The Zacks Analyst Blog Highlights: Yingli Green Energy Holding, JD.com, Mindray Medical International, Signet Jewelers and Tiffany
For Immediate Release
Chicago, IL – September 24, 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 Yingli Green Energy Holding Co. Ltd. (YGE-Free Report), JD.com, Inc. (JD-Free Report), Mindray Medical International Limited (MR-Free Report), Signet Jewelers Limited (SIG-Free Report) and Tiffany & Company (TIF-Free Report).
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Here are highlights from Tuesday’s Analyst Blog:
China’s Near-Term Fears Obscure Long-Term Views
The US may no more be the largest economy in 2024 as China is forecasted to snatch the crown. Analytics firm IHS anticipates China’s nominal gross domestic product to reach $28.25 trillion in 2024, beating the US’ projected GDP of $27.31 trillion. The chief Asia economist of the firm believes the economy will “re-balance towards more rapid growth in consumption, which will help the structure of the domestic economy as well as growth for the Asia Pacific (:APAC) as a region.”
It is consumer spending that is expected to play a vital role in helping China topple the US economy. Consumer spending is forecasted to grow at 7.7% annually in real terms in the next 10 years. China’s share in global GDP is forecasted to be at 20% in 2025, up from 12% in 2013.
Long-Term Prediction Risks
However, such a long-term view is always devoid of factoring in the series of events that may turn up in these 10 years. Be it qualitative or a quantitative forecasting that may again include indicator approach or time series methods, several new issues may crop up and may change the scenario.
If we look at 2014 alone, macroeconomic issues including the Russia-Ukraine crisis or Middle East tensions have certainly changed many views so far. For example, sanctions against Russia and then by Russia on Western nations have affected trade relations, indicating the possibility of hampering trade balance and then the GDP.
For short to mid-term investors it is thus prudent to take note of the recent past events and look for how investments can shape up in the near term. On that note, the recent economic data in China and related events do not suggest a bullish trend. Manufacturing data has been largely weak for some time now, housing sales are down and investment demand has been dismal.
China’s Economy Faces Immediate Hurdles
China’s economy also faces many hurdles. IHS’ chief Asia economist said that China needs to convert economy from “low-cost manufacturing export-driven economy of the past three decades into a higher value-added economy, competing in more sophisticated, higher value-added exports.”
A report by Fox Business argues that “A country’s wealth is not based on consumer transactions occurring during a calendar year. Cheaper currency to buy cheaper goods or services doesn’t equate to wealth — nor does arming consumers with more paper in their wallets.” The debate gains strength amid an environment where the country is devaluing its currency.
Certain sector specific steps to stimulate growth itself hints at the sorry state of the economy. Such steps had become necessary following weakness in the property sector and a series of dismal economic reports. This includes industrial production, foreign investment and home prices.
A slowdown in the property sector and problems with the country’s banking system has put the brakes on China’s economy. The slide in the real estate sector has also impacted the growth rate, with the economy expanding only by 6.3% in August on an annual basis. This is a grievous decline from the 7.4% increase experienced in July.
If the situation continues to deteriorate, the economy also runs the risk of missing its yearly growth target of 7.5%. The area of new property under development has fallen by 14.4% till now this year.
President Xi also needs to move China away from a tendency of using nationally owned banks to boost the economy when it veers away from its growth path. This habit has led to an excessive allocation of a large amount of resources to infrastructure and property sectors.
Recently, China Finance Minister Lou Jiwei stated that government will not “make major policy adjustments” based on any one economic indicator. Recently, a report showed that China’s industrial production expanded at the slowest pace since Dec 2008. Industrial production increased by 6.9% in August year over year, less than 9% in July.
3 Stocks to Sell
Here we will suggest 3 stocks that are currently carrying unfavorable Zacks Ranks and have seen prices dropping over the past four weeks. These stocks are also seeing negative earnings estimate trends.
Yingli Green Energy Holding Co. Ltd. (YGE-Free Report) is a leading vertically integrated manufacturer of photovoltaic products in China. Headquartered in Baoding, the People’s Republic of China, the company also operates in the US, Germany, France and the UK, among others.
Yingli carries a Zacks Rank #4 (Sell) and has lost 4.5% in the last month. Current quarter estimates moved down from break even to loss of 13 cents over the past month, while current year loss estimates widened from loss of 39 cents to loss of 71 cents.
JD.com, Inc. (JD-Free Report) operates as an online direct sales company in China. The company, through its website www.jd.com and mobile applications, offers a selection of products ranging from computers; mobile handsets and other digital products, home appliances; automobile accessories; clothing and shoes; to books, e-books, music, movies and other media products.
JD.com carries a Zacks Rank #4 (Sell) and has lost 12.9% in the last month. Current quarter estimates moved from loss of 2 cents to loss of 5 cents over the past two months, while current year loss estimates widened from loss of 49 cents to loss of 60 cents.
Mindray Medical International Limited (MR-Free Report) conducts much of its business through its consolidated operating subsidiary, Shenzhen Mindray, which was established in 1999. Mindray owns about 99.9% of the equity of Shenzhen Mindray. It maintains its global operational headquarters (:HQ) in Shenzhen, China, while the U.S. HQ is in Mahwah, New Jersey. Mindray is a developer, manufacturer and seller of medical devices globally.
Mindray Medical carries a Zacks Rank #4 (Sell) and has lost 3.2% in the last month. Current quarter estimates moved from 48 cents to 43 cents over the past two months, while current year dropped from $1.96 to $1.81.
2 Jewelry Retailers for the Long Run
Are Signet Jewelers Limited (SIG-Free Report) and Tiffany & Company (TIF-Free Report) part of your portfolio? Well, given their underlying factors and the nearing holiday season, these stocks may be good picks. The economy looks much more balanced now with no imminent hike in interest rates, consumer confidence moving north, job market conditions gradually improving and the bond-buying program nearing its end. Retailers are thus hopeful of solid business.
Signet Ready to Sparkle
Signet’s primary strength is its earnings surprise history. The company has outperformed the Zacks Consensus Estimate in 11 out of the past 14 quarters, with an average beat of 8.6%. In the last concluded quarter, this jewelry retailer outdid the Zacks Consensus Estimate by 1%. The stock holds a Zacks Rank #2 (Buy) and has surged roughly 46% year to date, demonstrating its inherent strength and long-term earnings growth projection of 8%.
The company remains focused on store remodeling, digital enhancement as well as outlet channel development. This led Signet to post better-than-expected second-quarter fiscal 2015 results. On an organic basis, the company posted earnings per share of $1.00 that came a penny ahead of the Zacks Consensus Estimate and increased 19% year over year. On an adjusted basis – including organic earnings as well as earnings attributable to Zale division’s 65 days performance – earnings were $1.01 per share.
Total sales of $1,225.9 million jumped 39.3%, driven by healthy performance of stores in the U.K. division and the acquisition of Zale. On an organic basis, revenues were $978.4 million, up 11.2%. The Zacks Consensus Estimate was $1,163 million.
Signet now projects adjusted earnings of 12–18 cents a share for the third quarter and $5.38 to $5.54 for fiscal 2015.
Tiffany Shining
After missing the Zacks Consensus Estimate in the final quarter of fiscal 2013, Tiffany is back in the game as it posted two consecutive quarters of earnings beat in fiscal 2014 implying that it is gradually regaining its sheen. After a positive surprise of 26% in the first quarter, second-quarter earnings surpassed the Zacks Consensus Estimate by 11.6%. Moreover, the long-term earnings growth projection of 13% for this Zacks Rank #3 (Hold) stock is also encouraging.
Tiffany delivered second-quarter earnings of 96 cents a share that beat the Zacks Consensus Estimate of 86 cents and improved from the prior-year quarter’s 83 cents. Results benefited from an increase in both sales and gross margin. The company posted net sales of $992.9 million, up 7% on the back of healthy performance across the Americas and Asia-Pacific regions and also came ahead of the Zacks Consensus Estimate of $990 million.
Following healthy results, Tiffany raised its earnings expectations. The company now projects fiscal 2014 earnings between $4.20 and $4.30 per share against $4.15 and $4.25 expected earlier, and reflects 13% to 15% year-over-year growth.
We believe Tiffany is well positioned to support robust sales and witness earnings growth in the long run by leveraging from capital investments made over the past several years in distribution, manufacturing and diamond sourcing processes. Moreover, with nearly half of the total sales generated internationally, we believe that the company is well diversified from a regional perspective. However, softening demand across Japan and Europe remains a concern. But don't ignore the company’s strong fundamentals.
Stocks Portraying an Uptrend in Zacks Consensus Estimate
Estimates for both Signet and Tiffany have been portraying an uptrend as an outcome of their impressive second-quarter results. It seems that analysts have become constructive on the stocks’ future performance.
Signet’s Zacks Consensus Estimate has increased 1.8% to $5.51 for fiscal 2015 and 5.4% to $6.60 for fiscal 2016 in the past 30 days. The Zacks Consensus Estimate for Tiffany has climbed 1.4% to $4.34 for fiscal 2014 and 1% to $4.90 for fiscal 2015 in the same period.
We believe the above two stocks could be the bright spots in your portfolio over the long run.
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
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