For Immediate Release
Chicago, IL – August 8, 2019 – Zacks Equity Research Sonic Automotive SAH as the Bull of the Day, Delphi Technologies DLPH as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Pinterest PINS, Twitter TWTR, Facebook FB, B2Gold BTG and Royal Gold RGLD.
Here is a synopsis of all seven stocks:
Bull of the Day:
One of the largest auto retailers in the U.S., Sonic Automotive is a company with dealership franchises that sell new and used cars; the sale of replacement parts; vehicle maintenance, warranty, paint and repair services; and arrangement of extended warranty contracts.
Q1 Earnings Cement Growth Promise
Earnings of 62 cents per share and revenues of $2.6 billion easily beat the Zacks Consensus Estimate.
But the biggest surprise of the quarter came from its EchoPark pre-owned vehicle retail chain. Even though it only accounts for about 10% of Sonic’s total sales, the company expects EchoPark to bring in over $1 billion in revenue this year; it generated revenue of $249.6 million in Q1, increasing 90% year-over-year.
EchoPark also became profitable in Q1, bringing in profits of $0.2 million before taxes.
“As we expand our footprint into other areas across the country, we believe EchoPark will exceed the overall volumes and profitability of our franchised dealerships,” said CEO David Smith.
Sonic doesn’t provide guidance, but analysts expect the company’s top line to grow 70% this year and bottom line to increase 15%.
SAH is Soaring
Shares of Sonic soared this year, jumping more than 100% compared to the S&P 500’s return of roughly 15%.
Earnings estimates have since been rising, and the stock is now a Zacks Rank #1 (Strong Buy).
For the current fiscal year, four analysts have revised their earnings estimate upwards in the last 60 days, and the Zacks Consensus Estimate risen 18 cents from $2.07 to $2.25. 2020 looks pretty strong too, with earnings and revenue expected to show positive year-over-year growth.
SAH currently trades at 11.8X its forward full-year earnings estimates, a discount compared to the broader Retail-Wholesale Market. If Sonic can continue to capitalize and expand on EchoPark, investors can likely expect to see further upside to shares.
Thanks to EchoPark’s soaring sales, the future is looking promising for Sonic Automotive. If you’re an investor searching for a broader retail sector stock to add to your portfolio, make sure to keep SAH on your shortlist.
Bear of the Day:
Delphi Technologies develops, designs and manufactures powertrain technologies for original equipment manufacturers. The company's operating segment consists of Powertrain Systems and Products & Service Solutions; it supplies a full suite of aftermarket products, including engine control modules, pumps, injectors, fuel modules, exhaust gas recirculation valves, brakes, steering and suspension.
Q2 Earnings Weaker-Than-Expected
Earnings of 58 cents per share lagged behind our consensus estimate, while revenues of $1.2 billion also came just short of analyst expectations; revenues fell 9% year-over-year.
Adjusted revenue reflects a decrease of 7% in 7% in Powertrain Systems and an increase of 3% in Aftermarket.
Delphi also noted that its North America and Asia markets were down 10%, but were partially offset by growth of 3% in South America and consistent revenue in Europe.
Estimates Keep Falling
Analysts have since turned bearish on Delphi Technologies, with seven cutting estimates in the last 60 days for the current fiscal year. Earnings are expected to decline about 34% for the year, and the Zacks Consensus Estimate has dropped 28 cents during that same time period from $3.17 to $2.89 per share.
This sentiment has stretched into 2020. While earnings could see positive growth, our consensus estimate has dropped 37 cents in the past two months.
DLPH is now a Zacks Rank #5 (Strong Sell).
Shares of the automotive supplier have gained only 9% since January compared to the S&P 500’s gain of about 15%.
Like other auto suppliers, Delphi have been under pressure after President Trump announced plans to impose additional 10% tariffs on $300 billion worth of Chinese goods last week.
It’s also been struggling a bit since the 2017 split with its self-driving business; since then, its lost 70% of its value.
CEO Richard Dauch has been focusing on streamlining Delphi’s operations and improving the company’s profitability, but macroeconomic headwinds are putting pressure on shares and Delphi’s growth prospects.
Investors who are interested in adding a broader technology services peer to their portfolio should take a look at Zacks Rank #2 (Buy) ranked Loop Industries or Zacks Rank #3 (Hold) ranked Aptiv.
How to Invest During a Volatile Stock Market
Welcome to Episode #188 of the Zacks Market Edge Podcast.
Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.
This week she’s joined by Zacks Chief Equity Strategist, John Blank, to talk about the stock market volatility, including the impact of a possible trade war with China, the slowdown in US manufacturing and where the global economy is heading.
Where Should Stock Investors Be Looking?
Is there anywhere to hide out in this uncertainty?
Some industries, like the industrial manufacturers, are going to be impacted directly by the tariffs.
But others, like the social media giants, who are already banned from doing business in China anyway, probably will not.
Gold has hit 6-year highs as investors have flooded into the yellow metal seeking security. Suddenly, it’s one of the hottest industries.
Should investors be buying gold?
Gold and the Social Media Stocks
1. Pinterest gets most of its revenue from North America so its exposure to China is low. Its earnings picture is improving with earnings expected to jump 97% in 2020. Pinterest is a Zacks Rank #2 (Buy) stock.
2. Twitter is global but it’s mostly banned in China which has its own Twitter-like service called Weibo. It’s one of the cheaper social media stocks as it has a forward P/E of just 17 and a PEG of 0.7.
3. Facebook has large operations in India, but not in China where it has been banned. Tencent is often called the “Facebook of China” because it offers a very similar portal. Shares are down nearly 10% in the last month’s volatility. It now has a forward P/E of just 29.
4. B2Gold is a gold miner which is expected to grow earnings by 12.5% in 2019 and another 54% in 2020. Shares are up 15% over the last month. But has the gold rally been priced in?
5. Royal Gold is not a miner but it acquires and manages precious metal stream and royalty interests from 40 revenue producing properties. Shares are up 14% in the last month. It also pays a dividend, currently yielding 0.9%.
What else should you know about investing in this volatile market?
Find out on this week’s podcast episode.
[In full disclosure, the author of this article owns shares of FB in her personal portfolio.]
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Sonic Automotive, Inc. (SAH) : Free Stock Analysis Report
Facebook, Inc. (FB) : Free Stock Analysis Report
Twitter, Inc. (TWTR) : Free Stock Analysis Report
Delphi Technologies PLC (DLPH) : Free Stock Analysis Report
Royal Gold, Inc. (RGLD) : Free Stock Analysis Report
B2Gold Corp (BTG) : Free Stock Analysis Report
Pinterest, Inc. (PINS) : Free Stock Analysis Report
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