For Immediate Release
Chicago, IL – December 26, 2019 – Zacks Equity Research InMode Ltd. INMD as the Bull of the Day, Navistar International Corp. NAV as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Salesforce CRM, Nvidia NVDA and Microsoft MSFT.
Here is a synopsis of all five stocks:
Bull of the Day:
InMode Ltd. is one of the most successful IPOs of 2019 as shares have soared nearly 200%. This Zacks Rank #1 (Strong Buy) is riding the social media "selfie" wave to double digit revenue growth in 2020.
InMode develops and manufactures devices harnessing novel radio-frequency (RF) based devices for the plastic surgery, gynecology, dermatology, otolaryngology and ophthalmology categories.
It's procedures are minimally-invasive.
InMode went IPO in August of 2019. It's a small-cap company with a market cap of $1.3 billion.
A Big Beat in the Third Quarter
On Nov 5, InMode reported its third quarter results and beat the Zacks Consensus by $0.13, or 44%. Earnings were $0.42 versus the consensus of $0.29.
Earnings were up 62% compared to third quarter 2018.
This was its second quarterly report to Wall Street after the IPO.
Revenue soared 57% year-over-year to a third quarter record of $40 million, fueled by a 88% increase in international revenue compared to 2018, driven primarily by European and Asian sales.
In the age of the "selfie" and Instagram, consumers are willing to spend money on looking better. Procedures which are lower cost and have less downtime are becoming increasingly popular.
Earnings Estimates on the Rise
As a small cap company and recent IPO, there's little analyst coverage of InMode, so far.
But the Zacks Consensus Estimate for both 2019 and 2020 have been on the move higher since the big earnings beat.
Over the last 60 days, the 2019 Zacks Consensus Estimate has risen to $1.55 from $1.38.
Similarly, the 2020 Zacks Consensus has jumped to $1.76 from $1.55 during that same time.
That's earnings growth of 13.5%.
Shares on Fire
InMode is one of the few recent IPOs that is actually profitable. And given its product position in the Instagram generation, investors have jumped in to grab the shares.
Shares are up 189% since the August IPO.
They aren't crazy expensive for a small cap growth company, with a forward P/E of 27.
Bear of the Day:
Navistar International Corp.recently lowered 2020 guidance and will cut 10% of its workforce as global trucking demand remains weak. This Zacks Rank #5 (Strong Sell) is expected to see revenue fall 15%.
Navistar makes the International brand commercial trucks, proprietary diesel engines and IC Bus brand school and commercial buses.
A Big Beat in the Fourth Quarter
On Dec 17, Navistar reported its fiscal fourth quarter 2019 results and posted a big beat of $0.25. Earnings were $1.14 versus the consensus of $0.89.
Revenue, however, fell 16% year-over-year due to very strong fourth quarter 2018 vehicle chargeouts following supplier production constraints in the third quarter of that year, the impact of the sale of Navistar Defense in December 2018, and lower industry demand in the quarter.
Full year revenue was up 10%, however, to $11.3 billion.
During the year, Navistar's Core market share grew by 1.3 points to 18.8%. This was the third year in a row it increased its Core market share.
It also increased its school bus market share to 35.8%, where it is again the industry leader.
The company had $263 million of manufacturing free cash flow for the year and finished the fourth quarter with $1.4 billion in consolidated cash and cash equivalents as well as $1.3 billion in manufacturing cash and cash equivalents.
Guided Below Consensus for Fiscal 2020
While the 2019 numbers don't look too bad, the problem with the report was in the guidance for next year.
Trucking industry demand remains weak.
Navistar called it a "cyclical downturn."
It guided full year revenue in the range of $9.25 billion to $9.75 billion.
That's 15% below Fiscal 2019's $11.3 billion.
It also announced it would cut 10% of its workforce to contain costs.
Earnings Estimates Slashed
As a result, the analysts moved to lower earnings estimates as well as sales estimates.
The Zacks Consensus for fiscal 2020 fell to $2.51 from $2.99 in the week since the report. That's a decline of 41%.
Looking forward, for fiscal 2021, 3 estimates were lowered and 1 was raised in the last 7 days but the Zacks Consensus fell to $2.81 from $3.06. That's an earnings gain of 12%.
Shares Fall on the News
The Street never likes a guidance cut. Navistar shares fell on the news and remain down 8.3% over the last month.
They're still in the green for the year, however, up 11.4%.
Is this a buying opportunity?
Shares appear cheap, with a forward P/E of just 11.9. But in a cyclical, they can seem like a value even as the estimates continue to be cut.
3 Blue-Chip Tech Stocks to Buy for 2020
Both the U.S. and China have posted some better-than-expected economic indicators recently. Plus, corporate earnings growth is expected to return in 2020 and the Fed is poised to keep interest rates low, as U.S. unemployment rests at historic lows (also read: Why Stocks Are Poised To Soar In 2020).
Overall, the U.S. economy is expected to expand again in 2020, but uncertainty always remains. Therefore, investors should think about adding some mega-cap stocks poised to grow as part of longer-term trends.
With this in mind, we found three blue-chip technology stocks, with the help of our Zacks Stock Screener, that investors might want to buy for 2020…
Salesforce topped our Q3 fiscal 2020 estimates in early December and CRM stock is up 5% since then. Shares of the cloud-based customer relationship management powerhouse continued their climb in 2019, up roughly 20% (7% below the S&P 500’s return). But much of this strength came early on. In fact, CRM has moved mostly sideways since the end of February, which could give the stock a better launch pad in 2020.
Salesforce has over 150,000 customers and the business-focused cloud firm has expanded through acquisitions recently. Salesforce boasted that its $15 billion Tableau deal—its largest ever, completed in August—joined together the “World's #1 CRM and #1 analytics platform.” The deal helps Salesforce expanded its data-analytics offerings to help it become more attractive to its enterprise clients in an ever more competitive space.
The San Francisco-based company has also improved its platforms from marketing to sales through AI, voice-control, and more. Our estimates call for Salesforce’s revenues to jump 28% this year to $17 billion and another 23% in fiscal 2021 to reach $20.89 billion. Peeking way ahead, CRM executives expect sales to reach between $34 billion to $35 billion by end of 2024, after its revenue came in at just $13.28 billion in 2019.
At the bottom end, CRM’s adjusted earnings are projected to pop 5% this year and 7.3% in 2021. Salesforce has also consistently surpassed our bottom-line estimates and its full-year earnings revisions activity has trended upward. CRM holds a Zacks Rank #3 (Hold) and an “A” grade for Momentum in our Style Scores system right now. In the end, Salesforce appears to be a strong longer-term, growth-focused buy as more businesses, governments, and other enterprises continue their digital transformations.
Shares of Nvidia hit another new high Monday and are now up 14% in the last four weeks and 80% on the year. Despite the climb, which easily tops its market’s average, NVDA rests roughly 15% below its October 2018 highs. This could give Nvidia stock solid room to run as part of what is projected to be a return to top and bottom line growth across the semiconductor industry in 2020, after a rough 2019.
Last quarter (Q3 fiscal 2020) marked the fourth straight period that the GPU giant posted declining sales and earnings. Nvidia over the last year was negatively impacted by the cyclical nature of the chip space and its own outsized success. Looking ahead, Nvidia expects to remain a key player in the high-end video game industry. Nvidia, under the leadership of CEO Jensen Huang, also expects to expand its reach in data centers, which are integral in our cloud age, along with AI, IoT, 5G, autonomous driving, and more.
NVDA is expected to report full-year sales and EPS declines this year, but its Q4 fiscal 2020 sales are projected to jump 34.2% to help lift adjusted earnings by 107.5%. Then the company’s full-year fiscal 2021 EPS figure is projected to jump 30% higher on the back of 19.4% higher sales to reach $12.86 billion. Investors should note that both of these figures would easily surpass Nvidia’s 2019 performance.
Nvidia is a Zacks Rank #2 (Buy) at the moment, based on its strong fiscal 2020 and 2021 earnings revision activity. The stock also rocks a “B” grade for Growth and is part of an industry that sits in the top 10% of our over 250 Zacks industries. NVDA also consistently beats our bottom-line estimates and returns value to shareholders through a dividend. And the company announced in November that it “will return to repurchasing its stock after closing the acquisition of Mellanox Technologies,” which Nvidia expects to happen “in the early part of calendar 2020.”
Microsoft is one of the quintessential blue-chip stocks on the market and its run of success over the last several years helps it rest as one of only two public companies in the U.S. with a market cap of over $1 trillion, alongside Apple. MSFT stock has surged 55% in 2019 and over 5.5% in the past month. This climb is a part of a much longer and stronger run for Microsoft under CEO Satya Nadella, who took over in February 2014.
Microsoft has transformed into a cloud computing powerhouse that has started to encroach on industry-leader Amazon. Last quarter (Q1 fiscal 2020), MSFT’s Intelligent Cloud revenue surged 27%, driven by 59% expansion in the key Azure division. Overall, the company’s cloud computing revenues are projected to surge another 21% in 2020 to match last year’s full-year climb.
Along with its cloud success, MSFT has improved its legacy businesses such as Office, Windows, and gaming, and continues to expand through acquisitions. Our current Zacks estimates call for Microsoft's fiscal 2020 revenue to pop 11.3%, with fiscal 2021 expected to jump another 11% higher to $155.51 billion. These estimates come in below the firm’s 14% growth in both 2019 and 2018 but look strong compared to 2017’s 6% climb and mark impressive top-line expansion for a company of its size and age.
MSFT’s adjusted full-year earnings are expected to climb 12.6% this year and another 12.3% in 2021. On top of that, Microsoft’s longer-term earnings revision activity has trended completely upward since its last quarterly report. Microsoft holds a Zacks Rank #2 (Buy) at the moment and it raised its quarterly dividend by 11% and announced a new share repurchase program back in September.
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