Key players are reporting earnings next week. These companies demand your attention due to the illumination provided for key industry spaces. They will provide first looks into worldwide expectations for food and feed crops next year, computer storage and social gaming.
Background: Monsanto is a leading global provider of technology-based solutions and agricultural products for growers and downstream customers such as grain processors and consumers, in the agricultural markets. The combination of its herbicides, seeds and related genetic trait products provides growers with integrated solutions to more efficiently and cost effectively produce crops at higher yields, while controlling weeds, insects and diseases. Monsanto trades an average of 3.1 million shares per day with a market cap of $48.69-billion.
- 52-Week Range: $58.89 to $91.95
- Book Value: $22.95
- Price To Book: 3.89
Monsanto is forecast to report weaker fourth-quarter earnings before the market opens on Wednesday. The consensus estimate is currently expected at a loss of 44 cents a share, doubling the loss of 22 cents during the same period last year.
Last quarter Monsanto’s earnings were released on June 27, and the previous closing price was $80.89. Shares are now trading up about 13 per cent.
Analysts are not alarmed by the expected loss and the direction Monsanto is headed. Eleven of the 18 analysts covering Monsanto continue their buy recommendation, six analysts rate it a hold and only one has a sell rating. The average analyst target price is $97.46.
Monsanto is in a strong bull trend. The key moving averages are progressing higher, and shareholders are elated. Trend followers love this pattern and will hold a position until a technical break.
The company currently pays $1.20 per share in dividends for a yield of 1.33 per cent. The dividend growth over the last five years screams “buy me” at 20.4 per cent per year, especially when coupled with expected earnings that support a payout rate under 40 per cent.
Monsanto has potential revenue risk with NK603, a genetically engineered corn recently subject to a sales halt in Russia, France, and possibly parts of Africa. A controversial French study suggests rats may have developed tumours as a result of eating the product. The single product is not as important as what impact it may have on the perception of future genetically engineered products.
Overall, I believe Monsanto is a buy on dips. Profits should continue to grow as demand grows world wide.
Background: Mosaic is one of the world’s leading producers and marketers of concentrated phosphate and potash crop nutrients. For the global agriculture industry, Mosaic is a single source for phosphates, potash, nitrogen fertilizers and feed ingredients. Mosaic is a subsidiary of Cargill . Mosaic trades an average of 4.2 million shares per day with a market cap of $24-billion.
- 52-Week Range: $44.43 to $62.65
- Price To Book: 2.04
Mosaic is forecast to record a slightly lower first-quarter earnings result before the market opens on Tuesday. The consensus estimate is currently $1.15 a share, a drop of 2 cents (1.7 per cent) from $1.17 during the equivalent quarter last year.
The last time Mosaic released earnings was July 17, and the closing price was $58.21. Based on a recent price of $57.68, Mosaic shares are lower by 1 per cent since.
Fourteen out of 19 analysts rate Mosaic a buy or strong buy. The company has five analyst hold recommendations, and not one sell rating can be found. The average analyst target price is $66.56.
The widely followed 60-day moving average is trending the 200-day moving average, very bullish while the shares trade above both. Shares recently tested the 60-day average Shareholders are now receiving $1 annually in dividends, for a yield of 1.74 per cent. In the last three years, the dividends have steadily increased.
The short interest based on the float is small and not a big concern. Short interest is 2.4 per cent, relatively on par for companies in this space.
Background: OCZ Technology is engaged in the design, manufacturing, and distribution of Solid State Drives (SSDs) and computer components. SSD is a disruptive, game-changing technology that is a substitute to traditional rotating magnetic hard disk drives (HDDs). SSDs are faster, generate less heat and use significantly less power than the HDDs.
In addition to its SSD and Memory Module product lines, the company designs, develops, manufactures and distributes other high performance components for computing devices and systems, including thermal management solutions, AC/DC switching PSUs and computer gaming solutions. The company was founded in 2002 and is headquartered in San Jose, Calif. OCZ Technology trades an average of 5.1 million shares per day with a market cap of $230-million.
- 52-Week Range: $3.03 to $10.05
Investors aren’t expecting an improvement in earnings this time at bat. Analysts forecast per share results below last year in the same quarter. A loss of 18 cents is expected after the market closes on Wednesday. During the matching period in the previous year, OCZ lost “only” 14 cents per share.
I want to say that a surprise beat will explosively send shares higher; while true, I don’t have a high level of confidence it will happen. If OCZ is able to at least meet estimates it will be a victory. Look for, or at least be prepared for, a miss.
Last quarter OCZ’s earnings were released on July 10 and the previous closing price was $5.45. Relative to a current price of $3.40, shares are down 37.6 per cent.
Five out of eight analysts rate OCZ a hold, two recommend this as a buy and one recommends selling. The average analyst target price for OCZ is $6.05.
There is no other way to describe the chart pattern than train wreck. After trading oversold in late May, OCZ bounced back to briefly (three days) test the 200-day moving average. Needless to say, OCZ didn’t receive a passing grade.
In the last month, the stock has really taken a turn for the worse. Shares have crumbled 39.7 per cent in the last month of trading.
Last quarter OCZ’s earnings were released on July 10, and the previous closing price was $5.45. Relative to a current price of $3.40, shares are down 37.6 per cent.
The short interest says a lot. I know I write it a lot, but it needs to be repeated: Short-sellers are regarded as the smart money. The short interest is altitudinous and is a strong warning that short-sellers expect the share price to fall considerably. The short interest is 41.4 per cent. When a stock is under $5, and the shorts are still not letting go, it’s like a robot yelling “danger Will Robinson, danger.”
Background: Zynga is the world’s largest social game developer. Games include CityVille, FarmVille and many others on which I receive daily requests to join in. Zynga games are available on a number of global platforms including Facebook, MySpace , Yahoo!, the iPad, the iPhone and Android devices. Zynga trades an average of 18 million shares per day with a market cap of $2-billion.
- 52-Week Range: $2.66 to $15.91
- Price To Book: 1.11
Wall Street isn’t expecting much this quarter (not a surprise for one of the worst performers this year). The third-quarter earnings release is scheduled for Monday. The consensus estimate is currently a loss of 6 cents a share, and there isn’t a corresponding period last year.
Last quarter ZNGA’s earnings were released on July 25, and the previous closing price was $5.08. Relative to a current price of $2.84, shares are down 44.1 per cent.
Fifteen out of 20 analysts rate Zynga a hold. Only four recommend a buy and one recommends selling. The average analyst target price is $4.89.
From a technical perspective, the chart for Zynga looks like an Aspen ski slope with the top of the hill on the left side. Over the last month in trading the stock has dropped about 8.4 per cent.
Zynga has an awful looking chart, an upcoming report expected to post a loss, and a dependency on Facebook that makes meth addicts appear stable and in control. Still, there is something very wrong with this picture. Not all the dots connect, and maybe it’s a result of a lack of long-term history. However, Zynga has found technical support.
It’s almost too obvious Zynga will continue to fall, except the short interest based on the float is still rather small at only 4.4 per cent. Zynga may not beat in the upcoming report so focus on the guidance and ignore the previous results. If they don’t guide into the abyss, consider the earnings a strong indication shares will trend higher. A price under $3 a share will likely appear as a bargain price.
Also, keep an eye on the options. Options are pricing in a large move the odds favour a move higher.
I use Zacks.com , WSJ.com , Tradestation and Reuters for my data. PE is generally adjusted PE based on an average number of shares.
This article was written by an independent contributor, separate from TheStree t’s regular news coverage.