I have identified five stocks that have seen a lot of trading over the last week. While I believe MGIC Investment (MTG, Financial) is the bad apple of this group, I noticed that First Horizon (FHN, Financial), Regal Entertainment (RGC, Financial), Merck (MRK, Financial), and AmerisourceBergen (ABC, Financial) are good choices for certain portfolios. In this article, I will explore five companies that are reacting to recently reported earnings to see if they present any opportunities for investors.
First Horizon National Corporation is a Southeastern bank that has had an average volume of 4,583,330. The company just announced that its FTN Financial subsidiary acquired Main Street Capital Advisors, and this figures to be a useful addition to First Horizon's portfolio. Here's how FTN Financial president Michael Kisber explained it: "This expansion into public funds asset management broadens our institutional portfolio advisory services beyond our traditional depository focus." First Horizon also reported earnings recently. The company managed to pull out a quarterly profit compared to a loss this time last year due to reduced loan provisions. Both total loans and net interest income were down 2%, however, so there are still a couple of important concerns with this bank. Regardless, First Horizon appears to be a decent investment. The stock has a price to earnings ratio of 18.71, which is a bit high, but still lower than fellow Southeastern bank SunTrust. Additionally, the price to earnings ratio is a bit misleading right now because it includes some quarters in which First Horizon temporarily experienced bad earnings. Those bad earnings were due to credit problems with First Horizon's customers, and the situation should resolve itself as First Horizon makes amends and the economy improves.
MGIC Investment Corporation is a provider of insurance to mortgage lenders, and the stock has had an average volume of 7,455,570. MGIC Investment just reported earnings, and the company experienced a loss of 67 cents per share for the fourth quarter. That's not as bad as the 93 cent per share loss from a year ago, but shareholders are still worried regardless. The problem is that MGIC Investment insures mortgage lenders against defaults or unprofitable foreclosures. Needless to say, these events have been happening in troves, which means MGIC Investment has had to pay out a fair bit of money. The company even said that its risk-to-capital might go over the limit for some of the states it operates in. Although the most recent analyst actions for this stock have been upgrades to Outperform, I find it hard to recommend. It's difficult to see when this company will return to profitability, and the price to sales ratio is surprisingly high at 0.57. In fact, similar companies like Genworth Financial, PMI Group, and Radian Group have lower price to sales ratios of 0.43, 0.01, and 0.32 respectively. Until management outlines a time frame for when this company will profit again, I would stay away from this stock.
Regal Entertainment Group is an operator of movie theaters that has had an average volume of 1,738,710. The company just reported earnings, and adjusted earnings per share were significantly higher than analysts were expecting. Revenues were a bit of a disappointment, though, and both attendance revenue and concession revenue fell significantly. On the other hand, CEO Amy Miles offered some compelling reasons why Regal should do better in the future. She said, "We are encouraged by the early results from our expanded food menu," and, "We are encouraged by what appears to be a promising line-up of high profile tempo films that are evenly spaced throughout the release calendar." I agree with Ms. Miles, and I think investors can profit handsomely by buying this stock. With its dividend yield of 6.7%, Regal Entertainment shares can help bring in some serious additional income. While the current entertainment climate (which includes widespread piracy) probably won't allow for dividend increases anytime soon, Regal Entertainment is in a solid position financially. Operating cash inflow for the first three quarters of 2011 was $220.2 million. I expect these cash flows to stay strong due to summer superhero movies like The Avengers and The Dark Knight Rises.
Merck & Company, Inc. is a major drug manufacturer that has had an average volume of 15,131,100. The company just received a key approval from the Food and Drug Administration for its Zioptan treatment. Indeed, Zioptan reduces intraocular pressure for patients with open-angle glaucoma and ocular hypertension, so this could be a big hit for Merck. Another important story for Merck is about its Suvorexant drug. Indeed, Merck will apply for approval for Suvorexant now that two phase-III trials have been successfully completed. Here's how Peter Kim described the drug: "Suvorexant selectively targets an important pathway involved in helping to promote sleep and, if approved, will be a new, first-in-class treatment for patients with insomnia." On the other hand, Merck is having less success with its experimental drug vorapaxar. While the latest study shows vorapaxar decreasing risk of heart attack, stroke, or death from disease/surgery, the treatment may also increase the chances of internal bleeding. I recommend investors look past the vorapaxar troubles and concentrate on this stock's terrific dividends. For a yield of 4.4%, Merck continues to impress with its amazing innovations. Additionally, operating cash inflow of $9.15 billion for the first three quarters of 2011 are a testament to this company's financial strength.
AmerisourceBergen Corporation is a drug distributor that has had an average volume of 2,329,460. The company could be experiencing some boardroom drama as evidenced by the abrupt departure of Chief Financial Officer Michael DiCandilo. Some are speculating that CEO Steve Collis (just hired in July) is installing his own management team, but it's hard to say. Meanwhile, AmerisourceBergen also reiterated its full-year fiscal outlook. Indeed, the company expects earnings per share of between $2.74 and $2.84, and the average analyst estimate is $2.81. Another important story for AmerisourceBergen is its recent earnings report. Adjusted earnings per share were $0.62, which was a cent lower than analyst expectations, although revenue was better than anticipated. AmerisourceBergen figures to benefit from future increases in healthcare spending, and the stock appears to be cheaper than similar companies like Cardinal Health and McKesson. Indeed, AmerisourceBergen's price to earnings ratio is 14.51, while those other two companies have ratios of 15.65 and 16.00 respectively. Moreover, I expect AmerisourceBergen to benefit in particular from future additions of generic drugs. Specifically, AmerisourceBergen's business model focuses on consumers who tend to buy generic drugs and may also be insured. This could drive sales growth in the future because of trends that make this an increasingly important demographic.
First Horizon National Corporation is a Southeastern bank that has had an average volume of 4,583,330. The company just announced that its FTN Financial subsidiary acquired Main Street Capital Advisors, and this figures to be a useful addition to First Horizon's portfolio. Here's how FTN Financial president Michael Kisber explained it: "This expansion into public funds asset management broadens our institutional portfolio advisory services beyond our traditional depository focus." First Horizon also reported earnings recently. The company managed to pull out a quarterly profit compared to a loss this time last year due to reduced loan provisions. Both total loans and net interest income were down 2%, however, so there are still a couple of important concerns with this bank. Regardless, First Horizon appears to be a decent investment. The stock has a price to earnings ratio of 18.71, which is a bit high, but still lower than fellow Southeastern bank SunTrust. Additionally, the price to earnings ratio is a bit misleading right now because it includes some quarters in which First Horizon temporarily experienced bad earnings. Those bad earnings were due to credit problems with First Horizon's customers, and the situation should resolve itself as First Horizon makes amends and the economy improves.
MGIC Investment Corporation is a provider of insurance to mortgage lenders, and the stock has had an average volume of 7,455,570. MGIC Investment just reported earnings, and the company experienced a loss of 67 cents per share for the fourth quarter. That's not as bad as the 93 cent per share loss from a year ago, but shareholders are still worried regardless. The problem is that MGIC Investment insures mortgage lenders against defaults or unprofitable foreclosures. Needless to say, these events have been happening in troves, which means MGIC Investment has had to pay out a fair bit of money. The company even said that its risk-to-capital might go over the limit for some of the states it operates in. Although the most recent analyst actions for this stock have been upgrades to Outperform, I find it hard to recommend. It's difficult to see when this company will return to profitability, and the price to sales ratio is surprisingly high at 0.57. In fact, similar companies like Genworth Financial, PMI Group, and Radian Group have lower price to sales ratios of 0.43, 0.01, and 0.32 respectively. Until management outlines a time frame for when this company will profit again, I would stay away from this stock.
Regal Entertainment Group is an operator of movie theaters that has had an average volume of 1,738,710. The company just reported earnings, and adjusted earnings per share were significantly higher than analysts were expecting. Revenues were a bit of a disappointment, though, and both attendance revenue and concession revenue fell significantly. On the other hand, CEO Amy Miles offered some compelling reasons why Regal should do better in the future. She said, "We are encouraged by the early results from our expanded food menu," and, "We are encouraged by what appears to be a promising line-up of high profile tempo films that are evenly spaced throughout the release calendar." I agree with Ms. Miles, and I think investors can profit handsomely by buying this stock. With its dividend yield of 6.7%, Regal Entertainment shares can help bring in some serious additional income. While the current entertainment climate (which includes widespread piracy) probably won't allow for dividend increases anytime soon, Regal Entertainment is in a solid position financially. Operating cash inflow for the first three quarters of 2011 was $220.2 million. I expect these cash flows to stay strong due to summer superhero movies like The Avengers and The Dark Knight Rises.
Merck & Company, Inc. is a major drug manufacturer that has had an average volume of 15,131,100. The company just received a key approval from the Food and Drug Administration for its Zioptan treatment. Indeed, Zioptan reduces intraocular pressure for patients with open-angle glaucoma and ocular hypertension, so this could be a big hit for Merck. Another important story for Merck is about its Suvorexant drug. Indeed, Merck will apply for approval for Suvorexant now that two phase-III trials have been successfully completed. Here's how Peter Kim described the drug: "Suvorexant selectively targets an important pathway involved in helping to promote sleep and, if approved, will be a new, first-in-class treatment for patients with insomnia." On the other hand, Merck is having less success with its experimental drug vorapaxar. While the latest study shows vorapaxar decreasing risk of heart attack, stroke, or death from disease/surgery, the treatment may also increase the chances of internal bleeding. I recommend investors look past the vorapaxar troubles and concentrate on this stock's terrific dividends. For a yield of 4.4%, Merck continues to impress with its amazing innovations. Additionally, operating cash inflow of $9.15 billion for the first three quarters of 2011 are a testament to this company's financial strength.
AmerisourceBergen Corporation is a drug distributor that has had an average volume of 2,329,460. The company could be experiencing some boardroom drama as evidenced by the abrupt departure of Chief Financial Officer Michael DiCandilo. Some are speculating that CEO Steve Collis (just hired in July) is installing his own management team, but it's hard to say. Meanwhile, AmerisourceBergen also reiterated its full-year fiscal outlook. Indeed, the company expects earnings per share of between $2.74 and $2.84, and the average analyst estimate is $2.81. Another important story for AmerisourceBergen is its recent earnings report. Adjusted earnings per share were $0.62, which was a cent lower than analyst expectations, although revenue was better than anticipated. AmerisourceBergen figures to benefit from future increases in healthcare spending, and the stock appears to be cheaper than similar companies like Cardinal Health and McKesson. Indeed, AmerisourceBergen's price to earnings ratio is 14.51, while those other two companies have ratios of 15.65 and 16.00 respectively. Moreover, I expect AmerisourceBergen to benefit in particular from future additions of generic drugs. Specifically, AmerisourceBergen's business model focuses on consumers who tend to buy generic drugs and may also be insured. This could drive sales growth in the future because of trends that make this an increasingly important demographic.
