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Emissions Solutions, AutoNation, Xilinx, Cisco Systems and Qorvo highlighted as Zacks Bull and Bear of the Day

Zacks Equity Research
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For Immediate Release

Chicago, IL – April 22, 2019 – Zacks Equity Research Advanced Emissions Solutions ADES as the Bull of the Day, AutoNation AN asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Xilinx, Inc. XLNX, Cisco Systems, Inc. CSCO and Qorvo, Inc. QRVO.

Here is a synopsis of all five stocks:

Bull of the Day:

Advanced Emissions Solutions is a Zacks Rank #1 (Strong Buy) and it broke out the other day. Normally, I am all about growth stocks and topline is where I focus my attention, but this stock has some tremendous bottomline growth and I thought this would be a great chance to review it as a Bull of the Day.

Description

Advanced Emissions Solutions, Inc. develops, offers and implements environmental technologies, equipment and specialty chemicals that enable coal-fueled power plants to meet emissions regulations. It operates in three principal business segments: Refined Coal, Emissions Control and CO2 capture. The company also offers dry sorbent injection systems to control SO2 and acid gases. It operates primarily in the United States along with its subsidiaries. Advanced Emissions Solutions, Inc. formerly known as ADA-ES, Inc., is based in Highlands Ranch, Colorado.

Estimates

This quarter is looking at $0.64 when 60 days ago, the estimate was calling for $0.39. That is huge. But wait there is more.

Next quarter has $0.87 when 60 days ago, the estimate was calling for $0.54. That is huge. But wait there is more.

2019 is slated to come in at $3.39 when 60 days ago, the estimate was calling for $2.50. That is huge. But wait there is more.

2020 has a $5.90 number when 60 days ago, the estimate was calling for $4.15. That is huge.

The projected earnings growth for this stock is 74%.

For these moves alone, you can see why this is a Zacks Rank #1 (Strong Buy).

Valuation

Looking ahead, the 1.5 year forward multiple is less than 3 times earnings. Right now the forward PE is 3.7x with the trailing number at 7.2x. The revenue growth is 1853% -- so a jump from almost nothing a year ago. I see a 3.7x price to book and a 10x sales multiple. All of that is fine with me.

This is an earnings growth play. The dividend isn’t what I am used to getting, but it is just the icing on the top of the cake.

Bear of the Day:

AutoNationis a Zacks Rank #5 (Strong Sell) and it fell to that Rank last week and that is a bad sign as the company is set to report earnings at the end of the week.  Let's review how this stock fell to the lowest Zacks Rank in this Bear of the Day article.

Description

AutoNation is the America's Largest Automotive Retailer, AutoNation is constantly innovating and striving to change the way America buys & services their vehicles. AutoNation offer a diversified range of automotive products and services, including new vehicles, used vehicles, parts and service, which includes automotive repair and maintenance services as well as wholesale parts and collision businesses, and automotive finance and insurance products, which include vehicle service and other protection products, as well as the arranging of financing for vehicle purchases through third-party finance sources.

Earnings Estimates

The Zacks Rank is primarily driven by the movement in earnings estimates.  If estimates are moving up the Rank moves in a similar direction.  When estimates slide, the Rank tends to follow suit

For AN the estimates for the current quarter have been falling.  90 days ago, the Zacks Consensus Estimate was at $1.09, that fell to $0.94 as of 30 days ago and that has slipped to the current level of $0.92.

There is a similar story for the next quarter, as numbers fell from $1.10 to $1.05 to $1.03 over the same time period.

The full year estiamte carries more weight than the quarterly numbers on the Zacks Rank.  Those numbers are moving lower as well.  90 Days ago the 2019 estimate was at $4.56 and now it is down to $4.14.

Earnings History

AN does not have the worst earnings history I have ever seen, but it is not the best.  Of the last four reports, there have been two beats and two misses.  That isn't a big problem, as 3 of the 4 reports were a beat or a miss of a single penny.

That said, the last two reports were misses so there is a recent trend.

Valuation

As a growth investor, I look at the topline.  I see contraction of 4.78% on an annual basis, so I am not thrilled.  Then I see the price to sales of 0.16x and I see the market does not really value their sales.  

A 9x forward earnings multiple is low, but so is the price to book multiple of 1.26x.

The valuation is low, but depressed earnings tell you that we could see a lower valuation still.  

Additional content:

5G Chipset Market Humming: 3 Solid Buys

Fifth-generation (5G) chipset market is set to gain immensely, especially, in the United States as the country is impatiently awaiting its arrival. Increase in demand for high-speed Internet, advancement in IoT and the recent spike in government initiatives for better rural connectivity are helping the 5G chipset market gather steam.

5G Chipset Market’s Impressive Outlook 

According to Markets and Markets report, the 5G chipset market is estimated to be worth $22.41 billion by 2026 and is valued at $2.03 billion for 2020. Thus, the 5G chipset market is expected to witness a compounded annual rate of 49.2% during the forecast period.

The market has been projected till 2026, given that the commercialization of the 5G technology takes place in 2020.

5G Networks Offer High Speed, Wider Connectivity

To begin with, the 5G chipset market and 5G networks go hand in hand. Therefore, technological advancement and growth in commercialization of 5G networks will allow the 5G chipset space to gain immensely.

5G chips will be an essential component of the upcoming 5G-enabled devices such as smart phones, laptops and routers, and that’s the primary reason for this market’s remarkable growth projection. At present, customers are patiently awaiting 5G technology’s rollout. Once that is through, a surge in demand for 5G-enabled devices will be inevitable.

After all, the selling point of 5G networks is its ability to offer high-speed Internet and wider connectivity. 5G networks are expected to be 10-20 times faster than 4G with near-impossible latency detection. Simply put, a user can’t notice the lag time a webpage/video/game takes to load.

Since smart phones have become the most preferred medium of online services such as audio and video streaming, running business applications and file sharing, demand for 5G-enabled smart phones will be higher and in turn boost 5G chipset as well.

Noting this, Apple and 5G chipmaker Qualcomm have teamed up to launch iPhone 5 next year. While 5G networks aren’t expected to replace 4G networks in a major way before 2020, the 5G-enabled smart phone and 5G chipset markets will gain traction from the very beginning.

Advancement in AI, IoT to Push 5G Chipset Market

5G is expected to enhance the spectrum, allowing it to support everything from broadband services to IoT, which will drive the widespread use of new mobile-driven applications. These applications may consist of industrial automation as well.

This is how 5G will raise the establishment of smart phone applications across verticals such as transport, automation, retail, manufacturing, finance and healthcare. 5G’s faster wireless connectivity will be a boon for new technologies such as driverless cars and augmented reality. As IoT products improve with enhanced AI, 5G will enable its smooth application, ultimately boosting the 5G chipset market.

Trump Administration’s 5G Initiatives

Thanks to United States and China’s race to win the 5G race, the U.S. government has been taking various initiatives to secure the crown.

First, the Trump administration intervened in Singapore chipmaker Broadcom’s takeover of Qualcomm last year. The acquisition could have caused a significant reduction in Qualcomm’s 5G research and development, allowing China to have an upper hand in developing 5G networks. 

Secondly, President Donald Trump and Federal Communications Commission (FCC) Chairman Ajit Pai announced a plan earlier this week to enhance 5G by auctioning more spectrum. The FCC also created a $20.4 billion fund called Rural Digital Opportunity Fund, aimed at assisting telecom companies to expand into rural America.

Finally, the Trump administration will also decrease barriers created by regulations. This will allow private companies to take more charge in the 5G domain, equally boosting the 5G chipset market.

Our Choices

The impressively broader market for 5G chipsets has created new opportunities for several key players in the industry. We have chosen three stocks that are poised to benefit from the emergence and implementation of these chipsets. All the stocks mentioned below carry a Zacks Rank #2 (Buy).

Xilinx, Inc. manufactures 5G radio-frequency chips, orders for which are expected to rise 50% year over year in 2019, according to a report by Mizuho.

Xilinx’s expected earnings growth rate for the current year is 23.7% compared with the Zacks Semiconductor – Programmable Logic industry’s projected rise of 23.4%. The company’s stock price has given a return at par with the broader Semiconductor – Programmable Logic Market over the past one year period (+109.3%). You can see the complete list of today’s Zacks #1 Rank stocks here.

Cisco Systems, Inc. provides vital internet infrastructure. The company implements what it refers to as “Cloud-to-Client” approach to 5G. Cisco’s determination to modify networks end-to-end makes its products an important aspect of faster 5G delivery.  

Cisco Systems’s expected earnings growth rate for the current year is 17.7% compared with the Zacks Computer – Networking industry’s projected decline of 0.4%. The company’s stock price has outperformed the Computer – Networking Market over the past one-year period (+26.3% vs +23.8%).

Qorvo, Inc. offers innovative radio-frequency solutions and is looking to expand its portfolio of RF products for 5G networks. The company’s new products will allow transmission of multiple data streams with more capacity, allowing the faster implementation of 5G networks, according to Qorvo.

Qorvo’s expected earnings growth rate for the current year is 17.4% compared with the Zacks Semiconductors – Radio Frequency industry’s projected rise of 11.2%. The company’s stock price has outperformed the Semiconductors – Radio Frequency Market over the past one-year period (+8.4% vs -2.0%).

In fact, Xilinx, Cisco and Qorvo have outperformed the broader S&P 500 so far this year.

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Cisco Systems, Inc. (CSCO) : Free Stock Analysis Report
 
AutoNation, Inc. (AN) : Free Stock Analysis Report
 
Qorvo, Inc. (QRVO) : Free Stock Analysis Report
 
Advanced Emissions Solutions, Inc. (ADES) : Free Stock Analysis Report
 
Xilinx, Inc. (XLNX) : Free Stock Analysis Report
 
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