0goodhealthy24: February 2014

Friday, February 14, 2014

Angie's List Fourth Quarter Results: Buying Opportunity Or Further Downside Ahead?

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On Wednesday, Angie's List (NASDAQ: ANGI) reported its fourth quarter results. The company announced an EPS of $0.05, missing the consensus estimate by eight cents. Revenue of $68.8 million beat the consensus estimate of $68.5 million.

Angie's List guided its first quarter revenue to be $71.5 million to $72.5 million, below the consensus estimate of $74.1 million.

Investors reacted negatively, and shares traded lowered immediately following the earnings release. Is a further downside warranted -- or are shares attractive at current valuations?

Barrington Research: Attractive Entry Point

Jeff Houston, analyst at Barrington Research,said shares appear to be attractive following Wednesday's after market decline.

“Gross member additions declined three percent year over year and cost per acquisition increased 33 percent as Angie rolled out a new member-join platform, experimented with product positioning (e.g., ecommerce), and marketing dollars were diverted away from member signup given the aforementioned changes,” Houston said in a research note to clients.

Related: Itron Disappoints Investors With Poor Fourth Quarter And Weak Guidance

“On the positive side, both sales force productivity and market penetration improved in all cohorts as we expected and marketplace revenue was up 70 percent year over year.”

Houston believes Angie's operates a solid business with a sound business model, and believes the recent 15 percent decline “could prove to be an attractive entry point as the Q4 changes come to fruition in 2014.”

“Furthermore, we like its revenue visibility, differentiated offering, ability to increase advertising prices, and operating leverage.”

Shares are Outperform, rated with a price target of $25.

Stifel: Management Could Do Better to Calm Investors

Jordan Rohan, analyst at Stifel, said Angie's quarterly results contained a mix of positives and negatives.

Angie's List was able to reach the high end of revenue guidance, but “while reaching guidance is a positive, the cost to acquire members is increasing, growth in advertising clients continues to decelerate and net advertiser ARPU (average revenue per user) ex-ecomm is faltering,” he said in a note to clients. “In our opinion, management has not outlined a sufficient plan to improve these metrics.”

“Internet platforms with large addressable markets (TAM) need to consistently deliver solid operating metrics that cycle upward toward a larger future business opportunity,” Rohan added, noting the company's third quarter results showed signs of weakness which carried over to Wednesday's earnings.

Despite a 15 percent decline in share prices after the earnings report, Rohan felt it necessary to downgrade shares to Hold from Buy, with no price target. Previously, the analyst had a $25 price target.

Deutsche Bank: Staying on the Sidelines

Lloyd Walmsley, research analyst at Deutsche Bank, thought Angie's List's quarterly report contained plenty of reasons for investors to be concerned.

“Angie's List's 4Q results leave us more confused as to what's going on at Angie's List and how the company solves its challenges,” he said in a note to clients.

“Sales force efficiency showed no improvement six months after the ramp in hiring, renewing our concerns around P1 SP revenue," Walmsley added. "Problems deepened in the consumer-facing side of the business with CPA spiking in the quarter, reflecting more defensive marketing/growing competition.”

“While the company pointed to changes in the user funnel, either something is not working in the existing funnel or marketing test execution is poor, or both.”

Walmseley, like Rohan, feels management has done an insufficient job in reassuring investors. “Commentary around impending changes was vague,” he said.

Shares are Hold rated, with a price target lowered to $13 from a previous $16.

Posted-In: Angie's List Barrington Resarch Deutsche Bank Jeff Houston Jordan Rohan Lloyd Walmsley StifelAnalyst Color Earnings News Analyst Ratings Tech Best of Benzinga

Kraft ends 2013 with mixed results, but investors buy anyway

Kraft Foods Group (NASDAQ: KRFT) will reach a new high this evening, but the company goes slightly after reporting its fourth-quarter results.

The packaged foods maker is one of many within the industry that has struggled to deal with a general decline in consumption.

"Things are tough out there," said Edward Jones & co. analyst Brian Yarbrough, who spoke to Benzinga before closing the market. "I think meet the number of earnings-or potentially beat ...--just because I think there is some operating margin expansion and some opportunities there. "

Kraft may have had the opportunity, but it might not have gone after them fast enough.

The company had announced a fourth quarter GAAP EPS of $1,54, which included a gain of $1,11. Without an official adjusted EPS, it seems that Kraft's earnings per share reach $ 0.43 (equals less $1,11 $1,54 $0,43), which is a bit shy of the EPS $(0.61) that Wall Street anticipated.

Revenue came to $4,6 billion, which was slightly below the estimated Street of $ 4.63 billion.

"We have made significant strides during our first full year as a public company," Kraft CEO Tony Vernon said in a statement. "Our focus on profitable growth while re-investing in our brand and people driving has delivered solid results to date and will also serve as we continue to redo Kraft in the best food and beverage company in North America."

Kraft said that its operating income from meals and desserts was partially offset by an increase in ad spending. The company also enjoyed "significant" overhead cost savings and productivity gains that offset the net prices of raw material costs and a two-digit increase in advertising.

Industry declines are still a mystery

No one was able to explain why the packaged food industry is under pressure. It is a problem that has baffled corporate executives for the last year, especially when other sectors in difficulty (e.g. restaurants) are taken.

Yarbrough said that some have blamed on reluctance of consumers to picture their pantries fully as they have in the past.

"Some say, is the lower-income consumer who is out there, struggling so are buying closer to need and you're not stocking up, '" said Yarbrough.

Others are worried that the Wal-Mart of struggling food Department could have a negative impact on food companies that rely on the dealer for more sales.

Store brands aren't having an impact

Store brands-how Wal-Mart's great value or Kroger's simple truth ... don't seem to have a negative effect on their more expensive competitors.

"Private label has earned a lot and there's a lot of people who moved to private label in economic recession, said Yarbrough.But I think that type of tide has shifted. I didn't see the tidal flow to where they are losing altitude, but I don't think you're growing either. "

This is all mostly speculation. Yarbrough said if "these managers who manage these companies do not know the motive behind [the decline], of course I don't know."

Warrior rising

Kraft may be soaring, but still up more than 18 percent in the last year and a half is more than 14 percent over the past 12 months.

In the past six months haven't been too kind to Kraft; could count the picture rose and fell several times that most investors.

Things were looking this month, however. The broth seems to be gradually moving away from its period of stagnation and rose more than four percent since Feb. 3.

Kraft is currently more than two percent in after-hours trading.

Verdict: Kraft is a manufacturer of powerful foods (but not waterproof)

Investors seem to be happy with the results of Kraft ...--for now. But keep an eye on how the market reacts in the next few weeks.

Disclosure: at the time of this writing, Louis Bedigian had no positions in stocks mentioned in this report.

-Published In: Brian Yarbrough Edward Jones co. & VernonAnalyst color news earnings Tony best of Benzinga

Thursday, February 13, 2014

Day trade: two choices In aerospace defense-& 2/13/14

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Today's Trade of the Day is a double feature! Aerospace & Defense has been one of the strongest sub-industries in the market for over a year now. While the mid-January correction in major indices really soured some technical pictures in certain spaces, Aerospace & Defense held up extremely well, maintaining its strong intermediate- and long-term up-trend. The constituents are strong buys this week, as market leaders at a short-term discount are hard to come by.

Basically, there are two ways to play. The first is to pick out an Aerospace & Defense constituent that is similar to the sub-industry, but has a higher beta. Exelis Inc (XLS) seems like the perfect choice for this route. The stock has moved mostly in line with the greater Aerospace & Defense sub-industry (see similarities between XLS and ITA), though has generally outperformed. There is some great short-term support around $18.70, and the stock has clear upside to recent highs of $20.80. XLS looks to have righted the ship following the January pull-back and is beginning to enter the overbought stochastic, meaning buyers are stepping in in a meaningful way.

The other way to play is to buy the sub-industry itself using the iShares U.S. Aerospace & Defense ETF (ITA). ITA's top ten holdings are 9.22% UTX, 8.7% BA, 6.83% LMT, 6.16% PCP, 6.14% GD, 5.6% RTN, 5.14% NOC, 3.47% TXT, 3.42% COL, and 3.4% LLL. This ETF gives a nice mix of holdings that represents the sub-industry well and has performed admirably as a whole. The ITA has a lower beta than XLS, which means the upside is not as great. On the positive side, it also means a smoother ride for those looking to capitalize on the Aerospace & Defense set-up but want to avoid individual stock-specific risks like earnings or analyst ratings. ITA's set-up is nearly identical to XLS's, there is just less risk and lower potential reward.

For XLS: Upside from current prices to $20.80 is +5.58%, downside risk to a stop of $18.63 is -5.43%.

For ITA: Upside from current prices to $110.49 is +3.45%, downside risk to a stop of $103.47 is -3.11%

Both have similar reward to risk ratios, and the technical set-ups of the two are nearly identical. So, depending on whether you want to play bigger or smaller, take your pick! Either choice is a great play this afternoon.

For more free, daily swing-trading ideas and set-ups, check out SoTM's Trade of the Day hosted on Marketfy

Entry Method:

Buy XLS at the current price (~$19.70), or ITA at the current price (~$106.80).

Exit Method:

Sell at a close below $18.63 for XLS, $103.47 for ITA (Breakdown) / An intraday price of $20.80 for XLS, $105.63 for ITA or above (Profit-Taking)

Company Profile:

Exelis Inc. (Exelis) is engaged in Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance (C4ISR) related products and systems and information and technical services, which the Company supplies to military, government and commercial customers in the United States and globally. The Company's customers include the United States Department of Defense (DoD), including the United States Army, Navy, Marines and Air Force, and its prime contractors, the United States Government intelligence agencies, National Aeronautics and Space Administration (NASA), Federal Aviation Administration (FAA), allied foreign governments and domestic and foreign commercial customers. As a prime contractor, subcontractor, or preferred supplier, the Company participates in many high priority defense and non-defense programs in the United States. In February 2014, Exelis, Inc purchased FareSight, ARC's Web-based tool for corporate air travel optimization.

iShares U.S. Aerospace & Defense ETF, formerly iShares Dow Jones U.S. Aerospace & Defense Index Fund (the Fund), is an exchange-traded fund. The Fund seeks investment results that correspond generally to the price and yield performance of the Dow Jones U.S. Select Aerospace & Defense Index (the Index). The Index measures the performance of the aerospace and defense sector of the United States equity market. Aerospace companies include manufacturers, assemblers and distributors of aircraft and aircraft parts. Defense companies include producers of components and equipment for the defense industry, such as military aircraft, radar equipment and weapons. The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to the Index. Its investment advisor is BlackRock Fund Advisors.

Stock Rating:

The Stock Rating indicates the combined score of our proprietary Earning Strength and Company Performance models. The rating scale is 0 - 10 with 10 being the highest.

Disclosure:

At the time of publication the editor and affiliated companies own the following positions: None

Note: Positions may be bought or sold while this publication is in circulation without notice.

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