Welcome to stocks in the news where the headline meets the trendline.
Stock Number One: Express Scripts Holding Company (SYMBOL: ESRX)
And the headline says: Express Scripts quarterly net profit rises, shares dip--Reuters
“Pharmacy benefit manager Express Scripts Holding Co on Thursday reported higher net earnings for the third quarter but said claims volume declined 9 percent,” reports Reuters. “The company's shares, which closed at $63.74 on the Nasdaq, were down 4.3 percent at $60.99 in after-hours trading. ‘They had a pretty good quarter ... results were in line,’ said Morningstar analyst Vishnu Lekra. He said some investors may have been disappointed with the drop in claims but that the decline was expected after one of the company's larger health insurer clients decided to take its business in-house.”
While that’s likely true, it just shows again that Wall Street is watching results. QE matters, but it’s not the only thing that matters. The big PEs are going to go to the big growers and the little PEs will go to little growers.
The company’s trading about 28 times earnings, and profit growth is expected to slow down in the next five years. Likely the company’s stock prices is starting to adjust to reflect the future years’ earnings growth, which analysts expect to be more in the 14% range than the 25% range.
Our Ransom Notes Trendline says: Avoid Express Scripts
Stock number two: Fidelity National Financial (SYMBOL: FNF)
And the headline says: Fidelity National Financial, Inc. Announces Pricing for Public Offering of Common Stock– From Press Release by company.
“The net proceeds from this offering will be used to pay a portion of the cash consideration for the previously announced merger with Lender Processing Services, Inc,” says the release. “If the Company does not consummate the merger, the net proceeds will be used for general corporate purposes, which may include the repurchase of shares of its common stock.”
Fidelity National has been screaming in light of the mortgage refinance business doing well in 2013. Quarterly revenues are up year-over-year by 32%.And while the mortgage servicing business will be down a little bit in terms of growth, generally low interest rates will make it an attractive play going forward.
The company is in the midst of completing the merger with Lender Processing Services Inc, which will help balance out its revenues going forward.
However, like a lot of companies, short-term estimates have been going down recently in light of the slowdown in the mortgage business.
The stock shows extreme volatility. The time to have bought was when the stock price was near $21. If you have profits, take ‘em.
Our Ransom Note Trendline says: Sell Fidelity National
Stock Number Three: Cliff’s Natural Resources (SYMBOL: CLF)
And the headline says: Cliffs Hires Barrick Executive Halverson as Next CEO– Bloomberg
“Cliffs Natural Resources Inc. (CLF), the biggest U.S. iron-ore producer, hired Gary Halverson from Barrick Gold Corp. (ABX) to be its next chief executive officer,” reports Bloomberg. “Halverson, 55, formerly interim chief operating officer at Barrick, will start Nov. 18 as president and chief operating officer before eventually assuming the CEO role, Cleveland-based Cliffs said today in a statement. Cliffs CEO Joseph Carrabba, who announced his retirement in July, will leave Nov. 15.”
Cliff’s has got pounded this year on declining revenues and profits.
While analysts have increased estimates for the next quarter, profits are expected to be down about 44% next year.
The company currently has no PE because it has no earnings.
Our Ransom Note Trendline says: Avoid Cliff’s Natural Resources.
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