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Owens & Minor, Acuity Brands, Tesla, Ford and General Motors highlighted as Zacks Bull and Bear of the Day

Zacks Equity Research

For Immediate Release

Chicago, IL – October 21, 2019 – Zacks Equity Research Shares of Owens & Minor OMI as the Bull of the Day, Acuity Brands AYI as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Tesla TSLA, Ford F and General Motors GM.

Here is a synopsis of all five stocks:

Bull of the Day:

Owens & Minoris a Zacks Rank #1 (Strong Buy) with A’s for Value and for Growth. This is an interesting name because I watched it last week as it had several days with strong buying support.  There were two days during which this stock was up 7% last week.  Let's take a look at why this stock hold the top Zacks Rank in this Bull of the Day.

Description

Owens & Minor, Inc. is a global healthcare solutions company dedicated to Connecting the World of Medical Products to the Point of CareSM by providing vital supply chain services to healthcare providers and manufacturers of healthcare products. Owens & Minor provides logistics services across the spectrum of medical products from disposable medical supplies to devices and implants. With logistics platforms strategically located in the United States and Europe, Owens & Minor serves markets where three quarters of global healthcare spending occurs. Owens & Minor's customers span the healthcare market from independent hospitals to large integrated healthcare networks, as well as group purchasing organizations, healthcare products manufacturers, the federal government, and healthcare patients at home through the Byram Healthcare subsidiary.

Earnings History

We have seen better when it comes to the earnings history. This stock has beaten the Zacks Consensus only one time in the last four outings. The company missed the mark twice and met it one time. The important thing to consider here is that the most recent quarter was the beat and it was a solid one coming in 42% ahead of expectations.

Earnings Estimate Revisions

I see a one penny move higher for the current quarter and a three cent move higher for the next quarter.

The Zacks Rank cares more about the full year numbers and for this year that estimate has moved from $0.60 to $0.65 in the last 90 days.

The 2020 Zacks Consensus Estimate has moved from $0.70 to $0.77 over the last 60 days and that is the sort of move that gets your attention. A 10% jump in estimates is going to have an impact on the stock.

Valuation

The valuation is good here, so it deserves the "A" in the Zacks Style Scores. The forward PE of 11x is very low, as is the price to book of less than 1 at 0.92x. That suggests the stock is trading at a value of less than all the assets and value players love that. The topline growth is thin at 1% in the most recent quarter and margins are pretty thin, but there is a buyer and this stock is on the move.

I believe we see double digits on this one in the near future.

Bear of the Day:

Acuity Brandsis a Zacks Rank #5 (Strong Sell) yet five months ago it was a Zacks Rank #1 (Strong Buy) and it was the Bull of the Day.  So what happened that this one is now at the lowest Zacks Rank and the Bear of the Day? Let's take a deeper look in this Bear of the Day article.

Description

Headquartered in Atlanta, GA, Acuity Brands is the parent company of Acuity Brands Lighting, Inc. (“ABL”) and other subsidiaries. The company manufactures and distributes lighting fixtures and related components that comprise devices such as luminaires, lighting controls, and controllers for various building systems, power supplies, prismatic skylights, and drivers, as well as integrated systems designed to optimize energy efficiency and comfort for various indoor and outdoor applications.

Earnings History

As I look back at the earnings history for AYI, I see mostly good results.  There were three beats in the last four reports, and investors love to see that.  

The problem is that more recent quarter, it was a miss.  A small miss of only 3 cents or about 1%, but still a miss.  The real issue here is the guide lower.

The company sees the next quarter revenues down mid to high single digit on a year over year basis.  So we can guess that means a roughly 5% - 8% decline which put the guide at approximately $850M - $885M for the topline.  The problem is the street consensus was at $935M at the time, so this means that estimates are going to be hit.

Earnings Estimates

With cut in revenue guidance, earnings estimate fell for AYI.  The Zacks Consensus Estimate was $2.50 but it slipped to $2.25 for the current quarter.

Next quarter saw 3 cents come off the top.

The full year estimate fell from $10.32 to $9.85 but there was no change to next year’s numbers.

Valuation

With the guide lower and the stock dropping, the valuation has gotten much better.  I see 12x forward earnings and that is well below the market multiple of around 18x. The topline is contracting, yet the market still gives the stock value for incremental sales as the price to sales multiple stays over 1x at 1.34x.

Additional content:

Is Ford’s Charging Network a Headache for Tesla?

Tesla easily has the largest charging network out there with its 4,375 public charging stations and around 15,000 plugs. About a third of these enable fast charging and with upcoming new technology, it will be able to pump 75 miles (250KW) of power in about five minutes. Because Tesla mans and manages its own charging stations, which are only available to Tesla owners, this has always been a key differentiator, other than its beautiful designs.

But Ford has other plans. According to Ford spokesperson Emma Bergg, “We’re taking away all that hassle factor… That’s what we’re doing for our whole electrification plan: a seamless experience, so that jumping from internal combustion engines is not such a big deal.”

To make this a reality, the company laid out plans for its charging station network, before the 2020 launch of its first Mustang-style SUV that was from the get-go, designed to be an electric car.

And it’s not doing it alone. Electrify America will help it build the charging stations and also supply DC fast chargers. Shell Group's Greenlots will create a platform for independent charging providers to connect with buyers that Ford users can access through their FordPass apps. General Motors, which is building a large network of public chargers with its construction partner Bechtel could even join this network later.

Ford expects this network to have more than 12,000 charging locations with more than 35,000 plugs, or more than double Tesla’s footprint. Of course, since these are independent providers, the stations will be open to all and not just Ford users.

But Ford users have an advantage in that they can go check their apps or dashboard for the closest station and make an in-app purchase rather than subscribing to the individual networks. And then, they can add 47 miles in 10 minutes, or get up to an 80% charge of their batteries in about 40 minutes. This isn’t as good as Tesla, but it’s worth noting that the market continues to evolve.   

Further, since most people actually charge their batteries at home, Ford said it is working with Amazon Home Services to install at-home chargers for Ford users.

How It Affects Tesla

Since fuel is what drives vehicles and since electric cars can only go so far on a single charge, the availability of charging stations becomes very important. Tesla is ahead of the pack here, since its EVs do more than 300 miles, with the Model S doing significantly higher. No other manufacturer has that range yet, so these other cars need relatively more frequent charging.    

The network approach sounds like a really good idea, especially if traditional automakers (competitors) agree to collaborate on charging stations. The number of EVs on the roads is increasing, so with easier charging available, competition is set to increase rapidly for Tesla. But it also means that it could lead to more mass-market appeal with positive kickbacks for Tesla, which is already seeing more demand than it can handle.

The U.S. Department of Energy estimates the cost per gallon to charge an EV at around $1.21, less than half the cost of a gallon of gas, which is estimated to be $2.65. This can further increase EV appeal.

So is this good news or bad news for Tesla? The answer is, it’s too soon to tell.

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