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Cutera, Party City, Micron, Perficient and CACI highlighted as Zacks Bull and Bear of the Day

Zacks Equity Research

For Immediate Release

Chicago, IL – September 24, 2019 – Zacks Equity Research Cutera Inc. CUTR as the Bull of the Day, Party City Holdco Inc. PRTY as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Micron Technology Inc. MU, Perficient, Inc. PRFT and CACI International, Inc. CACI.

Here is a synopsis of all five stocks:

Bull of the Day:

Cutera Inc. is a company that designs, develops, manufactures, and markets the CoolGlide family of laser products. The original CoolGlide CV provides permanent hair reduction on all skin types, and the second generation CoolGlide Excel added the capability to treat a variety of vascular lesions like telangiectasia, spider and reticular leg veins. CoolGlide Vantage added non-ablative skin therapy to the company’s range of applications.

Q2 Earnings Fly Past Expectations

Overall, Cutera had a great second quarter. Revenue of $48 million beat our consensus estimate and rose 12% year-over-year, marking the highest sales level in the company’s history. Earnings of $0.04 per share easily beat the Zacks Consensus of a loss of 16 cents, with net income of $0.6 million.

The company saw strong growth internationally—revenue grew 36% year-over-year in its international segment—and nice gains across Japan, Europe, and Asia all contributed to Cutera’s growth this past quarter.

As a result, CUTR shot up 34% after releasing its Q2 earnings.

Year-to-date, CUTR is up nearly a whopping 90%. Estimates have been rising lately too, pushing the stock towards a Zacks Rank #1 (Strong Buy).

For the current fiscal year, Cutera’s earnings growth is expected to rise almost 73% year-over-year. Two analysts have revised their estimate upwards in the past 60 days, and the Zacks Consensus Estimate has jumped 16 cents higher from three cents to 19 cents per share during the same time frame.

2020 looks strong too, and earnings could see growth of roughly 116%; next year’s consensus estimate sits at 41 cents per share, with one upward revision in the last 60 days (though one analyst cut their estimate during the same time frame).

Bottom Line

Cutera has a new CEO at the helm, David Mowry, and he said in the company’s news release that he is confident “there are multiple pathways to sustain above-market growth, enhance the Company’s profitability, and be the supplier of choice in these exciting and growing markets.”

Looking ahead, Cutera looks to have a solid rest of the year ahead of it. It expects revenue to fall in the range of $165 to $175 million, reflecting a 2%-8% increase over 2018. Gross margin is also expected to expand compared to last year’s, while adjusted EBITDA is projected to be between $2 million and $4 million.

If you’re an investor looking for a computer and technology stock to add to your portfolio, make sure to keep CUTR on your shortlist.

Bear of the Day:

Party City Holdco Inc. designs, manufactures, and distributes party goods like paper and plastic tableware, metallic and latex balloons, Halloween and other costumes, accessories, novelties, gifts and stationery. It also operates specialty retail party supply stores throughout the U.S and Canada.

Last month, Party City reported weak second quarter results overall, and shares closed down over 18% that day. Earnings of 22 cents per share and revenue of $563.9 million both lagged the Zacks Consensus Estimate; comparable sales fell 2.1% year-over-year, while gross margin slumped 390 basis points to 37.1%.

Party City partly blamed tariffs on China for its disappointing performance, as well as “direct and indirect impacts of the helium shortages and higher helium costs in many of our markets,” noted CEO James Harrison in the company’s Q2 earnings release.

Analysts have since turned bearish on Party City, with five cutting estimates in the last 60 days for the current fiscal year. The Zacks Consensus Estimate has dropped 36 cents during that same time period from $1.66 to $1.30 per share. This sentiment has stretched into 2020, and our consensus estimate has also dropped 36 cents in the past two months.

GT is now a Zacks Rank #5 (Strong Sell).

Looking Ahead

Party City has cut its guidance for 2019, and now expects revenue in the range of $2.4 billion-$2.45 billion, down from a previous range of $2.49 billion-$2.54 billion. Comparable sales are projected to be flat to down 1% compared to 1% growth, and Party City’s bottom line is now expected to fall in the range of $1.26-$1.36 per share.

The party supply retailer is also closing down stores. It said it would sell all of its Canadian stores to Canadian Tire, and is planning on 55 more store closures this year.

In addition to a lowered outlook, Party City is dealing with a $1.9 billion debt burden.

Micron Technology (MU) to Post Q4 Earnings: What’s in Store?

Micron Technology Inc. is set to report fourth-quarter fiscal 2019 results on Sep 26.

Notably, the company’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, the average positive surprise being 10.3%.

In the last reported quarter, the company’s non-GAAP earnings of $1.05 per share outpaced the Zacks Consensus Estimate of 75 cents but declined from the year-ago quarter’s figure of $3.15.

Moreover, revenues dropped 33% on a year-over-year basis to $4.80 billion but exceeded the Zacks Consensus Estimate of $4.66 billion.

The year-over-year revenue decline was due to industry oversupply and higher-than-expected fall in DRAM and NAND pricing. Moreover, restriction on sales to Huawei negatively impacted the company’s DRAM and NAND revenues.

Estimates and Guidance for Q4

Micron projected revenues for fourth-quarter fiscal 2019 between $4.3 billion and $4.7 billion.

The Zacks Consensus Estimate is currently pegged at $4.51 billion, suggesting a decline of almost 46.51% from the year-ago reported figure.

The company envisions non-GAAP earnings to be roughly within 38-52 cents per share.

The consensus mark for earnings currently stands at 48 cents, indicating a plunge of 86.4% from the prior-year reported number.

Factors at Play

Micron is witnessing progress in customer inventory adjustments in most of its end-markets, making it anticipate bit demand for DRAM to resume healthy year-over-year growth from the fiscal fourth quarter onward. The company anticipates a strong uptick in DRAM bit shipments for the cloud, graphics and PC markets in the fiscal fourth quarter and thereafter.

In the automotive space, while slowdown in global auto sales is a woe, rising demand for in-vehicle infotainment and advanced driver assistance systems is likely to drive content growth at a steady pace.

Despite challenges, Micron’s focus on increasing the mix of high-value solutions in its portfolio is a tailwind. We also expect strong growth in managed NAND products to leave a positive impact on its Mobile Business Unit revenues in the fiscal fourth quarter.

Moreover, in the computing and networking business unit, normalized customer inventory levels — particularly in graphics and client — are expected to expand shipment volume in the to-be-reported quarter.

However, Micron’s overexposure in China makes the Sino-U.S. trade war a major overhang on the company. Moreover, starting mid-May, the company suspended its chip shipments to Huawei, a major customer, in response to the export ban imposed by the U.S. government. Even though the company has resumed shipment of select products to Huawei, the considerably lower revenues coming from such a sizeable customer are likely to remain a headwind on the to-be-reported quarter’s results.

Moreover, there is a glut in the market with surplus supply due to the industry’s transition from 2D NAND production to 3D NAND. Moreover, even though NAND bit demand is inversely related to price declines, NAND shipment growth in the fiscal fourth quarter is likely to be limited due to the ongoing transition of the SSD portfolio.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has maximum chances of beating estimates. Meanwhile, the Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Micron has a Zacks Rank #2 and an Earnings ESP of 7.64%. You can uncover the best stocks to buy or sell, before they’re reported, with our Earnings ESP Filter.

Stocks With Favorable Combination

Here are a couple stocks worth considering as our model shows that these have the perfect mix of elements to beat on earnings in the upcoming releases:

Perficient, Inc. has an Earnings ESP of +2.58% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

CACI International, Inc. has an Earnings ESP of +2.03% and a Zacks Rank #3.

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