Caterpillar, American Railcar, Netflix and United Continental highlighted as Zacks Bull and Bear of the Day

For Immediate Release

Chicago, IL – April 18, 2017 –Zacks Equity Research highlights Caterpillar (NYSE: CAT – Free Report ) as the Bull of the Day, American Railcar (NASDAQ: ARII – Free Report ) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Netflix (NASDAQ: NFLX – Free Report ) and United Continental (NYSE: UAL – Free Report ).

Here is a synopsis of all four stocks:

Bull of the Day :

Caterpillar (NYSE:CAT – Free Report ) shares have rallied 8% in the past six months, nearly keeping up with the S&P 500 at +10%, on hopes for economic stimulus and infrastructure plans from Washington.

And while the stock made a new multi-year low in early 2016 under $60, the earnings picture for the company may just be beginning to bottom.

CAT is a Zacks #1 Rank this month because several analysts have raised EPS estimates, instead of lowering them like they have consistently done for most of the past two years.

In the past 30 days, the full-year 2016 profit projection has moved up from $3.07 to $3.20.

And 2017 estimates were pushed from $4.20 to $4.34, representing 35.5% annual EPS growth on the back of a projected 5.9% climb in revenues to $40.7 billion.

That's still a ways below 2012's peak at $67 billion and even 2014's flat-line around $55 billion. So it's a good time to look at what's still digging into CAT's top and bottom lines.

Short Thesis Expired?

Global investors are aware that famed short seller Jim Chanos outlined his bearish thesis on CAT last October, citing a pending real estate bubble burst in China as well as the slowdown in mining and oil & gas projects around the world.

But weeks before in September, Deutsche Bank analysts stated that they believed 2016 would be the "cyclical trough" for Caterpillar. They noted that the "bulk of the natural resource downturn in the rearview mirror" as both gold and oil recover somewhat from their bear markets.

Deutsche analyst Nicole DeBlase also asserted that Wall Street hadn't given Caterpillar credit for its aggressive restructuring efforts that saved the company almost $2.25 billion since 2013. When shares were trading around $82 she placed a $98 target on them.

That was a solid call by the DB analyst over one month ahead of the US presidential election. And CAT delivered at 27.7% upside earnings surprise for the December quarter to add some validity to their "trough" call. That $98 target was reached by January.

Excavation and Tax Tailwinds

As further proof, word came last week that sales of excavators in China were up 89% in March and +106% for the quarter. Sales of roughly 21,000 units are still below half of the peak in 2011.

If commodity markets have indeed bottomed and are now becoming beneficiaries of inflationary forces, this will continue to add to steady improvement in CAT sales and profits.

Finally, while tax reform from the new administration may be a thing of the future, one past change is coming home to roost and could have a positive impact on Q1 earnings for industrial companies.

Bear of the Day :

American Railcar (NASDAQ:ARII – Free Report ) was a Bear of the Day in early December when trading near $48 and analysts were lowering EPS estimates after another earnings miss.

Shares did not move much higher through their $48-49 resistance zone for the next 2+ months until the company's February earnings report confirmed the negative outlook.

The stock fell 20% in two weeks to $39 and analysts took profit projections down further, moving the full-year 2016 consensus estimate from $3.23 to $2.88 in the past 60 days.

That drop equates to negative earnings "growth" of -23% for the year on the back of a 37% decline in sales to $403.6 million.

Here's how my colleague Tracy Ryniec, who has been an active investor in rail car companies for several years, described the outlook on December 7...

American Railcar Industries can't escape the rail car cycle , which is still on a downward trajectory. This Zacks Rank #5 (Strong Sell) is expected to see falling sales and earnings through 2017.

American Railcar makes and sells railcars, specifically hopper and tank cars, custom designed railcar parts and other industrial products. It also leases railcars it manufactures to some markets. Additionally, the company provides railcar repair services through various repair facilities.

Another Miss in the Third Quarter

On Oct 28, American Railcar reported its third quarter results and missed on the Zacks Consensus Estimate by 5 cents. Earnings were $0.94 compared to the Zacks Consensus of $0.99.

It was the second earnings miss of the year for the company.

It continued to see "softness" in the North American railcar market.

Revenue fell 16% to $145 million from $172.7 million in the third quarter of 2015. The decrease came from lower revenue in the manufacturing segment, partially offset by increased revenue in the leasing and railcar services segments.

Manufacturing segment revenue fell 24% to $93.5 million driven by a higher mix of hopper railcars sold, which generally have a lower average selling price than the tank railcars.

Tank railcar demand continues to be challenged as the crude market remains subdued.

Additional content:

Netflix (NFLX), United (UAL) Beat on Q1 Earnings

After today's close, Netflix (NASDAQ: NFLX – Free Report ) and United Continental (NYSE: UAL – Free Report ) report earnings for their fiscal Q1. Netflix topped the Zacks consensus estimate by 2 cents to 40 cents per share on revenues exactly in-line with projections: $2.64 billion in the quarter. United also outperformed expectations on both top and bottom lines, with 41 cents per share on $8.4 billion in quarterly sales beating the 37 cents and $8.36 billion anticipated.

Shares of the streaming entertainment giant is selling the news following its Q1 report, in which 1.42 million domestic subscribers and 3.53 million international subscribers missed analyst estimates of 1.5 million and 3.7 million, respectively. Guidance for Q2 includes revenues in-line with the consensus at $2.75 billion, though costs are ratcheting EPS estimates downward: 15 cents per share is now expected for Q2, far less than the 23 cents in the Zacks consensus.

Netflix CEO Reed Hastings mentioned that he doesn't see streaming TV bundles jeopardizes the company's near-term outlook, nor is the company interested in going after broadcasting sporting events in the near future. Clearly the focus has been on building out internationally for the past several quarters, and even though shares of the stock are selling off following the Q1 report, Netflix shares remain near their all-time trading highs.

For a more in-depth account of Netflix's Q1 earnings, please click here .

United, recently beleaguered with bad press regarding an incident where a customer was forcibly removed from a United flight, has now beaten estimates in each of its last 5 quarters. This 4-cent beat after the bell today, however, represents the best of the lot. It may be a struggle for United to maintain this streak, especially if we start to see a drop in bookings for Q2, but certainly the airline major and Zacks Rank #3 (Hold) stock will fight to remain competitive.

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About the Bull and Bear of the Day

Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Strong Stocks that Should Be in the News

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Caterpillar, Inc. (CAT): Free Stock Analysis Report
 
American Railcar Industries, Inc. (ARII): Free Stock Analysis Report
 
Netflix, Inc. (NFLX): Free Stock Analysis Report
 
United Continental Holdings, Inc. (UAL): Free Stock Analysis Report
 
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