For Immediate Release
Chicago, IL – June 3, 2019 – Zacks Equity Research ViaSat Inc. VSAT as the Bull of the Day, 3D Systems Corp. DDD as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Constellation Brands STZ, General Motors GM and Fiat Chrysler FCAU.
Here is a synopsis of all five stocks:
Bull of the Day:
ViaSat Inc. is a global broadband services and technology company that connects international communities to the internet by offering residential internet service. The company also provides satellite-based Wi-Fi to JetBlue Airways and others, as well as communications services for a range of commercial and government customers.
Q4 Results Impressed Wall Street
Recently, shares of ViaSat popped more than 10% in early trading after the company reported better-than-expected fourth-quarter results.
Earnings of $0.04 per share came in well ahead of the Zacks Consensus Estimate of -$0.25 per share. Revenues also surpassed consensus expectations, hitting $557 million for the quarter and increased 27% year-over-year.
Notably, the company’s Satellite Services segment achieved another quarter of record revenue. Sales were $190 million, growing 31% over the year-ago period.
For fiscal 2019, net contract awards were the highest on ViaSat’s history at $2.4 billion, expanding $700 million year-over-year.
"We are energized by the opportunities before us in fiscal year 2020 that are enabled by our unique, highly integrated technology and business approach," said CEO Mark Danberg.
As a result of this good quarter, Needham analyst Richard Valera hiked his price target on VSAT to $100 from $78, saying the satellite communications company came in ahead of projections across the board. Because of things like in-flight service and business contracts, Valera sees revenue and EBITDA growth opportunities in 2020.
VSAT on the Move
Year-to-date, shares of VSAT have increased over 50% compared to the S&P 500’s return of roughly 10%.
Earnings estimates have since been rising, and the stock is now a Zacks Rank #1 (Strong Buy).
For the current fiscal year, one analyst has revised their estimate upwards in the past 60 days, and the Zacks Consensus Estimate has jumped eight cents during that same time period. 2021 looks pretty strong too, with earnings expected to jump back into positive territory and grow over 900% year-over-year.
Thanks to bullish guidance, soaring sales and strong product acceleration, the future is looking promising for ViaSat. If you’re an investor searching for a tech stock to add to your portfolio, make sure to keep VSAT on your shortlist.
Bear of the Day:
3D Systems Corp. is a leading provider of 3-D Modeling, rapid prototyping and manufacturing solutions. Its systems and materials reduce the time and cost of designing products and facilitate direct and indirect manufacturing by creating actual parts directly from digital input. These solutions are used for design communication and prototyping well as for production of functional end-use parts.
Disappointing Q1 Results
Last month, 3D Systems reported earnings results for its fiscal 2019 first quarter, but shares of the 3D printer manufacturer plunged nearly 25% in the wake of the results.
On an adjusted basis, the loss per share grew to $0.09 per share from a loss of $0.03 per share in the year ago quarter; the bottom line also missed the Zacks Consensus Estimate. Revenues fell 8% year-over-year to $152 million and lagged behind our consensus estimate as well.
Even though the company reported 90% higher unit sales, printer revenue decreased 29% year-over-year. Additionally, materials revenue fell 3%, software decreased 8%, and on demand services decreased 12% compared to Q1 2018.
DDD was also hit hard by large orders placed at discounted prices, and the rougher-than-expected transition to metal printers in Q1.
Estimates Keep Falling
Analysts have since turned bearish on 3D Systems, with six cutting estimates in the last 60 days for the current fiscal year. Earnings are expected to plunge over 130% for the year, and the Zacks Consensus Estimate has dropped 22 cents during that same time period from $0.17 to -$0.05 per share.
This sentiment has stretched into 2020. Though earnings growth could bounce back into positive territory, our consensus estimate has dropped 14 cents in the past two months.
DDD is now a Zacks Rank #5 (Strong Sell).
Shares of the 3D printing company have fallen almost 20% since January compared to the S&P 500’s gain of 10%.
3D Systems did not provide official guidance in its earnings release, though CFO John McMullen did say back on the Q4 2018 earnings call that the company anticipates “continued revenue growth, improved profitability, and cash generation" in 2019.
One bright spot to come out of DDD’s Q1 numbers was actually an analyst upgrade. Paul Coster at JPMorgan believes the worst might be over for the 3D printer, so he upgraded DDD to Neutral from Underweight; however, he said the company’s Q2 “may remain pressured” due to tough comps and a shift to lower priced printers.
Immigration Tariff and Mexico-Linked Stocks
Once again President Trump threatens tariffs, but this time it’s directed to our southern neighbor. Trump says that if Mexico doesn’t take action to avert the flood of Central Americans illegally entering the US, we will impose more tariffs starting on June 10 with a 5% levy on all Mexican goods coming into the US. “The Tariff will gradually increase until the Illegal Immigration problem is remedied”, Trump explained in a tweet last night. The White House said this broad-based tariff could hit 25% by October if issues aren’t resolved.
This is a very unorthodox move for a president to impose trade restrictions on an issue unrelated to trade. It is disconcerting to investors because there is no telling what countries Trump may threaten next and for what reason.
The market broke on this news with the DOW, S&P 500, and NASDAQ all down over 1%, with Mexico-linked firms being the catalyst of the drop. In this article, I will discuss some stocks that will be materially impacted if this tariff and its further escalation come to fruition.
STZ has fallen over 6% today with this new threatened tariff having substantial implications on their Mexican made beers like Corona, Modelo, and Pacifico. Constellation has more than tripled its beer production capacity in Mexico since 2013 with roughly 75% of Constellation’s beer portfolio being imported from there. A 5% tariff would have a 4% negative impact on STZ’s bottom-line, and if it reached 25% this could cut their profits by as much as 19%, according to a WSJ article today which cited Morgan Stanley as the source.
STZ is up 10% YTD but down more than 20% over the past 52-weeks due to the massive sell-off it saw at the end of 2018. I would expect earnings estimates to be revised down for this firm and STZ will likely drop to a Zacks Rank #4/5 (Sell/Strong Sell).
All of the big three automakers are going to be impacted by this newly imposed tariff, with the greatest exposure being held by General Motors and Fiat Chrysler. GM has the largest number of Mexican-made cars sold in the US with 663,000 units and about 22% of its US sales being made up by these vehicles. Roughly 18% of domestically sold Fiat Chrysler vehicles were made in Mexico. These tariffs could cut bottom-lines as much as 10% if they materialize. This automotive data was acquired through today’s WSJ article which cited LMC Automotive and Evercore ISI as sources.
GM is down over 4% while FCAU saw a drop exceeding 5% in trading today. Both of these stocks have seen significant 52-week losses with GM down 22% and FCAU sliding over 45%.
FCAU and GM are subject to downwardly revised EPS estimates for the remainder of this year and likely next. Look to see these stocks drift down to Zacks Rank #4/5 (Sell/Strong Sell).
This tariff isn’t set in stone yet, and White House advisers are opposing it, citing that it could impact the impending NAFTA revision, which has already seen resistance from the Democratic Party. I don’t believe that the full impact of this broad-based tariff has been priced into the markets yet and these stocks that I mentioned above could see further declines if this issue isn’t resolved. Look to buy these stocks on lower valuations if a resolution is imminent.
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