Archives for February 1, 2018

Preparing for a $6 Billion Market

by

Here’s How These Canadian Companies Are Preparing for Potential $6 Billion Market

The Canadian recreational cannabis market is one of the most exciting markets in the world. In summer 2018, Canada will become one of the first countries in the world to fully legalize recreational marijuana. Deloitte estimates the market to be a $4.98 – $8.78 Billion dollar opportunity, while a recent report says that in 2015 Canadians already spent $6.5 Billion on marijuana.

Big cannabis brands are taking opportunity very seriously and are moving quickly to prepare. Companies like Aphria Inc. (TSX: APH OTCQB: APHQF) and Aurora Cannabis Inc. (TSX: ACB) (OTCQB: ACBFF) are preparing by making strategic investments and purchases to bolster their rec presence.

The recreational market is such a huge opportunity that even big alcohol is getting in on it, with Constellation Brands (NYSE: STZ and STZ.B) recently investing $190 Million USD ($245 Million CDN) in Canopy Growth Corporation (TSX:WEED) (OTC: TWMJF).

These are examples of brands that specialize in medical marijuana trying to maximize and prepare for the recreational market as it blossoms. Of course the recreational market will demand different brands than medical.

For investors looking to capitalize on this huge opportunity, we’re following an emerging Canadian company with not one, but three major growing facilities under development and brand/distribution capacity that are perfectly built for the recreational market: MYM Nutraceuticals (CSE: MYM) (OTC: MYMMF).

We will look at MYM Nutraceuticals in a bit, but first let’s look at the recreational industry and what companies are doing to prepare.

Trends for 2018

After a crazy market upswing over Christmas and into the New Year, the Canadian Marijuana industry prepares for a big year.

Marijuana Index

Branding In The Canadian Recreational Industry

Advertising standards and regulations for the legalized marijuana industry are still being finalized, but just as with alcohol advertising, there will likely be very strict controls on advertising. Companies will have to be focused only on their own brand and adhere to ad standards of Canada.

This results in branding being one of the most important aspects of the new recreational industry.

Established companies were traditionally set up for medical and now have to somehow make the transition to market themselves for recreational use.

Key deals display the trend:

  • Aphria (TSX: APH OTCQB: APHQF) signed an agreement to acquire 100% of Broken Coast Cannabis, a premium cannabis producer located in British Columbia for $230 million in stock and cash. The deal will add incremental annual production of 10,500 kgs, some of that cannabis being market ready today. This addition will boost Aphria’s forecast annual production to 230,000 kgs. The transaction also gives Aphria more geographic diversification, a cross-Canada distribution platform, and access to over 40,000 medical patients.

 

  • Recent merger of DOJA Cannabis Company Limited (CSE: DOJA) and TS Brandco Holdings Inc. (“Tokyo Smoke”) created the first brand and retail-focused, Hiku, craft cannabis producer, with a portfolio of highly recognizable brands. Hiku is strategically positioned to become the preeminent cannabis brand house in the Canadian adult-use cannabis market. Concurrently, DOJA entered into a binding agreement with Aphria pursuant to which Aphria has committed to make a $10 million strategic equity investment into Hiku. Additionally, the parties have agreed on the terms of a supply agreement to secure cannabis concentrate supply for Hiku’s premium brand portfolio. Upon completion of the merger, the Company will have a robust cash position of approximately $31 million, which it plans to invest in expanding its cannabis production capacity, growing its retail footprint, and adding select brands to its portfolio through highly strategic and complementary acquisitions.

 

  • Harvest One Cannabis  (TSXV:HVST) (OTC: HRVOF) through its wholly owned subsidiary United Greeneries announced the launch of retail sales beginning February 2018. Starting February 2018, United Greeneries will launch a new online retail platform for medical clients under the Access to Cannabis for Medical Purposes Regulations (“ACMPR”). The initial offering will consist of two distinct cannabis brands, providing patients a wide range of different strains and cannabinoid profiles.

 

  • Aurora Cannabis Inc. (TSX: ACB) (OTCQB: ACBFF) has bought in 17% stake in The Green Organic Dutchman (TGOD), with option to Increase to in Excess of 50%.  As part of the agreement, the companies shall enter into a supply contract, providing Aurora with the right to purchase up to 20% of TGOD’s annual production of organic cannabis from TGOD’s Ancaster and Valleyfield facilities. Consequently, Aurora anticipates being able to procure in excess of 20,000 kg per annum of premium organic products once TGOD`s Valleyfield and Ancaster facilities are completed and at full capacity. The supply contract provides Aurora with the right to purchase up to 33% of TGOD’s production at the two facilities if Aurora increases its ownership interest to 31%.

 

  • Canada’s move toward legalization has already inspired one U.S. Company, the New York-based alcohol beverage producer Constellation Brands (NYSE: STZ and STZ.B), to buy a 10% stake in the Canadian pot company Canopy Growth Corporation (TSX:WEED) (OTC: TWMJF) for $190 million.

MYM Nutraceuticals (CSE: MYM) (OTC: MYMMF) – Ready to Rock The Rec Market

Unlike medical marijuana brands who have to acquire brands to prepare for rec, this small cap Canadian company was created with developing brands, marketing and distribution for the recreational market rom the get go.

MYM has also become a leading integrated provider of branded products related to the natural cannabis nutraceuticals industry. This strategy, coupled with its strategic partnerships, international expansion and growth in revenue have put MYM Nutraceuticals right in the sweet spot for rec.

Investors have already proven that they are excited about the MYM Nutraceuticals, with its share price experiencing over a 500% gain on the CSE since a momentum price rise in October 2017.

MYM Nutraceuticals has a video that explains their vision for the company.

Investment Highlights

MYM Nutraceuticals is a multi-faced, brand oriented marijuana company building the biggest growing operations and collaborations on the roster.

  • Through its subsidiary, Sublime Culture Inc., MYM Nutraceuticals is in the last stages of obtaining License Producer status under Health Canada’s Access to Cannabis for Medical Purposes Regulations (ACMPR).
  • MYM Nutraceuticals has taken a brilliant tact to assemble what, upon completion, will be the largest group of cannabis growing facilities in the world. The company has three projects that will bring its total growing capacity to over 625,000 square feet as early as 2019.
  • The projects include:
  • Weedon, Quebec: Its flagship project is a planned 1.5 million square foot growing facility in the town of Weedon, Quebec. Through its subsidiary, CannaCanada, the company is building what will be, at full capacity, the most productive Cannabis facility in the world by total output.
  • Laval Quebec: is a smaller by comparison, but will be MYM Nutraceuticals’ first operation to come online and begin harvesting. The company is completing the first phase of its production facility. MYM Nutraceuticals’ planned extraction and processing department there will also house a cannabis product testing and research laboratory in partnership with TheraCann Canada – a leading ISO compliance testing firm.
  • Casino, South Wales, Australia: The Northern Rivers Project is a co-venture just reached between PUF Ventures and MYM Nutraceuticals for a 35% stake in a proposed 1.2 million square foot greenhouse and extraction facility in Casino, New South Wales, Australia. At full scale, the facility will have the capacity to produce 100,000 kilograms of high quality cannabis per year, worth between C$800 million and C$1.1 billion.
  • January 2018, MYM Nutraceuticals announced it signed a Memorandum of Understanding (MoU) with NEWCANNA S.A.S., a leading Colombian medical cannabis company for a joint venture or partnership agreement in which they would form a new, jointly owned company in Colombia to focus on the large-scale commercial cultivation and transformation of cannabis and hemp for medical, scientific and industrial purposes and export to worldwide markets.

Deloitte Review Of Weedon Facility

Unlike many companies entering in this budding new area, MYM Nutraceuticals has a very clear view of its prospects. A case in point is the Deloitte Report on the company’s Weedon facility that gives a great breakdown of the its flagship project in Quebec, Canada.

Report Highlights

  • Fixed assets investments: Investments of $104 M are planned for the construction of cannabis production greenhouses in Weedon, Québec, as well as $119 M for the construction of a multipurpose center, which will include a museum, an auditorium, a cafeteria, a school, a restaurant, a bookstore, a luxury hotel, a clinic and a cannabis research and innovation center. These two infrastructures represent a total of $223 M in construction investments.
  • Total economic impact: The total economic impact (added value to the project’s costs) for all construction projects and greenhouses operations on a 15-year period, assuming full production capacity, is estimated at $3.1 B for Canada. The breakdown goes as follows: $208.1 M for construction and $2.9 B for operations ($194.9 M per year). As for Québec, using the same calculation method, the economic impact over the same period of time is estimated at $2.2 B.
  • Economic impact generated by the construction: The direct value added to GDP from the construction projects in Canada is estimated at $93.1 M and the total impact (including indirect and induced impacts) is estimated at $208.1 M. The economic impact in Québec is estimated at $173.5 M.
  • Economic impact generated by the operations: The total economic impact in Canada of the greenhouses operations (including indirect and induced impacts) generated by the operating expenses is estimated at $2.9 B for a period of 15 years, or $194.9 M per year. The economic impact for Québec is estimated at $2.1 B for the same period.
  • Governments Tax Revenues: The construction projects and the greenhouses operations will generate tax revenues (excluding corporate taxes and potential excise duty) of nearly $493.4 M for the Government of Québec and nearly $277.6 M for the Government of Canada.

So in essence, the company’s Weedon facility represents  a $2.9 Billion (CDN) operation annually upon completion.

Conclusion: Recreation legalization will create a brand new wave of investment opportunity. While established companies that started with medical brands are trying to address the upcoming recreational market through acquisitions and capacity expansions, companies entering the recreational market directly like MYM Nutraceuticals will have a distinct competitive advantage given their recreational-ready business model.

MYM Nutraceuticals’ approach is one of our favorites in the emerging rec market thanks their impressive investment highlights.

For investors looking to get into the huge potential of the recreational market with an up and coming company that’s not already valued like a big board stock,  small cap company, MYM Nutraceutical (CSE: MYM) (OTC: MYMMF) could be a great option.

 

Editorial Staff

Canada News Group

 

Disclaimer: Nothing in this publication should be considered as personalized financial advice. We are not licensed under securities laws to address your particular financial situation. No communication by our employees to you should be deemed as personalized financial advice. Please consult a licensed financial advisor before making any investment decision. This is a paid advertisement and is neither an offer nor recommendation to buy or sell any security. We hold no investment licenses and are thus neither licensed nor qualified to provide investment advice. The content in this report or email is not provided to any individual with a view toward their individual circumstances. usanewsgroup.com is a wholly-owned subsidiary of Market IQ Media Group, Inc. (“MIQ”). MIQ has been paid a fee for MYM Nutraceuticals advertising and digital media. There may be other 3rd parties who may have shares in MYM, and may liquidate their shares which could have a negative effect on the price of the stock. This compensation constitutes a conflict of interest as to our ability to remain objective in our communication regarding the profiled company. Because of this conflict, individuals are strongly encouraged to not use this newsletter as the basis for any investment decision. The owner/operator of Canada News Group has purchased a total of two thousand shares of MYM Nutraceuticals in the open market and own an additional five hundred and fifty five five hundred and fifty five thousand shares purchased through a subscription agreement (along with a corresponding amount of warrants exercisable at .40 starting October 3, 2017) and have no plans on selling these shares in the next 72 hours (from June 19, 2017) but reserve the right to buy and sell shares in MYM Nutraceuticals, Inc. at any point after June 22, 2017 – No further notice shall be given.

While all information is believed to be reliable, it is not guaranteed by us to be accurate. Individuals should assume that all information contained in our newsletter is not trustworthy unless verified by their own independent research. Also, because events and circumstances frequently do not occur as expected, there will likely be differences between the any predictions and actual results. Always consult a real licensed investment professional before making any investment decision. Be extremely careful, investing in securities carries a high degree of risk; you may likely lose some or all of the investment

Top Stock Picks for the Week of Jan 29, 2018

by

Caterpillar Inc. CAT recently kept its great 5-year earnings streak alive as it beat fourth quarter estimates by 22%. The construction and mining equipment maker is expected to grow earnings by 22% in 2018. It also is shareholder friendly with a dividend yield of 1.9%. With estimates on the increase in for 2018, it’s a Zacks Rank #1 (Strong Buy).

JPMorgan Chase & Co JPM is one of the largest banks in America. It also recently reported fourth quarter results and beat the Zacks Consensus by 4%. Thanks to a growing global economy, and US tax reform, earnings are expected to rise 27% in 2018. It also pays a dividend, currently yielding 1.9%. Despite a big rally in the shares in 2017, they’re still cheap. JPM trades with a forward P/E of just 13. It’s a Zacks Rank #2 (Buy).

A medical advance is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating substantial revenue, and even more wondrous products are in the pipeline.

Inflation’s return could shock a generation that’s never seen it: Don Pittis

by

Canadians under fifty have never experienced serious inflation in their adult lives

How will Canadians who have never seen serious inflation react if it comes back?

Friday’s headline cost-of-living numbers showed prices are on the way down. They may have been deceptive.

Beneath the headline figures lurk signs inflation is brewing in Canada, part of a trend that is emerging around the world.

For a generation that has never experienced serious inflation, a trend toward steadily rising prices may mean a younger generation doesn’t realize it could happen.

Inflation’s big surprise

“We’re moving into difficult territory. Inflation could be the big surprise of this year,” UBS chair Axel Weber, former chief of the German central bank, told the London Telegraph at last week’s World Economic Forum in Davos, Switzerland.

The chair of international banking giant UBS, Axel Weber, warns inflation could be the big surprise of 2018.

While economists fear deflation, from the point of view of financial markets, new signs of inflation are worrying because they push interest rates higher, cutting the value of existing bonds.

Canadian borrowers know bond traders aren’t the only ones to be affected by rising rates. But it’s fair to ask why anyone would be worried about inflation in Canada when the official inflation rate has declined from an annualized 2.1 per cent to 1.9 per cent.

And the simple answer is that for people watching the inflation trend, the important number is core inflation. And core is rising.

“Two of the three [core] measures rose, with the trimmed mean up a tick to 1.9 per cent, the weighted median holding fast at 1.9 per cent, and the common component edging up a tick to 1.6 per cent,” Doug Porter, the Bank of Montreal’s chief economist, said in his Friday analysis of the Statistics Canada data.

A rising trend

The Bank of Canada and other central banks around the world use core, not headline consumer price index (CPI) to decide whether inflation is on the way up and whether they must begin to raise rates to combat it.

While Canadians saddled by rising debt payments may disagree, many economists will tell you that inflation is not a bad thing.

In the world’s rich countries inflation has been almost non-existent meaning its sudden arrival could come as a shock.

“I think right now, we’re finally where we want to be with our levels of inflation,” said Luba Petersen, a research economist who does experiments on the behaviour of people exposed to rising prices under laboratory conditions.

Anything below three or four per cent inflation can remain stable and actually be healthy for an economy, said Petersen an assistant professor at Simon Fraser University. But a sudden change in inflation could affect people who have never experienced it before.

“We’ve had a generation of young people who have seen hardly any inflation and there has been some experimental work . . . showing that young people overreact to their recent experiences,” Petersen said. “If, for example, were were to get a big spike in inflation, we might expect that young people would overreact.”

Eager to raise rates

She said that could have the effect of propelling inflation even higher.

But Petersen is convinced that the world’s central bankers would be quick to jump on any real signs of rising prices.

“If inflation did start rising, central banks would be eager to raise rates,” she said.

Economist David Laidler is not so sure. In his nearly 80 years, the professor emeritus at Ontario’s Western University has seen repeated bouts of serious inflation.

In 1955, U.S. central banker William McCheney Martin made a famous admonition on the importance of raising rates early to keep inflation under control. But since then, Laidler has lived through repeated bouts of sharply rising prices. Somehow, central banks just couldn’t seem to bring themselves to raise rates soon enough.

“I’m old enough to have seen that happen,” says Laidler, who experienced a bout of 25 per cent inflation in the 1960s in the U.K. that got him into financial trouble. He also lived through two sharp spikes in the 1970s and 1980s where inflation kicked up into the teens.

From his own experience, he described how people who have never seen inflation would experience it

“They would see price labels in the supermarket that seem to have been there forever suddenly creeping up,” he says. “They would see gas suddenly not quite going back down after it’s gone up. After a little while, they would see the interest rate on their mortgage going up and they’d be kicking themselves because they hadn’t taken the fixed rate, which seemed so incredibly high.”

At the beginning, he said, wages rise too. That makes people feel rich and spend more than they otherwise would.

But how could it happen? Some economists believe that the effects of cheap money and high public debt really have been stimulating the economy, creating pent-up inflation that will eventually show itself. Others say the rise in house prices has not been correctly counted in inflation and will only show itself as interest rates rise.

“One of the things that really drove inflation in the 60s and the 70s was that the U.S. gave up on reasonable economic policy,” Laidler said.

With huge government deficits from the Vietnam war, the central bank was directed to let the government keep spending by buying up bonds, he said.

“There was a kind of looking the other way in American politics that let inflation get out of hand.”

We want more colorful phones, and LG’s delivering with bright new G6 and Q6 models

by

LG G6

Phones don’t have to be black, silver, or gold. There are a few other colors for companies to choose from, and the message seems to be getting through. LG is the latest to launch a complete new color run of not just the LG G6, but the cheaper LG Q6 too. There are three new colors for the G6, bringing the total available to eight, and two new colors for the LG Q6, giving you seven to choose from overall. South Korea will be first to get the new G6 and Q6 range in February, with other countries to follow afterwards. LG has not released prices or other exact release dates.

The G6’s new colors have been carried across from the LG V30, with Moroccan blue, lavender violet, and raspberry rose making the phone even better looking than before. We’re still huge fans of the ice platinum and mystic white colors, but also like the marine blue option. These three existing hues are joined by astro black and terra gold. For the LG Q6, all of the above colors also exist, and are now joined by Moroccan blue and lavender violet. LG seems to be restricting the raspberry rose to its flagship phones.

Despite coming up for its first birthday, the LG G6 remains a very modern looking, stylish phone, mostly due to the 18:9 aspect ratio screen — which at the time was an industry first. While it was a little expensive at launch, it’s now possible to buy the G6 for $600 without a contract, making it good value. The LG Q6 is considerably cheaper and shares a similar look, but not the same level of functionality. However, if you can live with Amazon’s ads and promotions, you can pick one up for $180 through an Amazon Prime Exclusive offer. If not, the Q6 can be purchased for $300.

These new colors help revive interest in the G6 ahead of Mobile World Congress, where the phone was launched in 2017; but there are rumors its successor won’t arrive at the 2018 show. An LG executive said the company would launch new smartphones, presumably including the LG G7, “when the time is right,” and not just when other manufacturers do so. Samsung will launch the Galaxy S9 and MWC 2018, which may have put LG off trying to share the limelight. For now, it seems new G6 and Q6 colors are all we’re going to get for a few months.

B.C. Transplant attributes ‘cultural shift’ for increase in donations

by

Discussion with patients and families has changed, talks led by trained educators on end-of-life options

B.C. Transplant placed special nurse educators in health authorities across the province who were trained to support ICU and ER staff and patient families, during end-of-life discussions. They’re now starting to see the results.

Training and awareness programs are boosting B.C.’s organ donations, with a 25 per cent increase in deceased donors making 2017 a record-breaking year.

More donations of lungs and kidneys led to 479 lives saved in the province last year, and Dr John Yee, the medical director of the B.C. Lung Transplant Program, said the increase is a result of seeds that were planted almost 10 years ago.

B.C. Transplant placed special nurse educators in health authorities across the province who were trained to support ICU and ER staff, and patient families, during end-of-life discussions.

“Prior to this, the conversations with families were ad-hoc and often very pressurized due to the rawness of emotions amongst family members and the workload pressures faced by staff in the ER and ICU,” Yee told On The Coast host Gloria Macarenko.

“Over the years, we had trained people whose sole purpose was to help facilitate end-of-life discussions and to include organ donation as a normal option for families.”

Yee noticed a cultural shift in the way patients and families viewed organ donation as the conversation evolved.

“Organ donations helps to partially heal the overwhelming grief that comes with the loss of a family member… Knowing that many lives will be saved, or significantly prolonged, from an unselfish gift at the time of incredible tragedy provides some meaning and measure of comfort in the face of loss,” he said.

Overdose deaths and donors

In response to how the opioid crisis has affected donations, Yee said that they only see traces of fentanyl in about 20 per cent of donated organs and it’s not necessarily the cause of death.

In many cases, overdose victims are found dead in the community, which excludes them from being possible donors, because the organs need to be harvested and preserved shortly after the patient is pronounced dead.

But because opioids are short lasting within the body, drug users are still eligible to donate their organs, which is a fact Yee said physicians are transparent about when discussing transplants with recipients.

“We make recipients aware that there is a drug history involved, but we also make them aware that all testing has been done and that these organs are completely safe for implantation.”

“As much as we like to be transparent about the fact that drugs were involved with the donor, that is not a no-fly zone for the system, and the organs remain perfectly safe for implantation,” he said.

Industrials ETFs in Focus on Q4 Earnings

by

The earnings season is off to a flying start with equity markets scaling record highs, owing to a slew of upbeat economic data, strong corporate performance and President Donald Trump’s tax reform signed into law. However, the performance has been a mixed bag for industrials companies, with some beating market expectations, while a few failing to do so.

We will now discuss the performance of a few industrials giants such as General Electric GE, 3M Company MMM, Honeywell HON, Caterpillar Inc CAT and Union Pacific UNP.

General Electric

Shares of General Electric Company declined around 2.4% on Jan 24, 2018, as it failed to beat the Zacks Consensus Estimate on both earnings and revenues.

The company’s revenues of $31.402 billion decreased 5.1% in fourth-quarter 2017 on a year-over-year basis. Moreover, revenues decreased 6.2% on a sequential basis and came in below the Zacks Consensus Estimate of $32.693 billion. For full-year 2017, the company reported a loss of $1.13 per share against a profit of $0.40 per share in the prior period. It reported revenues of $31.402 billion in 2017 compared with $33.088 billion in the prior year.

General Electric reported non-GAAP earnings per share (EPS) of $0.27 for fourth-quarter 2017, decreasing 41.3% year over year and 6.9% on a sequential basis. Also, it failed to beat the Zacks Consensus Estimate of $0.28. However, GE offered upbeat guidance for 2018, as it expects adjusted EPS in the range of $1.00-$1.07 in 2018.

3M Company

Shares of 3M Company increased more than 2.0% at market close on Jan 25, 2018, after it beat the Zacks Consensus Estimate on both earnings and revenues.

The company’s revenues increased 9.0% in fourth-quarter 2017 on a year-over-year basis. However, revenues decreased 2.2% on a sequential basis. Moreover, revenues of $7.990 billion beat the consensus mark of $7.878 billion. Revenues for full-year 2017 were $31.657 billion compared with $30.109 billion in the prior year. Non-GAAP earnings per share increased 12.4% year over year in 2017 to $9.17.

3M Company reported non-GAAP earnings per share (EPS) of $2.10 for fourth-quarter 2017, increasing 11.7% year over year but decreasing 9.9% on a sequential basis. Also, it beat the Zacks Consensus Estimate of $2.03. The company now expects earnings for 2018 in the range of $10.20 to $10.70 per share, up from earlier projections of $9.60–$10.00.

Honeywell

Shares of Honeywell increased almost 1.9% at market close on Jan 26, 2018, after it surpassed the Zacks Consensus Estimate on both earnings and revenues.

The company’s revenues increased 8.6% in fourth-quarter 2017 on a year-over-year basis. Also, revenues increased 7.1% on a sequential basis. Moreover, revenues of $10.843 billion beat the consensus mark of $10.689 billion. Revenues for full-year 2017 were $40.534 billion compared with $39.302 billion in the prior year. Non-GAAP earnings per share increased to $7.11 in 2017 from $6.46 in 2016.

Honeywell reported non-GAAP earnings per share (EPS) of $1.85 in fourth-quarter 2017, increasing 6.3% year over year and 5.7% on a sequential basis. It surpassed the Zacks Consensus Estimate of $1.84. Moreover, Honeywell updated full-year 2018 EPS guidance range to $7.75-$8.00 per share, up from earlier expectations of $7.55−$7.80.

Caterpillar Inc

Shares of Caterpillar increased 0.3% at market close on Jan 25, 2018. Although fears of a trade war weighed on the stock’s performance, it bounced back after the company surpassed the Zacks Consensus Estimate on both earnings and revenues. President Donald Trump imposed a 30% tariff on solar power imports recently, sparking fears among analysts that steel and aluminum imports may be next.

The company’s revenues increased 34.7% in fourth-quarter 2017 on a year-over-year basis. Moreover, revenues increased 13.0% on a sequential basis. Revenues of $12.896 billion beat the consensus mark of $12.012 billion. Revenues for full-year 2017 were $2.689 billion compared with $2.595 billion in the prior year. Adjusted earnings per share increased to $6.88 in fiscal 2017 from $3.42 in the prior period.

Caterpillar reported non-GAAP earnings per share (EPS) of $2.16 for fourth-quarter 2017, increasing 160% year over year and 10.8% on a sequential basis. Also, it beat the Zacks Consensus Estimate of $1.77. Moreover, Caterpillar initiated adjusted earnings per share guidance to the range of $8.25-$9.25 for 2018.

Union Pacific

Shares of Union Pacific decreased almost 5.4% at market close on Jan 26, 2018, after surpassing the Zacks Consensus Estimate on revenues but failing to beat the earnings consensus.

The company’s revenues increased 5.5% in fourth-quarter 2017 on a year-over-year basis. Also, revenues increased 0.8% on a sequential basis. Revenues of $5.450 billion beat the consensus mark of $5.409 billion. Revenues for full-year 2017 were $21.2 billion compared with $19.9 billion in the prior year. Adjusted earnings per share increased to $5.79 in fiscal 2017, up 14% from the prior period.

Union Pacific reported non-GAAP earnings per share (EPS) of $1.53 for fourth-quarter 2017, up 10.1% year over year and 2.0% on a sequential basis. It missed the Zacks Consensus Estimate of $1.54.

In the current scenario, we believe it is prudent to discuss the following ETFs that have a relatively high exposure to the industrial companies discussed (see all Industrial ETFs here).

Industrial Select Sector SPDR Fund XLI

This fund focuses on providing exposure to the U.S. industrial sector. It has AUM of $15.6 billion and charges a fee of 14 basis points a year. It has a 6.0% allocation to 3M Co, 5.0% to Honeywell, 4.3% to Union Pacific, 4.0% to Caterpillar and 3.9% to General Electric (as of Jan 26, 2018). The fund has returned 27.4% in a year and 6.6% year to date. XLI has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

Vanguard Industrials ETF VIS

This ETF is a pure play on the U.S. industrials sector. It has AUM of $3.9 billion and charges a fee of 10 basis points a year. It has a 5.0% allocation to General Electric, 4.6% to 3M, 3.6% to Honeywell, 3.5% to Union Pacific and 3.1% to Caterpillar (as of Dec 31, 2017). The fund has returned 24.5% in a year and 5.9% year to date. VIS has a Zacks ETF Rank of 3 with a Medium risk outlook.

iShares U.S. Industrials ETF IYJ

This ETF is a relatively costly bet on the U.S. industrial sector. It has AUM of $1.3 billion and charges a fee of 44 basis points a year. It has a 4.2% allocation to 3M Co, 3.8% to General Electric, 3.4% to Honeywell, 2.9% to Union Pacific and 2.7% to Caterpillar (as of Jan 26, 2018). The fund has returned 28.7% in a year and 7.3% year to date. IYJ has a Zacks ETF Rank of 3 with a Medium risk outlook.