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Masimo and Black Knight have been highlighted as Zacks Bull and Bear of the Day
Read MoreHide Full Article
For Immediate Release
Chicago, IL – April 25, 2023 – Zacks Equity Research shares Masimo Corp. (MASI - Free Report) as the Bull of the Day and Black Knight as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Lenovo Group Ltd. (LNVGY - Free Report) , HP Inc. (HPQ - Free Report) and Dell Technologies Inc (DELL - Free Report) .
Masimo Corp., a Zacks Rank #1 (Strong Buy), has benefitted from a resurgence in the health care sector. After falling markedly during last year’s bear market, the stock has hit a series of 52-week highs this year on increasing volume. Shares continue to display relative strength as buying pressure accumulates in this market leader.
MASI is part of the Zacks Medical – Instruments industry group, which ranks in the top 43% out of more than 250 Zacks Ranked Industries.
Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
Company Description
Masimo Corp. develops, manufactures, and markets various patient monitoring technologies along with automation and connectivity solutions. Its medical products offer unique ways to monitor oxygen levels, hemoglobin concentration, respiration rate, and brain function. In addition, MASI provides patient position and activity tracking, neuromodulation technologies, and telehealth solutions.
MASI provides its products through direct sales force, distributors, and original equipment manufacturers to hospitals, long-term care facilities, physician offices, emergency medical services, and through e-commerce wellness sites.
Earnings Trends and Future Estimates
MASI has built up an impressive earnings history, surpassing earnings estimates in each of the last four quarters. Back in February, the company reported Q4 earnings of $1.32/share, a 12.82% surprise over the $1.17 consensus estimate.
MASI has delivered a trailing four-quarter average earnings surprise of 9.02%. Consistently beating earnings estimates is a recipe for outperformance.
The health solutions growth engine is expected to remain hot this year, as analysts covering MASI have increased their EPS estimates recently. Full-year estimates have been raised by +8.7% in the past 60 days. The 2023 Zacks Consensus EPS Estimate now stands at $4.75/share, reflecting potential growth of 3.49% relative to last year. Sales are anticipated to rise 19.52% to $2.43 billion.
Let’s Get Technical
MASI shares have advanced over 75% since bottoming out late last year. Only stocks that are in extremely powerful uptrends are able to make this type of move while the major market indices continue their choppy price action. This is the kind of stock we want to include in our portfolio – one that is trending well and receiving positive earnings estimate revisions.
The stock has been making a series of higher highs. With both strong fundamentals and technicals, MASI is poised to continue its outperformance.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, Masimo Corp. has recently witnessed positive revisions. As long as this trend remains intact (and MASI continues to deliver earnings beats), the stock will likely continue its bullish run this year.
Bottom Line
Backed by a leading industry group and robust history of earnings beats, it’s not difficult to see why this company is a compelling investment. Solid institutional buying should continue to provide a tailwind for the stock price. Increasing volume at recent breakout levels is another bullish sign.
Robust fundamentals combined with a strong technical trend certainly justify adding shares to the mix. Investors would be wise to consider MASI as a portfolio candidate if they haven’t already done so.
Black Knight provides integrated software, data, and analytics solutions. Its software offers a service application platform for mortgages, home equity loans, and lines of credit. Black Knight also provides analytics that show property ownership data, valuation models, and collateral risk scores. In addition, BKI delivers lead generation, multiple listing service, and other servicing data.
The Zacks Rundown
BKI, a Zacks Rank #5 (Strong Sell), is a component of the Zacks Business – Information Services industry group, which ranks in the bottom 36% out of more than 250 Zacks Ranked Industries. As such, we expect this industry group as a whole to underperform the market over the next 3 to 6 months.
Candidates in the bottom tiers of industries can often be solid potential short candidates. While individual stocks have the ability to outperform even when included in a poor-performing industry group, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much more difficult.
The odds are stacked against BKI, and the stock is agreeing with this notion. Black Knight shares experienced a climax top in late 2021 and have been in a price downtrend ever since. The share price is hitting a series of lower lows and represents a compelling short opportunity for those looking to hedge any long positions.
Despite a drastic move lower, Black Knight stock remains relatively overvalued, irrespective of the metric used.
Recent Earnings Misses
BKI has fallen short of estimates in two of the past four quarters. The software company most recently reported Q4 earnings back in February of $0.52/share, missing the $0.55/share consensus EPS estimate by -5.45%. The stock has moved steadily lower since the announcement.
During the prior quarter, BKI once again missed estimates when it reported Q3 earnings of $0.56 per share. This represented a -16.4% miss versus the $0.67 estimate. BKI has posted a trailing four-quarter average earnings miss of -3.83%. Consistently falling short of earnings estimates is a recipe for underperformance, and BKI is no exception.
Deteriorating Outlook
Black Knight has been on the receiving end of negative earnings estimate revisions as of late. For the current quarter, analysts have decreased estimates by -13.33% in the past 60 days. The Q1 Zacks Consensus EPS Estimate is now $0.52/share, reflecting a -17.46% regression relative to the same quarter last year.
For the year, analysts have also revised their EPS estimates downward by -12.45% in the past 60 days. The 2023 Zacks Consensus Estimates is now $2.18/share, translating to negative growth of -7.23% versus last year.
Falling earnings estimates are a huge red flag and need to be respected. Negative growth year-over-year is the type of trend that bears like to see.
Technical Outlook
BKI is in a sustained downtrend. The stock is making a series of lower lows, with no respite from the selling in sight. Also note how both moving averages have rolled over and are sloping down – another good sign for the bears.
While not the most accurate indicator, BKI has also experienced what is known as a ‘death cross’, wherein the stock’s 50-day moving average crosses below its 200-day moving average. BKI would have to make a serious move to the upside and show increasing earnings estimate revisions to warrant taking any long positions in the stock. The stock has fallen more than 10% this year alone.
Final Thoughts
A deteriorating fundamental and technical backdrop show that this stock is not set to print new highs anytime soon. The fact that BKI is included in one of the worst-performing industry groups provides yet another headwind to a long list of concerns. A history of earnings misses and falling future earnings estimates will likely serve as a ceiling to any potential rallies, nurturing the stock’s downtrend.
Our Zacks Style Scores depict a weakening outlook for this stock, as BKI is rated a worst-possible ‘F’ in our Value and Growth categories, along with an ‘F’ for our overall VGM score. This signals that falling earnings and sales along with relative overvaluation will likely hinder stock performance.
Potential investors may want to give this stock the cold shoulder, or perhaps include it as part of a short or hedge strategy. Bulls will want to steer clear of an overvalued BKI until the situation shows major signs of improvement.
Additional content:
Can the PC Market Bounce Back from Current Lows?
Global PC sales, which rebounded and soared during the peak of the pandemic, started slowing with the economic reopening. Sales have slowed further this year as the industry continues to face multiple challenges.
Supply-chain crisis, which has been hampering sales, somewhat eased last year, but higher prices are now plaguing sales. Almost all major players saw a steep decline in PC sales in the first quarter of 2023.
PC Sales See Steep Decline
The COVID-19 outbreak impacted a large number of industries but, at the same time, also proved to be a boon in disguise for several others. The PC industry emerged as one of the biggest beneficiaries of the pandemic. However, things have changed since then, with sales declining almost every quarter.
According to a report from Gartner, global PC shipments plummeted 30% year over year in the first quarter of 2023. Total PC shipments during the quarter totaled 55.2 million units.
This follows a 28.5% decline in the fourth quarter of 2022, when global PC shipments totaled 65.3 million units. Understandably, the crisis is worsening for the industry, with shipments plummeting almost every quarter.
The report also mentioned that during the quarter, the top global vendors remained unchanged, with Lenovo Group Ltd. holding the top spot. However, all top vendors saw a steep decline in sales.
The Gartner report is quite similar to the IDC report on PC shipments. According to IDC, global PC shipments totaled 56.9 million units, declining 29% year over year in the first quarter of 2023.
Challenges Galore
With the decline in shipments, market leaders are suffering the most, despite holding on to the top positions. According to market share, Lenovo held the top spot with a 23.9% market share, HP Inc. commands 21.5%, followed by Dell Technologies Inc, which holds 16% (Apple was a distant fourth).
Lenovo recently reported that its revenues declined 24% year over year to $15.3 billion, owing to a massive downturn in PC and smartphone industries in the final quarter of 2022. In the first quarter of 2023, LNGVY recorded a meager 12.7 million units of shipments. Lenovo’s shipments declined 30.3% in the quarter on a year-over-year basis. LNGVY has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
HP, Inc. reported a net income of $487 million in the first quarter of 2023 but also said that its PC and laptop sales declined drastically. HPQ’s PC unit recorded revenues of $9.2 million in the first quarter, down 24.2% year over year. According to the IDC report HP, Inc. shipped only 12 million units.
Dell Technologies held its position as the third biggest player but shipped only 12 million units of PCs. DELL saw a 31% decline in shipments in the first quarter of 2023 on a year-over-year basis.
Apple was the biggest loser, with a 40.5% year-over-year decline in shipments. AAPL shipped only 4.1 million units during the quarter. The company shipped 2.8 million fewer devices in the first quarter on a year-over-year basis.
The U.S. PC market, one of the biggest in the world, fell 25.8% in the first quarter on a year-over-year basis. This follows a 20.5% decline in the fourth quarter of 2022. Slowing laptop sales are hurting the entire U.S. PC industry.
The sector is dealing with a number of other challenges, with price being the biggest factor. Americans have cut down on spending on pricey goods amid high inflation. Although the supply-chain issue started to improve in the third quarter, the continued drop in demand in both consumer and commercial markets is now raising new concerns.
According to the IDC report, supply chains can adapt as PC OEMs look into manufacturing options outside of China owing to the slowdown in growth and demand. Also, PC manufacturers are simultaneously altering their strategies for the remainder of the year and making orders for Chromebooks, anticipating a jump in license fees later this year.
According to analysts, the struggle for PC manufacturers will continue for a while, but the market is expected to rebound by the end of this year once the global economy improves and users consider upgrading to Windows 11.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index.Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Masimo and Black Knight have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – April 25, 2023 – Zacks Equity Research shares Masimo Corp. (MASI - Free Report) as the Bull of the Day and Black Knight as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Lenovo Group Ltd. (LNVGY - Free Report) , HP Inc. (HPQ - Free Report) and Dell Technologies Inc (DELL - Free Report) .
Here is a synopsis of all five stocks.
Bull of the Day:
Masimo Corp., a Zacks Rank #1 (Strong Buy), has benefitted from a resurgence in the health care sector. After falling markedly during last year’s bear market, the stock has hit a series of 52-week highs this year on increasing volume. Shares continue to display relative strength as buying pressure accumulates in this market leader.
MASI is part of the Zacks Medical – Instruments industry group, which ranks in the top 43% out of more than 250 Zacks Ranked Industries.
Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
Company Description
Masimo Corp. develops, manufactures, and markets various patient monitoring technologies along with automation and connectivity solutions. Its medical products offer unique ways to monitor oxygen levels, hemoglobin concentration, respiration rate, and brain function. In addition, MASI provides patient position and activity tracking, neuromodulation technologies, and telehealth solutions.
MASI provides its products through direct sales force, distributors, and original equipment manufacturers to hospitals, long-term care facilities, physician offices, emergency medical services, and through e-commerce wellness sites.
Earnings Trends and Future Estimates
MASI has built up an impressive earnings history, surpassing earnings estimates in each of the last four quarters. Back in February, the company reported Q4 earnings of $1.32/share, a 12.82% surprise over the $1.17 consensus estimate.
MASI has delivered a trailing four-quarter average earnings surprise of 9.02%. Consistently beating earnings estimates is a recipe for outperformance.
The health solutions growth engine is expected to remain hot this year, as analysts covering MASI have increased their EPS estimates recently. Full-year estimates have been raised by +8.7% in the past 60 days. The 2023 Zacks Consensus EPS Estimate now stands at $4.75/share, reflecting potential growth of 3.49% relative to last year. Sales are anticipated to rise 19.52% to $2.43 billion.
Let’s Get Technical
MASI shares have advanced over 75% since bottoming out late last year. Only stocks that are in extremely powerful uptrends are able to make this type of move while the major market indices continue their choppy price action. This is the kind of stock we want to include in our portfolio – one that is trending well and receiving positive earnings estimate revisions.
The stock has been making a series of higher highs. With both strong fundamentals and technicals, MASI is poised to continue its outperformance.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, Masimo Corp. has recently witnessed positive revisions. As long as this trend remains intact (and MASI continues to deliver earnings beats), the stock will likely continue its bullish run this year.
Bottom Line
Backed by a leading industry group and robust history of earnings beats, it’s not difficult to see why this company is a compelling investment. Solid institutional buying should continue to provide a tailwind for the stock price. Increasing volume at recent breakout levels is another bullish sign.
Robust fundamentals combined with a strong technical trend certainly justify adding shares to the mix. Investors would be wise to consider MASI as a portfolio candidate if they haven’t already done so.
Bear of the Day:
Black Knight provides integrated software, data, and analytics solutions. Its software offers a service application platform for mortgages, home equity loans, and lines of credit. Black Knight also provides analytics that show property ownership data, valuation models, and collateral risk scores. In addition, BKI delivers lead generation, multiple listing service, and other servicing data.
The Zacks Rundown
BKI, a Zacks Rank #5 (Strong Sell), is a component of the Zacks Business – Information Services industry group, which ranks in the bottom 36% out of more than 250 Zacks Ranked Industries. As such, we expect this industry group as a whole to underperform the market over the next 3 to 6 months.
Candidates in the bottom tiers of industries can often be solid potential short candidates. While individual stocks have the ability to outperform even when included in a poor-performing industry group, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much more difficult.
The odds are stacked against BKI, and the stock is agreeing with this notion. Black Knight shares experienced a climax top in late 2021 and have been in a price downtrend ever since. The share price is hitting a series of lower lows and represents a compelling short opportunity for those looking to hedge any long positions.
Despite a drastic move lower, Black Knight stock remains relatively overvalued, irrespective of the metric used.
Recent Earnings Misses
BKI has fallen short of estimates in two of the past four quarters. The software company most recently reported Q4 earnings back in February of $0.52/share, missing the $0.55/share consensus EPS estimate by -5.45%. The stock has moved steadily lower since the announcement.
During the prior quarter, BKI once again missed estimates when it reported Q3 earnings of $0.56 per share. This represented a -16.4% miss versus the $0.67 estimate. BKI has posted a trailing four-quarter average earnings miss of -3.83%. Consistently falling short of earnings estimates is a recipe for underperformance, and BKI is no exception.
Deteriorating Outlook
Black Knight has been on the receiving end of negative earnings estimate revisions as of late. For the current quarter, analysts have decreased estimates by -13.33% in the past 60 days. The Q1 Zacks Consensus EPS Estimate is now $0.52/share, reflecting a -17.46% regression relative to the same quarter last year.
For the year, analysts have also revised their EPS estimates downward by -12.45% in the past 60 days. The 2023 Zacks Consensus Estimates is now $2.18/share, translating to negative growth of -7.23% versus last year.
Falling earnings estimates are a huge red flag and need to be respected. Negative growth year-over-year is the type of trend that bears like to see.
Technical Outlook
BKI is in a sustained downtrend. The stock is making a series of lower lows, with no respite from the selling in sight. Also note how both moving averages have rolled over and are sloping down – another good sign for the bears.
While not the most accurate indicator, BKI has also experienced what is known as a ‘death cross’, wherein the stock’s 50-day moving average crosses below its 200-day moving average. BKI would have to make a serious move to the upside and show increasing earnings estimate revisions to warrant taking any long positions in the stock. The stock has fallen more than 10% this year alone.
Final Thoughts
A deteriorating fundamental and technical backdrop show that this stock is not set to print new highs anytime soon. The fact that BKI is included in one of the worst-performing industry groups provides yet another headwind to a long list of concerns. A history of earnings misses and falling future earnings estimates will likely serve as a ceiling to any potential rallies, nurturing the stock’s downtrend.
Our Zacks Style Scores depict a weakening outlook for this stock, as BKI is rated a worst-possible ‘F’ in our Value and Growth categories, along with an ‘F’ for our overall VGM score. This signals that falling earnings and sales along with relative overvaluation will likely hinder stock performance.
Potential investors may want to give this stock the cold shoulder, or perhaps include it as part of a short or hedge strategy. Bulls will want to steer clear of an overvalued BKI until the situation shows major signs of improvement.
Additional content:
Can the PC Market Bounce Back from Current Lows?
Global PC sales, which rebounded and soared during the peak of the pandemic, started slowing with the economic reopening. Sales have slowed further this year as the industry continues to face multiple challenges.
Supply-chain crisis, which has been hampering sales, somewhat eased last year, but higher prices are now plaguing sales. Almost all major players saw a steep decline in PC sales in the first quarter of 2023.
PC Sales See Steep Decline
The COVID-19 outbreak impacted a large number of industries but, at the same time, also proved to be a boon in disguise for several others. The PC industry emerged as one of the biggest beneficiaries of the pandemic. However, things have changed since then, with sales declining almost every quarter.
According to a report from Gartner, global PC shipments plummeted 30% year over year in the first quarter of 2023. Total PC shipments during the quarter totaled 55.2 million units.
This follows a 28.5% decline in the fourth quarter of 2022, when global PC shipments totaled 65.3 million units. Understandably, the crisis is worsening for the industry, with shipments plummeting almost every quarter.
The report also mentioned that during the quarter, the top global vendors remained unchanged, with Lenovo Group Ltd. holding the top spot. However, all top vendors saw a steep decline in sales.
The Gartner report is quite similar to the IDC report on PC shipments. According to IDC, global PC shipments totaled 56.9 million units, declining 29% year over year in the first quarter of 2023.
Challenges Galore
With the decline in shipments, market leaders are suffering the most, despite holding on to the top positions. According to market share, Lenovo held the top spot with a 23.9% market share, HP Inc. commands 21.5%, followed by Dell Technologies Inc, which holds 16% (Apple was a distant fourth).
Lenovo recently reported that its revenues declined 24% year over year to $15.3 billion, owing to a massive downturn in PC and smartphone industries in the final quarter of 2022. In the first quarter of 2023, LNGVY recorded a meager 12.7 million units of shipments. Lenovo’s shipments declined 30.3% in the quarter on a year-over-year basis. LNGVY has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
HP, Inc. reported a net income of $487 million in the first quarter of 2023 but also said that its PC and laptop sales declined drastically. HPQ’s PC unit recorded revenues of $9.2 million in the first quarter, down 24.2% year over year. According to the IDC report HP, Inc. shipped only 12 million units.
Dell Technologies held its position as the third biggest player but shipped only 12 million units of PCs. DELL saw a 31% decline in shipments in the first quarter of 2023 on a year-over-year basis.
Apple was the biggest loser, with a 40.5% year-over-year decline in shipments. AAPL shipped only 4.1 million units during the quarter. The company shipped 2.8 million fewer devices in the first quarter on a year-over-year basis.
The U.S. PC market, one of the biggest in the world, fell 25.8% in the first quarter on a year-over-year basis. This follows a 20.5% decline in the fourth quarter of 2022. Slowing laptop sales are hurting the entire U.S. PC industry.
The sector is dealing with a number of other challenges, with price being the biggest factor. Americans have cut down on spending on pricey goods amid high inflation. Although the supply-chain issue started to improve in the third quarter, the continued drop in demand in both consumer and commercial markets is now raising new concerns.
According to the IDC report, supply chains can adapt as PC OEMs look into manufacturing options outside of China owing to the slowdown in growth and demand. Also, PC manufacturers are simultaneously altering their strategies for the remainder of the year and making orders for Chromebooks, anticipating a jump in license fees later this year.
According to analysts, the struggle for PC manufacturers will continue for a while, but the market is expected to rebound by the end of this year once the global economy improves and users consider upgrading to Windows 11.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
See Stocks Free >>
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index.Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.