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Scotts Miracle-Gro, Barnes, Digital Turbine, Zix and DouYu as Zacks Bull and Bear of the Day

Zacks Equity Research
·13 mins read

For Immediate Release             

Chicago, IL – July 31, 2020 – Zacks Equity Research highlights Scotts Miracle-Gro SMG as the Bull of the Day and Barnes Group B as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Digital Turbine, Inc. APPS, Zix Corporation ZIXI and DouYu International DOYU.

Here is a synopsis of all five stocks:

Bull of the Day:                                                 

Scotts Miracle-Grois a Zacks Rank #1 (Strong Buy) and it recently posted a super strong beat and raised quarter.  Just the numbers caught my attention but digging deeper, I saw other things I liked.

One of the other things that I like was the previous Bull of the Day on SMG written on 4/29 by the man with the best email address at Zacks.  Ben Rains is his name and picking winners is his game!  Here is his Bull of the Day article on the company (https://www.zacks.com/stock/news/980597/buy-smg-stock-on-the-dip-for-growth-amp-income-amid-coronavirus-uncertainty)

Beat And Raise

Let's take a look at that quarter that caught my eye.

SMG reported EPS of $3.80 when $3.35 was the Zacks Consensus Estimate.  That is a big beat of 45 cents or a 13.4% positive earnings surprise.

The previous quarter was a 43 cent beat and a 10.5% positive earnings surprise.

The guidance is what caught my eye for this stock.  Before we get to the numbers, let’s go over why I think a beat and raise is almost always the best thing that can happen to a stock (besides a buyout). I like to say a beat and raise is like six months of good news all at once. If you think about it, that is a really powerful thing for a stock.

The company beat estimates for the quarter, so the last 3 months were better than expected. That is good news. When they raise guidance (above the consensus) then the next three months are now looking better than expected as well. Put that together and you have 6 months of good news all at once.

The company guided FY20 for EPS of between $6.65 and $6.85 and that is a big step up from $5.65 - $5.85 when guidance was previously given.  The company also sees the topline reaching $3.97B to $4.04B when the estimate was calling for $3.69B

That is a good looking beat and raise!

Estimate Revisions

The next two quarters will be losses for SMG, as the company is looking at a loss of 91 cents for the current quarter and a loss of $1.08 for next quarter.

The Zacks Rank, however, looks more at the full year numbers.  The fiscal 2020 year has seen an increase in EPS estimates from $5.26 to $5.79 over the last 60 days.  The following year has seen a jump of 33 cents to $6.06 over that same time horizon.

Bear of the Day:

Barnes Group has slipped to a Zacks Rank #5 (Strong Sell) and that comes despite posting a good sized beat just a few days ago.  Let's take a look at whyBarnes Group is a Zacks Rank #5 (Strong Sell) in this Bear of the Day article.

Description

Barnes Group Inc. provides engineered products, industrial technologies, and innovative solutions in the United States and internationally. The company operates through two segments: Industrial and Aerospace. The Industrial segment offers precision components, products, and systems used by various customers in end-markets, such as transportation, industrial equipment, automation, personal care, packaging, electronics, and medical devices. This segment also designs and manufactures hot runner systems, mold cavity sensors and process control systems, and precision high cavitation mold assemblies for injection molding applications; provides force and motion control solutions for various metal forming and other industrial markets; and designs and develops robotic grippers, end-of-arm tooling systems, sensors, and other automation components for intelligent robotic handling solutions and industrial automation applications.

In addition, it manufactures and supplies precision mechanical products, including mechanical springs, and high-precision punched and fine-blanked components used in transportation and industrial applications, including mechanical springs, and high-precision punched and fine-blanked components. This segment sells its products primarily through its direct sales force and distribution channels.

The Aerospace segment produces fabricated and precision machined components and assemblies turbine engines; and nacelles, and structures for commercial and military aircrafts. It also provides aircraft engine component maintenance, repair, and overhaul services for turbine engine manufacturers, commercial airlines, and the military; and manufactures and delivers aerospace aftermarket spare parts. This segment primarily serves the original equipment manufacturing industry. Barnes Group Inc. was founded in 1857 and is based in Bristol, Connecticut.

Earnings History

The Zacks Rank cares more about earnings estimate revisions that the earnings history, but one look at the earnings history for B, and you have to smile.  I see the company posting 4 straight beats of the Zacks Consensus Estimate with an average positive earnings surprise of 22%.

Estimate Revisions

Over the last week or so, estimates have fallen for B.  This quarter slipped to 34 cents from 37 cents and next quarter dropped a penny.  

Stretch that time horizon out to 60 days and the drops increase to 4 cents and 3 cents respectively.  

The Zacks Rank cares more about the full year numbers and only this year has fallen.  I see that number moving from $1.82 to $1.75 over the last 60 days and that is what pushed this stock to become a Zacks Rank #5 (Strong Sell).

Additional content:

3 Cheap Stocks for Second-Half Growth Despite Uncertainties

Thursday morning saw initial second quarter GDP data roll in that was brutal, but slightly better than expected. The U.S. economy shrank by 32.9% in Q2, based on initial Commerce Department estimates. This likely marks the bottom of the economic downturn since it features what will hopefully be the period with the most stringent lockdown measures.

Therefore, Wall Street might shake this figure off sooner than later, as people knew the second quarter was going to be rough. And this could slam home why many might remain in don’t fight the Fed mode, after Jerome Powell said Wednesday that it would continue to do all it can to support the U.S. economy.

Yet, with short-term interest rates near zero and long-term rates floating around all-time lows, the Fed chairman noted that more fiscal policy efforts are needed. This could put greater pressure on Congress to hammer out a second stimulus bill.

Despite the broader unknowns and a possible near-term pullback from tech and elsewhere, as Wall Street uses earnings as a chance to take home profits, investors should still be on the hunt for strong stocks to buy or add to their watchlists. And it’s worth noting that the second half earnings picture is slowly improving (also read: An Improving Earnings Outlook Despite Covid-19 Concerns)

With this in mind, let’s dive into three“cheap” stocks that are trading for under $20 per share that appear strong at the moment…

Digital Turbine, Inc.

Prior Close: $12.52 USD

Digital Turbine works to connect OEMs, mobile operators, and publishers with advertisers and developers for “frictionless app and content discovery, user acquisition and engagement, operational efficiency and monetization opportunities.” The Austin, Texas-based firm has landed on Deloitte's Technology Fast 500 list multiple times and it completed in early March its acquisition of Mobile Posse.

The deal helps create a more robust offering for clients, by adding Mobile Posse’s “suite of highly-engaging content discovery products” to its portfolio. The firm’s Q4 FY20 revenue, which it posted in early June, jumped 45%, with full-year sales up 34%. This performance came on top of the year-ago period’s 39% sales growth and was mostly organic since it only included a month of Mobile Posse operations.

APPS has climbed from under $2 in the fall of 2018 to its current price of $12.50 a share. This includes its 215% jump from the market’s March 23 lows, which destroys its industry’s 55% climb. Along with its cheap price tag, Digital Turbine trades at a solid discount compared to its industry, as it has for the last several years.

Our Zacks estimates call for APPS Q1 sales to surge 59%, with FY21 projected to come in 52% higher. Meanwhile, its adjusted earnings are projected to surge 80% in Q1 and 100% for the year to reach $0.40 a share. Digital Turbine operates within a booming market and it earns a Zacks Rank #2 (Buy) right now, alongside its “B” grade for Growth in our Style Scores system. The content discovery and delivery firm is set to report its Q1 results on August 5.  

Zix Corporation

Prior Close: $6.73 USD

Zix is an email security firm that specializes in email encryption, data loss and threat protection, and other cybersecurity offerings. ZIXI stock is up over 100% since the market’s lows. Despite the climb, the stock hovers 30% below its July 2019 highs, which could give it far more room to run if it’s able to impress Wall Street with its second quarter 2020 results that are due out on August 5. Along with its cheap shares, Zix trades at a significant discount against its industry at the moment, at 1.7X forward 12-month sales vs. 7.1X.

Peeking ahead, ZIXI’s second quarter revenue is projected to jump 14.4%, with its FY20 sales expected to climb over 23%. Better still, ZIXI’s adjusted quarterly earnings are expected to surge over 27%, with its full-year EPS figure set to soar 138% to $0.57 a share.

The email security firm’s earnings and revenue are expected to continue to grow in 2021. Plus, Zix’s positive earnings revisions help it grab a Zacks Rank #2 (Buy) right now, which goes well with its “B” grade for Value and an “A” for Growth in our Style Scores system.

The cloud email security solutions provider is also part of an industry that rests in the top 23% of our more than 250 Zacks industries. And Zix is poised to benefit from the ongoing need for cybersecurity. “The COVID-19 pandemic is accelerating digital transformation and is increasing the need for robust business communications solutions that ensure organizations remain secure, compliant and productive,” CEO David Wagner said in prepared Q1 remarks.

DouYu International

Prior Close: $12.55 USD

DouYu is a live streaming firm that focuses mostly on the video gaming and e-sports market in China. The company went public in July 2019 and it’s drawn comparisons to Amazon’s Twitch for its ability to allow people to watch video games live, which is a massive and growing market. DouYu is backed by Chinese social media and gaming powerhouse Tencent and it holds a Zacks Rank #2 (Buy) right now.

DOYU operates across both PC and mobile apps and it says it “has gained coveted access to a wide variety of premium eSports content.” This is great news as China represents a growth market within the global video space that is projected to soar from $159 billion in 2020 to over $200 billion by 2023. Investors have shown love for the stock recently, with DOYU shares up 100% since April 1. Despite its climb, DOYU trades at a discount against its industry that includes Activision Blizzard and Electronic Arts and its own highs.

DouYu outperformed the high-end of its Q1 FY20 sales guidance in late May, with revenue up 53%. Its mobile monthly average users climbed 15% to 56.6 million and its quarterly average paying user count popped 26% to 7.6 million. Plus, the company’s margins hit a record high. DouYu also topped our adjusted earnings estimate by 45%.

The company is set to release its second quarter financial results on August 10, with our estimates calling for 25% revenue growth and a 333% spike in adjusted earnings. DouYu’s fiscal 2020 revenue is projected to climb 37%, with FY21 expected to jump another 23% higher to hit $1.78 billion. And its adjusted FY20 EPS figure is projected to skyrocket 223% to $0.55 a share, with FY21 set to surge all the way to $0.72 per share.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>

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Barnes Group, Inc. (B) : Free Stock Analysis Report
 
The Scotts MiracleGro Company (SMG) : Free Stock Analysis Report
 
Zix Corporation (ZIXI) : Free Stock Analysis Report
 
Digital Turbine, Inc. (APPS) : Free Stock Analysis Report
 
DouYu International Holdings Limited Sponsored ADR (DOYU) : Free Stock Analysis Report
 
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