CHICAGO, July 24, 2014 /PRNewswire/ --Zacks Equity Research highlights Acadia Healthcare (Nasdaq:ACHC-Free Report) as the Bull of the Day and Splunk (Nasdaq:SPLK-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis onStarbucks Corporation (Nasdaq:SBUX-Free Report), Chipotle Mexican Grill, Inc. (NYSE:CMG-Free Report) and Domino's Pizza, Inc. (NYSE:DPZ-Free Report).
Here is a synopsis of all five stocks:
Bull of the Day:
Acadia Healthcare (Nasdaq:ACHC-Free Report) provides inpatient behavioral health care services, including psychiatric and chemical dependency services. The stock became a Zacks #1 Rank this month after significant bumps in analyst earnings estimates for this year and next, with 2014 EPS projections moving up to $1.44 from $1.30, representing 34% annual growth.
And 2015 estimates were lifted to $1.96 from $1.58 in the past two months, equivalent to 37% annual EPS growth. Analysts have become much more optimistic about the company as its strategies of both organic and M&A-based growth are bearing fruit.
With a mix of inpatient psychiatric hospitals, residential treatment centers, outpatient clinics and therapeutic school-based programs Acadia Healthcare has a comprehensive approach to helping people overcome debilitating mental and substance abuse issues.
Clearly this is an area in our society that is seeing more patients and need for quality care, not less. And the tailwinds of the Affordable Care Act (ACA) are supporting growth in this company's programs.
Bear of the Day:
Cloud and "big data" stocks took a big hit starting in Q1 with names like Tableau Software dropping nearly 50% from February to May. But is there any way that investors could have seen this "fall from the clouds" coming?
For investors in Splunk (Nasdaq:SPLK-Free Report) shares, there was one clear warning sign on March 5 when the stock was trading $92. That's when SPLK became a Zacks #5 Rank Strong Sell. And since then, the stock has consistently been a #5 or #4 Rank Sell. This week is no exception as shares have been cut in half since March.
Splunk provides a software platform, which collects and indexes data and enables users to search, correlate, analyze, monitor and report on this data, all in real time. Sounds like a red hot, growing area of Technology.
But the Zacks Rank doesn't care how exciting the industry is or how great the company's story is. It's a quantitative model that only focuses on one thing: Earnings Estimate Revisions (EER) from Wall Street analysts. When the analysts are raising estimates sufficiently, a stock can earn a Zacks #1 or #2 Rank or Strong Buy or Buy, respectively.
When EER are headed up, a stock's price usually follows. And when EER are headed down, they lead stock prices lower.
Additional content:
Will Strong Comps Help Starbucks (SBUX) Beat Earnings?
Starbucks Corporation (Nasdaq:SBUX-Free Report) is set to report third-quarter fiscal 2014 results on Jul 24, after the market closes. Last quarter, the company delivered in-line results. Let's see how things are shaping up for this announcement.
Factors to Consider This Quarter
Starbucks' strong U.S. comps in the second quarter despite an unusually harsh winter in most parts of the country caught investors' attention. Europe and Asia/Pacific also did well in the quarter.
Moreover, Starbucks raised its full-year earnings outlook and expressed a bullish overall tone for the second half based on the healthy first-half performance. We believe strong comps, food/beverage innovations, lower food costs and lower operating expenses should boost profits in the third quarter. However, the fourth quarter is expected to be stronger than the upcoming third quarter.
In addition to food/beverage innovations, loyalty program and single-serve products, we believe Teavana tea, La Boulange bakery items, Fizzio handcrafted cold carbonated beverages and Evolution Fresh juices could emerge as meaningful top-line growth drivers in fiscal 2014. Fizzio sodas were launched across 3000 U.S. stores last month.
However, a major concern for Starbucks in upcoming quarters would be the increasing coffee costs. In fiscal 2014, with 100% of the company's coffee needs being hedged, coffee costs are expected to be lower than 2013. However, in fiscal 2015, though more than 40% of its coffee needs are locked at favorable prices, the recent record-high coffee prices are a growing concern. Coffee prices are at a record high so far this year due to the increasing prices of Arabica coffee since January as a result of drought in Brazil which produces about one-third of the world's coffee. In fact, last month, Starbucks raised prices of some of its coffee drinks as well as packaged coffee products in response to the rising coffee costs.
Earnings Whispers?
Our proven model does not conclusively show that Starbucks is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here, as you will see below.
Zacks ESP: The Earnings ESP is 0.00%.
Zacks Rank: Starbucks' Zacks Rank #2 (Buy) when combined with a 0.00% ESP, makes surprise prediction difficult.
We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies in the restaurant sector that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Chipotle Mexican Grill, Inc. (NYSE:CMG-Free Report), with an Earnings ESP of +0.98% and a Zacks Rank #2.
Domino's Pizza, Inc. (NYSE:DPZ-Free Report), with an Earnings ESP of +1.54% and a Zacks Rank #2.
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