For Immediate Release
Chicago, IL – October 31, 2017 – Zacks Equity Research highlights ON Semiconductor Corp. (ON - Free Report) as the Bull of the Day and Hibbett Sports Inc. (HIBB - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Micron Technology, Inc. (MU - Free Report) .
Here is a synopsis of all three stocks:
Bull of the Day:
Arguably the silent, unsung heroes of the technology industry, semiconductors, provide the power needed to fuel computers, smartphones, flat-screen displays, and many other electronic devices.
While it’s a profitable time to be a tech-focused investor in any regard, investors should take a close look at ON Semiconductor Corp.
The Zacks Rank #2 (Buy) company is mostly known as a power management and commodity chip maker, but ON has slowly begun to create a budding Internet of Things division.
Its IoT offerings include products catered to wearables, industrial automation, and smart city development, and ON is also heavily involved with automotive solutions.
Solid Third Quarter Outlook
ON is set to report its third quarter fiscal 2017 results on November 6 before the bell.
We currently expect the company to report revenues of $1.37 billion on earnings of 40 cents per share. Earnings estimates were sitting at 37 cents 90 days ago.
Seven analysts have revised their estimates upwards in the last 60 days compared to none lower.
Even though the company has an average surprise of -1.37%, ON anticipates double-digit earnings and revenue growth for the quarter of about 74% and 44%, respectively.
Impressive Growth Fundamentals
With more double-digit earnings growth continuing into next year, it’s no wonder ON stock sports a Growth Score of ‘A.’
Its ROE of 22.7% has significantly improved over the years, suggesting that the company is getting better and better at efficiently utilizing its shareholder funds.
And, its acquisition of Fairchild has helped ON’s top-line growth, and management expects to witness even further growth from this deal driven by the company’s strong foothold in the power semiconductor market post-acquisition.
So far this year, shares of ON have gained over 64% compared to the S&P 500’s return of nearly 15% and the Semiconductor-Analog and Mixed industry's gain of over 29%.
Bear of the Day:
It’s no secret how much the broader sporting goods industry has struggled recently, and like all retailers, companies who operate in this space have suffered from intense competition, changing consumer habits, and the surge in online shopping.
They are then forced to run aggressive promotions and discounting to get customers back in stores, undercutting the value of the products they sell.
This is a vicious cycle, but it’s not a new narrative. It’s a retail story that has been told quarter after quarter as e-commerce companies like Amazon continue to dominate and alter how we think about shopping.
One sporting goods stock that has been hit particularly hard has been Hibbett Sports Inc. The Zacks Rank #5 (Strong Sell) stock is based in Birmingham, AL, and operates full-line sporting goods stores in small to mid-sized markets mostly in the Southeastern U.S; the company offers products like athletic equipment, footwear, apparel.
Weak Guidance for Fiscal 2018
Last quarter was rough for Hibbett. To recap, net sales decreased 9.2% while comparable store sales fell 11.7% year-over-year; the company reported a loss per share of 15 cents, though the bottom line surpassed the Zacks Consensus Estimate of a loss of 20 cents per share.
As a result, Hibbett slashed its outlook for fiscal 2018. The sporting goods company expects continued soft sales—Hibbett has posted a top line miss in nine of the last 10 quarters—and gross margin pressure due to the promotional retail environment.
The company expects earnings in the range of $1.25 to $1.35 compared to previous guidance of $2.35 to $2.55, and comps in the negative mid to high single-digit range versus previous guidance of negative 1% to positive 1%.
How Will HIBB Perform in Q3?
Hibbett is tentatively reporting its third-quarter fiscal 2018 results Nov. 17. We currently expect revenues of $217 million on earnings of 21 cents per share, representing year-over-year declines of 8.4% and over 68%, respectively.
For the current quarter, five analysts have revised their earnings estimates downwards in the last 60 days compared to none higher. Earnings estimates were sitting at 45 cents a share just 90 days ago.
HIBB’s average earnings surprise is only 3.81%, though it did beat earnings last quarter by 25%.
Hibbett’s Q3 report will likely be a good indicator of how the company will perform during the upcoming holiday season, so investors should keep an eye on any more guidance cuts.
Shares Down on the Year
Many sporting goods stocks are taking a beating right now as the industry deals with the cyclical nature of retail.
So far in 2017, HIBB stock is down over 65%. Its broader industry, Retail-Miscellaneous, has only lost about 20%.
While the company’s growth story seems to have stalled, Hibbett could be an interesting value play.
Micron (MU - Free Report) : Strong Growth Stock Powering Self-Driving Cars
The world of autonomous driving is set to become a major industry, with the potential to grow massively over the next few decades. Investors have taken notice and are currently on the lookout for stocks that have exposure to the self-driving car push.
Picking stocks in this industry might seem to be growth plays on their face. But not every company with ties to autonomous vehicles are set to pop. This is where picking a stock with real growth fundamentals can be fun and potentially rewarding, as it presents the possibility for massive returns.
One stock that fits this mold for outside growth, based on real business segment fundamentals, is Micron Technology, Inc.
As a semiconductor giant, Micron markets its memory and data storage solutions to computer manufacturing firms, consumer electronics companies, and telecommunications powers. Micron has also invested heavily in vehicle safety technology that could prove to be foundational for a driverless car future.
The company’s vehicle-focused semiconductor technology currently helps reduce human driving errors. This includes gesture control interfaces that help detect drowsy and distracted drivers and vehicle sensors that create more advanced computer “vision.” Along with these technologies, Micron’s artificial intelligence already helps vehicles detect and alert drivers to objects, pedestrians, and other hazards that might be in the road.
Micron is currently a Zacks Rank #1 (Strong Buy) that rocks an “A” grade for Growth. On top of that, Micron’s sports an overall VGM grade of an “A.”
Shares of Micron have already surged over 133% during the last 52 weeks. Micron has seen its stock price climb nearly 47% in the last 12 weeks alone. It seems that this substantial stock price movement was based on Micron’s ability to grow both it top and bottom lines.
At the end of September, Micron reported fourth-quarter and full-year 2017 results that climbed year-over-year. The company’s Q4 revenues skyrocketed 91%, while its full-year sales soared 64% to hit $20.32 billion.
"Micron delivered exceptional fourth quarter and fiscal year results, reflecting solid execution and robust demand for our memory and storage solutions," Micron CEO Sanjay Mehrotra said in a statement. "We expect healthy industry fundamentals to continue into 2018, supported by increasingly diverse end markets and applications.”
Investors who didn’t benefit from Micron’s substantial gains so far this year might be glad to know that the semiconductor company’s growth metrics are set to keep on climbing.
Micron revenues are expected to jump nearly 60% in its current quarter, based on our current consensus estimates. The company seems set to keep on cruising as its full-year 2018 revenues are projected to climb almost 20% to hit an upward estimate of $24.20 billion.
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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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