For Immediate Release
Chicago, IL – September 16, 2019 – Zacks Equity Research Shares of Fiserv, Inc. FISV as the Bull of the Day, DXC Technology Company DXC asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Canadian Solar Inc. CSIQ, SolarEdge Technologies Inc. SEDG, and Enphase Energy Inc. ENPH.
Here is a synopsis of all five stocks:
Bull of the Day:
Fiserv, Inc. is perhaps one of the most important financial services companies in the U.S. and it recently significantly extended its reach. Shares of FISV have crushed the broader Business Service Market over the last five years and Fiserv looks poised to remain more relevant than ever in the digital money age.
Fiserv is headquartered in Brookfield, Wisconsin, just outside of Milwaukee. The location doesn’t necessarily scream financial tech hub. Yet, FISV operates the backend payment and money transfer technology used by many financial institutions, banks, and credit unions. The firm officially offers digital banking solutions, account processing, payments and e-commerce solutions, and much more.
On July 29, the company closed its long-awaited, all-stock deal to buy First Data for roughly $22 billion. Chief executives often boast of synergies after acquisitions, but the combination of Fiserv and First Data does appear to be a nearly perfect match. Fiserv helps process debit and credit card transactions and other payments for banks, while First Data operates on the merchant side of these same transactions. First Data works with the likes of Walmart and Lyft .
The joint company creates a situation where the two firms can sell their core services to each other’s clients. The beefed-up Fiserv is now better prepared to take on the likes of Square and other fintech standouts such as PayPal. Fiserv’s cloud-based point-of-sale solution, called Clover, already competes directly with Square.
Fiserv now serves “thousands of financial institutions and millions of merchants and businesses in more than 100 countries.” The company also plans to invest $500 million over the next five years to ramp up and help expand in a financial environment that increasingly includes less cash and far more digital and electronic payments.
As we mentioned at the outset, FISV stock has been on a strong run recently. Shares of FISV have soared 215% over the last five years, against its industry’s 78% average climb and the S&P 500’s 52% jump.
Over the last 12 months, shares of Fiserv are up 26%. This compares favorably to its sub industry’s (Financial Transaction Services Market—which includes Western Union and Total System Services 18% climb and blows SQ’s 35% downturn out of the water. Year-to-date, Fiserv stock is up 40% and currently rests at around $103 per share, which falls not too far short of its recent 52-week and all-time highs.
Fiserv’s valuation picture also hardly appears that stretched at the moment. In fact, it looks relatively impressive given its stellar run. Shares of FISV have traded as high as 28.2X forward 12-month Zacks Consensus earnings estimates over the past five years, well above its current 22.9X.
FISV’s forward P/E hovers right near its five-year median of 22.2X. On top of that, the financial services firm is trading a discount against its industry’s 26.9X average.
Furthermore, Fiserv’s forward price/sales ratio of 2.6 rests at its lowest point in five years. FISV has traded as high as 6.5 during this stretch, with a 4.2 median, which marks a huge discount against its industry’s 8.5.
Investors should note that the company’s price/sales ratio came down substantially after it completed its Frist Data deal. However, this means that FISV stock could have plenty of room to run since investors were willing to pay 6.5X forward sales before the deal went through, which is now six weeks old at this point.
Q3 Outlook & Beyond
Moving on, our Zacks Consensus Estimates call for the firm’s Q3 fiscal 2019 revenue to skyrocket 168% from $1.41 billion in the year-ago period to $3.79 billion. Clearly, this estimate includes the projected positive impact of First Data’s inclusion, which is then expected to boost total full-year revenue by 130% to $13.35 billion.
Peeking ahead to fiscal 2020, when roughly half of the year will include merger-comparable numbers, the company’s sales are projected to climb 26% above our 2019 estimate to hit $16.85 billion.
Fiserv’s adjusted third-quarter earnings are expected to climb 23.6% higher to hit $0.93 per share, with Q4’s EPS figure projected to come in roughly 37% above Q4 2018. Overall, FISV’s fiscal 2019 earnings are projected to jump 21.4%. Then, the company’s 2020 earnings are expected to soar nearly 30% above our 2019 estimate.
Above, investors can see just how much Fiserv’s overall earnings estimates climbed following the merger, which is not always the case. Fiserv’s positive earnings estimate revision activity also helps the stock hold a Zacks Rank #1 (Strong Buy) at the moment. And the joint company is more prepared and well-equipped to expand and adapt in quickly changing financial tech environment.
Bear of the Day:
Shares of DXC Technology Company have tumbled 65% over the last 12 months. Looking ahead, the firm that was formed from the merger of Hewlett Packard Enterprise’s Enterprise Services unit and Computer Sciences Corporation, doesn’t appear as though it is likely to inspire enough investor confidence to help support a comeback.
DXC Technology was officially formed in April 2017 and currently has a market cap of $8.6 billion. The company, which operates in our Computers - IT Services industry, tries to help clients transform their operations in the digital age. DXC holds strategic partnership with some impressive names, including Amazon Web Services , Google Cloud, Microsoft, ServiceNow, AT&T and many more. Overall, the Tysons, Virginia-based firm has roughly 6,000 private and public-sector clients around the world.
The firm did top both our quarterly earnings and revenue estimates in early August. Unfortunately, the end-to-end IT services firm’s Q1 fiscal 2020 sales and earnings slipped from the year-ago period. DXC’s brutal quarter saw its shares fall from $51.32 per share to $35.68 in one day. Wall Street and investors also voiced their displeasure with the company recently, after it announced last Wednesday that Mike Lawrie would retire as President and CEO.
Outlook & Earnings Trends
Moving on, DXC’s Q2 2020 revenue is projected to slip 1.8% from the year-ago period to hit $4.92 billion, based on our current Zacks Consensus Estimates. On the positive side, this would mark an improvement against Q1 2020’s 7.5% downturn.
The company’s full-year fiscal 2020 revenue figure is expected to slip 2.1% to come in at $20.31 billion. Peeking further ahead, DXC’s fiscal 2021 sales are projected to pop 0.61% above our current-year estimate, which would still come in below 2019’s figure.
At the bottom end of the income statement, the company’s adjusted Q2 earnings are projected to plummet approximately 26% to touch $1.50 a share. Unlike DXC’s second-quarter top-line estimate, this would represent a much worse showing than Q1’s roughly 10% bottom-line decline.
The company’s Q3 EPS figure is then projected to fall 13.3%, to help drag full-year fiscal 2020’s earnings down by 12.5%. Luckily, DXC’s 2021 earnings are projected to surge 17.5% above our 2020 estimate. Despite next year’s positivity, the company’s overall earnings estimate revision picture has turned far worse recently.
DXC is currently a Zacks Rank #5 (Strong Sell), based, in large part, on its recent negative earnings estimate revision activity. The company also holds an “F” grade for Growth in our Style Scores system. On the positive side, the company does pay an annualized dividend of $0.84 share at the moment. Nonetheless, investors should probably look elsewhere.
U.S. Solar Consumption on the Rise: 3 Stocks to Buy
Solar energy has been gaining popularity in the United States over the last few years on increasing usage of renewable energy sources. Per a recent report of the U.S. Energy Information Administration (EIA), solar energy usage has increased from 0.427 quadrillion btu (British thermal unit) in 2015 to 0.951 quadrillion btu in 2018. It is expected to touch 1.073 quadrillion btu in 2019 and rise another 20% to 1.293 quadrillion btu next year.
Given the bullish prospects, we believe the Zacks Solar industry has scope to expand. Advancement of technology allows solar panels to generate energy even during low sunlight conditions. Along with this, declining cost of solar panels and higher conversion rate of the latest solar panels are bringing down the cost of installing and operating utility-scale solar plants.
Sunlight is available in abundance and for free, which is the key reason why solar energy is used for electricity generation. To encourage consumers to use more solar power, the federal government provides a solar tax credit for solar systems installed in residential and commercial properties. The credit can be applied to both customer-sited commercial solar systems and large-scale utility solar farms. Governments also provide grants to homeowners to encourage the purchase and installation of a solar photovoltaic (PV) system.
Environmental awareness has resulted in the development of infrastructure which helps drive usage of renewable energy sources like wind, solar and hydropower. EIA forecasts that these sources will collectively produce 18% of U.S. electricity in 2019 and 19% in 2020.
U.S. states like California, Florida and Texas are leading the way with utility operators setting up solar plants in the states with the assistance of local administration.
To safeguard the interest of domestic solar panel producers, additional tariffs were imposed on the import of solar cells and panels in January 2018. The tariff imposition will protect the interest of domestic producers but might also decelerate the speed of development of new of solar projects as cheap solar panels will be no longer available.
The primary drawback of solar-powered generation units is their inability to produce electricity 24x7 like those based on conventional fossil fuel. However, with the ongoing development of battery storage units across the United States, renewable sources will be able support the demand for electricity around the clock.
Per a recent report of The United Nations Environment Programme (UNEP), global investment in new renewable energy capacity is set to reach $2.6 trillion by the end of 2019. Solar power alone is estimated to draw half of the investments. Moreover, some oil super majors have been investing billions of U.S. dollars considering the prospects of the industry. For instance, Exxon plans to invest up to $100 million over 10 years to research and develop advanced lower-emissions technologies with the U.S. Department of Energy. In the past 12 months, The Solar industry has returned 41.5% while the S&P 500 Index has returned 2.5%.
Picking the Right Stocks
With the help of the Zacks Stock Screener, we have identified three attractive solar stocks based on the following criteria.
Zacks Rank #1(Strong Buy) or 2 (Buy)
Positive Estimate movement
12 Months Return = > 40%
ROE = > 14%
Canadian Solar Inc., a solar module producer, currently sports a Zacks Rank #1. The Zacks Consensus Estimate for its 2019 earnings per share has moved up 32.6% to $3.25 in the past 60 days. The company’s ROE is 14.80% and has returned 44.8% in the past 12 months. You can seethe complete list of today’s Zacks #1 Rank stocks here.
SolarEdge Technologies Inc., a solar inverter solutions provider, currently sports a Zacks Rank #1. The Zacks Consensus Estimate for its 2019 earnings has risen 21.3% to $3.92 in the past 60 days. The company’s ROE is 17.81% and has returned 70% in the past 12 months.
Enphase Energy Inc., a producer of solar inverters, currently holds a Zacks Rank #2. The Zacks Consensus Estimate for its 2019 earnings has moved 51.9% north to 79 cents in the past 60 days. The company’s ROE is 31.17% and has returned 450.8% in the past 12 months.
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