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CHDN, AMC, FMS, OMI and TMO as Zacks Bull and Bear of the Day

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·13 min read
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For Immediate Release 

Chicago, IL – September 11, 2020 – Zacks Equity Research highlights Churchill Downs CHDN as the Bull of the Day and AMC Entertainment AMC as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Fresenius Medical Care AG & Co. KGaA FMS, Owens & Minor, Inc. OMI and Thermo Fisher Scientific, Inc. TMO.

Here is a synopsis of all five stocks:

Bull of the Day:                                                 

Churchill Downs shares are off to the races with its shares illustrating a 185% appreciation from its March lows and the rally looks far from over. This gambling titan managed to stay relatively buoyant in the heat of the medically induced economic coma, and with its operations beginning to reopen fully, its future looks bright. Analysts have become increasingly optimistic about CHDN pushing both price targets and earnings estimates, propelling the stock into a Zacks Rank #1 (Strong Buy).

The Business

Churchill Downs is globally recognized for its iconic horse-racing event, The Kentucky Derby, but its operations encompass a much broader gambling platform portfolio. The company operates 7 casinos with 3 hotels, 2 casino joint ventures, as well as 11,000 slot machines and 200 table games across 8 states.

The enterprise has been capitalizing on the newly authorized online sports betting, which was just made federally legal after the Professional & Amateur Sports Protection Act was struck down in May of 2018. Churchill Downs operates the largest online horse race betting platform in the US, TwinSpires, as well as sports betting and iGaming platform, BetAmerica.

The Pandemic Effect

Churchill Downs has seen an accelerating topline over the past few years, with the exception of the past two quarters. The global pandemic put a short-term damper on this enterprise's operations. They were forced temporarily to shut down their horse tracks, casinos, hotels, and not allow patrons at its biggest annual event (The Kentucky Derby). 

With operations slowly reopening, I anticipate this business to come out of the pandemic stronger than ever.

The world has an appetite for gambling these days, and the stock market has been the latest conduit, with 10s of millions rushing to their online brokerage of choice. The 'pandemic traders,' as I like to call them, have been betting big on bullish out-of-the-money (OTM) call options, hoping to get rich quick. I suspect that Churchill Down's and its reopening gambling operations will be met with strong demand.

Technical Support

CHDN has been driving robust returns for its investors for years through healthy organic growth and savvy acquisitions. This stock is outperforming the broader market on effectively every timescale you could measure it on.

Over the past 5 years, the shares have appreciated 276%, almost 4 times what the broader S&P 500 was able to produce. Now CHDN is teetering at a level with its February highs representing a support.

It appears that CHDN is poised to jump off this support level once operations are fully functional again. Churchill Downs is a robust play for the economic recovery, and its capital gains potential is enormous in the long-run.

I suspect that this enterprise's savvy management team may be able to pick off some synergy driving acquisitions amid this period of financial distress in the entertainment sector. Either way, I have confidence that the executive team will continue to drive the same growth figures they have produced over the last decade.

Final Thoughts

Market volatility remains high as the election approaches, and many tech stocks reach frothy levels. This is an excellent long-term play if you can stomach short-term volatility. CHDN a beta above 1, so it is subject to broader market pull-backs, but I believe these shares will produce a strong alpha throughout the roaring 20s.

Bear of the Day:

The movie industry is in duress, and theaters are getting the brunt of the blow. The movie theater space has been suffering for years as many consumers favor streaming from the comfort of their own homes to making the long trek to their local theater.

AMC Entertainment has been fighting this trend with everything they have, including a subscription-based offering. The pandemic may have put the nails in the coffin of this seemingly antiquated movie theater giant. Analysts have been slashing their EPS estimates to a deeper bottom line deficit for years to come, pushing AMC into a Zacks Rank #5 (Strong Sell).

Death By Streaming

Movie theaters are treading water in the video streaming economy today, hitting the media segment like a tidal wave. Subscription streaming services like Netflix, Amazon Video, Disney+, Hulu, HBO Max and Peacock keep providing more and more content for seemingly unlimited viewing pleasure. There is no longer a necessity to go to the theater for entertainment, with the explosion of new streaming services completely disrupting the space.

Those film connoisseurs are still out there who want to see every movie right when they hit the silver screen, but they don't need AMC's massive empire of theaters to do so. There are enough local arthouse and boutique theaters to meet recently niched consumers’ needs.

Pandemic's Nails In The Coffin

AMC hasn't posted an annual profit (on an adjusted basis) since 2016, and every year it seems to be falling deeper into the hole. This pandemic may have been the straw that broke this theater chain's back with all its locations forced to shut down temporarily.

This movie giant, unsurprisingly, had its worst 6 months in history this year. It illustrated massive topline declines and a 2-quarter deficit of $2.7 billion, which almost quadruples all of the enterprise's annual profits combined (at least since 2013 when the company went public).

AMC has been fighting to avoid bankruptcy throughout the first half of 2020, renegotiating almost all its global leasing terms and raising $500 million in a desperate bond issuance. These bonds were not only first-lien secured but yielded investors 10.5%, not to mention being sold at a discount of 98 cents on the dollar. These were extremely unfavorable terms for this theater chain, but this extremely unfavorable economic climate forced their hand.

These bonds' value slid significantly in the months that followed its issuance as its rating fell deeper into probable default territory. AMC's bonds are currently rated Caa3 on Moody's scale, meaning that default is imminent with little prospect for recovery.

Final Thoughts

AMC shares boomed over 16% yesterday as speculative traders looked for a reason to buy this seemingly "cheap" stock as the chain reopened an additional 170 locations. I wouldn't touch this stock with a 50-foot pole.

This stock currently has no buy ratings and is trading 52% above the average price target. Beware of these toxic shares.

Additional content:

3 MedTech Outperformers to Grab as Pandemic Conditions Continue


The coronavirus pandemic threw a curveball that has impacted every facet of life and the MedTech industry has been no exception to the trend. However, going by the first half of the year, MedTech has been more resilient compared to other industries despite the worldwide manufacturing halt and supply chain disruption.

Since the reopening of the economy (with lockdown restrictions gradually lifted around May and June), the optimism among investors is palpable. However, market watchers remain skeptical about the economic scenario as spike in infections continue to plague several regions of the United States amid bleak prospect of vaccines.

While most sectors are struggling to cope with the market turmoil, the MedTech space has been benefiting from the growing worldwide demand for critical products and services. Hence, it may be prudent to invest in this space at the moment to capitalize on the prospects.

MedTech’s Pandemic Takeaways

If we look closely, the impact of the pandemic on MedTech has been mixed so far.

Postponement of elective and non-critical procedures (creating a dent on MedTech sales) came as a blow to most players in this space. Although key markets like the United States have taken steps to resume elective procedures, Moody’s anticipates earnings for the next 12 to 18 months to be flat (down from 2-4% growth per the prior prediction).

Moreover, according to Moody’s analysts, as per a MedTech Dive report, MedTech behemoths have high fixed costs associated with infrastructure such as manufacturing plants. Consequently, the fixed costs will make it difficult for companies to lower spending at the pace of revenue declines.

Also, diagnosis and treatment of COVID-19 patients became the top priority of health care facilities and first responders. Due to this scenario, ongoing and prospective clinical trials and product approvals will face delays.

Nonetheless, there have been areas where MedTech companies benefited from this pandemic as it drove their growth prospects and the momentum is likely to sustain for the remainder of the year.

Digital healthplayed a crucial role during this public health crisis and continues to do so. The pandemic fueled rapid growth and adoption of digital health technologies such as telemedicine and remote patient monitoring, which helped the companies involved in the same to gain immensely from it.

Prospects of diagnostic testing are also immense as some of the key molecular diagnostic players are showing potential on account of rigorous work on development of diagnostic testing for the coronavirus and attaining regulatory approvals for them.

3 Top MedTech Picks to Add to Your Portfolio Now

Going by the aforementioned discussion, investors might take a look at these three stocks that have capitalized on the COVID-19 pandemic.

To narrow down the list, we have selected stocks with a VGM Score of A or B. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy), offer the best upside potential. You can see the complete list of today’s Zacks #1 Rank stocks here.

Fresenius Medical Care AG & Co. KGaAis a key integrated provider of products and services for dialysis patients. In July, this Zacks Ranked #2 company with a VGM Score of A, reported solid second-quarter 2020 results. A wide range of dialysis products and services instills optimism in the stock. Management expects to undertake meaningful investments in 2020 to capitalize on opportunities and optimize cost base. Per the postulates of the ‘Growth Strategy 2020’, the company aims to boost revenues to $28 billion by 2020.

Year to date, shares of this company have gained 15.1%, compared with the industry’s rally of 12.5%. 

Owens & Minor, Inc.operates as a healthcare solutions company in the United States and internationally. The company exited second-quarter 2020 on a strong note with improved results courtesy of increased productivity, higher manufacturing output related to personal protective equipment (PPE), favorable revenue mix, and continued execution and delivery of operating efficiencies.

It achieved a milestone in the battle against the pandemic with nearly five billion units of PPE shipped since February 2020. Additionally, strong second-quarter performance enabled the company to double full-year 2020 adjusted earnings per share (EPS) guidance to $1-$1.20 and reconfirm double digit adjusted EPS growth in 2021.

Shares of this Zacks Rank #2 company, with a VGM Score of A, have gained 211.6% on a year-to-date basis, against the industry’s decline of 4.1%.

Thermo Fisher Scientific, Inc., a scientific instrument maker and a world leader in serving science, has taken significant strides with respect to coronavirus testing. The company’s real-time PCR test has got FDA’s EUA as well as CE mark in the European Union. In May, the company received an expanded EUA for its multiplex real-time PCR test intended for the qualitative detection of nucleic acid from SARS CoV 2. It also progressed with highly specialized viral transport media (VTM) for sample collection.

At the end of the second-quarter 2020, the company noted that its PCR-based workflow is widely utilized in 50 countries. The company ended the quarter with enough capacity to produce more than 10 million tests per week. Further, in terms of the development of therapeutics and vaccines, Thermo Fisher is partnering with a number of pharma and biotech customers who are working on coronavirus-related projects.

Year to date, shares of this Zacks Rank #2 company, with a VGM Score of B, have gained 28.7%, compared with the industry’s growth of 12.5%.

These Stocks Are Poised to Soar Past the Pandemic

The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.

Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

See the 5 high-tech stocks now>>

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Owens Minor, Inc. (OMI) : Free Stock Analysis Report
Fresenius Medical Care AG Co. KGaA (FMS) : Free Stock Analysis Report
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Churchill Downs, Incorporated (CHDN) : Free Stock Analysis Report
AMC Entertainment Holdings, Inc. (AMC) : Free Stock Analysis Report
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