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SMART Global, Jinko Solar and Citigroup highlighted as Zacks Bull and Bear of the Day

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For Immediate Release

Chicago, IL – October 11, 2017 – Zacks Equity Research SMART Global Holdings (Nasdaq: (SGH - Free Report)  – Free Report) as the Bull of the Day, Jinko Solar Holdings (NYSE: (JKS - Free Report)  – Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Citigroup (NYSE: (C - Free Report)  – Free Report).

Here is a synopsis of all three stocks:

Bull of the Day:                                   

SMART Global Holdings (Nasdaq: (SGH - Free Report) – Free Report), a Zacks Ranked #1 (Strong Buy) company is a designer, manufacturer and supplier of electronic subsystems to OEMs. It engaged in the computer, industrial, networking, telecommunications, aerospace and defense markets. The company operates primarily in the U.S., Europe, Asia and Latin America. Smart Global Holdings Inc. is headquartered in Newark, California.

Recent Earnings

The company reported their second quarter results since going public on September 28th where they easily beat both the Zacks consensus earnings and revenue estimates.  On a year over year basis, the company saw gains in Net Sales +52.5% (fifth consecutive quarter of YoY increases), Gross Profit +60.5%, and Operating Income +415%.  Management also noted that they paid down $61.1 million of their term loans from the proceeds of their IPO, and refinanced other debt that reduced overall interest expenses.  

Driving Factors

Brazil PC DRAM, the specialty memory segment, and Brazil mobile acted as strong tailwinds for the company.  Specifically, the Brazil PC/smartphone segment grew by +23% on a sequential basis.  Continued growth in the Brazilian markets is expected to push sales through 2018.  Further, management noted that they see strength coming from their server/storage and All Flash Arrays which are contributing to their increased future growth expectations.  

Management’s Take

According to Iain MacKenzie, President and CEO, “We completed fiscal 2017 on a strong note, having accomplished a number of key milestones that set the foundation for continued momentum as we enter fiscal 2018. The strength of the global memory market contributed to all of our businesses across the board.  In SMART Brazil we are also benefitting from the improving economy and the introduction of new products.  Increasing demand from our networking and storage customers is driving healthy growth in our Specialty Memory business as well.  We also recently paid off a portion of our term loan with the proceeds of our IPO, as well as completing an important debt refinancing that clears the path for improved operating leverage in our financial model, enabling us to drive increasing returns for our shareholders.”

Bear of the Day:

Jinko Solar Holdings (NYSE: (JKS - Free Report) – Free Report) who currently holds a Zacks Rank #5 (Strong Sell) is a solar product manufacturer with operations based in Jiangxi Province and Zhejiang Province in China. JinkoSolar has built a vertically integrated solar product value chain from recovered silicon materials to solar modules. JinkoSolar's principal products are silicon wafers, solar cells and solar modules which are all along the photovoltaic value chain, with a global network spanning across Europe, North America and Asia.

Recent Earnings Results

In early September, JKS reported Q2 earnings where they significantly missed the Zacks consensus earnings estimate ($0.20 actual vs. $0.69 expected), but did beat the Zacks consensus revenue estimate.  

Factors for the Decline

While the company posted strong revenue growth (+37.2% sequentially) in their Q2 17 earnings report, issues of increased supply chain pricing negatively impacting their cost structure.  Further, these costs look like they are going to continue to increase into 2018.  Lastly, the increased pricing coupled with more shipments from lower margin products caused gross margins to come in below expectations.  

Management’s Take

According to Mr. Kangping Chen, CEO, “Shipments over the past few quarters have surged to new highs, allowing us to continuously capitalize on the growing recognition of JinkoSolar's brand and excellent products and services to increase our market share. While ASPs declined during the quarter, prices along our supply chain remained relatively high and impacting our margins. We also worked with our OEM partners more extensively than expected during the quarter to ensure timely delivery, which adversely impacted our margins. We are currently reviewing our strategy in order to improve profitability and further cut down the use of OEM going forward. Our efforts will also be focused on strengthening inventory management and controlling operating expenses.”

Additional content:

3 Key Predictions for Citigroup’s Q3 Earnings Report

It’s been an interesting few days around the global markets, but investors are still eagerly anticipating the slew of earnings reports coming from the big banks later this week. Of these, we can almost guarantee that investment and consumer banking behemoth Citigroup’s (NYSE: CFree Report) latest quarterly results will be an important bellwether for the rest of the financial sector.

With shares up about 27% year-to-date, Citigroup has emerged as one of the most compelling stocks in the financial sector. On top of that, excitement over the GOP’s proposed tax cuts and anticipation for another rate hike in December has sparked positive momentum throughout the banking industry.

(For more on the banking industry as a whole, check out our expanded earning preview: Bank Stocks Earnings Preview: What To Expect From BAC, JPM, C, & WFC)

Today, we’ll be taking a closer look at Citigroup and what types of results investors should expect to see in its key categories this quarter. By using our Zacks Consensus Estimates, as well as our exclusive non-financial metrics file, we’ve found three important things to note ahead of Citigroup’s report.

Earnings:

Based on the latest Zacks Consensus Estimate, we expect to see Citigroup report earnings of $1.30 per share. This would represent growth of 4% from the $1.25 per share posted in the year-ago quarter. The biggest potential headwind for this quarter will be weak trading revenues, as lower volatility around the world has likely led to a slow quarter in this unit. However, recent restructuring and streamlining initiatives should support profitability.

Efficiency Ratio:

The efficiency ratio is always an important measure of bank productivity. In short, it is a way to gauge the cost required to generate one dollar of revenue. According to our consensus estimates, Citigroup’s efficiency ratio is expected to come in at 57.4% this quarter. That would mark an improvement from the 59% ratio posted in the previous quarter, further signaling that the company’s expense management efforts have been successful.

Total Provisions For Credit Losses:

Based on our consensus estimates, we expect to see Citigroup report total provisions for credit losses in the area of $1.855 billion. This is up from $1.717 billion in the previous quarter and $1.736 in the year-ago period. Remember, while this is an estimation of potential losses due to defaulted credit, it is treated as an expense on the company’s balance sheet. With provisions rising, Citigroup will need to support earnings somewhere else.

Some of these consensus estimates are pulled from our exclusive non-financial metrics consensus estimate file. These estimates are updated daily and are based on the independent research of expert stock analysts. Learn more here>>>

Want more stock market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!

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About the Bull and Bear of the Day

Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

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