For Immediate Release
Chicago, IL – July 20, 2020 – Zacks Equity Research Shares of Calix, Inc. CALX as the Bull of the Day, Weibo Corporation WB asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Lowe’s Companies, Inc. LOW, Sportsman’s Warehouse Holdings, Inc. SPWH and Patterson Companies, Inc. PDCO.
Here is a synopsis of all five stocks:
Calix is a Zacks Rank #2 (Buy) that has the growth divergence that I love to see. Tech stocks need to show a higher growth style score and a lower value score because that is just their nature. You want a tech name to be growing, not a solid value!
Let’s take a deeper look at CALX in this Bull of the Day article
Description
Calix, Inc. provides cloud and software platforms, and systems and services required to deliver the unified access network. The company’s cloud and software platforms, and systems and services enable communication service providers (CSPs) to provide a range of services, such as basic voice and data, and advanced broadband services. The company offers Calix Cloud, an analytics platform that leverages network data and subscriber behavioral data to deliver analytics and intelligence to communications professionals. Calix, Inc. was founded in 1999 and is headquartered in San Jose, California.
Earnings History
CALX has a great earnings history here, with 4 straight beats of the Zacks Consensus Estimate.
The average positive earnings surprise over that time period is 43%, so these are good-sized beats.
Estimate Revisions
As a Zacks Rank #2 (Buy) I see only small increases and that says a lot. Maybe 4 weeks ago this would have been a Zacks Rank #1 (Strong Buy) but it is clear that estimates across the whole market are starting to rise.
This quarter the Zacks Consensus Estimate has increased by a penny over the last 60 days while next quarter has held still.
The full year number has increased by two cents to $0.24 while next year has also increased by the same amount to $0.51.
I see the earnings growth rate at 100%+ so that bodes well for long term holders.
Valuation
The valuation here is stiff with the forward PE of 62x and the price to book multiple at 5.6x is also a little high. Growth of 13% in the most recent quarter was probably impacted by COVID… so I am looking forward to those numbers lifting again soon. The price to sales multiple of 1.9x is nice to see (in that it is above 1x which tells me the market values each incremental dollar of revenue) and I am looking for some improvement in margins to continue.
Weibo Corp has slipped to a Zacks Rank #5 (Strong Sell) and to add insult to injury the Zacks Style Scores for Growth and Value are both F’s. Let’s take a deeper look at this stock in this Bear of the Day article.
Description
Weibo Corporation operates as a social media platform for people to create, distribute and discover Chinese-language content. The Company operates in two segments: Advertising and Marketing Services, and Other Services. The company offers self-expression products; social products; discovery products; notifications; third-party online games.
Weibo also develops mobile apps, such as Weibo Headlines; Weibo Weather and WeiDisk. It also provides advertising and marketing solutions, including social display ads and promoted marketing products. Weibo Corporation is headquartered in Beijing, China.
Earnings History
The earnings history for a stock plays a role in the Zacks Rank, but not as big as earnings estimate revisions.
That said, I see a good earnings history with the company topping the Zacks Consensus Estimate in each of the last four quarters.
Estimate Revisions
Changes in estimates from sell side analysts change the consensus number. When the consensus moves lower, the Zacks Rank tends to follow that movement.
Quarterly estimates for any stock don’t carry that much weight, but it is good to look at them just the same.
WB has seen no movement in this quarter, but next quarter I see a decrease in the Zacks Consensus Estimate. The number moved from $0.74 to $0.67 over the last 60 days.
The full year 2020 numbers have slid from $2.37 to $2.18 over the same time period.
2021 numbers have dropped from $2.97 to $2.78.
When estimates fall, the Zacks Rank also tends to fall.
Valuation
I see a forward PE of 16.5x which is cheap for a tech name like this, but I also see a topline contraction of 19% in the most recent quarter. That is not something any investor wants to see. Margins have slipped over the last few quarters and that pattern can lead to lower EPS even without the revenue decreases, but when there are fewer revenue dollars and smaller margins, EPS numbers can fall dramatically.
Additional content:
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Lowe’s Companies
After three consecutive quarters with small earnings beats, Lowe’s suddenly topped expectations by 37.2% in its fiscal first quarter. So what could have happened?
Well, millions of people (who were fortunate enough to keep their jobs) swarmed into this home improvement giant in hopes of keeping their sanity during this shutdown by doing some work around the house. If you’re going to be stuck in one place for months on end, then it might as well be comfortable, visually appealing and not have that annoying drip-drip-drip from your bathroom faucet.
As a result, the building products – retail space is in the top 9% of the Zacks Industry Rank. And LOW’s shares have jumped approximately 111% from the coronavirus low on March 23.
The quarter included earnings per share of $1.77 that improved 45% year over year and topped the Zacks Consensus Estimate by the aforementioned 37%. Sales of $19.7 billion advanced 10.9% from last year and beat expectations of $18.3 billion.
Furthermore, same-store sales were up 11.2% and online sales increased 80% as LOW managed to get a piece of the “stay home” economy while remaining a brick-and-mortar powerhouse.
The company took several actions to adjust operations during the coronavirus, including withdrawing its fiscal 2020 guidance. Such a move is par for the course at a time of such uncertainty, but it hasn’t swayed analysts from raising their expectations.
The Zacks Consensus Estimate for this fiscal year (ending in January 2021) is $6.67, which is up 13.7% over the past 60 days. Next fiscal year doesn’t end until January 2022, but it has already advanced 7.1% in that time to $7.22.
Therefore, analysts currently expect earnings growth of 8.4% next year over this year, and there’s plenty of time for that to improve as we move forward.
Sportsman’s Warehouse
No matter how perfect you’ve prepared your place for the long haul of this pandemic, there comes a time when you just have to get out. And you need more than just a walk around the block or lunch at an outdoor patio. We’re talking about getting away for a while.
With public gatherings on hold for now, one of the best places to take a vacation is the great outdoors. But first you need to take a trip to Sportsman’s Warehouse.
The company is an outdoor sporting goods retailer, which sells all the stuff you’ll need to go fishing, camping, hiking or hunting. These activities are so popular during the coronavirus that shares of SPWH have soared approximately 193% since March 23.
In its fiscal first quarter, the company earned a penny per share. That may not seem like a lot, but it’s a huge improvement over the six-cent loss that was expected and the 12-cent loss from the previous year. The earnings surprise came to more than 116%!
Revenue of $246.8 million jumped nearly 42% from last year and also topped the Zacks Consensus Estimate by almost 7%. Same-store sales were up 28.6% in the quarter year over year.
Unsurprisingly, SPWH doesn’t feel comfortable giving a forward guidance amid all the uncertainty right now, but analysts were still raising their estimates.
The Zacks Consensus Estimate for this fiscal year (ending January 2021) surged 28.6% over the past 60 days to 81 cents. Likewise, expectations for next fiscal year (ending January 2022) improved 21.4% in that time to 85 cents.
At the moment, analysts are only expecting a 5% improvement for next year over this one. However, this pandemic has opened new opportunities for a company like this one.
If you never went camping before because there was so much to do in town before the craziness started, then the experience can’t help but make new customers that will head back into the wilderness even when things return to normal.
Patterson Companies
What do your teeth and your pets have in common (other than yourself of course)? There’s a good chance they’re both served in some way by Patterson Companies, which is split into two segments: Patterson Dental and Patterson Animal.
The dental side provides things like consumables, equipment, software and even stationary to dentists, while the animal part provides veterinary supplies to clinics and shelters. Shares of the company have improved more than 55% since March 23.
PDCO was impacted by the coronavirus like most other businesses, but it still managed a solid fiscal fourth quarter report. It earned 43 cents per share, which improved by 16.2% from the previous year and beat the Zacks Consensus Estimate by more than 150%. The company has outperformed expectations in six of the previous seven quarters, including the last four straight.
Net sales of $1.29 billion were down year over year, but still beat the Zacks Consensus Estimate by 1.9%.
To combat the virus, PDCO took several additional actions, such as aggressive cost savings measures, the suspension of all non-essential capital expenditures and other liquidity preservation measures.
Everything was moving along just fine for fiscal 2020 before the coronavirus hit, but PDCO still managed solid results. Adjusted EPS of $1.55 improved 10.7% from last year, while revenues of $5.49 billion were only down 1.5%. Both the top and bottom lines beat expectations, though earnings did so by 10.7% while revenue only surpassed by 0.4%.
Speaking of annual results, analysts are expecting good numbers this fiscal year and next. Expectations for the year ending April 2021 are up 21.6% in the past 30 days to $1.35, while the year ending April 2022 has advanced 5% in that time to $1.68.
Therefore, even though they’re dealing with results far into the future, analysts expect profit growth of more than 24% for next fiscal year over this one.
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