Vertex Pharmaceuticals Inc. (VRTX) recently received a notice from the U.S. Food and Drug Administration (FDA) informing the company about a partial clinical hold on Vertex Pharma’s ongoing phase II U.S. study of its hepatitis C virus (HCV) candidate, VX-135. The news had a negative impact on the company’s stock price.
Vertex Pharma discontinued the 400 mg arm of the phase II study of VX-135 in combination with ribavirin in Europe as elevated liver enzymes were observed. Following this observation, the FDA put a clinical hold on the 200 mg dose of VX-135 in combination with ribavirin in a study in the U.S. The FDA has asked Vertex Pharma to submit additional clinical, preclinical and pharmacokinetic data in the fourth quarter. VX-135 is also being evaluated in a 100 mg dose in combination with ribavirin in a study in the U.S. This study will be continued as planned and data is expected in the second half of 2013.
Besides this, Vertex Pharma also provided updates on other all-oral studies conducted on VX-135.
Dosing of 100 mg and 200 mg of VX-135 in combination with ribavirin as part of the 12-week, phase II study in Europe was recently completed. Both doses were well tolerated with no serious adverse events identified. Complete data is expected by Dec 31, 2013.
Recently, as part of a phase II study, in New Zealand, 100 mg and 200 mg doses of VX-135 in combination with Bristol-Myers Squibb’s (BMY) daclatasvir were initiated. Data from this study is expected in early 2014.
VX-135 is also being evaluated in a drug-drug interaction clinical study in combination with Johnson & Johnson’s (JNJ) simeprevir.
Vertex Pharma carries a Zacks Rank #3 (Hold). Right now, Jazz Pharmaceuticals Public Limited Company (JAZZ) looks well positioned with a Zacks Rank #1 (Strong Buy).
Natural gas processor and distributor, MarkWest Energy Partners LP (MWE) raised its first-quarter 2013 cash distribution to 83 cents per unit ($3.32 per unit annualized), representing an increase of approximately 1.2% sequentially and 5.1% year over year.
MarkWest’s announcement is in sync with its goal of delivering disciplined growth to unitholders. The partnership boasts a consistent and improving financial policy with high distribution coverage. MarkWest’s new distribution is payable on May 15 to unitholders of record as on May 7, 2013.
MarkWest is a Colo.-based master limited partnership (MLP). The partnership gathers, processes and transports natural gas. It also engages in the transportation, fractionation and storage of natural gas liquids (NGLs) as well as the gathering and transportation of crude oil. The customers of MarkWest include major oil and gas companies, large and small independent energy companies and oil refineries. The partnership conducts its operations in four segments: Southwest, Northeast, Liberty and Utica.
We like MarkWest’s high-quality and diverse portfolio of midstream assets, which generate stable and recurring revenues from long-term fee-based contracts. It is one of the largest processors of natural gas in the Northeast and the largest gatherer of natural gas in the prolific Carthage field in East Texas. Additionally, MarkWest has a number of other gas gathering and intrastate gas transmission assets in the Southwest, primarily in Texas and Okla.
However, like other MLPs, the actual amount of cash distributed to MarkWest unitholders may fluctuate and is directly exposed to the partnership’s future operating performance, which is susceptible to movement in margins and throughput volumes.
MarkWest currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Three oil and gas production pipeline MLPs that are expected to outperform the broader U.S. equity markets in the next one to three months are Atlas Pipeline Partners LP (APL), Delek Logistics Partners LP (DKL) and Energy Transfer Partners LP (ETP). All three stocks carry a Zacks Rank #2 (Buy).
United Parcel Service Inc. (UPS) is planning to take over Hungary-based pharmaceutical logistics company, CEMELOG Zrt. Although the transaction is expected to be completed in the second quarter of 2013, none of the companies disclosed the financial terms.
Based near Budapest, CEMELOG has been serving clients, including some of the most renowned healthcare global brands, with custom-made healthcare logistics solutions for the last 14 years.
With this acquisition, United Parcel will gain access to a strong regional network, highly developed warehousing management systems, high-quality assurance services and efficient manpower. The company’s current European base will be enhanced by three healthcare distribution facilities of approximately 255,000 square feet. United Parcel currently operates 41 dedicated healthcare units worldwide covering over 6.4 million square feet.
This acquisition forms part of United Parcel’s expansion and investment program, whereby it aims to fortify its footing in Europe. The company renders wide-ranging and superior services to customers in the pharmaceutical, biotech and medical device sectors to capture large market shares in Central and Eastern Europe.
The company remains focused on developing its healthcare business to tap growth opportunities in this rapidly expanding market for package delivery service companies. Over the years, the company has established various distribution facilities specially dedicated to healthcare in key regions like Singapore, the Netherlands, Canada, Latin America, Australia and the U.S.
United Parcel is further eyeing opportunities in emerging markets like China, India, Japan and Brazil. As a result, the company extended its 8-year long partnership with pharma company Merck & Co. Inc. (MRK) to expand its distribution and logistics services to certain Asian and Latin American markets.
United Parcel, which operates with the likes of Air Transport Services Group Inc. (ATSG) and Atlas Air Worldwide Holdings Inc. (AAWW), retains a Zacks Rank #3 (Hold).
Leading manufacturer of cleaning and sanitation products company, Ecolab Inc. (ECL), has entered into an agreement to acquire AkzoNobel’s Purate franchise in order to expand its Global Water business. No financial details of the deal have been provided by the company.
Purate is a producer of chlorine dioxide which is used as an antimicrobial agent in cooling towers and other industrial water treatment applications. Ecolab plans to use Purate’s patented technology with its own 3D Trasar cooling water technology, which is an automated system used to clean industrial waters in a cost-effective manner.
3D Trasar technology has been developed by Nalco, which Ecolab took over in Dec 2011. Following the acquisition, this technology has been incorporated into Ecolab’s new division, the Global Water segment. The 3D Trasar technology has received the U.S. Presidential Green Chemistry Award based on its ability to save water and energy as well as reduce operating cost.
In the last reported fourth quarter of 2012, Global Water sales were up 3% on a constant currency pro forma basis to $536.2 million. Higher sales reported in Latin America, Asia-Pacific and Canada along with modest improvement in Europe, led to revenue growth.
Ecolab serves the food service, food and beverage processing, healthcare, energy, water treatment and hospitality markets both in the U.S. as well as internationally. The company continues to invest in strategic areas such as health care, food, water and energy and global pest elimination to expand its business.
With a background of robust growth, Ecolab is poised to gain momentum via its aggressive strategy of pursuing acquisitions. Recently, Ecolab acquired Champions to become a giant in the oilfield chemical business and reduce competition for its Nalco subsidiary.
Although we are impressed by Ecolab’s strong international exposure, we remain cautious about aggressive competition. Challenging economic and market trends in 2013 together with unfavorable internal issues will likely be near-term headwinds for the company. Raw material price inflation also remains a cause of concern.
Ecolab currently has a Zacks Rank #3 (Hold) and is slated to report its first quarter 2013 earnings results tomorrow, Apr 30.
Other chemical-specialty companies such as Minerals Technologies Inc. (MTX), NewMarket Corporation (NEU) and Prospect Global Resources, Inc. (PGRX) warrant a look. All the stocks carry a Zacks Rank #2 (Buy).
On Apr 26, 2013, the shares of PPL Corp. (PPL) hit a new 52 week high of $33.15. The utility’s focus on rate-regulated investments propelled the stock to a new high. The company registered earnings surprises in the past four quarters with an average beat of 10.71%.
PPL’s wide customer base served well in generating healthy revenues. The company provides power to around 1.4 million consumers in Pennsylvania alone and to 7.8 million UK consumers as well.
Going forward, PPL’s high-end acquisition of AES Ironwood, L.L.C and AES Prescott, L.L.C, now known as PPL Ironwood from The AES Corp. (AES) has strengthened its natural gas portfolio. This has expanded PPL’s regulated business which stood to gain from rising coal-to-gas switching in 2012.
The company’s efforts to upgrade its midstream infrastructure have also helped in delivering uninterrupted electric services. PPL’s Western Power Distribution invested £3.7 million (approximately $6.0 million) to boost reliability of its transmission services in UK’s Irthlingborough network.
Further, the company recently proposed to better equip its power assets and spend about $1 billion in 2013.
The company’s sound financial position has also supported its growth-related endeavors and will further aid in developing its inorganic growth strategy. PPL’s impressive dividend profile has been a major highlight with the recent quarterly increase of 2.1% to 36.75 cents. The annual dividend yield of the company is 4.45% substantially higher than the industry average of 2.98%.
The present valuation too makes the shares of PPL attractive. The forward price/earnings (P/E) multiple 13.7x is lower than the peer group average of 15.3x, reflecting a discount of 10.45%. In addition, Return on Equity ("ROE") of the company is 12.8%, higher than the peer group average of 9%.
PPL Corp. at present carries a Zacks Rank #3 (Hold). Other operators in the utility space currently looking good are Brookfield Infrastructure Partners L.P. (BIP) and Pike Electric Corp. (PIKE). Both the stocks hold a Zacks Rank #1 (Strong Buy).
We expect Avon Products Inc. (AVP), the world’s leading beauty company to beat expectations when it reports first-quarter 2013 results on Apr 30.
Why a Likely Positive Surprise?
Our proven model shows that Avon Products may beat the earnings because it has the right combination of two key components.
Positive Zacks ESP: Avon Products currently has an Earnings ESP (Read: Zacks Earnings ESP: A Better Method) of +14.29%. This is because the Most Accurate Estimate stands at 16 cents, while the Zacks Consensus Estimate is pegged at 14 cents.
Zacks #2 Rank (Buy):Note that stocks with a Zacks Rank #1, #2 and #3 have a higher chance of beating the earnings. The Sell rated stocks (#4 and 5) should never be considered going into an earnings announcement.
The combination of Avon Products’ Zacks Rank #2 (Buy) and Earnings ESP of +14.29% makes us confident of a positive earnings beat on Apr 30.
What is Driving the Better-than-Expected Earnings?
Of late, Avon has been encountering challenges on various fronts including declining top and bottom lines and a highly-leveraged balance sheet. In Nov 2012, Avon outlined some strategic measures focused on accelerating the top-line growth, trimming down costs and improving working capital. Management is in the process of easing business issues and directing the company toward the growth trajectory, while reviving its competitive position among peers. We believe that the company’s strategies are paying off, which is evident from its fourth-quarter 2012 operating results. After reporting dismal results over the past 6 quarters, Avon posted better-than-expected total revenue and earnings for the fourth quarter.
Other Stocks to Consider
Avon Products is not the only firm looking up this earnings season. The following companies are also likely to beat earnings estimates in the to-be-reported quarter:
Church & Dwight Co. Inc. (CHD) with Earnings ESP of +1.39% and a Zacks Rank #3 (Hold).
Dean Foods Company (DF) with Earnings ESP of +3.85% and a Zacks Rank #3 (Hold).
Zumiez Inc. (ZUMZ) Earnings ESP of +9.09% and a Zacks Rank #3 (Hold).
We expect Scripps Network Interactive Inc. (SNI), a pure-play lifestyle cable network company, to beat expectations when it reports its first-quarter 2013 results before the market opens on May 2, 2013.
Why a Likely Positive Surprise?
Our proven model shows that Scripps Network is likely to beat earnings because it has the right combination of two key ingredients.
Positive Zacks ESP: Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method), which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +1.35%. This is a meaningful and leading indicator of a likely positive earnings surprise.
Zacks Rank #3 (Hold): Scripps Networks currently has a Zacks Rank #3 (Hold). Note that the stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) and 3 (Hold) have a significantly higher chance of beating earnings.
The combination of Scripps Network’s Zacks Rank #3 (Hold) and +1.35% ESP makes us confident of a positive earnings beat on May 2, 2013.
What is Driving the Better-Than-Expected Earnings?
We expect Scripps Network to deliver positive results based on solid growth in advertising and affiliate-fee revenues from its flagship Lifestyle Media businesses. Recently, HGTV – a subsidiary of Scripps – formed a multi-year partnership with interactive channel retailer, HSN Inc. This will bring HGTV HOME Outdoor Living show on HSN.
Additionally, Scripps entered into a content licensing deal with Amazon.Com, which will allow the latter’s subscription-based video streaming subscribers to view past episodes of Scripps Network’s popular TV channels. This deal will allow Scripps to earn additional revenues from its past shows. However, the company continues to face stiff competition in both its Lifestyle Media and Interactive Services businesses from alternative providers of similar services.
Other Stocks to Consider
Other companies you may consider on the basis of our model, which have the right combination of elements to post an earnings beat this quarter are as follows:
Comcast Corporation (CMCSA) has an Earnings ESP of +4.08% and holds a Zacks Rank #3 (Hold).
Telus Corporation (TU) currently has an Earnings ESP of +3.77% and holds a Zacks Rank #3 (Hold).
Dish Network Corporation (DISH) has an Earnings ESP of +1.89% and carries a Zacks Rank #3 (Hold).
China Petroleum and Chemical Corporation (SNP) , also known as Sinopec, reported first quarter 2013 net income of 15.834 billion yuan (US$2.52 billion), up 23.4% from the prior-year quarter. Earnings per share of 0.178 yuan ($2.83 per ADS) jumped 21.1% year over year, as per the Chinese reporting standards. The growth was mainly backed by higher oil and gas production as well as improved refinery throughput.
Revenues in the first quarter improved 3.6% to 695.6 billion yuan from 671.4 billion in the prior year.
During the quarter ended Mar 31, 2013, Sinopec’s crude oil production grew 0.8% year over year to 82.2 million barrels, while natural gas volumes surged 14.0% to 163.2 billion cubic feet. Domestic crude oil production increased 0.6% year over year to 76.2 million barrels, while overseas volumes increased 3.5% year over year to 6.0 million barrels.
Total oil and gas production expanded 3.8% to 109.4 million barrels of oil equivalent.
The average realized crude oil prices were $98.83 per barrel, down from $106.1 per barrel in the prior-year quarter. Average realized natural gas price was $5.86 per thousand cubic feet compared with $5.64 per thousand cubic feet in the first quarter of 2012.
The company’s Refining business recorded refinery throughput of 58.7 million tons (up nearly 6% year over year). It also produced approximately 35.3 million tons of oil products, representing a 7.4% improvement from the year-ago quarter.
The Marketing and Distribution segment sold 42.2 million tons of refined oil products, reflecting a 1.9% year-over-year increase.
The output of ethylene from the Chemicals segment was 2.442 million tons, down 0.5% from the year-ago level.
Capital expenditures for the quarter totaled 21.535 billion yuan, of which 9.416 billion yuan was spent on exploration and production projects. In the Refining segment, Sinopec spent 2.837 billion yuan, while the chemical business and marketing and distribution segment were allocated 277 billion yuan and 6.396 billion yuan, respectively. The company also spent 609 million yuan for the company’s scientific research facilities and IT projects.
Sinopec currently retains a Zacks Rank #3 (Hold). However, there are certain Zacks Ranked #1 stocks – Harvest Natural Resources, Inc. (HNR), Lehigh Gas Partners LP (LGP) and EPL Oil & Gas, Inc. (EPL) – that appear more rewarding in the short term.
Broadcom Corp. (BRCM), a leading semiconductor solutions provider, was recently adjudged the best in its category for its 5G WiFi chip for smartphones and tablets titled BCM4335 at the UBM Tech EE Times and EDN Annual Creativity in Electronics (ACE) Award. Broadcom received the award for the Ultimate Products category in the ACE Awards.
With the increasing dependence on wireless networks and the rising demand for a reliable network, Broadcom’s BCM4335 has provided a combo chip designed for smartphones, tablets, and ultrabooks. The BCM4335 offers the complete 5G Wifi system with Bluetooth 4.0, FM radio and software on a single, integrated chip with a seamless experience. BCM4335 chips are currently being used in HTC One smartphones.
Broadcom’s 5G WiFi is up to six times more power efficient and provides speed nearly three times faster than the other WiFi connections available in the market. Also, devices featuring its 5G WiFi solutions cover a much broader network, providing higher capacity video streaming and connecting multiple devices to the network simultaneously.
The ACE Awards program, through a mass peer review, recognizes and rewards persons and companies associated with the launch of new products and technologies. The Ultimate Products of the Year is awarded to the most noteworthy products that have brought about a revolution in the world of electronics in the last one year. The finalists are handpicked by renowned editors from the leading newspapers.
Based in Irvine, California, Broadcom is engaged in designing and marketing semiconductor components of network, voice video, and data traffic for various applications used in home, office and mobile phones. The company continues to drive innovation and engineering excellence across a broad range of communication end markets to help its customers enhance device performance and overall efficiency.
Broadcom currently has a Zacks Rank #2 (Buy). Other stocks within the sector worth mentioning are Nitto Denko Corporation (NDEKY) with a Zacks Rank #1 (Strong Buy), Cypress Semiconductor Corporation (CY) and Atmel Corporation(ATML), each with a Zacks Rank #2 ( Buy).
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