For Immediate Release
Chicago, IL – December 3, 2019 – Zacks Equity Research Shares of Anaplan, Inc. PLAN as the Bull of the Day, Ryder System, Inc. R asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Applied Materials AMAT, Ubiquiti UI and Aspen Technology AZPN.
Here is a synopsis of all five stocks:
Bull of the Day:
Anaplan, Inc. has beat on the estimate all five quarters since it went public at the end of 2018. This Zacks Rank #1 (Strong Buy) is expected to grow revenue in the double digits both this year and next.
Anaplan runs a subscription-based platform in the category of Connected Planning. Its large global customers use the platform to connect people, data and plans to allow real-time planning and decision making.
The company has 20 global offices and more than 1,300 customers worldwide.
Another Beat in the Fiscal Third Quarter
On Nov 21, Anaplan reported its third quarter fiscal 2020 results and beat the Zacks Consensus for the fifth quarter in a row. It hasn't missed since its 2018 IPO.
Earnings were a loss of $0.08 versus the Zacks Consensus of a loss of $0.13.
Anaplan is a growth company and you can see that in the revenue which jumped 44% to $89.4 million year-over-year. Subscription revenue rose 47% to $79.7 million.
While it still saw a loss per share, it has been cutting that in the year-over-year numbers. The $0.08 loss in fiscal 2020 was down from the $0.18 loss in the third quarter of fiscal 2019.
It has cash and cash equivalents on hand of $310.8 million.
Raised Full Year Guidance
Given yet another beat and the hot revenue numbers, it's not surprising that the company raised its full year outlook.
Total revenue is now expected to be between $346 to $347 million, up from prior guidance of $339 to $343 million. That's revenue growth of 44.1%.
Non-GAAP operating margin is now expected to be in the range of negative 17% and 18%, down from the prior guidance of negative 19.5% and 20.5%.
Analysts are bullish on fiscal 2020 with 3 raising estimates to match the company's forecast in the last month.
The Fiscal 2020 Zacks Consensus Estimate has risen to a loss of $0.48 which is up from a loss of $0.68 just 3 months ago. That's earnings growth of 34% as the company lost $0.73 in fiscal 2019.
The analysts are also adjusting fiscal 2021 but 2 estimates have been cut in the last 60 days. However, it's moving in the right direction as the Fiscal 2021 Zacks Consensus has falling to a loss of $0.44 from a loss of $0.61 just 90 days ago.
Shares Soar in 2019
Anaplan was one of the hot IPO stocks in 2019, as shares have soared 97% year-to-date.
However, over the last 3 months, they have been treading water, and are actually down 2.3%.
The "pause" in the rally could be a buying opportunity for those looking for a mid-cap tech growth name.
For those investors looking for new technology names, Anaplan is one to keep on the short list.
Bear of the Day:
Ryder System, Inc. is still growing revenue but saw an earnings loss in the third quarter thanks to a change in vehicle residual value estimates of all power vehicles. This Zacks Rank #5 (Strong Sell) is expected to see earnings decline 81% in 2019.
Ryder operates in commercial fleet management, dedicated transportation and supply chain solutions.
Another Beat in the Third Quarter
On Oct 29, Ryder reported its third quarter results and beat the Zacks Consensus Estimate by 3 cents. Earnings were $1.52 versus the Consensus of $1.49.
It is on a beating streak as that was the 10th quarter in a row it met or beat.
Total revenue was up 3% to $2.2 billion.
Fleet Management saw revenue pop 4% to $1.4 billion from $1.34 billion a year ago. Dedicated Transportation Services also saw a 5% gain to $359 million. Only Supply Chain Solutions saw a drop, of 2%, to $618 million.
So what's the problem?
The used vehicle market softened in late second quarter and intensified in the third quarter which led to a triggering review and change in residual value estimates on all power vehicles.
The earnings outlook was adjusted downward even as it expects solid revenue growth.
New Full Year Guidance
The most significant negative impact to earnings will be in the third quarter, and is expected to decline each quarter after that but fourth quarter 2019 isn't going to be a picnic either.
As a result, the full-year 2019 EPS forecast was revised down to between $1.00 and $1.10.
9 estimates were revised lower, sending the Zacks Consensus down to $1.06 from $5.64. That's an 81% decline from 2018's $5.79.
2020's Zacks Consensus was also cut dramatically to $2.60 from $5.99 60 days ago. 2 more estimates were even cut in the last month which could indicate that the used vehicle market remains soft.
Shares Under Perform the S&P 500 in 2019
It's been a roller coaster ride ever since shares hit a new 52-week low at the end of December 2018.
They've gained just 7.6% in 2019, under performing the S&P 500 which is up 24% during that same time period.
However, the company is shareholder friendly. It has paid a quarterly cash dividend for 43 years, or 173 consecutive quarters.
It's currently yielding an impressive 4.2%.
But with the earnings guidance cut, the shares now look "expensive" on a P/E basis as they are trading at 49.7x.
The Zacks Ranks don't look great for most of the industry. The Transportation Equipment and Leasing industry is in the bottom 4% of the Zacks Industry Rank.
Watch Out for an Overvaluation Trigger: Global Week Ahead
This Global Week Ahead finishes with a U.S. nonfarm payroll report for November.
That is the KEY macro indicator -- at all times. Pay heed to that report on Friday. Its sister report from the ADP payroll company will foreshadow the Federal jobs data. It is out on Wednesday.
However, do not neglect an overpowering share price rally on Nasdaq-listed tech stocks. Sky-high valuations across numerous tech growth stocks look startling.
Want a straightforward example? I see the darling wireless equipment supplier Ubiquiti Networks trading near $200 a share, with a nosebleed 36 forward Price to Earnings ratio. That’s just past 2x the S&P 500 forward 12-month P/E ratio. You can understand my concern.
A Zacks #1 Rank (STRONG BUY) stock like this could be halved on no ‘new’ news.
The U.S. stock market has been rallying on euphoric forward-looking stories of earnings growth for some time. I can’t see any turndown either. I can only show you: these tech stocks look overvalued by a comfortable margin.
If a global macro catalyst, or a U.S. macro catalyst — out this week — changes this bullish tone, I would be surprised. The trend is still your friend.
Want an overvaluation shoe more likely to kick down growth stocks? Consider more and higher U.S. tariffs on Chinese goods imported into that major countries’ markets. I see the December 15th U.S. tariff increase deadline looming. Tech stocks have the most global supply chains.
Next, I reorder Reuters’ Five World Market Themes, in order of importance to equities.
(1) On Friday, Fresh U.S. Nonfarm Payroll Data Hits the Trading Tape
U.S. job creation has slowed this year, running around 167,000 per month, a quarter below the 2018 average. Still there’s no real sign that unemployment rates, near a 50-year low, are set to rise significantly. Non-farm payrolls, due on Dec. 6, are forecast to show 183,000 jobs were created in November, rebounding from October’s 128,000. The October figures were likely skewed by a workers’ strike at General Motors.
A forecast-beating number could further boost Wall Street, where stocks have repeatedly hit record highs. But markets are on the lookout for any signs of weakness; after all, labor markets are “not that strong everywhere,” UBS economists note, pointing to pockets of manufacturing and agriculture weakness.
(2) Asian Manufacturing PMIs Come Out
Manufacturing surveys will offer a checkup on Asia’s trade-war wounds, with the consensus forecast for a seventh straight month of shrinking factory activity in China, pressured by sluggish domestic demand and limp exports.
But the devil lurks in the details. Caixin’s PMI, a separate survey with a focus on smaller businesses, is expected to show a fourth straight month of expansion, which would leave a picture that looks increasingly like a two-speed economy.
Big industry — dominated by lumbering state enterprises — is shrinking, while private juggernauts such as Tencent, Alibaba and smaller e-commerce firms are soaring. Yet economic planners are biding their time, perhaps wary of creating a 2015-style runaway gravy train. While moves to ease monetary policy have so far been tentative, the PMIs may provide an additional push.
(3) OPEC Gathers for a Major Policy Meeting on Thursday, December 5th
Dec. 5 is shaping up to be a big day for oil markets. The Organization of the Petroleum Exporting Countries (OPEC) gathers for a policy meeting and the same day, OPEC’s biggest producer Saudi Arabia will give the final pricing for the IPO of state oil firm Aramco.
The IPO will be the elephant in the OPEC meeting room because the oil price at the time will be key to the listing, expected in mid-December.
A year ago, OPEC and non-OPEC countries agreed to lower crude supply by 1.2 million barrels per day to prop up prices in the face of slowing oil demand. In July, they extended that deal until March 2020.
Seasoned OPEC-watchers know never to exclude the possibility of a surprise decision but sources within the group seem pretty sure the supply-cut pact will be extended further into 2020. After all, an oil price tumble is something the Saudis won’t want to risk just as the Aramco shares list.
(4) NATO Celebrates 70 Years of Existence on Tuesday and Wednesday
Beneath the birthday bonhomie, tensions will be simmering as the transatlantic military alliance turns 70 and leaders of the 29 member states celebrate near London on Dec. 3-4.
U.S. President Donald Trump’s gripes about having to “subsidize” Europe is forcing it to contribute more, while French president Emmanuel Macron has ruffled feathers by calling NATO “brain dead” and suggesting a “strategic relationship” with Russia.
Expect heated debate over Turkey’s threat to vote against a defense plan for the Baltics and Poland unless NATO recognizes the Kurdish YPG militia as terrorists. Unlikely, given the YPG helped defeat Islamic State. So how do they pacify Turkish President Tayyip Erdogan while keeping the YPG on side?
And summit host Prime Minister Boris Johnson will hope Trump does not wade into the British election, which could be exploited by the opposition. Johnson seems assured of a majority and will not want to take chances just a week before polling.
As for NATO’s future role, the summit is will ask a group of “wise persons” to come up with suggestions, but they won’t report until the next summit in late-2021.
(5) Will Brazil See Big Economic Protests on Thursday?
South American leaders of the MERCOSUR trade bloc gathering in Brazil’s Bento Gonçalvea on Thursday to discuss tariffs won’t be short of talking points.
Waves of violent protest and social discontent sweeping across Latin America have already brought down Bolivia’s government and pushed currencies from Chile to Colombia to record lows while showing little sign of abating.
Brazil has so far avoided such unrest but its currency, the real, is at record lows, forcing authorities to intervene. Chile’s central bank is selling dollars amid the worst month for the peso since 2011, and an interest rate cut that was priced for December may now be in doubt.
There is no sign of relief for Venezuela, where the economy is contracting at double-digit rates. Finally, popular discontent has helped elect a center-left president in Argentina who will have to deal with a suffocating debt burden.
Top Zacks #1 Rank (STRONG BUY) Stocks
Applied Materials: This semi chip fabrication company is back to $58 a share, making it a $54.3B market cap company. The Zacks Value score is C and the Zacks Growth score is F.
How long does the stock market buy the story of a rebound in the chip markets, when there is no rebound to be seen? We shall see.
Ubiquiti: This is a $197 wireless equipment stock with a $12.7B market cap. There is a Zacks Value score of F and a Zacks Growth score of B.
How long do traders keep chasing this momo stock higher? When do they care about the nosebleed valuation score? We shall see.
Aspen Technology:This is a Computer Software industry stock. It has a $125 share price tag and a market cap of $8.5B. There is a Zacks Value score of F and a Zacks Growth score of F.
Here is a final tech momo stock. Unfortunately for me, I just see the F in Zacks Value and Zacks Growth. The bullish “QE” driven stock market does not care. Yet.
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