For Immediate Release
Chicago, IL – June 3, 2022 – Zacks Equity Research shares Paycom Software PAYC as the Bull of the Day and General Electric GE asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Univar Solutions UNVR, Cumulus Media CMLS, and Gray Television GTN.
Here is a synopsis of all five stocks:
Bull of the Day:
Paycom Software is a $17 billion provider of integrated HR services for corporations. Shares surged above $500 last autumn after another stellar earnings report inspired analysts to raise estimates and targets.
A more uncertain outlook for the next two quarters saw shares get pulled down in the software/cloud bear market of the last six months.
But all that could be about to reverse as the company's Q1'22 beat-and-raise report has analysts once again raising estimates.
PAYC is projected to pull in topline revenues this year of $1.33 billion, representing 26.4% annual growth. And the consensus EPS forecast is $5.53, for a 23.4% advance.
Shark Tank's Barbara Corcoran Likes the App for That
Much like bigger peers Automatic Data Processing and Paychex, Paycom provides functionality and data analytics that businesses need to manage the complete employment life cycle from recruitment to retirement. Its HCM (human capital management) solution offers a suite of applications in the areas of talent acquisition, time and labor management, and payroll.
But where the David among Goliaths has innovated faster is with a smartphone app that allows employees to access and engage their data at will. You've likely seen the commercials where Shark Tank's Barbara Corcoran shows off the slick features of the on-the-go HR app.
Bringing HCM to the People
Here's how the Paycom website describes the challenges they solve...
Still clinging to multiple HR systems and outdated processes? Whether you're using bad tech, too much tech or no tech at all, the results are the same: productivity suffers and frustrations climb.
With Paycom, employees can enter and manage their own HR data in a single, easy-to-use software. When they do, the weight of inefficient processes is finally lifted to transform your entire organization for the better.
Here are the benefits Paycom lists for companies who give their employees a self-service HR platform accessible on their smartphones...
HR is freed of this administrative burden
Efficiencies spread companywide
Employee engagement rises
Data accuracy increases
ROI is maximized
FinTech... from HR and Payroll?
Founded in 1998, Paycom offers analytics that manage the complete employment life cycle from recruitment to retirement with cloud-based human capital management (HCM) SaaS solutions for employee records, payroll, and talent management processes.
Oklahoma City-based Paycom serves more than 23,500 clients in all 50 states, or nearly 12,700 customers based on Parent Company Grouping. Its human resource services include retirement services administration, workers' compensation administration, employee benefit solutions, professional employer organization and other administrative services for businesses.
Paycom's HCM solution offers a full suite of applications that generally falls within the following categories: talent acquisition, time and labor management, payroll, talent management and HR management.
Its HCM software streamlines and automates many of the day-to-day record-keeping processes and provides a framework for HR staff to manage benefits administration and payroll, map out succession planning and document such things as personnel actions and compliance with industry and/or government regulations.
Ideally, the cloud-based HCM reduces the administrative burden on employers and increases employee productivity and retention.
Instant Access = Increased Engagement
In the era of HCM, employers are looking for new ways to empower employees and encourage engagement. Since its easy to forget about the total benefits one receives from a corporate job, the ability to instantly access key information and choices at the tap of a finger is synergistic bonus for everyone.
That access can include tasks and elements like requesting time off, seeing compensation, expenses, documents, and even performance.
This may be one reason that Paycom has such a rich valuation as they help corporations merge into the FinTech universe that their employees-as-consumers are now accustomed to with apps and access at their fingertips.
It certainly makes sense since we can access everything else in our financial lives this way.
FinTech for the People
In fact, the best firms will be taking "financial literacy" to new levels of responsibility, going beyond just giving a 401k with a match to teaching their employees how to organize and manage their entire financial lives.
I see a giant opportunity for all of the HCM companies, including Workday and Paylocity, to offer a personal finance platform to corporations that integrates with their existing tools. That kind of engagement and education could drive employee satisfaction and retention even higher.
And on the Mind Over Money podcast recently, I talked with veteran financial planner Mark Harvey about his brainchild for personal finance, The Harvest Plan.
Here's an excerpt from the article version of the podcast...
Get Yourself a MoneyPlan Coach
When it comes to personal finance, there are plenty of gurus out there, from Dave Ramsey to Suze Orman. But I doubt they have what my guest today has in terms of experience and tools. Today, we'll introduce Mind Over Money listeners to a financial advisor who combines the best elements of coaching and a rich platform of strategies and decision tools to get your money game in top shape.
In the podcast, we meet Mark Harvey, a 30-year financial professional who has served every area of consumer finances and he's got some of the top fiduciary credentials including RIA, Registered Investment Advisor, and the highest advocate role you can obtain with the IRS to serve his clients, that of the Enrolled Agent.
Mark is also the creator of The Harvest Plan software platform, which is the best, most complete portal I have ever seen for managing your money game, from mortgages, credit, taxes and debt elimination to savings, investments, college planning and retirement.
And there's a reason they call him The MoneyPlan Coach: every aspect of your financial life includes step-by-step video tutorials where Mark walks you through how to use the system to organize your total money game. So I was excited to have him on the program and dive into how this amazing platform, The Harvest Plan, helps us get our money game tuned up, turned on, and ready for anything.
And here's the podcast link and full article...
Get Your Money Game In Top Shape With Mark Harvey, The MoneyPlan Coach
Bottom line: Buy PAYC while you still can near $300 (it's rallied over 6% while I write this on Thursday). And check out a free trial of The Harvest Plan while you can before some big HCM software company buys them and only offers it to their customers.
Bear of the Day:
General Electric reported Q1'22 earnings in late April where EPS topped estimates but revenues missed the Zacks Consensus.
General Electric reported mixed first-quarter 2022 results, wherein earnings surpassed the Zacks Consensus Estimate, but sales missed the same. The company's quarterly earnings beat the consensus estimate by 20%. Sales lagged estimates by 2.4%.
The industrial conglomerate's adjusted earnings were 24 cents per share in the first quarter, beating the Zacks Consensus Estimate of 20 cents. The bottom line matched the year-ago figure.
In the quarter under review, General Electric's consolidated revenues were $17,040 million, reflecting a year-over-year decline of 0.2%. The quarterly sales suffered from weakness in the Power and Renewable Energy segments. A gain in Healthcare and Aviation was a relief.
The company's top line lagged the Zacks Consensus Estimate of $17,462 million.
The performance of Aviation, Healthcare, Renewable Energy and Power is discussed below:
Aviation revenues increased 12% year over year to $5,603 million and orders grew 31%. Organically, growth rates for revenues and orders were 12% and 32%, respectively. The high volume of shop visits significantly benefited Commercial Services revenues, partially offset by a decline in Commercial Engines revenues due to supply chain constraints.
Healthcare revenues in the reported quarter totaled $4,363 million, increasing 2% year over year. The segment's orders grew 8% on an organic basis. The segment gained from a 3% increase in services organic sales while equipment revenues were flat. Supply shortages in the industry played spoilsport in the quarter.
Renewable Energy revenues totaled $2,871 million, down 12% year over year. Organically, the segment's sales were down 10%. Its orders decreased 21% in the reported quarter. Weakness in Onshore Wind revenues and softness in Grid adversely impacted the segment's performance. Growth in services revenues was a relief.
The Power segment's revenues were down 11% year over year at $3,501 million. Organically, sales decreased 6%. However, the segment's orders increased 14% year over year (or were up 19% organically). The segment suffered due to lower shipment volumes.
In the quarter under review, General Electric's cost of sales was down 0.7% year over year to $12,453 million. It represented 73% of the quarter's revenues versus 73.4% in the year-ago quarter. Selling, general and administrative expenses decreased 26.2% to $3,651 million. It was 21.4% of the quarter's revenues versus 17% in the year-ago quarter. Research and development expenses totaled $641 million, reflecting an increase of 14.3%. It represented 3.8% of the quarter's revenues versus 3.3% in the year-ago quarter.
The company's adjusted operating profit was $946 million, up 19% year over year. Margin in the quarter was 5.8%, up 90 basis points (bps).
On a reported basis, the Power segment recorded operating earnings of $63 million against a loss of $87 million in the year-ago quarter. Renewable Energy recorded a loss of $434 million compared with a loss of $234 million in first-quarter 2021. The Aviation segment's earnings were $908 million versus $641 million in the year-ago quarter. The Healthcare segment's profits decreased 23% to $538 million.
Interest and other financial charges decreased 19.6% year over year to $390 million.
Balance Sheet and Cash Flow
Exiting the first quarter of 2022, General Electric had cash and cash equivalents of $12.8 billion, down from $15.8 billion recorded at the end of the previous quarter. Borrowings were $28.6 billion, down from $30.8 billion at the end of the previous quarter.
Non-GAAP free cash outflow totaled $880 million in the first quarter compared with $3,361 million cash outflow recorded in the year-ago quarter.
For 2022, General Electric anticipates organic revenue growth in the high-single digits on a year-over-year basis. Adjusted organic profit margin is predicted to expand 150 bps from the previous year.
Free cash flow will likely be $5.5-$6.5 billion for the year. Adjusted earnings per share for 2022 are anticipated to be $2.80-$3.50 per share, suggesting a rise from $1.71 recorded in 2021.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -42.86% due to these changes.
At this time, GE has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, GE has a Zacks Rank #5 (Strong Sell).
Brokers Now Have a Buy Rating on These 3 Stocks
The JOLTS report is in and we now know that the number of job openings shrank about half a million to 11.4 million in the month of April. But it was still way higher than the 5.94 million people looking for work. Wage growth over the 12 months to April remains in the +11% range. So it's reasonable to assume that the tightness in the labor market has continued into the second quarter of the year.
The ISM manufacturing report for May shows a contraction in the employment index, which would indicate fewer hires. But the report clarified that "despite the Employment Index contracting in May, companies improved their progress on addressing moderate-term labor shortages at all tiers of the supply chain."
It added that "panelists indicated improvement in ability to hire in May compared to April. Challenges with turnover (quits and retirements) and resulting backfilling continue to plague efforts to adequately staff organizations, but to a slightly lesser extent compared to April."
The bottom line on the employment front seems to be that the market is still pretty tight although improving.
So far, demand continues to increase, according to the ISM report, notwithstanding the effects of rate hikes, which usually take a year or so to kick in. Sentiment was describe as being "strongly optimistic regarding demand, with five positive growth comments for every cautious comment. Panelists continue to note supply chain and pricing issues as their biggest concerns."
Given this backdrop, there should not be a dearth of stocks to choose from. But if you'd rather be cautious given the impending softness as rate hikes take their toll on demand, you'd do well to go with what the experts say.
And for that purpose, I've picked a few stocks on which all of the covering analysts have a Strong Buy, or at least a Buy recommendation. And Zacks methodology also supports their selection as detailed below-
Univar has a Zacks Rank #2 and Value, Growth and Momentum scores of A, D and B, respectively. It belongs to the Chemical – Diversified industry (top 28%). Univar's surprise history is also good at 28.5% and analysts continue to raise its estimates.
The last 30 days have seen the Zacks Consensus Estimate on this stock jump 63 cents, or 24.0%. The 2023 estimate is also up 28 cents (10.1%) in the same time period. Univar's revenue and earnings are expected to increase 16.7% and 46.9% this year.
#1 (Strong Buy) ranked Cumulus Media belongs to the Broadcast Radio and Television industry (top 40%) and Zacks has allotted Value, Growth and Momentum Scores of A, A and D to it. While the company missed estimates in one of the four preceding quarters, the average positive surprise was still a whopping 108.1%.
In the last 30 days, the Zacks Consensus Estimate for 2022 has increased 18 cents, or 9.6%. The 2023 estimate has dropped 21 cents (7.4%). But analysts continue to expect the company to grow revenue and earnings in both years. In 2022, growth is expected to be a respective 9.1% and 441.7%. Increases in the following year are expected to be a respective 2.8% and 28.1%.
#1 ranked Gray Television belongs to the same industry. It has Value, Growth and Momentum scores of A, C and A, respectively. The company started surprising positively a couple of quarters ago and its four-quarter positive average surprise is 37.5%.
Analysts have turned optimistic about the company's prospects 30 days ago. Since then, its 2022 estimate has climbed $1.12 (27.0) while its 2023 estimate jumped $1.17 (50.9%). However, current estimates still represent declines in 2023 revenue and earnings after solid growth of 55.7% in revenue and 1,217.5% in earnings this year.
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General Electric Company (GE) : Free Stock Analysis Report
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