For Immediate Release
Chicago, IL – February 22, 2019 – Zacks Equity Research Pennsylvania, Sunoco LP SUN as the Bull of the Day, Papa Johns PZZA as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Salesforce CRM, Pure Storage, Inc. PSTG and Five9, Inc. FIVN.
Here is a synopsis of all five stocks:
Bull of the Day:
The price of oil tends to move in fairly well-defined trends and the earnings of oil companies mostly follow suit. After a nearly three-year rally that began at the beginning of 2016 that saw the price of WTI crude go from below $27/bbl. to over $75/bbl. the last three months of 2018 were brutal.
Trade war fears and the possibility of a global economic slowdown hit the price of oil hard. The revelation that the US would grant exemptions from the sanctions on Iran and allow several trading partners – most notably India – to continue to purchase oil from Iran put further downward pressure on oil.
After falling more than 40% in the fourth quarter of 2018, the price of oil is again on the rise as most of the trade worries appear to be well on their way to being solved and the fears of a global recession have significantly abated.
Founded in 1886 in Pennsylvania, Sunoco LP has been operated since 2012 as a subsidiary of Texas-based Energy Transfer Partners, one of the nation’s largest Natural Gas distributors.
ET transformed Sunoco’s business to focus on logistics and transportation fuels, as well as the gathering, treatment, processing and marketing of liquid natural gas.
Sunoco distributes fuel to approximately 10,000 convenience stores, independent dealers, commercial customers in 30 states, including the entire east coast from Florida to Maine. They also support the franchised operations of APlus stores, which sell groceries, snacks and beverages at considerably higher margins than fuel products.
Because of the volatility of the commodities markets that Sunoco is involved in, earnings results have been historically volatile, with the Price, Consensus and Surprise chart showing several big beats as well as several big misses.
Though the most recent quarterly earnings of $0.51/share were a bit of a disappointment, estimates for the rest of the year are on the rise, with the full year Zacks Consensus Earnings Estimate now at $2.48/share - an 81% increase over 2018. SUN is currently a Zacks Rank #1 (Strong Buy).
In the fourth quarter of 2018, Sunoco completed three acquisitions, two in the fuel distribution business and one in refined products terminalling, as well as the purchase of $50M worth of convenience store locations that were previously Speedway branded stores. The company also executed an agreement to sell its ethanol plant which was no longer a good fit for the refocused company.
Thanks to a healthy cash position and a strengthening balance sheet, Sunoco paid an exceptional cash dividend in the most recent quarter of $0.825/share – a yield of over 10% annually at current share prices. If cash flows remain strong as analysts expect, it wouldn’t be surprising to see share price appreciation simply in order to grow into that juicy dividend.
Bear of the Day:
Papa Johns wound up at the Zacks Bear of the Day several times in 2018, thanks to the fallout from an incident in July in which founder and former CEO John Schnatter was reported to have used racist language during a conference call and was subsequently pushed out of his roles at the company by the board of directors.
It was a rocky ride through the rest of the year as well as Schnatter and the board wrestled for control of the company, culminating in the board enacting a “poison pill” provision, guaranteeing Schnatter couldn’t gain a controlling interest as they searched for a buyer and/or merger partner.
Things were looking up just a few weeks ago when the company announced that hedge fund Starboard Value was making a $200 million investment, expecting to turn Papa Johns around. Starboard will own between 11-15% of the company and also name its CEO, Jeffrey Smith as Chairman of the board at Papa Johns.
Despite the infusion of cash – and Starboard also has the option to purchase a additional $50M in shares – it remains a very difficult time for Papa Johns, as evidenced by 2018 same store sales that fell 7.3% in North America and 10.5% in January of 2019.
The revenue woes are likely to continue as Papa Johns finds itself in the middle of a price war in the take out pizza business. Pizza Hut, Little Caesars and Dominos are all heavily advertising $5 and $6 menu items – loss leader pricing that suppresses gross margins.
Papa Johns’ franchisees are coming off an extremely difficult year and can ill-afford to lower retail prices, leaving the company in the unenviable position of having to compensate franchisees for the promotions needed to compete in the competitive market.
Though the Starboard investment may well save Papa Johns in the long run, there is likely more pain to come in the immediate future.
Revenues for the current quarter are expected to be down 20% from a year ago and net earnings are forecast to be 75% lower. The current Zacks Consensus estimate has fallen more than 50% in the past 30 days, from $0.32/share to just $0.16/share.
3 Cloud Stocks to Buy Right Now
“The Cloud” has evolved from a budding innovation in tech to one of the largest factors driving growth in the technology sector in only a few years. Today, cloud computing in an integral part of software-related firms, which in turn has seen investors search for cloud-focused tech stocks.
In our increasingly on-the-go and mobile world, cloud computing has dramatically reshaped the way companies conduct business. The technology allows firms big and small, as well as individuals, to access all their vital information nearly anywhere. Cloud computing like the smartphone, is hardly a fad, and it seems nearly impossible to think that people will reverse course—unless the cybersecurity concerns become too high.
Think how much market share Amazon’s AWS cloud business was able to gain based on its significant head start into the now booming market over rivals and fellow tech giants Microsoft, IBM and Google. With this in mind, we have highlighted three stocks that are not only showing strong cloud-related activity, but also strong fundamental metrics.
Check out these three Zacks buy-ranked cloud stocks to consider right now.
Salesforce is one of the quintessential cloud computing companies in Silicon Valley, offering cloud-based software that enables businesses to run modern digital operations that would otherwise require a ton of in-house talent, infrastructure, and maintenance. CRM’s software-as-a-service model is one that is likely to remain vital and the subscription payments create a more stable revenue stream that has seen it grow its top-line by roughly 25% every quarter for years. Looking ahead to its upcoming Q4 results, Salesforce is expected to see its revenue to surge 24.9% to reach $3.56 billion, based on our current Zacks Consensus Estimate.
At the bottom end of the income statement, Salesforce’s adjusted fourth-quarter earnings are projected to soar 60% and its full-year EPS figure is expected to skyrocket over 93%. Salesforce is currently a Zacks Rank #1 (Strong Buy) based on its recent earnings estimate revision activity and has a solid history of earnings beats. In the end, Salesforce is one of the largest customer relationship management platforms, with clients from American Express to the US Department of Agriculture, and its cloud-based platforms seem poised to help business run sales, marketing, e-commerce, analytics, and more for years to come.
2. Pure Storage, Inc.
Pure Storage is a data solutions and storage company that helps cloud service providers, SaaS firms, and enterprise clients deliver data securely in real-time within multi-cloud environments. The Mountain View, California-based firm announced last quarter a suite of new cloud offerings that run natively on AWS. The company, which is coming off 34% revenue growth in Q3 and also works with cloud firms, has seen its stock price surge 21% in 2019. Still, shares of PSTG rest roughly 34% below their 52-week high, which might set up a solid buying opportunity.
Moving on, the company is projected to see its Q4 fiscal 2019 revenues jump over 31% when it reports its quarterly results on Thursday, February 28. Pure Storage’s bottom-line is expected to pop 38.5% in the fourth quarter and its full-year earnings are projected to swing from a loss of $0.13 a share last year to EPS of $0.26, for a 300% climb. Plus, PSTG has earned some positive full-year fiscal 2019 and 2020 earnings estimate revisions recently to help it earn its Zacks Rank #1 (Strong Buy) standing.
3. Five9, Inc.
Five9 is one of the largest providers of cloud software for contact centers and has worked to shake up on-premise operations. The firm’s cloud-based virtual contact centers offer clients a suite of apps that allow them to manage customer interactions across everything from social media and email to voice. Five9 just reported its fourth-quarter financial results on Tuesday, which saw its full-year revenues surge 29% a record $257.7 million.
FIVN has also been on an insane run over the last three years, with its stock price up 585% from under $8 a share to its current $52. Looking ahead, the company’s Q1 revenues are projected to jump 20% to $70.69 million. Meanwhile, the company’s quarterly earnings are excepted to soar 50%. Five9 has also earned some full-year 2019 and 2020 earnings revisions in the last seven days to help it earn a Zacks Rank #2 (Buy).
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