Owens & Minor, eHealth, Portland General Electric Co, Avangrid and Avista Corp highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – March 29, 2021 – Zacks Equity Research Shares of Owens & Minor, Inc. OMI, as the Bull of the Day, eHealth Inc. EHTH as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Portland General Electric Company POR, Avangrid, Inc. AGR and Avista Corporation AVA
Here is a synopsis of all five stocks:
Bull of the Day:
One of the most valuable functions of Zacks stock screening functionality is to upend the usual order in which individual investors make trading decisions. Quite often, an investor will start with a company or industry that has been in the news and then perform a deeper analysis of the financial data to decide whether to make a purchase.
Going in the other direction by starting with the financials you’d like to see and letting the screening software find candidates that fit your criteria can help you uncover candidates that you otherwise might not have noticed -- but that makes complete sense once you consider why their financial data and forecasts are already headed in the right direction.
For instance, there’s been a great deal of attention paid over the past year to biotech and pharmaceutical companies that were working on Covid-19 vaccines. Stocks like Johnson and Johnson, Moderna and Pfizer were in the news constantly during the entire process from research and trial, through regulatory approval and on to distribution and administration.
Comparatively less attention was paid to the lesser-known players in the healthcare industry, even though they stand to have their results impacted even more than the household names working on vaccines. That’s where screening comes into play. While it may have been easy to miss if you were reading the headlines in the financial news, I became aware of how well things were going for health logistics company Owens and Minor because of how well it has been screening for my work on the Zacks Black Box algorithmic service.
When you visit a clinic, doctors office or hospital, it’s nearly certain that a significant amount of the equipment and supplies you see are there because of Owens and Minor. The same goes for surgical and diagnostic tools and medical devices that you're unlikely to ever actually see.
During the most challenging year in memory for the health care industry, OMI’s supply capabilities and logistics expertise were understandably in high demand. With the ability to rapidly boost production of N95 respirators, surgical and procedure masks and face shields, Owens and Minor predictably turned in several solid quarters – and saw the share price rise considerably as well.
As case numbers recede and vaccination efforts look increasingly successful, an investor might reasonably conclude that OMI has already seen the best of the situation and that the current share price already includes all of the good news.
A look at the numbers suggests otherwise.
The considerable rally in share price was the direct result of earnings that were rising even faster. OMI went from netting just $0.04/share in the first quarter of 2020 to $1.14/share in Q4. Full year adjusted net income of $2.26/share was a nearly four-fold increase over 2019.
But it’s getting even better.
While announcing those stellar Q4 results, OMI also increased full-year 2021 guidance, explaining, “the company expects adjusted net income for 2021 to be in a range of $3.00 to $3.50 per share which represents growth in the range of 33% to 55% over 2020 adjusted net income per share.”
Thanks to estimates that were quickly and significantly revised, OMI looks like a great value proposition based on a F12 month P/E Ratio of just 11X – less than half the multiple of the S&P 500.
It’s true what they say – the numbers don’t lie. Using Zacks screening functionality can help you sort through all the numbers to find the hidden gems – like Owens and Minor.
Bear of the Day:
Today’s Bull of the Day is a healthcare company that has seen hugely increased demand for its products recently, resulting in excellent earnings results and increased estimates going forward.
Today’s Bear of the Day is heading in the opposite position, issuing disappointing guidance recently that sent earnings estimates for the next two years tumbling.
eHealth operates a private online marketplace for health insurance, matching customers with insurers, primarily for Medicare-related insurance like prescription coverage and Medicare Advantage. The company also sells plans for small businesses and individuals as well as dental and vision coverage, but Medicare makes up more than 90% of revenues.
Doing business as ehealthinsurance.com, eHealth sells plans in all 50 states and offers coverage from more than 180 carriers. More than 50% of revenues come from the top five insurance company partners.
Despite the high-tech name, eHealth’s has offered significantly more human contact than many online marketplaces, with an extensive and growing team of licensed agents and service reps on hand to assist customers who are often minimally proficient with technology and/or don’t trust a business that transacts exclusively online.
That level of contact is popular with prospective customers, but it’s also expensive to provide. Additionally, the company has relied on external telesales agents who have recently been underperforming at onboarding new paying customers.
Medicare segment revenue was up 12% in the 4th quarter and 28% in full-year 2020 over the corresponding year-ago periods, yet profits were down 23% and 10% respectively – a shortfall management hung on that external sales team. eHealth plans to increase its internal sales team and focus on customer acquisition channels with higher rates of return in 2021, but it remains to be seen how effective that transition will be.
The worst part of the Q4 report was the guidance. ehealth forecasts $660-700 million in revenues in 2021 and non-GAAP adjusted income of $2.77-3.26/share. While that’s a modest improvement over 2020, the markets were expecting a much better 2021.
The Zacks Consensus Earnings Estimate for full-year 2021 had been as high as $5.44/share and fell all the way to $2.81.
The 2022 estimate fell by a similar amount. Those reduced estimates contribute to a Zacks Rank #5 (Strong Sell). The company also earns a score of “F” in Growth, Value and Momentum – resulting in a VGM of “F.”
ETHT shares took a beating earlier in the year but have been inching higher recently despite the lowered expectations.
That increase in price could be an opportunity for those with a long position to lighten up. Though there’s no catalyst on the horizon to make eHealth a candidate for a short position, those reduced earnings expectations make it a risky investment.
Additional content:
3 Electric Utilities That Have Outperformed YTD
Electricity demand from the commercial and industrial (C&I) group remained dampened for 2020 due to the COVID-19 outbreak. With the resumption of economic activities, demand from C&I is likely to witness growth this year while residential demand is expected to continue seeing an upward trend.
Per U.S. Energy Information Administration (EIA), electricity consumption will improve 2.1% in 2021 and another 1.4% in 2022 after dipping 3.8% in 2020. Also, EIA expects demand from the residential sector to inch up 2.7% and that from the commercial and industrial sectors to increase 0.7% and 3.7%, respectively, in 2021. This is a very positive development for the utilities and the companies in this space will definitely benefit from the revival of demand.
Along with growth in demand, economic recovery will help these companies’ operational efficiency reach the pre-pandemic levels. Per Fitch Ratings, U.S. GDP is now anticipated to expand 6.2% this year (up from December 2020’s expectation of 4.5%), marginally greater than the global GDP figure. Also, the Federal Reserve expects the unemployment rate to fall from the current figure of 6.2% to 4.5% by 2021 end and again to 3.9% by the close of 2022 with the uptick in economy. The improving economic parameters will logically spur demand.
A transition toward clean sources of energy is already evident in the United States with a number of utilities on their own deciding to become carbon neutral over the next two decades. Moreover, the new government targets building a carbon-free electricity sector by 2035 and achieve net-zero emissions 15 years later. Environmental sustainability remains a peak concern for this industry. Per EIA, renewable energy generation will account for 21% in 2021 and 23% in 2022, up from 20% in 2020.
Use of high-quality solar modules, large wind blades and the development of large battery storage projects are making renewable energy more reliable and cost-effective. Being capital-intensive in nature, utilities face a constant stress of procuring funds. The current near-zero interest rates will assist the utilities to get the necessary investments at favorable rates. Also, the Fed plans to maintain these rates through 2023 to help the economy rebound from the damages caused by the pandemic.
Apart from the above-mentioned factors, companies from this industry seem an attractive option for investors as they continue to boost shareholder value via regular dividends on the back of stability in earnings. Remarkably, the industry’s dividend yield is 3.35%, better than the Zacks S&P 500 composite’s 1.38% at present.
The electric utilities’ focus on domestic operations alongside being subject to stern regulations helped them counter the pandemic-led chaos. These utilities will also continue benefiting from rate revision and their efforts to manage costs.
3 Utility Picks
We picked a few stocks from the industry that have returned more than the Zacks S&P 500 composite’s 4.4% growth in the year-to-date period. These stocks carry a Zacks Rank #3 (Hold) or above at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
These companies pay regular dividends to shareholders and have better dividend yields compared with the industry average of 3.35%. We added some more criteria for the selection of utilities from our proprietary Zacks Stock Screener.
Portland General Electric Co. is a fully integrated energy company with operations across Oregon. The utility serves 900,000 customers with a service area population of 2 million Oregonians in 51 cities. It carries a Zacks Rank #2 (Buy) at present.
Year-to-Date Return =10.9%
Dividend Yield =3.44%
Long-Term Earnings Growth (three to five years) = 13.36%
Estimate Movement =The Zacks Consensus Estimate for 2021 earnings has moved 1.5% up to $2.67 in the past 60 days.
Avangrid is an energy services and delivery company, serving 3.1 million customers throughout the state of New York and New England. It carries a Zacks Rank #3 at present.
Year-to-Date Return =7.7%
Dividend Yield =3.60%
Long-Term Earnings Growth (three to five years) = 4.60%
Estimate Movement =The Zacks Consensus Estimate for 2021 earnings has moved 0.9% north to $2.24 in the past 60 days.
Avista Corp. is an energy company involved in the production, transmission and distribution of energy as well as other energy-related businesses. It carries Zacks Rank of 3 at present.
Year-to-Date Return =19.5%
Dividend Yield =3.53%
Long-Term Earnings Growth (three to five years) = 6.88%
Estimate Movement =The Zacks Consensus Estimate for 2021 earnings has been revised 2% upward to $2.09 in the past 60 days.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
See the 5 high-tech stocks now>>
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Owens & Minor, Inc. (OMI) : Free Stock Analysis Report
Portland General Electric Company (POR) : Free Stock Analysis Report
Avista Corporation (AVA) : Free Stock Analysis Report
eHealth, Inc. (EHTH) : Free Stock Analysis Report
Avangrid, Inc. (AGR) : Free Stock Analysis Report
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