For Immediate Release
Chicago, IL – December 12, 2018 – Zacks Equity Research BioTelemetry BEAT as the Bull of the Day, Papa John's PZZA asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Twitter TWTR and NRG Energy NRG.
Here is a synopsis of all four stocks:
Bull of the Day:
BioTelemetryis a $2.2 billion maker of cardiac monitoring devices and services that became a Zacks #1 Rank Strong Buy on November 1 after delivering an earnings report true to its name with a 65% positive surprise on the bottom line.
I chose BEAT as the Bull of the Day on Nov 15 when shares were trading below $62. Here's what I said then...
On October 30, BEAT reported third-quarter adjusted EPS of $0.53 vs. consensus estimates of $0.32 and sales of $100 million vs. the expectation of $98 million.
The company also raised Q4 guidance and this inspired analysts to lift their estimates going forward, pushing BEAT shares into the top tier of the Zacks Rank.
What Does BEAT Do?
BioTelemetry provides ambulatory outpatient management solutions for monitoring clinical information regarding an individual's health. It is focused on the diagnosis and monitoring of cardiac arrhythmias and other heart rhythm disorders using wireless and mobile technologies.
BEAT technology and systems, including mobile cardiac outpatient telemetry (MCOT), can give medical caregivers and patients remote information as well as historical data.
Estimates Jump for a Record Year
After BioTelemetry's Q3 report, investment bank analysts at Raymond James commented that "three straight quarters of accelerating organic revenue growth (+18% in 3Q) and 500bp of EBITDA margin expansion" made them "increasingly confident in management’s ability to execute."
Full-year 2018 revenue estimates have now climbed to $397 million, representing 38.4% growth. Next year's top line stands currently at $437 million, for 10% growth.
And on the profit line, 2018 EPS estimates were boosted 14% from $1.51 to $1.72, representing a 77% advance this year.
Next year's profit projections also rose to $1.72 which is flat year-over-year. But I suspect analysts are waiting until Q4 results before detailing their models.
(end of excerpt from my Nov 15 report)
Since then, full-year 2018 EPS estimates have climbed further to $1.81 and next year's look is now for $1.78.
Revenue projections have also moved up with this year's consensus now at $399 million and 2019 still pushing 10% growth at $439 million.
What Else Is New?
How about a price target bump from SunTrust analysts to $80 from $67. On Nov 29, the bank's med-tech team updated their long-run sales estimates for BioTelemetry citing 9.2% top-line growth over the period 2018-2021. Embedded in this view is the projection that mobile cardiac outpatient telemetry (MCOT) -- which is over 60% of sales -- grows at an estimated 9%, roughly in line with the market. BEAT has about 60% share of that market.
BEAT also has a growing Research segment that is able to use data from its devices and services. And its acquisition last year of the Switzerland-based LifeWatch expanded its reach in Europe.
And SunTrust believes that "BEAT’s very capable management team will articulate an interesting digital population health strategy sometime in 2019."
But there's an elephant in the room we haven't discussed yet. Here's what I wrote last month...
Will Apple Leave Medical to BEAT?
BEAT shares took off this year after inking a deal with Apple to conduct a joint Heart Study. The new Apple Watch Series 4, which received FDA clearance as a Class II device, has the potential to expand the cardiac monitoring market.
So while Apple may not be interested in BEAT technology, the brand and research pedigree has clearly benefited BEAT growth and interest.
But this also raises concerns that a move by Apple into BEAT's territory could be fatal if the giant iPhone maker is pursuing "medical grade" applications for the Watch or some other device.
Right now, it appears that Apple is not treading on BEAT's turf. And optimism remains among analysts that the services growth trajectory of the big fruit will only continue to benefit the addressable market for the little heart-watcher.
(end of Nov 15 report excerpt)
Well on December 6 Apple made this announcement...
Starting today, the ECG app on Apple Watch Series 4 marks the first direct-to-consumer product that enables customers to take an electrocardiogram right from their wrist, capturing heart rhythm in a moment when they experience symptoms like a rapid or skipped heart beat and helping to provide critical data to physicians. The irregular rhythm notification feature on Apple Watch can now also occasionally check heart rhythms in the background and send a notification if an irregular heart rhythm that appears to be atrial fibrillation (AFib) is identified.
Did this news put a dent in BEAT shares? Not even a scratch for a stock that has weathered the Nov-Dec stock market heart-stopping chop better than most.
As I said last month, I would be a buyer of BEAT and its low-30s P/E multiple any time it dips into the $50s. That's still the drum I'm pounding.
Bear of the Day:
Since the Zacks Rank first delivered Papa John's as a Strong Sell in March when shares were trading above $60, the stock has been a dough-making machine -- primarily for the bears.
Even a summer-fall rally from below $40 back up to $60 just provided another chance to sell, or short, as the stock has cratered back to $44 this month.
Despite that period of rising optimism, what has never changed is the deterioration in the profit outlook from analysts. And the most recent earnings miss only brought more estimate cuts with full-year 2019 EPS sliding from $1.68 to $1.54.
That slide represents only 4.5% earnings growth next year, after a 44% collapse in profitability this year.
Here's a great way to visualize this fundamental decline using the Zacks proprietary Price & Consensus chart which plots changes in annual earnings estimates against the stock price. Red and green arrows also highlight beats and misses...
What PZZA lovers want to see here is a turn back upwards in those 2019 estimates.
Until then, try a different pie. The Zacks Rank will let you know.
Twitter (TWTR) Surges to Become S&P 500’s Top Monthly Gainer
At one point during Wednesday trading hours, shares of Twitter were up more than 6%, bringing the social media company’s month-to-date gains up to 17% and giving it the strongest December rally of any stock in the S&P 500.
With no obvious news to cite for today’s surge, investors were pointing to favorable technical patterns to explain why Twitter was in the green once again. Regardless, the stock has clearly returned to favor in recent weeks, despite lingering uncertainty in broader markets.
The story of Twitter’s latest bout of momentum starts back in July. The stock had become one of 2018’s top momentum picks, tallying gains of about 90% en route to a 52-week high of $47.79 per share. But shares moved sharply lower after Twitter warned of a drop in users amid its purging of fake accounts and efforts to prevent malicious content.
While Twitter still has a long way to go if it wants to see those mid-summer levels again, it’s recent run has been impressive. Shares found a bottom in October—as the rest of the market was sputtering—and the internet company managed to rally more than 20% in what was a brutal month for most major indexes. At today’s high of $37.14, Twitter shares were nearly 39% above that October low and on track to carry some serious momentum into the New Year.
The next-best December performer in the S&P 500 is NRG Energy, which had gained almost 11% on the month through late afternoon trading hours Wednesday. The index itself is down more than 2.5% so far this month, as investors worried about trade disputes and global economic conditions have not quite found their “Santa Claus Rally.”
Twitter is currently sporting a Zacks Rank #1 (Strong Buy). This is because earnings estimate revisions have been largely positive as of late. In fact, the company has witnessed 13 upward revisions against just two downward revisions to its fiscal 2018 earnings estimates within the last 60 days. Twitter is now expected to finish the year with EPS growth in excess of 84%.
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