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Harmonic, Analog, GOL, JetBlue and AZUL highlighted as Zacks Bull and Bear of the Day

Zacks Equity Research

For Immediate Release

Chicago, IL – July 10, 2019 – Zacks Equity Research Harmonic HLIT as the Bull of the Day, Analog Devices ADI as the Bear of the Day. In addition, Zacks Equity Research provides analysis on GOL Linhas Aereas Inteligentes S.A. GOL, JetBlue Airways Corp JBLU and AZUL SA AZUL.

Here is a synopsis of all five stocks:

Bull of the Day:

Harmonic is a Zacks Rank #1 (Strong Buy) with a good growth score and a weaker value score.  The style scores tell me right away what kind of stock I am looking at and value investors and growth investors are inherently looking for different things.  Let's look at why the stock hold the top Zacks Rank in this Bull of the Day article.

Description

Harmonic Inc. enables media companies and service providers to deliver ultra-high-quality broadcast and OTT video services to consumers globally.The company has also revolutionized cable access networking via the industry's first virtualized CCAP solution, enabling cable operators to more flexibly deploy gigabit internet service to consumers' homes and mobile devices. Whether simplifying OTT video delivery via innovative cloud and software-as-a-service (SaaS) technologies, or powering the delivery of gigabit internet cable services, Harmonic is changing the way media companies and service providers monetize live and VOD content on every screen.

Earnings History

I see a good earnings history with the company beating the Zacks Consensus Estimate in each of the last four quarters.  You want to see that because it shows that management knows what to tell Wall Street in order to set the bar low enough.

Estimates

So there was a negative move or two in estimates, but it was more than 60 days ago, so the Rank only sees the more recent bumps higher.  The current quarter is looking at a loss of 7 cents, down from a gain of a penny about 90 days ago.  The next quarter has seen a bump higher in estimates by a penny, moving to 3 cents from 2 cents.

The full year 2019 Zacks Consensus Estimate has risen from $0.00 to $0.02 over the last 30 days, and the 2020 number has increased 3 cents to $0.20.  That implies some really strong earnings growth for next year.

Valuation

The valuation on this stock is stiff.  A 292x forward earnings multiple is crazy high, but that is due to the low EPS number and stock price that is on the move higher in anticipation of higher earnings in the future.  The 2.3x price to book is much more reasonable.  I also like seeing the 1.3x sales number as it tells me that the market values their sales.

News Last Night

After the close HLIT announced that Comcastsaid they elected enterprise license pricing for its CableOS software.  As a result HLIT will see around $175M in software license fees over the next four year and about $50M of that coming in 2019. Comcast is also scouping up a lot of stock in HLIT, 7.8M shares from a warrant with a $4.76 exercise price.

In after hours the stock traded $6.50.

Bear of the Day:

Analog Deviceshas seen estimates drop and the Zacks Rank for this stock dropped right along with them. Earnings estimate revisions are the foundation of the Zacks Rank so let's look at why this stock is now a Zacks Rank #5 (Strong Sell) in this Bear of the Day article.

Description

Analog Devices, Inc. is a world leader in the design, manufacture and marketing of a broad portfolio of high performance analog, mixed-signal, and digital signal processing (DSP) integrated circuits (ICs) used in virtually all types of electronic equipment. Since their inception in 1965, they have focused on solving the engineering challenges associated with signal processing in electronic equipment.

Used by over 100,000 customers worldwide, their signal processing products play a fundamental role in converting, conditioning, and processing real-world phenomena such as temperature, pressure, sound, light, speed, and motion into electrical signals to be used in a wide array of electronic devices. They focus on key strategic markets where their signal processing technology is often a critical differentiator in their customers' products, namely the industrial, automotive, communications, and consumer markets.

Earnings History

I see a good earnings hisotyr for ADI, with the company beating the Zacks Consensus Estimate in each of the last four quarters.  That would be a positive influence on the Zacks Rank, so it is not the reason the stock has the lowest Rank.

Estimate Revisions

This is clearly the reason why the stock is a Zacks Rank #5 (Strong Sell).  Estimates for this quarter have come in from $1.38 to $1.22 as have estimates for next quarter as well. Those numbers fell from $1.44 to $1.29.

Full year numbers have also slid lower here with 2019 moving from $5.45 to $5.24 and next year coming in at $5.51 after reaching up to nearly $6 just 60 days ago.

Not ADI's Fault

As I scanned the news looking for a reason for the dip in consensus estimates, I didn't see much.

I did find an upgrade from Goldman Sachs, as they put the stock at Buy after it was a sell with a $114 price target.  That is good news, so why are numbers falling?

Trade War?

AVGO reported a while back and they took down forward guidance in a big way.  Many analysts applied the same logic to other names in the same sector as well as suppliers to chip stocks.  

The recent change in the trade war - the cease fire - has yet to show up in earnings estimate revisions.  That could make this stock worth a deeper look.  

ADI reports again in late August so you have plenty of time with this one.

3 Airline Stocks to Help a Portfolio Take Off

Airlines have benefitted in recent months from relatively low fuel costs. Now, with the summer travel season in full swing, here are a few airline stocks that could perform well over the next few months and years.

All three airline stocks are a Zacks Rank #2 (Buy).

GOL Linhas Aereas Inteligentes S.A.

GOL is a Brazilian low-cost airline based in Rio de Janeiro. From January through November of 2018, GOL held 33.4% of the domestic passenger share, making it the domestic leader in Brazil. Our Zacks Consensus Estimates call for GOL’s EPS to be $0.67 in fiscal 2019. This represents growth of 578.57% from the $0.14 loss the company posted last year.

Looking further ahead, fiscal 2020 EPS is expected to continue to soar an additional 52.61%, on the back of 13.51% revenue growth above their respective fiscal 2019 estimates. Estimate revisions for fiscal 2019’s EPS have also trended in the right direction with three upward revisions, against zero downward revisions over the past 60 days. The company has seen a similar trend for fiscal 2020. Overall, GOL’s 2019 estimate has increased 17.5%, from $0.57 to $0.67 in the past 90 days. Meanwhile, fiscal 2020 has seen its estimate surge 87%, from $0.55 to $1.03. GOL stock is up 276.5% over the past 12 months, and its expected growth could help fuel the stock higher.

JetBlue Airways Corp

The New York-based firm offers 1,000 daily flights and, as of 2018, was the sixth largest US airline by passengers carried. Along with being a Zacks Rank #2 (Buy), JetBlue also currently boasts an overall “A” VGM (Value, Growth, Momentum) grade in our Style Scores system. Over the past five years, JBLU has traded with an average P/E of 10.66, 1.02 higher than the airline industry’s average for the same time period. But, JetBlue currently has a P/E of 9.07, which is below the industry average and could suggest the stock is undervalued, especially since JBLU stock is up 21% in 2019.

JetBlue is also expected to see significant growth over the next couple of years. Our Zacks Consensus Estimates predict fiscal 2019 EPS growth of 25.16%, as well as 6.74% revenue growth. Fiscal 2020 is then expected to bring a further 17.30% earnings growth and 8.60% revenue growth over their respective 2019 numbers.

AZUL SA

Azul is a Brazilian budget airline based in a suburb of Sao Paulo and was founded by David Neelson, a Brazilian-American who also founded JetBlue. In 2018, Azul grabbed 22.8% of the domestic passenger share, making it the third largest domestic airline in Brazil. Azul is another company that is expected to report solid growth over the next two fiscal years. Our Zacks Consensus Estimates call for 19.25% top line growth to fuel 22.01% earnings growth in fiscal 2019.

Following these expectations is another 21.27% revenue and 61.47% earnings growth in fiscal 2020. Over the past 30 days, Azul’s EPS estimates have seen significant revisions. The fiscal 2019 EPS estimate has been increased by 12%, with the fiscal 2020 estimate up 15.9%. On top of that, Azul has posted a positive earnings surprise in six out of its past seven quarter, with an average surprise of 54% in the trailing four periods. AZUL stock is also up 38.1% YTD and might have more room to climb.

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Gol Linhas Aereas Inteligentes S.A. (GOL) : Free Stock Analysis Report
 
JetBlue Airways Corporation (JBLU) : Free Stock Analysis Report
 
Harmonic Inc. (HLIT) : Free Stock Analysis Report
 
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