For Immediate Release
Chicago, IL – February 24, 2020 – Zacks Equity Research Shares of InMode Ltd. INMD as the Bull of the Day, The Kraft Heinz Company KHC as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Heico Corporation HEI, Leidos Holdings, Inc. LDOS and L3Harris Technologies, Inc. LHX.
Here is a synopsis of all five stocks:
Bull of the Day:
InMode Ltd. is an Israeli-based medical technology company that develops, manufactures and markets devices harnessing novel radio-frequency technology. Its surgical tools are minimally invasive, and mainly used for plastic surgery, gynecology, dermatology, otolaryngology and ophthalmology.
InMode recently went public, and was one of the best IPOs of last year. Shares gained more than 200% in the first four months of trading.
Q4 Earnings Better-Than-Expected
There was a lot riding on InMode’s fourth quarter earnings, especially after its stellar performance in the third quarter where revenue jumped 57% year-over-year and earnings rose 62%.
But Q4 managed to beat expectations once again; both the company’s top and bottom line easily beat the Zacks Consensus Estimate. And, shares were up as much as 10.5% after the report was released.
Revenue in the quarter increased 63% year-over-year thanks to the continued expansion of its direct sales organization in the U.S. International revenue surged 71%.
Looking ahead to 2020, management expects to generate $190 million to $198 million in revenue, with 85% to 87% in gross margin; non-GAAP earnings are expected to fall in the range of $1.85 to $1.93 a share.
Shares of InMode are up over 80% in the last six months, thanks to investor optimism after the company’s last two earnings releases. Comparatively, the S&P 500 has returned about 14.3%. Earnings estimates have been rising too, and InMode is a Zacks Rank #1 (Strong Buy) pick right now.
For the current fiscal year, one analyst has revised their bottom line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up 10 cents from $1.76 to $1.86. 2020 looks strong too, with earnings expected to continue double-digit year-over-year growth.
InMode is banking on two specific procedure categories, aesthetic surgery and hands-free aesthetic procedures, to be main growth drivers in the coming years. And the company has a potentially huge addressable market, in the U.S. and abroad, since the desire and demand for aesthetic procedures (especially ones that can contour the body and face without surgery) looks to only increase.
If you’re an investor searching for a unique medical stock to add to your portfolio, make sure to keep INMD on your shortlist.
Bear of the Day:
Pittsburgh-based The Kraft Heinz Company is one of the largest consumer packaged food and beverage companies in North America. It manufactures and markets products like condiments and sauces, cheese as well as dairy, meats, refreshment beverages, coffee, and other grocery items. Popular brands include Heinz, Kraft, Oscar Mayer, Planters, Philadelphia, Velveeta, Lunchables, Maxwell House, Capri Sun, and Ore-Ida.
Q4 Earnings Weak
Shares of KHC slid as much as 7% after the packaged food giant released disappointing fourth quarter results.
Organic sales (which takes out the impact of divestitures, acquisitions, and foreign currency) fell 2.2%; sales volume and mix also dropped 4.2%, demonstrating that its brands are losing some market share.
In the U.S., Canada, and Rest of World regions, organic sales decreased, but Europe, Middle East, and Africa saw a small jump of 0.3%.
Total revenue declined 5.1% to $6.54 billion while adjusted earnings, despite beating our consensus estimate, declined 14.3%.
Management did not provide any guidance, but said that at its investor conference in May, it would outline a turnaround strategy.
KHC is now a Zacks Rank #5 (Strong Sell).
Shares of the consumer staples stock are down over 15% year-to-date, and have lost more than 43% in the last one year. The S&P 500 is up 3.2% and 19.7% in comparison.
"While our 2019 results were disappointing, we closed the year with performance consistent with our expectations, and driven by factors we anticipated…Our turnaround will take time, but we expect to make significant progress in 2020, laying a strong foundation for future growth,” said new CEO Miguel Patricio. Patricio took the helm about eight months ago.
Changing consumer tastes is also negatively affecting Kraft Heinz, as more and more shoppers choose organic and natural items over its core packaged food brands. There’s also the matter of debt. KHC currently has $30 billion in debt on its balance sheet.
Kraft Heinz has many challenges ahead of it, but management is looking towards cutting costs, optimizing marketing spending, and focusing on products with the best returns to help the company in the near-term.
3 Must-Have Defense Stocks for Your Portfolio
The United States has dominated the global military scene since time immemorial. The country spends trillions of dollars on its defense to keep it upgraded. Meanwhile, defense stocks have had a great run since Donald Trump became President, courtesy of his humongous defense spending plan.
Further, Trump’s efforts to boost U.S. military strength have also paved the way for the sector’s gains. Rising geopolitical conflicts on a global scale and the magnitude of existing issues are expected to bolster growth of U.S. defense companies in 2020 as well.
Meanwhile, per the latest reports, global military spending saw the biggest increase in 2019. The latest annual assessment of the International Institute for Strategic Studies (IISS) titled, The Military Balance 2020 shed light on the fact that global defense spending rose 4% in 2019 from 2018 amid "an unstable international security environment."
The Unites States was the highest spender on defense in 2019 with $638 billion, followed by China, which spent $185 billion. The increase in U.S. defense budget of $53.4 billion from 2018 was almost equal to Britain's entire defense budget. In these circumstances, adding defense stocks to one’s portfolio seems prudent.
Geopolitics to Shape Up U.S. Defense in 2020
Investors remain bullish on U.S. defense stocks for 2020. They expect the space to dominate this year given geopolitical tensions. The animosity between the United States and its arch rivals, viz., Russia, China and North Korea has made defense stocks a hot choice.
The escalation of tensions between the United States and Iran also boosted defense stocks. The situation between the two countries worsened after U.S. forces killed Qasem Soleimani, an Iranian major general on Jan 3.
Things appear to have cooled down as of now. However, analysts have not negated the possibility of a potential war between the two countries. Furthermore, geopolitics of the Middle East has remained volatile in the recent past. Such fears are expected to propel gains for the space.
Defense Spending to Rake in Gains for the Space
Per the U.S. Department of Defense’s (DoD) fiscal 2021 budget proposal sent to Congress on Feb 10, the Trump administration’s fiscal 2021 defense budget request stands at $740.5 billion. This comes after three straight years of increases and is also in line with the two-year budget deal between the Congress and the White House last year. The Pentagon would be allotted $705.4 billion of the total budget.
The 2020 defense budget stands at $738.0 billion. This marks an increase of around $20 billion from the last year. The money is expected to be used for the establishment of the U.S. Space Force as well as for military hardware such as 98 F-35 and eight F-15EX aircraft.
Furthermore, the Pentagon wants to retire warplanes, drones and ships, some of which are less than two decades old. The idea is to free up billions of dollars, which could be used to develop as well as buy new weapons that defense officials believe are necessary to win a war against rivals like China and Russia.
Also, in September 2018, the Pentagon had announced that it would approximately spend $2 billion over the next five years on development of artificial intelligence.
3 Best Choices
President Trump’s huge defense spending bill, ever-growing geopolitical tensions and America’s defense resolve should lead to gains for defense stocks in 2020.
In this context, we have selected three defense stocks that are expected to gain. These three stocks carry a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Heico Corporation is a designer and manufacturer of aerospace, defense, and electronic related products and services.
The company is based out of Hollywood, FL and has a Zacks Rank #2. The expected earnings growth rate for the current year is 17.74%. The Zacks Consensus Estimate for the current year has improved 2.3% over the past 60 days.
Leidos Holdings, Inc. is a provider of services and solutions in the defense, intelligence, civil and health markets in the United States as well as globally.
The company is based out of Reston, VA and has a Zacks Rank #2. The expected earnings growth rate for the current year is 6.83%. The Zacks Consensus Estimate for the current year has improved 1.3% over the past 60 days.
L3Harris Technologies, Inc. is a provider of advanced defense and commercial technologies across air, land, sea, space and cyber domains.
The company is based out of Melbourne, FL and has a Zacks Rank #2. The expected earnings growth rate for the current year is 39.60%. The Zacks Consensus Estimate for the current year has improved 1.9% over the past 60 days.
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