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Enphase, AAR, Science Application, Cisco and Microsoft highlighted as Zacks Bull and Bear of the Day

Zacks Equity Research

For Immediate Release

Chicago, IL – July 22, 2019 – Zacks Equity Research Enphase Energy ENPH as the Bull of the Day, AAR Corp AIR as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Science Applications International Corp. SAIC, Cisco Systems, Inc. CSCO and Microsoft MSFT.

Here is a synopsis of all five stocks:

Bull of the Day:

Enphase Energy is a Zacks Rank #1 (Strong Buy) that sports the type of divergence that I love to see in the Zacks Style Scores.  I am all about growth, and I know that value investors and growth investors are almost always looking for different things.  ENPH has an A for Growth and a D for Value, so I know I am on the right path.  Let's take a look at how the stock achieved the best Zacks Rank.

Description

Enphase Energy, Inc. delivers microinverter technology for the solar industry, which increases productivity and reliability of solar modules. The Company builds a semiconductor-based microinverter system that converts direct current electricity to alternating current electricity at the individual solar module level. Enphase sells its microinverter systems primarily to distributors who resell them to solar installers. It also sells directly to installers, as well as through original equipment manufacturers. Enphase Energy, Inc. is headquartered in Petaluma, California.

Earnings History

The earnings history is ok, two beats are the bookends of a meet and a miss. So not great by any means, but not terrible.

Estimate Revisions

Estimates are trickling higher, but not surging… so that means there is room for improvement and that helps our story.

Valuation

The valuation is stiff but worth it. A 37x forward multiple is hard to swallow as is 153x book. The top line growth is 43% and that is great to see as is the constant improvement in margins.

Bear of the Day:

AAR Corp is a Zacks Rank #5 (Strong Sell) and it is the Bear of the Day today.  Often times you will see the Bear of the Day as a very weak name that has estimates falling after a series of earnings misses.  This is not the case for AIR, which has a solid history of beating the number and has seen a very mild decrease in estimates.  

Description

AAR Corp. is an independent provider of aviation services to commercial and government customers. AAR Corp. aftermarket expertise and award-winning solutions help customers increase efficiency and reduce costs while maintaining high levels of quality, service and safety. AAR Corp. are a trusted partner to airlines, militaries and OEMs delivering competitiveness so they can focus on transporting passengers, cargo and parts around the world.

Beating The Number

A quick check of the earnings history shows that AIR has topped the Zacks Consensus Estimate in each of the last four quarters.  This is not something we see all the time for a Bear of the Day.

Estimates Fall Slightly

The Zacks Rank focuses on earnings estimate revisions, and AIR has a few negative revisions for this quarter, next quarter and the full year.  This quarter has seen a two cent decrease, down to $0.53.  Next quarter has also come in, but by four cents to $0.62 from $0.66.

The full year 2019 estimate is where we see the biggest move.  The Zacks Consensus Estimate has dropped from $2.73 to $2.58 over the last 30 days and that will cause the Zacks Rank to slide.

Valuation

This stock might be ok with the lower estimates as the forward PE of 16x is pretty attractive given the 18% top line growth rate.  A 1.6x book also looks good to me, but some recent weakness in net margins need to be corrected.

3 Tech Stocks for Dividend Investors to Buy in July

Mega-cap tech stocks helped drive the impressive first half of 2019, and the broader industry is likely to fuel the markets for years to come. With that said, investors who want to be a part of the technology industry don’t just have to search for high-flying growth stocks. Instead, tech-minded investors can take a page out of the income investing book and focus on companies with solid dividends—that have grown nonetheless.

Finding a strong dividend-yielding tech stock might seem difficult, but investors should not feel too intimidated. For example, Apple and some of the other biggest names in tech, pay dividends. And dividend-focused investors can search for the best tech stocks by using the Zacks Stock Screener, which is a great one-stop screening tool for investors of all kinds.

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1. Science Applications International Corp.

Science Applications International Corporation is a technology integrator that provides IT, engineering, and mission solutions and works across the defense, intelligence, civilian, and space sectors. The Reston, Virginia-Headquartered firm, which holds a market cap of $5.1 billion, has contracts with multiple branches of the U.S. military. In January, the firm officially announced the approval to buy rival government-services provider Engility to help bolster its business amid increasing consolidation in the larger defense contractor industry.

SAIC stock has jumped 36% in 2019 to outplace its industry’s 22% average climb. Looking ahead, our current Zacks Consensus Estimates call for the company to post Q2 revenue of $1.64 billion, which would mark a 47% climb from the year-ago period. This growth is expected to help lift adjusted Q2 earnings by 12.4%. Meanwhile, the firm’s full-year EPS figure is projected to pop 9% on 41% higher revenue. SAIC has also seen its earnings revisions trend more heavily upward recently to help it earn a Zacks Rank #2 (Buy). Science Applications International also boasts “B” grades for both Value and Momentum and an “A” for Growth in our Style Scores system. SAIC raised its most recent quarterly payout to $0.37 per share, up from $0.31 and has a dividend yield of 1.72% at the moment.   

2. Cisco Systems, Inc.     

Cisco is coming off a stronger-than-projected Q3 of fiscal 2019 that helped it raise its fourth-quarter outlook. The historic networking power has expanded its IoT business in recent years in order to better compete going forward. On July 9, Cisco announced its plan to buy Acacia Communications for $2.6 billion to help it meet heightened performance demands. The move is part of a series of acquisitions over the last serval years. Shares of the San Jose, California-headquartered firm have climbed 33% in 2019 to outpace its industry’s 28% climb and the S&P 500’s 18% move. CSCO stock currently hovers just off its 52-week high at around $57.81 per share.

Cisco paid a quarterly dividend of $0.35 a share the last two periods, up from $0.33 per quarter in calendar-year 2018.  CSCO’s new quarterly payout also marked a 20% increase from its 2017 dividend. The networking giant is currently a Zacks Rank #2 (Buy) and sports a dividend yield of 2.42%. Cisco’s adjusted Q4 EPS figure is projected to jump over 17% on 4.2% higher revenue. The company’s current full-year earnings—due out on August 14–are projected to climb 18.5%, with sales set to pop 5.1%. This bottom-line strength is then projected to continue in 2020, with adjusted earnings expected to climb 11.4% higher than our 2019 estimate.

3. Microsoft

Microsoft stock hit a new high of $140.65 per share during morning trading Friday after the tech powerhouse posted better-than-expected quarterly results after the closing bell Thursday. The firm’s Intelligent Cloud was once again the star of the show, as Q4 2019 unit revenue surged 19% to $11.4 billion, with Azure up 64%. The firm’s expansion into cloud computing has seen it compete directly with industry giant Amazon. Meanwhile, its Office, Windows, and gaming businesses have continued to grow as well. MSFT stock is now up over 36% in 2019 and Microsoft is currently the world’s most valuable public company with a market cap over $1 trillion.

Microsoft pays an annualized dividend of $1.84 a share at the moment, with a 1.35% yield. Microsoft’s current dividend represented a 9.5% jump from the prior year’s quarterly payout. Peeking ahead, MSFT’s fiscal 2020 and 2021 revenue are both projected to climb by roughly 10%. Meanwhile, adjusted earnings are projected to jump over 7% in its current fiscal year and 13.5% higher in the following year. Microsoft is a Zacks Rank #2 (Buy) that also rocks “B” grades for Growth and Momentum in our Style Scores system. Despite its impressive climb, MSFT stock is trading at a discount compared to its industry’s 29.5X average at 26.6X forward 12-month earnings estimates.

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