U.S. Markets close in 43 mins

Electro Scientific, Advanced Drainage Systems, Nvidia, Facebook and Sony as Zacks Bull and Bear of the Day

Zacks Equity Research
Northern Trust (NTRS) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

For Immediate Release

Chicago, IL – January 25, 2018 – Zacks Equity Research highlights Electro Scientific Industries ESIO as the Bull of the Day and Advanced Drainage Systems WMS as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Nvidia Corporation NVDA, Facebook, Inc. FB and Sony Corporation SNE.

Here is a synopsis of all five stocks:

Bull of the Day:

Electro Scientific Industries is a Zacks Rank #1 (Strong Buy) and recently guided higher. This caused the stock to rocket higher to the $27 range, but in recent trading the stock retraced back below $24.  The question is, should you be buying this stock?  Well, today, it is the Bull of the Day and this article might help you make that decision.

Description

Electro Scientific Industries supplies laser-based microfabrication solutions for the microtechnology industry worldwide. It provides printed circuit boards, including laser via drilling systems for electrical interconnect applications; micro via drilling technology that addresses the changing applications in integrated circuit packages, multichip modules, and high density interconnect circuit boards; and ultraviolet laser processing systems comprising single-beam and multi-beam systems. Electro Scientific Industries, Inc. was founded in 1944 and is headquartered in Portland, Oregon.

Guiding Higher

On January 17, the company raised guidance for the current quarter.  They now expect revenue to be $106M - $111M, up from $80M - $90M when the consensus was calling for $85M.  Management noted that EPS will come in above the previously guided to range ($0.48 - $0.60) when the consensus was $0.55.

This was a big guide higher, but it wasn't the first of its kind.

On November 1 the company set forth the original guidance during the previous earnings call.  At that time, the revenue estimate for the next quarter (the one that will be reported on 1/31) was $45M in revenue and $0.02 in EPS.

Earnings History

I see a very solid earnings history for ESIO, with four of the last four reports coming in ahead of the Zacks Consensus Estimate. In fact, the beats have not been small ones, they have been very large.  The average positive surprise is an impressive 110%.

Valuation

The multiples that I see on the Zacks Website make me scratch my head.  I see a 10x forward earnings multiple and a 40x trailing number.  That can happen when estimates skyrocket like they have for ESIO, so the real question is why investors haven't taken hold.  The price to book of 5x and price to sales of 3.3x are more or less in line with industry averages.

Analysts

Needham first moved their target to $27 following the November 1 earnings report.  Now they have moved their target to $35 and that is before the company is reporting earnings on 1/31.

It isn't a secret that I hold ESIO in Home Run Investor, a subscription service that send buy and sell alerts for small and mid cap stocks.  I tweeted some time back that Home Run added shares on October 25 at just under $17 a share.  Here is the tweet (https://twitter.com/bbolan1/status/925869286811488256) so think about this when ESIO reports again on January 31.

Bear of the Day:

Advanced Drainage Systems should probably be poised to move higher, but earnings estimates are moving lower and the purpose of this article is to show why this stock is the Bear of the Day.

Description

Advanced Drainage Systems, designs, manufactures and markets thermoplastic corrugated pipes and related water management products.The company was founded in 1966 and is headquartered in Hilliard, Ohio.

Tailwinds

Recently, the outline for the upcoming infrastructure bill was leaked and we saw a lot of places that a company like WMS could benefit.  I saw a lot of sewer and pipeline projects and I just skimmed the document - mostly because we cannot be sure that it is the real thing at this point.

The end idea is that there is going to be some major federal spending coming down the pike, but maybe this isn't in the analyst's models.

Earnings History

This is a mild sore spot for WMS.  The company has missed on 3 of the last four earnings reports.  That one that was not a miss was a meet, so no beats in the last four reports.

Estimate Revisions

The Zacks Rank is based on earnings estimates from analysts at multiple brokerage firms. When the consensus is moving lower, the stock tends to slide in terms of the rank.  Right now, we are seeing a host of company's raise guidance as a result of lower tax rates and those that are seeing even the smallest of decreases find their way to being the lowest Zacks Rank.

This is the case with WMS who has seen only a two penny move lower in earnings estimates for fiscal 2019. 60 Days ago, the Zacks Consensus Estimate was at $0.93 and now it is at $0.91.

This is not a huge move lower or one that would get this stock on your list of stocks to potentially short.   

The lesson learned from this Bear of the Day is that most stocks are seeing estimate increases.  That means the ones that are not moving significantly higher are being left behind. 

Additional content:

3 Blue-Chip Tech Stocks to Buy Now

The technology sector dominated Wall Street throughout 2017, and if the market’s reaction to the first wave of Q4 earnings reports is any indication, that trend should continue well into 2018. While many will feel that they have already missed their chance to win big on tech stocks, there are still plenty of opportunities to cash in as we head further into the New Year.

Of course, this is not the first notable tech rally. The cloud of the dot-com bubble still lingers over this sector, and plenty on Wall Street remain hesitant to load up on tech stocks because of it.

However, unlike the dot-com bubble, there is real earnings and revenue growth fueling this tech rally. In fact, the average P/E ratio of our “Computer and Technology” sector currently sits at 22.54, which compares favorably to the dot-com era’s average that routinely soared into the 200s.

Another interesting trend in today’s tech rally is that, rather than obsessing over the next big thing, investors seem to rewarding tried-and-true brands for their respectable growth. This means that some of the strongest tech stocks are the household names that consumers already know and love.

With that said, check out these three blue chip tech stocks to buy now:

1.       Nvidia Corporation

Thanks to its strategic investments in datacenters and artificial intelligence, Nvidia has emerged as one of Wall Street’s most popular stocks. Of course, the company’s industry-leading GPUs remain its backbone and are the number one choice for PC gamers worldwide. Nvidia shares have gained over 122% within the past year, and now that the stock sports a Zacks Rank #2 (Buy), it is showing few signs of stopping.

Our current consensus estimates are calling for Nvidia to end the fiscal year with earnings growth of 63%, and that expansion is expected to continue with EPS growth of an additional 12% next year. Nvidia is also expected to grow its revenues by another 16% in the upcoming year. What’s more, management is strengthening its financial stability with cash flow growth of 124% right now.

2.       Facebook, Inc.

Facebook is the world’s premiere social networking website, and through its WhatsApp and Instagram subsidiaries, the company has a stranglehold on internet advertising and communication. What’s more, Facebook has invested in original content and livestreaming and now stands ready to become a dominant multimedia force for years to come. The stock is currently a Zacks Rank #2 (Buy) and is widely considered a must-own internet play.

Despite pouring money into new projects in 2017, Facebook is still projected to end the fiscal year with earnings growth of 39%. And even though management has promised to spend money on security in the upcoming year, our consensus estimates are calling for further EPS growth of 13%. Meanwhile, shares are trading at a reasonable 29x earnings, and with the stock’s PEG ratio of just 1.07, investors are clearly getting a great price for that aforementioned EPS expansion.

3.       Sony Corporation

This Japanese electronics giant has a dominant position with many key products, including audio and video equipment, televisions, displays, semiconductors, electronic components, computers and computer peripherals, and telecommunication equipment. Sony is currently sporting a Zacks Rank #1 (Strong Buy) and looks like a promising tech stock for both the near term and in the coming years.

Sony shares have soared more than 65% over the past year, but the stock is still trading below 18x earnings and 0.90x sales. Meanwhile, management is generating $2.93 in cash per share, which should strengthen the company’s ability to invest in new technologies. Thanks to softer year-over-year comparisons, earnings growth is expected to fall in the triple digits this fiscal year, but that expansion is expected to continue with EPS growth of 8% next year.

Bottom Line

While there are no guarantees in the stock market, several bullish indicators point to continued strength in the tech sector. With corporate tax reform on the horizon and earnings growth already present, these blue chip tech companies should be able to continue their dominance.

Want more stock market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>

About the Bull and Bear of the Day

Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Strong Stocks that Should Be in the News

Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has more than doubled the market from 1988 through 2016. Its average gain has been a stellar +25% per year. See these high-potential stocks free >>.

Follow us on Twitter:  https://twitter.com/zacksresearch

Join us on Facebook:  https://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Media Contact
Zacks Investment Research

800-767-3771 ext. 9339

support@zacks.com

https://www.zacks.com

Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Advanced Drainage Systems, Inc. (WMS) : Free Stock Analysis Report
 
Facebook, Inc. (FB) : Free Stock Analysis Report
 
Sony Corp Ord (SNE) : Free Stock Analysis Report
 
Electro Scientific Industries, Inc. (ESIO) : Free Stock Analysis Report
 
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research