For Immediate Release
Chicago, IL – Jan 16, 2018 – Zacks Equity Research highlights SMART Global Holdings SGH as the Bull of the Day, Natus Medical BABY as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Interactive Brokers Group, Inc. IBKR, Renasant Corporation RNST and GATX Corporation GATX.
Here is a synopsis of all five stocks:
Bull of the Day:
SMART Global Holdings is a $700 million manufacturer of specialty semiconductor memory solutions, including DRAM and flash products. They are also a leading global provider of electronic components supply chain services for major OEMs.
And to fully understand the success of SMART Global requires knowing they are the largest in-country manufacturer of memory for smartphones, PCs, and servers in Brazil.
In November, the company delivered an earnings pre-announcement where management raised their Q1 fiscal year 2018 adjusted EPS view to 90-93 cents from 79-83 cents vs the Zacks Consensus of 82 cents. The revenue outlook was also boosted to $250-$260 million from $225-$240 million, vs the consensus $233 million.
Here's the commentary I gave my TAZR Trader members, where we have owned the stock since October, on the day of SMART Global's first quarter FY18 report (Q1 began in September)...
SMART Global delivered a strong quarterly report tonight, even beating its own revised guidance.
Revenue, gross margin and EPS all exceeded the high end of the revised guidance they gave last month for Q1 FY2018.
Shares were up as much as 10% after hours to $34.50 on 220K shares as of 6pm ET.
Here's the top of the press release...
NEWARK, Calif., Dec. 21, 2017 (GLOBE NEWSWIRE) -- SMART Global Holdings, Inc. (“SMART”), parent company of SMART Modular Technologies, Inc., today reported financial results for the first quarter of fiscal 2018 ended November 24, 2017.
First Quarter Fiscal 2018 Highlights:
Net sales of $265.4 million, 67% higher than year ago quarter
GAAP operating income of $31.5 million
GAAP net income of $21.0 million
Adjusted EBITDA of $36.9 million
GAAP diluted EPS of $0.92
Non-GAAP diluted EPS of $1.05
Iain MacKenzie, President and Chief Executive Officer of SMART Global Holdings commented in the PR...
“Looking ahead, we believe that the outlook is for more improvement in both SMART Brazil and our Specialty Memory businesses. The recovering economy in Brazil and health in the overall global memory market, combined with strong demand for higher density products from our OEM customers, lead us to be optimistic about continued positive momentum in the upcoming periods."
The Earnings Trifecta: Top & Bottom Beats and Guidance Raised
With earnings and revenue that both topped analysts' expectations, let's see by how much SMART beat the consensus views and then we'll look at the guidance.
For the quarter ended Nov. 24, the specialty memory solutions provider posted non-GAAP earnings of $1.05 per share, compared with the prior-year period's $0.04 per share. The Zacks EPS consensus was for $0.92.
SMART revenue was $265.4 million, up 67% from $159.3 million in the same quarter last year. The Zacks consensus was for revenue of $255 million.
The company expects fiscal Q2 EPS of $1.30 - $1.36 on revenue of $280 million - $300 million. The Street view is for EPS of $0.91 on revenue of $253.7 million.
Let's see if these solid results put SMART back on track to trade near $40 as one of the best values in small-cap Tech right now.
Current members already know the roller-coaster we've been on here with the surge to $40 and then retreat on a secondary offering by selling shareholders (the 30-year old company just IPO'd in May).
But we kept doing our homework here and we were not scared away when shares dipped under $29. Indeed, that was our cue to add more extreme value last week.
(end of Dec 21 TAZR commentary)
The Little 'Ole Success Story You Never Heard Of
Even though they've been in business for 30 years, SMART just IPO'd in May of 2017 at $12. And given its growth trajectory, that was an unbelievable steal.
For FY2018 (ending next August), SGH is now expected to grow the topline over 48% to $1.13 billion from FY2017 sales of $761 million. That gives the stock a very attractive Price-to-Sales ratio of under 0.7X.
Part of the big revenue growth is all about Brazil right now as their economy recovers and consumer demand for digital electronics picks up.
But the company also has manufacturing locations in a half-dozen other cities around the globe. Founded in 1988 as Smart Modular Technologies, SGH corporate headquarters are in Newark, California and the company employs over 1,100 people.
The company now exists as a holding company for various subsidiaries across its world-wide memory manufacturing and supply chain services.
There is an R&D center in Tewksbury, MA and a European Planning & Sales Center in East Kilbride, Scotland. There are sales centers in Hong Kong and Singapore and an Advanced Package Engineering and R&D center in South Korea.
From these locations, SMART serves a rich list of industries and applications, including automotive, communications, computing, defense, gaming, industrial, and the cloud.
Bear of the Day:
Natus Medical is a $1.2 billion provider of healthcare products used for newborns including the screening, treatment, and monitoring of common medical ailments such as hearing impairment, neurological dysfunction, epilepsy, sleep disorders, and other specific neonatal care.
Product offerings include computerized neurodiagnostic systems for audiology, neurology, polysomnography, and neonatology, as well as infant care products such as hearing screening systems, phototherapy devices for the treatment of newborn jaundice, head-cooling products for the treatment of brain injury in newborns, and software systems for managing and tracking disorders and diseases for public health laboratories.
If you've ever known a family who spent time in the neonatal intensive care unit (NICU) of a hospital, chances are they were exposed to these types of products. I have seen first hand how a cooling blanket works to prevent potential brain bleeding and swelling after a baby in our family was put on one for the first 72 hours of her life because of a difficult birth where the physicians were concerned she may have been without oxygen for several minutes.
It is truly amazing that medical research has found a way to lower a newborn's body temperature into a state of hypothermia to prevent brain damage, and to do this procedure safely.
Lack of oxygen to the brain in newborns is called neonatal hypoxic ischemic encephalopathy (HIE) and occurs in approximately 5 out of every 1,000 births. Without immediate treatment, infants are at risk not only of severe brain damage, but death as well. The National InstituteS of Health estimate that 15-20% of newborns who develop HIE will die.
So Why Did BABY Shares Drop 20% Last Week?
On January 8, Natus announced preliminary Q4 results and gave guidance for the coming year. Both sets of numbers disappointed investors and analysts, with 2017 revenues expected to fall in a range of $500.5 million to $501.5 million, versus the Street consensus of approximately $515.5 million.
Here was President and CEO Jim Hawkins commenting on how management expected the company to finish up the year...
"Revenue in the fourth quarter was lower than expected due to weakness in our U.S. Neurodiagnostic business. In addition, due in part to disruption from the integration of computer systems, fourth quarter revenue was also lower than expected at Otometrics. Revenue from our recently acquired neurosurgery business was slightly above our expectations. Newborn Care revenue performed as expected."
For the full year 2018, Natus expects to report revenue of $535 to $540 million and non-GAAP EPS of $1.60 to $1.65. For the first quarter of 2018, management expects to report revenue of $125 to $127 million and non-GAAP EPS of $0.23 to $0.24. The first quarter and full year of 2017 included approximately $10 million in revenue from a non-recurring contract with Venezuela that is not expected to reoccur in 2018.
The Zacks consensus numbers prior to this announcement were Q1 EPS of $0.38 on revenue of $129.7 million and 2018 EPS of $2.11 on revenue of $557.1 million.
3 Stocks Likely to Beat Earnings This Week
Earnings season is finally heating up, and this week should mark the first truly busy stretch for Q4 reports. We are coming off a series of great report seasons in 2017, so investors will want to stay focused on all of the upcoming marquee earnings announcements, as they could help establish the trend for 2018.
Of course, investors are always looking to find companies that are poised to post better-than-expected earnings results and experience strong post-earnings gains.
Luckily, Zacks Premium customers can utilize the Earnings ESP Screener in order to search for stocks that are expected to beat. Zacks Earnings ESP (Expected Surprise Prediction) looks to find earnings surprises by focusing on the most recent analyst estimates.
This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.
A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.
Today, we are giving our readers a very special treat: a free look three of the strongest stocks that are popping up on our Earnings ESP Screener right now. Check them out:
1. Interactive Brokers Group, Inc.
Interactive Brokers Group provides automated trade execution and custody of securities, commodities, and foreign exchange, around the clock, on over 120 markets. The company is set to report its fiscal fourth-quarter earnings results after the closing bell on Jan. 16. IBKR is currently a Zacks Rank #1 (Strong Buy) and has an Earnings ESP of +2.56%.
The firm has only met or surpassed estimates in two consecutive quarters, but our model is calling for another bear this quarter. Meanwhile, current consensus estimates are calling for earnings and revenue growth in the triple digits.
2. Renasant Corporation
Renasant Corporation is the parent company of Renasant Bank, a 113-year-old financial services institution with assets of nearly $9 billion and 170 banking, mortgage, and insurance offices in the southeastern United States. RNST is sporting a Zacks Rank #2 (Buy) and an Earnings ESP of +1.64%.
Renasant is scheduled to release its latest quarterly report after the market closes on Jan. 16. The firm has met or surpassed estimates in nine consecutive quarters. Our current consensus estimates are calling for earnings growth of 3.39% and revenue growth of 15.20%.
3. GATX Corporation
GATX Corporation is a global leader in railcar leasing. The company has one of the largest fleets in North America and also operates a significant European fleet. RNST is scheduled to announce its latest quarterly results before the market opens on Jan. 18. The stock is currently a Zacks Rank #2 (Buy) and has an Earnings ESP of +8.33%.
GATX has met or surpassed earnings estimates in nine consecutive quarters. Our consensus estimates are calling for earnings and revenue to slump 36.84% and 4.43%, respectively, but investors should be encouraged by the improving estimate picture heading into the report date.
Want more analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
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About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
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