For Immediate Release
Chicago, IL – April 16, 2020 – Zacks Equity Research Shares of Avid Technology, Inc. AVID as the Bull of the Day, G-III Apparel Group, Ltd. GIII asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Schlumberger Limited SLB, Baker Hughes Company BKR and Halliburton Company HAL.
Here is a synopsis of all five stocks:
Bull of the Day:
Is it glass half empty, or half full, for Avid Technology, Inc. during the coronavirus crisis? This Zacks Rank #1 (Strong Buy) is seeing increased business in one division, but a slowdown in others.
Avid operates a media platform with comprehensive tools and workflow solutions to create, distribute and monetize media, including feature films, popular televisions shows, news programs, televised sporting events and music recordings and concerts.
Avid’s industry-leading solutions include Media Composer®, Pro Tools®, Avid NEXIS®, MediaCentral®, iNEWS®, AirSpeed®, Sibelius®, Avid VENUE™, Avid FastServe®™, Maestro™, and PlayMaker™.
Record Growth in New Paid Subscriptions in Q1
On Apr 7, Avid released a business update regarding the impacts of COVID-19 on its business.
It revised first quarter revenue guidance to be slightly above the prior guidance issued on Mar 7, to a range between $44.5 million and $46 million as it saw record growth in the quarter in terms of net new cloud-enabled software subscriptions.
Avid, however, did withdraw its full year guidance due to the coronavirus impacts.
Where the glass was half full was that Avid's customers include many leading television broadcast networks and stations around the globe and its solutions are relied upon to deliver the news and other essential programming.
That included the signing of a new, significant multi-million dollar cloud services agreement with a major media company to enable production with remote workers, including those working-from-home.
Working-from-home has become key for every media company during the coronavirus shutdown.
Recurring revenue, including subscription, was 62% of total revenue in 2019.
But the non-recurring portion of the company's business was hit due to the economic shutdown, including the postponement or cancellation of many music festivals and major sporting events along with the suspension of television and movie production.
Those cancellations negatively impacted the company's product sales.
Cash on Hand?
This is a small-cap company with a market cap of just $264 million.
But it had $81 million cash on hand as of the end of the first quarter, on Mar 31, 2020, which it considered to be "sufficient near-term liquidity" to manage through the impacts.
Avid was also aggressively reducing its cost structure and managing cash flow.
Earnings Still on the Rise
The reason Avid has maintained its Zacks Rank of #1 (Strong Buy) is because the analysts haven't cut the earnings estimates for 2020 or 2021 in the last 90 days.
Just the reverse.
2 estimates were raised for 2020 in the last 60 days, pushing the Zacks Consensus up to $0.86 from $0.81.
That is earnings growth of 68.6% as the company only earned $0.51 in 2019.
Analysts are still bullish on 2021 as well with 1 estimate being raised in the last 60 days which pushed the Zacks Consensus up to $1.10 from $0.95.
That's another 28.5% earnings growth.
Can these numbers still be achieved even with the COVID-19 impacts?
Only time will tell.
Shares Are Cheap
Like many stocks in 2020, Avid has sunk 29% year-to-date.
It's now trading at just 7.1x forward earnings.
Avid is in the hot computer software industry and is only one of two Zacks Rank #1 (Strong Buy).
Bear of the Day:
G-III Apparel Group, Ltd. is just trying to survive the coronavirus crisis. This Zacks Rank #5 (Strong Sell) has already fallen 71% year-to-date.
G-III Apparel is a specialty retailer which makes apparel and accessories under their own, licensed and private label brands.
G-III's own brands include well-known brands DKNY, Donna Karan, Vilebrequin, G.H. Bass, Andrew Marc, Marc New York, Eliza J and Jessica Howard.
It has licenses under Calvin Klein, Tommy Hilfiger, Karl Lagerfeld Paris, Kenneth Cole, Cole Haan, Guess?, Vince Camuto, Levi's and Dockers brands.
It also has a team sports business with licenses with the National Football League, the NBA, Major League Baseball, the NHL and over 150 U.S. colleges and universities.
In addition to wholesale business, it operates retail stores for DKNY, Wilsons Leather, G.H. Bass, Vilebrequin, Karl Lagerfeld Paris and Calvin Klein Performance names.
Further Actions Taken in April 2020
On Mar 31, after G-III Apparel had reported fourth quarter results, it provided another update on actions it was taking in response to the COVID-19 outbreak.
As of Mar 30, management voluntarily agreed to temporary reductions in annual salaries. The CEO and Vice Chairman of the Board and President agreed to receive no salary.
Several others agreed to a 40% reduction in their annual salaries.
Also effective Mar 30, the base annual salaries of other senior personnel was temporarily reduced by 10% to 40%, depending on salary levels.
G-III Apparel also furloughed 60% of its wholesale operations segment employees, which was effective Apr 6. These employees would continue to receive existing healthcare benefits.
The company already had closed retail stores in locations with government-mandated shutdowns.
It will reduce its retail workforce by 80%, effective Apr 6, through furloughs and staff reductions. All of the full-time retail business furloughed employees will continue to receive existing healthcare benefits.
Cash on Hand?
On Mar 19, G-III Apparel reported its fourth quarter and full year fiscal 2020 results.
It did not issue any fiscal 2021 guidance at that time.
The company also confirmed that as of the end of fiscal 2020, it had about $800 million in cash and availability under its bank facilities.
Full Year Estimates Slashed
After the fourth quarter earnings report, the analysts all cut Fiscal 2021 earnings estimates.
6 estimates were lowered in the last 30 days for fiscal 2021, which pushed the 2021 Zacks Consensus Estimate to $0.99 from $3.07. That's an earnings decline of 69% as the company earnings $3.19 in fiscal 2020.
But that was then, and this is now.
Each retailer is simply trying to survive this crisis and make it to the other side.
Are Shares Cheap?
Shares have fallen 71% year-to-date, but have rallied off their March lows. They're still at 5-year lows.
They now trade with a forward P/E of 10.5 but it's still not clear what the "E" is going to be for the full year.
What Does Coronavirus-Hit Q1 Hold for Oil Services?
Investors will get a brief idea on how oilfield service firms have fared in the recently completed coronavirus-marred first quarter from Schlumberger Limited’s earnings announcement, scheduled for Apr 17.
Although a weak oil pricing scenario and reduced capital spending by U.S. explorers played spoilsport, rising rig count in international markets may have lent some support.
Oilfield Service Business Overview
Oilfield service players offer technologies to oil and natural gas drillers for efficient drilling and setting up of wells. Among the services offered are manufacturing and mending of equipment, which are utilized for extracting crude from wells.
Notably, drillers are now specializing in horizontal or angled drilling since explorers and producers are not finding it profitable to employ vertical drilling techniques on many wells. Oilfield service firms help explorers drill horizontal wells more efficiently.
Overall, the fate of all oil service firms is positively correlated to crude prices and also to the capital investment decisions of E&P operators.
Oil Price Plunges in Q1
Per the U.S. Energy Information Administration (EIA), average prices of West Texas intermediate (WTI) crude for the last two months of the March quarter were recorded at $50.54 per barrel and $29.21 per barrel, respectively. In comparison, average prices of the commodity were recorded significantly higher at $54.95 per barrel and $58.15 per barrel, respectively, in the last two months of first-quarter 2019. Only, the first month of the March quarter witnessed an increase in WTI oil price.
Weak global energy demand owing to the coronavirus outbreak mostly led oil prices to trade in the bearish territory, especially in the last two months of the quarter. The last month saw the lowest price in first-quarter 2020, since OPEC and Russia failed to agree on how much oil production to cut amid the pandemic.
U.S. Spending & Rig Count Tank
The weak commodity pricing scenario has primarily led U.S. drillers to remove rigs from the oil and gas resources. Per data provided by Baker Hughes Company, the average count of rigs for the months of January, February and March of 2020 were recorded at 791, 791 and 772, respectively.
In the respective months of first-quarter 2019, the count of rigs was reported at 1065, 1049 and 1023. The significant fall in year-over-year monthly rig tallies reflects a steep fall in spending by American drillers. This has likely hurt demand for oilfield services in the United States.
International Spending the Lone Bright Spot
Meanwhile, the count of oil drilling rigs in the international market has increased year over year in each of the three months of first-quarter 2020, per data provided by Baker Hughes Company. This implies improved oilfield service activities as well.
3 Oilfield Service Giants Unlikely to Beat Earnings Estimates
Despite a favorable international business scenario, the weak North American oilfield service operations have most likely offset the positive. In fact, our proven model does not conclusively predict an earnings beat for oilfield service bigwigs, Schlumberger Limited, Halliburton Company and Baker Hughes Company, this time around. Notably, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Based in Houston, TX, Schlumberger Limited is scheduled to report first-quarter 2020 earnings on Apr 17, before the opening bell. Although Schlumberger has a Zacks Rank of 3, its Earnings ESP of -10.00% makes surprise prediction difficult.
Halliburton Company is scheduled to report first-quarter earnings on Apr 20, before the opening bell. The earnings beat is unlikely as the Houston, TX-based oilfield service firm has an Earnings ESP of -2.00% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Baker Hughes Company is set to report first-quarter earnings on Apr 22, before the opening bell. The firm has a Zacks Rank #3 and an Earnings ESP of -30.45%.
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Schlumberger Limited (SLB) : Free Stock Analysis Report
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Baker Hughes Company (BKR) : Free Stock Analysis Report
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