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SunCoke Energy, Lindsay and Alcoa highlighted as Zacks Bull and Bear of the Day

For Immediate Release

Chicago, IL – April 12, 2016 – Zacks Equity Research highlights SunCoke Energy (SXC) as the Bull of the Day and Lindsay Corp (LNN) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Alcoa (AA).

Here is a synopsis of all three stocks:

Bull of the Day:

Coal mining companies have had a difficult run of late. Miners have seen coal prices drop to levels where it is actually costing more to mine than what the coal is worth. So when one company sells off their coal mining division in order to focus on their core competency, the domestic steel industry, we need to take a look at what is left over. And after looking, SunCoke Energy ( SXC) is the Zacks Bull of the Day.


This Zacks Ranked #1 (Strong Buy) is a producer of metallurgical coke in the Americas. The Company acquires, owns, and operates the coke making and coal mining operations. Its coke making facilities are in the United States and Brazil.

In their most recent earnings announcement, the company significantly beat both the Zacks Consensus Earnings and Revenue estimates. In the quarter the company saw net income increase from -$65 million in Q4 14 to +$19 million in Q415. Further, operating income was +$24.8 million in Q415 compared to -$21.6 million in Q414.

According to Fritz Henderson, President, Chairman and CEO, “ While 2015 was a challenging year across the steel and coal industries, we achieved our revised financial guidance and remain confident in our underlying business model and the value we provide to each of our customers. In 2015, we expanded our Coal Logistics platform, implemented a more holistic approach to stabilizing Indiana Harbor, further streamlined our corporate overhead and executed our capital allocation strategy."

Looking forward, we expect 2016 Consolidated Adjusted EBITDA to be between $210 million and $235 million. This outlook reflects our view for sustained performance in our Domestic Coke and Coal Logistics businesses coupled with the full-year benefit of the Convent acquisition and improvement at our Indiana Harbor facility .”

After their earnings announcement, on April 6th, the company announced that they sold essentially all of the SXC’s coal mining businesses for about $10.3 million to Revelation Energy. Per the agreement, Revelation Energy must supply SunCoke with about 300,000 tons of coal to Jewell Coke operations at “a favorable delivered cost as compared to alternative coal sources” for the next 5 years. Management believes that this move will be cash flow neutral by the end of 2017. Further, management expects to see reductions of $12 million in mine closure costs, SG&A declining by $2-$3 million per year till 2020, and reductions in mine related liabilities, and other capital requirements.

Bear of the Day :

According to the United States Department of Agriculture’s (USDA) Economic Research Service (ERS), national net farm income is forecasted to be down -3% in 2016, after declining -38% in 2015. Per the report, “The 2016 forecast represents the third consecutive year of decline and would be the lowest since 2002 in both nominal and inflation-adjusted dollars.” This indicates that companies that sell machinery to farms has and will experience some difficulties in the revenue department. This is one of the reasons that Lindsay Corp ( LNN) is the Zacks Bear of the Day.


This Zacks Ranked #5 (Strong Sell) company manufactures and markets irrigation equipment including Zimmatic, Greenfield, Stettyn and Perrot center pivot, lateral move and hose reel irrigation systems and GrowSmart controls, all of which are used by farmers to increase or stabilize crop production while conserving water, energy, and labor. The Company also manufactures and markets infrastructure products including movable barriers for lane management to reduce traffic congestion and improve safety through its wholly owned subsidiary, Barrier Systems Inc. In addition, the Company produces crash cushions and specialty barriers to improve motorist and highway worker safety, large diameter steel tubing, and provides outsourced manufacturing and production services for other companies.

In their most recent earnings announcement, the company missed both the Zacks Consensus Earnings and Revenues estimates. This was the third consecutive quarter the company missed the Zacks Consensus Revenue estimate. Specifically, the company saw year over year consolidated revenues drop by -15%, with irrigation revenues falling -5%, international irrigation revenues dropping -24%, and infrastructure revenues declining by -47%. Further, the company’s backlog was at $53 million at the end of the second quarter, which is down -29% (YoY), and management conceded that there were no large impending infrastructure projects in the near term.

According to Rick Parod, President and CEO, “ The irrigation markets continue to be constrained by lower commodity prices and foreign exchange rates. Excluding the Golden Gate Bridge project last year and the incremental environmental charge this year, our second quarter 2016 operating profits were flat with the prior year quarter. We are now in the midst of the primary selling season for irrigation equipment in North America. While we have seen signs of stabilization, the market continues to reflect reductions from peak periods in farmers’ investments in equipment due to the lowest projected net farm income since 2002. The current environment has near-term challenges, however the longer term drivers for our markets of population growth, expanded food production, efficient water use and infrastructure upgrades and expansion remain positive .”

Additional content:

Alcoa (AA) Q1 Earnings Up Big, Sales Miss; New Company Christened Arconic

Aluminum major Alcoa (AA) has posted a big Q1 earnings positive surprise after the bell Monday, bringing the customary start to earnings season to bear for another quarter. However, Alcoa's 250 percent earnings beat is dampened by its Q1 revenues, which reached $4.95 billion -- beneath the Zacks consensus estimate OF $5.23 billion.


Much of this discrepancy has to do with the coming split-up of Alcoa into two companies later this year: the upstream, raw materials space which will retain the Alcoa name, and the new company unveiled as Arconic, which includes the Global Rolled, Engineered Parts and Transportation & Construction businesses. The split will amount to roughly 50 percent of the current company businesses each, although the Arconic side has been showing more robust growth than the Alcoa side, having to do once again with still-low aluminum prices.

The revenue miss for the company, in fact, can be attributed to a good extent to the split-up itself. While Alcoa has been cutting its upstream businesses it has been expanding the Arconic side ahead of the separation of the two companies. In all, $364 million was cut from Alcoa's spending in the quarter. That said, Alcoa's current cash holdings of $1.4 billion amounts to less than analysts expected.

Ahead of the earnings report, Alcoa carried a Zacks Rank #3 (Hold), with a Value score of A but a Momentum score of F. Difficulties gauging the heavy lifting of separating the businesses has likely kept investors cautious on the shares, especially with raw aluminum prices staying low for so long. Analysts do seem to have a downward bias for fiscal 2016 and 2017, however -- in the past 60 days we've seen 7 and 4 downward revisions, respectively.

Altogether, we are witnessing a very public work in progress. Common wisdom continues to prefer the new Arconic brand for its growth and less dependency on its commodity prices, but we will continue to monitor progress going forward.

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SUNCOKE ENERGY (SXC): Free Stock Analysis Report
 
LINDSAY CORP (LNN): Free Stock Analysis Report
 
ALCOA INC (AA): Free Stock Analysis Report
 
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