For Immediate Release

Chicago, IL – October 19, 2022 – Zacks Equity Research shares Coupa Software as the Bull of the Day and Royal Gold (RGLD Quick QuoteRGLD - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Baker Hughes Company (BKR Quick QuoteBKR - Free Report) , EOG Resources (EOG Quick QuoteEOG - Free Report) and Continental Resources, Inc. .

Here is a synopsis of all five stocks.

Bull of the Day:

Coupa Software is one of the leading providers of Business Spend Management (BSM) solutions. Its cloud-based platform helps aid over 2,500 customers in mitigating supply chain risk and to increase business agility to adapt to change in spending trends.

The company's BSM platform unifies all business spend — from sourcing to contracts and invoicing to payments, thereby enabling enterprises to be more resilient and ultimately spend smarter.

Coupa Software is the pioneer of procure-to-pay solutions. The company’s procurement module aids customers to determine spend policies, and streamline purchase requisition and purchase order processes.

Q2 Results Spark Upward EPS Move

In early September, Coupa reported solid Q2 fiscal 2023 (ends January) results with record revenues and healthy momentum in the subscription business. Both the bottom line and top line beat estimates.

The healthy results were backed by Coupa providing companies with visibility and control over their business spending, resiliency in back-office operations and aiding in making strategic and data-driven decisions to yield positive outcomes for their business.

GAAP net loss in the quarter was $75.3 million or a loss of 99 cents per share compared with a net loss of $91.5 million or a loss of $1.24 per share in the prior-year quarter. Non-GAAP net income during the quarter was $16.5 million or 20 cents per share compared with $20.3 million or 26 cents per share in the prior-year quarter, beating the Zacks Consensus Estimate by 11 cents.

Revenues were record high at $211.1 million compared with $179.2 million in the prior-year quarter, beating the Zacks Consensus Estimate of $203 million. The growth was backed by the strong performance in the North America enterprise market, with more customers preferring its ROI-driven business spend management platform to optimize their spend.

Subscription revenues were record high at $192.7 million compared with $156.2 million, backed by the strengthening of the U.S. dollar against the euro. Professional services revenues during the quarter were $18.4 million compared with $23 million in the year-earlier quarter.

Subscription revenues aggregated 91.3% of total revenues in second-quarter fiscal 2023, while Professional services & other contributed the remaining 8.7%.

Guidance: Softer Sales, Higher Profits

For fiscal 2023, the company has updated its revenue guidance from $838-$848 million to $838-$844 million. Subscription revenues are expected to be in the range of $766-$771 million.

Professional services and other revenues are expected to be $72-$73 million. Non-GAAP earnings are likely to be in the range of 37-44 cents per share, up from earlier expectations of 21-27 cents.

While this jump in profit expectations made COUP a Zacks #1 Rank, it should be noted that even at the top of that 44-cent guide, the company would still post an annual EPS decline of 47%.

The good news is that analysts took next year's estimates higher too, with the profit consensus rising 24.5% to 71-cents. And that would represent 62% EPS growth.

For investors looking for an entry point in the stock, now might be an attractive time with the company trading at a $4 billion valuation against next year's sales growth of 19% to cross $1 billion. That puts the price/sales ratio at 4X, below average for the SaaS space.

More About the Business and Customer Services

Businesses can track and manage purchases in real-time, and reduce time and cost with purchase orders being automatically sent to suppliers for fulfillment and invoicing.

The company’s invoicing module aids suppliers to create electronic invoices that comply with government regulations allowing businesses to eliminate paper and further reduce invoice processing costs, all while reducing invoice payment fraud risk.

Expense management module with innovative mobile capabilities such as GPS and geo-location aids customers to gain real-time expense visibility. Coupa Software also offers additional travel management capabilities, including travel price assurance to help companies capture savings from flight and hotel price decreases that occur after the booking has been placed.

Meanwhile, the company’s Coupa Pay is a set of solutions that help customers consolidate and optimize their processes to manage working capital and make payments to suppliers and contractors, and employees for travel & expense reimbursements.

Coupa Software faces significant competition from SAP’s Ariba, Fieldglass and Concur solutions, and Oracle’s Procurement Cloud offerings.

Bear of the Day:

Royal Gold is a $6 billion manager of precious metals streams and royalty interests, with a primary focus on gold.

I have written about the company many times over the past 5 years as a Bear of the Day candidate, as persistent erosion in the price of gold leads to downward earnings estimate revisions for the stock.

Over longer periods, like the past 20 years, the stock has done exceedingly well versus its yellow metal.

Since the start of the 21st century, real gold is only up +466% while Royal Gold is up a whopping +3,071.5%.

But over the last 2-3 years, the story is more mixed as the barbarous relic loses its luster.

Since the start of this decade, the commodity is up +8.7% while the digger is down -21%.

Aside from the great miner rally of Q1 this year, it's been a losing proposition to hold anything gilded.

But I will say this for Royal: while in this decade it's about tied with the basket of diggers, the VanEck Gold Miners ETF, in just this year the basket is down -26% while Royal is only down -10%.

So I can't pick on the stock too much.

I just generally don't like owning gold or its diggers because its costs are too heavy for the value delivered.

In other words, I believe it's a dying asset class versus advanced technologies, like Biotech and AI, and their hyper-productivity.

As inflation and the US dollar roar higher, it's clearly not the inflation hedge everyone is sold to believe.

Here you can learn more about my thesis about why you should sell all your gold in the next 5-10 years...

Why Gold is Headed to Zero -- And What You Should Buy Instead

More About Royal Gold and Its Rich Valuation

Royal Gold manages its business under two segments:

1. Acquisition and Management of Stream Interests — A metal stream is a purchase agreement that provides, in exchange for an upfront deposit payment, the right to purchase all or a portion of one or more metals produced from a mine, at a price determined for the life of the transaction by the purchase agreement.

As of Jun 30 2022, Royal Gold owned interests on 185 properties on five continents, including interests on 41 producing mines and 19 development stage projects.

2. Acquisition and Management of Royalty Interests — Royalties are non-operating interests in mining projects which provide the right to revenues or metals produced from the project after deducting specified costs, if any.

Based in Denver, CO, the company’s financial results are primarily tied to the price of gold, silver, copper, and other metals. Gold contributed 71% to its revenues in first-quarter 2022.

Finally, a word about valuation which could be another problem for RGLD. With projected revenues next year of over $650 million, the stock trades at 9X its current market cap of $6 billion.

This is where a lot of technology stocks trade, not other miners like Barrick whose price/sales ratio is just over 2X.

I'm not sure why RGLD commands that valuation, but it's something to be aware of.

Additional content:

Permian Oil Rig Count Rises Second Straight Week

In its weekly release, Baker Hughes Company reported that the U.S. rig count was higher than the prior-week tally. The rotary rig count, issued by BKR, is usually published in major newspapers and trade publications.

Baker Hughes’ data, issued at the end of every week since 1944, helps energy service providers gauge the overall business environment of the oil and gas industry. The number of active rigs and its comparison with the prior-week figure indicates the demand trajectory for Baker Hughes’ oilfield services from exploration and production companies.

Details

Total U.S. Rig Count Increases: The count of rigs engaged in the exploration and production of oil and natural gas in the United States was 769 for the week ended Oct 14. The figure is higher than the prior week’s count of 762. Thus, the tally increased in four of the prior five weeks. The current national rig count is higher than the year-ago level of 543.

The onshore rigs in the week ended Oct 14 totaled 752, higher than the prior-week count of 746. In offshore resources, 14 rigs were operating, higher than the prior-week count of 13.

U.S. Oil Rig Count Rises: Oil rig count was 610 for the week ended Oct 14, higher than the prior week’s figure of 602. The current number of oil rigs — far from the peak of 1,609 attained in October 2014 — is up from the year-ago figure of 445.

U.S. Natural Gas Rig Count Falls: Natural gas rig count of 157 was lower than the prior-week figure of 158. The count of rigs exploring the commodity is, however, higher than the prior-year week’s tally of 98. Per the latest report, the number of natural gas-directed rigs is 90.2% lower than the all-time high of 1,606 recorded in 2008.

Rig Count by Type: The number of vertical drilling rigs totaled 23 units, in line with the prior-week count. Horizontal/directional rig count (encompassing new drilling technology with the ability to drill and extract gas from dense rock formations, also known as shale formations) of 746 is higher than the prior-week level of 739.

Gulf of Mexico (GoM) Rig Count Rises: GoM rig count was 13 units, all oil-directed. The count was higher than the prior-week number of 12.

Rig Count in the Most Prolific Basin

Permian — the most prolific basin in the United States — recorded a weekly oil rig tally of 341, higher than the prior week's count of 340. The tally increased for two straight weeks.

Outlook

The West Texas Intermediate crude price is trading at more than the $80-per-barrel mark, which is still extremely favorable for exploration and production activities. Solid oil prices will likely pave the way for further rig additions despite a slowdown in drilling activities, as upstream players mainly focus on stockholder returns rather than boosting output.

Investors may keep a close eye on energy stocks like EOG Resources and Continental Resources, Inc., as these companies are expected to benefit from the current healthy oil price scenario.

EOG Resources, a leading oil and natural gas exploration and production company currently carrying a Zacks Rank #3 (Hold), is well-placed to capitalize on the promising business scenario. It has an estimated 11,500 net undrilled premium locations, resulting in a brightened production outlook. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

EOG Resources is strongly committed to returning capital to shareholders. Since it transitioned to premium drilling, the company has returned roughly $10 billion in cash to stockholders. With the employment of premium drilling, EOG will be able to reduce its cash operating costs per barrel of oil equivalent, thereby aiding its bottom line.

Continental Resources is also a leading upstream energy company with proven reserves in North Dakota and Oklahoma. Its oil inventories are among the best in the industry.

Headquartered in Oklahoma City, Continental Resources has witnessed upward earnings estimate revisions for 2022 in the past seven days. The Zacks Rank #3 firm has gained 43.9% in the past year, outpacing the 31.8% rise of the composite stocks belonging to the industry.

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