For Immediate Release
Chicago, IL – March 27, 2018 – Zacks Equity Research highlights MSCI MSCI as the Bull of the Day, Mattel MAT as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Apple AAPL and Cisco CSCO.
Here is a synopsis of all four stocks:
Bull of the Day:
Founded in 1998 and headquartered in New York, MSCI provides decision support tools, including indexes, portfolio risk and performance analytics, and corporate governance products and services to institutional investors.
Their applications and solutions help investors in core investment activities, including allocating assets, constructing and optimizing portfolios and understanding and managing investment risk and performance.
MSCI serves 99 of the top 100 largest money managers, and total assets benchmarked to MSCI equity indexes exceed $12.4 trillion globally (as of September 30, 2017).
The company operates through the following segments: Index, Analytics and All Other. Their well-known brands include MSCI, Barra, RiskMetrics, IPD, FEA, InvestorForce and others.
The company has about more than 3,000 employees globally.
Excellent Results and Rising Estimates
MSCI reported excellent results for its fourth quarter 2017, beating on both the top and bottom lines. Q4 EPS came in at $1.15 per share, significantly ahead of the Zacks Consensus Estimate of $0.99.
Operating revenues for Q4 increased 14.3% year-over-year to $334.8 million. Revenue growth was driven mainly by 40.7% increase in asset-based fees (due to higher revenue from ETFs linked to MSCI indexes).
The 2018 guidance was also better than street consensus.
Bear of the Day:
Headquartered in El Segundo, CA, Mattel is one of the world’s largest manufacturer of toys. Their portfolio includes Barbie, Hot Wheels, Monster High, American Girl, Thomas & Friends and Fisher-Price brands. They employ approximately 32,000 people in 40 countries and sell products in more than 150 countries.
Weak Results Lead to Falling Estimates
The company reported weak results for Q4, missing on both the top and bottom lines. Adjusted loss of 72 cents per share was significant short of the Zacks Consensus Estimate of earnings of 17 cents.
This was the fifth consecutive miss for the toymaker.
Toys ‘R’ Us Liquidation
Toys ‘R’ Us—one of the biggest sellers of Mattel’s Barbie dolls--filed for liquidation of its US operation earlier this month. It also plans to sell its businesses in some other countries. This is a major blow to toy makers like Mattel.
With its 700 stores, Toys “R” Us accounted for about one-fifth of toy sales in the US. According to WSJ, Toys “R” Us’ owed Mattel $136 million in September when it filed for bankruptcy.
Further, its demise will leave US Toymakers without a “national partner to showcase its wares year-round, test experimental products and find the next Shopkins or ZhuZhu Pet.”
Mass retailers like Walmart and Target choose to focus on top-selling toys, whereas Toys “R” Us takes risks with newer toys to discover the next big thing.
Mattel shares fell more than 7% after the report. According to analysts, the impact is expected to be larger on Mattel than Hasbro.
The Bottom Line
Mattel has seen weak sales for the past many quarters as they struggle with kids’ rising preference for videogames and smartphone applications. Additionally, they are losing in competition with Hasbro after Disney selected Hasbro for the Disney Princess and Frozen franchises. Mattel had previously held the license for those dolls.
Toys ‘R’ Us’ bankruptcy and planned liquidation has created more headaches for this struggling company. It is better to avoid the stock for the time being.
Apple vs. Cisco: Which Is the Better Value?
Shares of tech value darlings Apple and Cisco surged on Monday as the sector looks to rebound from one of its toughest trading weeks of the year. And now, with volatility looming over the entire market, stable behemoths like these two companies might garner more attention if growth investors look to take profits from previously high-flying stocks.
Apple and Cisco are, of course, not perfectly comparable stocks, but both are dominant forces in their respective industries. Apple is basically the global leader in consumer electronics, while Cisco leads the worldwide enterprise IT business.
Still, these two firms seem to attract similar types of investors—those looking for financially sound, dividend-paying tech stocks that fit best in buy-and-hold portfolios. But these investors are also looking to build diverse holdings, so they might not have room for two stocks that accomplish the same goal. So which of these companies is the better buy right now? Let’s take a closer look.
Traditional value investors love to look at the price-to-earnings ratio to determine great buying opportunities. After all, buying a stock makes one a partial owner of that company, so investors are inherently interested in profitability.
There are a couple of things to note here. First of all, AAPL was consistently trading at a slight premium to CSCO until about six months ago, when the latter began to see its valuation surge well beyond that of the former. This suggests that investors have been more excited about Cisco recently.
Still, if one’s primary value strategy is to find stocks that are undervalued versus their broader sector, both of these companies look like solid options right now. In fact, our “Computer and Technology” sector is trading with an average Forward P/E of about 18.7, so AAPL and CSCO are both trading at discounts.
Value investors should also be interested in a stock’s recent price performance. For instance, if a stock has sold off significantly, its lower valuation might speak to a greater problem that has forced investors to flee.
Cisco has outpaced Apple over the past few months. This helps explain why its valuation has surged within the same timeframe, but given the fact that CSCO still looks undervalued compared to the broader tech market, its stronger momentum is probably more attractive right now.
We have proven that both of these stocks are intriguing picks, but the best value opportunities are undervalued companies that are also sporting strong Zacks Ranks. In this case, Cisco and its Zacks Rank #2 (Buy) have another edge over Apple, which is currently sporting a Zacks Rank #3 (Hold).
The proven Zacks Rank system puts an emphasis on earnings estimates and estimate revisions. Within the past 60 days, we have seen 13 revisions to CSCO’s full-year earnings estimates, with 100% agreement to the upside. The Zacks Consensus Estimate for the company’s EPS has gained 11 cents over that time.
This improving analyst sentiment, on top of Cisco’s attractive valuation and solid momentum, make CSCO look very interesting right now.
Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
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