For Immediate Release
Chicago, IL – October 16, 2020 – Zacks Equity Research Shares of Viasat, Inc. (VSAT - Free Report) as the Bull of the Day, CSG Systems International, Inc. (CSGS - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Bed Bath & Beyond Inc. (BBBY - Free Report) , Masco Corporation (MAS - Free Report) and Brunswick Corporation (BC - Free Report) .
Here is a synopsis of all five stocks:
Viasat is a Zacks Rank #1 (Strong Buy) that has a D for Value and a C for Growth and I have seen some broader strength in the satellite space in the last few weeks. Peers like IRDM, MAXR and others have forced me to take a deeper look at this stock and it is now the Bull Of The Day.
Viasat, Inc. provides broadband and communications products and services worldwide. It operates through three segments: Satellite Services, Commercial Networks, and Government Systems. The company's Satellite Services segment offers satellite-based fixed broadband services, including broadband internet access and voice over internet protocol services to consumers and businesses; in-flight entertainment, internet, and aviation software services to commercial airlines; community internet services; and mobile broadband services, including satellite-based internet services to energy offshore vessels, cruise ships, consumer ferries, and yachts. As of March 31, 2020, this segment provided broadband Internet services to approximately 590,000 subscribers. The company was founded in 1986 and is headquartered in Carlsbad, California.
I see a solid earnings history here with 4 beats in the last 4 quarters. That is really good to see as lately so many names have had issues in the two quarters that were impacted by the pandemic.
Over that time horizon there were three big beats, and one monster beat. The monster was 3 quarters ago and that skewed the average with its 1100% positive surprise.
The average positive earnings surprise over the last year is 361% but take that one beat out and you have an average of about 100%.
Estimates are moving around a good bit for this stock and I expect that to continue. The main idea here is that this year is looking at a loss of 15 cents while next year flips to a gain of 25 cents. That is a massive swing.
With the lack of earnings this year, the forward PE is an NA. There was a small contraction on the topline of 1.2% in the most recent quarter, but that number still came in well ahead of the expected level. I see a 1.15x price to book, so that is really good to see. The 1x price to sales tells me the market does value the sales of VSAT, and I like to see that as well. Margins have softened up, but clearly they are expected to rise in the coming quarters as revenue is only expected to increase 2.2% this year and 15% next year.
CSG Systems is a Zacks Rank #5 (Strong Sell) and it is the Bear of the Day today. Let's take a look at why this stock slipped to the lowest Zacks Rank and decide if now is a good time to think about adding it to your portfolio.
First thing I see is that it has a set of A's for the Zacks Style Scores, and that is always good to see. There is an A for Growth, Value and Momentum. This means it could be right for a lot of investors.
CSG Systems International, Inc. provides business support solutions primarily to the communications industry. The company offers revenue management and digital monetization solutions, including Advanced Convergent Platform, a cloud-based platform; and Ascendon, Singleview, Total Service Mediation, and Wholesale Business Management Solution platforms. The company was founded in 1994 and is headquartered in Greenwood Village, Colorado.
As much as I want to highlight the most recent quarter, it should be also noted that the 3 quarters before the most recent one were all beats. Solid beats too, with an average positive earnings surprise of about 15%.
The most recent quarter, however, was a miss. The company posted EPS of 50 cents when the Zacks Consensus Estimate was calling for 71 cents. That 12 cent difference translates into a -17% negative earnings surprise.
Following the miss, estimates have moved lower.
Thing is, they haven't moved lower by that much.
This quarter is staying strong at 79 cents and next quarter actually saw an increase of a penny.
The Zacks Rank cares more about the full year numbers and when you put the miss into your model that will bring down annual numbers. I see this year moving from $3.07 to $3.02.
Next year slipped a penny, so the move is not that dramatic.
I like the valuation here, with a 13x forward earnings multiple and only some small topline contraction. The price to book multiple of 3.5x is a little rich for the value investing crowd, but it is not a super lofty number either. The price to sales multiple of 1.4x is acceptable given the margin profile of about 10% on an operating basis.
This is a stock that will stay on my radar screen.
3 Model Zacks Buys
If you have a goal in life, it’s never a bad idea to find a model of success to emulate. Someone who already achieved the results you want.
But what if your goal is a more profitable portfolio? We’ve got an idea for you.
Check out the Model Zacks Strong Buys & Buy screen. You’ll find Zacks Rank #1s (Strong Buys) and Zacks Rank #2s (Buys) that are in the Top 50% of the Zacks Industry Rank and have strong Zacks Style Scores.
It's a great place to start on your path toward greater profitability. Here are three names that recently made the screen and are worth watching:
Bed Bath & Beyond
What a difference a new management team can make!
A couple of years ago, it looked like Bed Bath & Beyond would go the way of Linens ‘n Things and countless other specialty retailer stores. And that was without a pandemic.
However, new blood brought new prospects for this domestics merchandise and home furnishings giant. The stock is up more than 400% since the coronavirus low and it recently reported its first comps growth since the fourth quarter of fiscal 2016.
Even before we all became homebodies, the new team at BBBY was working to reduce costs, increase financial flexibility and invest in itself to regain its leadership position in the home market. And this reorganization came at just the perfect time.
When the pandemic came, it was able to focus on things like ecommerce, BOPIS (buy online, pick up in store), contactless curbside pickup and same-day delivery. In other words, it did what every retailer had to do in this unprecedented situation.
The result was digital sales growth of 88% in its fiscal second quarter.
Other highlights included earnings per share of 50 cents, which was 47% better than last year’s 34 cents and 394% better than the Zacks Consensus Estimate. That’s right… expectations were for a loss of 17 cents.
Sales of approximately $2.7 billion were down 1.1% from last year, but topped our expectations of $2.61 billion. But of course, the major news was that comparable sales rose about 6%, marking the first growth in almost four years.
The Zacks Consensus Estimate for this year (ending February 2021) is still a loss of 66 cents. However, that has narrowed from a loss of $2.46 just 30 days ago. So analysts really liked that quarterly report.
Even better, the Zacks Consensus Estimate says BBBY is returning to profitability next year (ending February 2022). Expectations are for a profit of $1.19, instead of a loss of 32 cents from a month earlier.
But before you go to Bed Bath & Beyond for some new décor, you may want to make more extensive changes to your place. Maybe you need to paint a few rooms or put a new faucet in your kitchen. Maybe you need a whole new bathroom! Hey… whatever it takes to keep your sanity while staring at the same four walls everyday…
Masco can help. The company manufactures, sells and installs home improvement and building products. Brands include Behr paint, Delta faucets and Endless Pools, among many others. It’s two segments are Plumbing Products (which made up nearly 55% of revenue last year) and Decorative Architectural Products (which made up more than 40%).
Strong homebuilding and home improvement markets have put the building products – miscellaneous industry in the top 10% of the Zacks Industry Rank. Furthermore, shares of MAS surged approximately 108% since the coronavirus low.
Earnings per share for the second quarter came to 84 cents, which bettered the Zacks Consensus Estimate by more than 18%. It was also the third straight positive surprise.
Meanwhile, sales of $1.76 billion were 4.2% better than our expectations. Net sales at the Decorative segment was up 8%. Meanwhile, net sales for Plumbing were down 14% due to the impact of the coronavirus, but that was still better than expected.
Demand picked up as facilities reopened amid easing restrictions. Most importantly though, that improved demand appears to have continued into the third quarter. It will report again on October 28.
At the moment, earnings estimates remain sharply higher than three months earlier. The Zacks Consensus Estimate for this year is up 15.8% in that time to $2.71. Analysts raised their expectations for 2021 by 11.7% to $2.96, which suggests year-over-year growth of 9.2%.
The Board at MAS also intends to raise the annual dividend 4% to 56 cents per share beginning in the fourth quarter.
You know where you’re not going to run into a whole lot of people? The open water! Nobody gets on your boat without your permission. And once you leave the dock… that’s it. They’ll be no party crashers or pop-ins unless they’re mighty good swimmers.
Given such an environment, there’s really no mystery in why a company like Brunswick managed to put together better than expected results, even though the pandemic did impact its performance compared to the previous year.
BC designs, manufactures and markets recreational products, which obviously makes it part of the Leisure & Recreation Products space. That industry is in the top 10% of the Zacks Industry Rank. Specifically, though, the company makes marine engine products and boats under various brands that are well-known to enthusiasts.
Once restrictions started easing a bit, people took off for the water. Demand accelerated into May and June as new and lapsed customers made up half of new boat sales. Its no wonder the stock is up more than 130% from the coronavirus low on March 23.
For its second quarter, earnings per share of 99 cents beat the Zacks Consensus Estimate by more than 130%. It was the company’s fifth straight beat and brought the four-quarter average up to just under 40%.
Revenue of $987.8 million topped our expectations by almost 24%.
Both the top and bottom lines were down from the previous year, but that’s par for the course during this pandemic. More importantly, BC said that all its businesses outperformed expectations to help the company stay resilient in the face of unprecedented challenges.
Earnings estimates for this year have jumped 38.3% in the past three months to $4.11, while next year has advanced 23.2% to $5.21 in that time. Most impressively, analysts expect earnings to jump nearly 27% in 2021 over 2020.
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>
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