetable prices.
Additionally, the trade deficit has decreased to its lowest level in a year, helping the rupee rebound from a one-month low. This occurred because a decline in import costs was triggered by lower fuel prices. Further, a decline in industrial production in the U.S. reduced concerns about a sooner than expected Fed rate hike. This also supported gains for the rupee.
Stock Markets Rebound
Markets responded enthusiastically to Standard & Poor’s upgrade with both the 30-share Sensex and the 50-share Nifty notching up gains. Banking stocks led the gainers with several blue-chip stocks making significant gains. SBI, Axis Bank, ICICI Bank Ltd. (IBN-Free Report) and HDFC Bank Ltd. (HDB-Free Report) gained 2.71%, 3%, 0.76%, and 2.35% respectively. These gains helped indices recover from one-month lows.
Several blue chips garnered impressive gains. Metal stocks such as Hindalco and Tata Steel made a recovery after taking losses in the last two sessions, gaining 5.25% and 3.1% respectively. Other important gainers include Mahindra and Mahindra and Tata Motors Ltd. (TTM-Free Report).
Below we present three stocks which will gain from these trends, each of which also has a good Zacks rank.
Tata Motors Ltd. is the largest automobile company in India. It is also the fifth largest truck manufacturer and the fourth largest bus manufacturer in the world. It also provides automotive solutions. Commercial and passenger vehicles are also sold in Europe, Africa, the Middle East, South East Asia, South Asia, Russia and South America.
Tata Motors holds a Zacks Rank #1 (Strong Buy) and has expected earnings growth of 29.8%. The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 9.11.
ICICI Bank Ltd. is one of the major private sector banks in India, with total assets of about INR 5,741.26 billion ($92.89 billion) as of Dec 31, 2013. The bank had a network of 3,588 branches and 11,215 ATMs as of the same date. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers.
The company currently holds a Zacks Rank #2 (Buy) and has expected earnings growth of 17.9%. It has a P/E (F1) of 15.29.
Infosys Ltd. (INFY-Free Report) is the second largest IT services company in terms of revenues in India. Headquartered in Bangalore, the company enables its clients to leverage its performance by utilizing its proprietary Global Delivery Model (GDM.V). Infosys relies on its GDM for the efficient and economic development of its business solutions.
Apart from a Zacks Rank #3 (Hold), Infosys has expected earnings growth of 10.5%. It has a P/E (F1) of 17.78.
The ratings upgrade has only added to India’s growing attractiveness to foreign investors. If the newly-elected government can stick to its reforms agenda, ratings are only expected to increase over time. This is why these three stocks would make good additions to your portfolio.
Can Ventas Ride Growth Curve with Latest Acquisitions?
Ventas Inc. (VTR-Free Report) is in a stock-and-cash deal worth $2.9 billion to acquire its competitor, American Realty Capital Healthcare Trust Inc. Further, last month, the company announced completing the acquisition of 29 Canadian senior living communities from Holiday Retirement. Positioned across seven Canadian provinces, predominantly in Ontario and Alberta, these private-pay properties enjoy 90% occupancy.
But can this healthcare real estate investment trust (:REIT) ride on the growth trajectory with such acquisitions?
As a matter of fact, demand for healthcare facilities and senior housing have been on the rise with an increase in the elderly population, and consequently proliferating healthcare expenses. Amid this, Ventas seems poised to well capitalize on this trend. We expect such acquisitions and the resultant cash flows to add momentum to the company’s growth going forward.
Particularly, the above-mentioned deals, in sync with the company’s strategy of focusing on the private-pay properties, are expected to strengthen its medical-office buildings footprint as well as international existence.
Moreover, Ventas’ second-quarter 2014 normalized FFO per share came 11% above the year-ago quarter figure, thanks to strategic investments, same-store growth in its portfolio, fees receipt and other income. The company has also increased its full-year 2014 outlook.
Yet, an expected rise in the interest rate in the long run and the company’s substantial exposure to long-term leased assets, remain our concerns. At the same time, cut-throat competition adds to our woes.
Echoing similar sentiments, over the last 7 days, the Zacks Consensus Estimate for 2014 and 2015 remained unchanged at $4.44 and $4.62 per share, respectively. Ventas currently carries a Zacks Rank #3 (Hold).
To gain a deeper insight into Ventas, you can refer to our updated research report issued on Sep 26, 2014.
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
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