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Michael Kors, JetBlue, Walmart, Microsoft, Amazon and Tesla highlighted as Zacks Bull and Bear of the Day

Zacks Equity Research
Higher contribution from U.S. Gas Pipelines and Liquids businesses drives the results of TransCanada (TRP) in the third quarter of 2018.

For Immediate Release

Chicago, IL – August 16, 2018 – Zacks Equity Research highlights SodaStream International Ltd. SODA as the Bull of the Day, JetBlue Airways Corporation JBLU asthe Bear of the Day. In addition, Zacks Equity Research provides analysis onWalmart WMT, Microsoft MSFT and Amazon AMZN.

Here is a synopsis of all three stocks:

Bull of the Day:

SodaStream International Ltd.just reported its most successful quarter in company history. This Zacks Rank #1 (Strong Buy), once again, raised its full outlook for the year.

SodaStream makes and distributes home beverage carbonation systems called Sparkling Water Makers. These allow consumers to turn tap water into sparkling water and flavored sparkling water. Products are available at more than 80,000 retail stores in 45 countries.

Crushed it in the Second Quarter

On Aug 1, SodaStream reported its second quarter results and simply hit the ball out of the park.

Earnings were $1.14 versus the Zacks Consensus of $0.71, for a $0.43 beat.

It was the 12th consecutive beat in a row.

Revenue rose 31.3% to $171.5 million from $130.6 million a year ago due to growth in most of the company's geographic regions, but especially in Germany, France, Canada and the United States.

Gross margin skyrocketed 620 basis points to 59.3% from 53.1% in the year ago period.

The gains were due to leveraging fixed infrastructure costs on higher revenue, the additional gross margin associated with the new French distribution model and the positive FX impact.

Sales of the sparkling water maker units rose 22% to over 1 million in the second quarter and sales of gas refill units jumped 17% to an all-time record of 9.7 million.

It has really positioned itself as an alternative to the use of plastic bottles and that marketing appears to be working.

Raised Guidance Again

For the second quarter in a row, SodaStream raised full year guidance.

Revenue is now expected to rise 23% versus last year, up from its prior guidance of a gain of 15%.

Earnings are forecast to jump 31% over 2017 compared to the previous forecast of a gain of just 8%.

Given the bullish guidance, it's not surprising that analysts moved to raise their estimates.

3 estimates were increased for 2018, pushing the Zacks Consensus Estimate up to $4.45 from $3.59 in the last month. That's earnings growth of 35.3% compared to 2017.

The good times are expected to continue into 2019 too. The 2019 Zacks Consensus jumped to $5.19 from $4.04 after the earnings report, another 16.5% gain.

Bear of the Day:

JetBlue Airways Corporation is getting hit by rising costs. This Zacks Rank #5 (Strong Sell) is expected to see a double digit decline in earnings in 2018.

JetBlue operates a a low-cost airline with its main hub being New York. It is also a leading carrier in Boston, Fort Lauderdale-Hollywood, Los Angeles (Long Beach), Orlando, and San Juan. JetBlue carries more than 40 million customers a year to 102 cities in the U.S., Caribbean, and Latin America with an average of 1,000 daily flights.

Ratified Its First Ever Pilot Contract

On July 27, JetBlue ratified its first ever pilot contract with the Air Line Pilots union.

It's a 4-year contract. Negotiations began all the way back in 2015.

These negotiations have been an overhang on the stock as there was a level of uncertainty regarding costs and the outcome for several years. That's now been removed. Analysts and investors can model the costs of the new pay rates and other provisions.

Higher Fuel Costs Spook Investors

On July 24, JetBlue announced second quarter results and beat the Zacks Consensus by 2 cents, earnings were $0.38 versus the consensus of $0.36.

However second quarter revenue per available seat mile (RASM) fell 1.2% year over year, mostly due to the negative impact of holiday travel that shifted into the first quarter.

All the airlines are dealing with the increase in fuel prices.

The realized fuel price in the quarter was $2.28, up 41.7% from the first quarter of 2017 when it was $1.61.

It's hedging about 7% of its fuel consumption for the third quarter and expects to have an average price per gallon of $2.33 in the quarter.

Capacity is expected to jump between 7.5% and 9.5% year-over-year in the third quarter.

For the third quarter, RASM growth is forecast to range between flat and 3% year-over-year.

Estimates Cut

While the pilot contract was seen as a positive by analysts, there's still a lot of uncertainty about the near term.

The analysts have cut full year estimates since the report.

Additional content:

Should You Buy Walmart (WMT) Ahead of Earnings?

Shares of Walmart ticked down 0.7% on Wednesday, the last full day of trading before its upcoming earnings release. This doesn’t tell us much, but we can take a look at WMT’s quarterly estimates and fundamentals to see what’s really going on.

Walmart stock has underperformed recently, gaining 11.1% over the last year but shedding about 9% on a year-to-date basis. WMT has aggressively boosted e-commerce spending, seeking to expand overall operations, with a focus in online grocery delivery. The company is also improving its international unit, having made headlines when it announced the purchase of a majority stake in Indian e-commerce player Flipkart.

Walmart announced a five-year strategic agreement with Microsoft in mid-July. The extended collaboration will bolster Walmart’s digital capabilities with Microsoft’s advanced cloud data solutions. The agreement is expected to help reduce operational costs and redundancies, and is the latest in a series of partnerships that WMT has inked to continue its fight against key rival Amazon.

But while these initiatives hold promise for Walmart, the increased investments and competitive pricing strategy have hurt margins, leading to the firm’s recent underperformance. Still, the short-term hit is outweighed by the added value that the moves are expected to generate for the storied retail giant.

There is plenty of recent Walmart-related news for investors to consider, but what can we expect from the company’s latest report? Let’s take a closer look.

Latest Outlook & Valuation

According to our latest Zacks Consensus Estimates, Walmart is expected to report earnings of $1.21 per share and revenue of $125.64 billion. These results would represent year-over-year growth of 12.04% and 1.85%, respectively.

Of course, top and bottom line growth estimates are just two of the many things investors will be concerned with when WMT reports its quarterly financial results. We can also turn to our exclusive non-financial metrics consensus estimate file to help prepare.

The Zacks Consensus NFM file contains detailed estimate data for business segment metrics and non-financial metrics reported by companies. The data is acquired from digest and contributing broker models and includes the independent research of expert stock market analysts.

According to these consensus estimates, Walmart is projected to see a 2.1% year-over-year boost in comparable store sales across its US locations. A beat here would be a promising sign, and mark the third-consecutive quarter in which the firm does so.

WMT is also expected to have hit 6,389 overall total international locations in the quarter, marking 2.2% growth from the year-ago period and maintaining a positive sequential trend. Moreover, international set sales are slated to reach $29.40 billion, representing 3.8%, or $1.07 billion growth over the year before.  

Furthermore, heading into Thursday, Walmart was trading with a Forward P/E of 18.6x, which marks a discount compared to the broader “Retail-Wholesale” market average of 24.1x.

Earnings ESP Whispers

Investors will want to understand what chance Walmart has to surprise investors with better-than-expected earnings results. For this, we turn to our Earnings ESP figure.

Zacks Earnings ESP (Expected Surprise Prediction) compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter. The Most Accurate Estimate is a version of the Zacks Consensus whose definition is related to change.

This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.

A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.

WMT is currently a Zacks Rank #3 (Hold) and sports an Earnings ESP of 0.97%. In other words, our model suggests that WMT could be poised to top estimates.

Surprise History

WMT’s earnings surprise history and the effect that these surprises have had on its share prices are two other important factors to consider ahead of its earnings report.

We can see that WMT has posted mostly solid earnings results, topping quarterly estimates in 14 of the last 16 quarters. But these beats do not always lead to positive momentum following WMT’s quarterly release.

We judge the price effect of earnings surprises by comparing the closing price of the stock two days before the report and two days after the report. Walmart’s stock has turned negative in five out of these last eight windows.

Walmart is scheduled to report its latest quarterly earnings Thursday morning.

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