CHICAGO, Feb. 28, 2014 /PRNewswire/ --Zacks Equity Research highlights Advance Auto Parts (NYSE:AAP-Free Report) as the Bull of the Day and Itron (Nasdaq:ITRI-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis onFirst Solar Inc. (Nasdaq:FSLR-Free Report), JinkoSolar Holdings Co. (NYSE:JKS-Free Report) and Trina Solar Ltd. (NYSE:TSL-Free Report).
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Here is a synopsis of all five stocks:
Bull of the Day:
Earnings estimates have been soaring for Advance Auto Parts (NYSE:AAP-Free Report) after the company delivered its 5th straight earnings beat and provided encouraging guidance for 2014.
It is a Zacks Rank #1 (Strong Buy) stock.
While shares of Advance Auto Parts have been surging since its latest beat, the valuation picture still looks very reasonable, providing investors with plenty of additional upside potential.
Advance Auto Parts is the largest automotive aftermarket parts provider in North America, serving both the do-it-yourself and professional installer markets. It operates 5,297 company-operated stores, 105 Worldpac branches, and services approximately 1,400 independently owned Carquest branded stores.
Advance Auto Parts reported its fourth quarter results on February 6. Adjusted earnings per share came in at 94 cents, crushing the Zacks Consensus Estimate by 16 cents. It was a 7% increase over the same quarter last year.
Sales rose 6% to $1.409 billion, beating the consensus of $1.383 billion. The increase was primarily driven by the net addition of 151 new stores over the past 12 months and an acquisition. Same-store sales inched up by +0.1%.
Adjusted gross profit as a percentage of sales slightly declined to 49.8%. Meanwhile, adjusted selling, general and administrative expenses increased from 41.4% to 41.7% of sales. This led to a decrease in the adjusted operating profit margin from 8.5% to 8.1%.
Bear of the Day:
Earnings estimates have been plunging for Itron (Nasdaq:ITRI-Free Report) after the company provided weak guidance for 2014.
It is a Zacks Rank #5 (Strong Sell) stock.
While shares of Itron have sold off following the announcement, it still does not look like a value at 20x forward earnings. Investors should consider avoiding this stock until its earnings momentum improves.
Itron provides solutions that measure, manage and analyze energy and water. It offers standard meters and next-generation advanced and smart metering products, systems, and services, for applications in the residential and commercial industrial markets for water and heat.
Itron reported its fourth quarter results on February 12. Adjusted EPS fell 38% year-over-year to $0.36, missing the Zacks Consensus Estimate of $0.76. The company's bottom line was significantly impacted by increased tax expenses.
The rest of the financial results weren't as bad. Revenues were essentially flat, inching up slightly to $523.5 million, which was actually ahead of the consensus of $520.0 million. And adjusted operating income increased 26% year-over-year.
However, free cash flow plunged 54% from the same quarter last year to $24.1 million.
Additional content:
First Solar Dims, but Here's Some Light
The largest U.S. solar panel manufacturer, First Solar Inc. (Nasdaq:FSLR-Free Report), not only reported disappointing fourth quarter 2013 results but also came up with weak first quarter guidance. This dealt a huge blow to investor confidence, leading to a 12% plunge in its share price in after-hours trading on Feb 25 and over 9% the following day.
This solar giant reported fourth quarter earnings of 89 cents per share, which missed the Zacks Consensus Estimate by 11% and came in 56.4% lower than the year-ago earnings. Revenues also plunged 29% year over year to $768.4 million and fell short of the Zacks Consensus Estimate of $974 million. Lower business project revenue was the primary reason for this huge miss.
First Solar's numbers look particularly wan in contrast to a solar energy largely on the mend after two years of a punishing downturn. Presently, China, Japan and the U.S are driving demand for solar panels. Solar majors -- comprising polysilicon manufacturers and panel makers -- active in Asia are expected to gain traction as the industry oversupply shrinks.
Solar is now a global phenomenon and the industry can no longer be regarded as a niche sector. It is breaking out as the most happening thing in energy today.
Notably, 2013 showed astounding scale in the Chinese market, overtaking longtime leader Germany. This year, solar developers around the globe are expected to install record capacity as a booming Chinese market drives growth.
Moreover, the U.S. Energy Information Administration projects that U.S. solar energy consumption will rise by roughly 35% in 2014. The increase in demand is likely to fuel top-line growth at the solar manufacturers.
In spite of First Solar's earnings debacle, we believe the momentum is intact for the solar sector with the preeminent stocks continuing with their forward march in 2014. Below we have hand- picked two solar stocks that have the potential to give a solid return in the near term, if the sector dynamics remains favorable.
JinkoSolar Holdings Co. (NYSE:JKS-Free Report)
This Zacks Ranked #1 (Strong Buy) China-based company specializes in low-cost production and supply of solar panels with operations across Europe, North America and Asia. A vertically-integrated firm with a global focus could be a great pick in the solar space. JinkoSolar is strategically balanced to take advantage of China's flourishing solar industry as well as other emerging solar nations.
The company has also displayed an impressive earnings trajectory following a disastrous Dec 2012 quarter. The 330% miss in the said quarter is now a thing of the past. JinkoSolar has delivered positive earnings surprises in the last three quarters with an emphatic average beat of 418.3%. Specifically, in its last reported quarter, the company exceeded the Zacks Consensus Estimate by more than 280.0%.
This stock trades at a descent 9.37x forward earnings. It has a price-to-book (P/B) ratio of 2.22, which is below the industry average of 3.2. Along with that its price-to-sales (P/S) multiple is 0.8 (the industry average is 1.7). JinkoSolar's share price gained 350% last year as the market regained confidence in the stock backed by its operational excellence. The company is scheduled to reports its fourth quarter 2013 earnings on Mar 3, 2014.
Trina Solar Ltd. (NYSE:TSL-Free Report)
Trina Solar - another Chinese manufacturer of photovoltaic modules - is a Zacks Rank #2 (Buy) stock.
After eight straight quarters in the red, Trina Solar returned to profit in the third quarter of 2013, a turnaround driven by impressive trade in panel shipments. Panel shipments doubled year over year to reach 774.6 megawatt (MW), propelling revenues higher by 84% to $548.4 million.
Rising Asian demand, China in particular, has helped the industry's main players like Trina Solar to maintain steady margins. China reportedly increased the 2014 target for new solar PV capacity installations to 14 gigawatt (GW) from its previous forecast of 12 GW. If that's so, the country is expected to account for a sizeable share of Trina Solar's total shipments this year.
The company - which is scheduled to report its fourth quarter earnings on Mar 4 - has a forward P/E of 29.8x. On P/B and P/S basis, the stock trades at 1.47x and 0.76x, respectively, which are lower than the industry averages.
The stock has rallied 205.1% last year.
Bottom Line
In the wake of environmental concerns, alternate energy sources are gradually gaining prominence worldwide. The universal availability of sun rays, decreasing cost of photovoltaic units and a higher conversion rate make solar power technology one of the most popular alternate energy resources. Make hay while the sun shines and add these two solar stocks to your portfolio.
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