For Immediate Release
Chicago, IL – March 14, 2018 – Zacks Equity Research highlights Regeneron Pharmaceuticals (REGN - Free Report) as the Bull of the Day, Caesarstone (CSTE - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Qualcomm (QCOM - Free Report) , Broadcom (AVGO - Free Report) and Exxon Mobil (XOM - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Regeneron Pharmaceuticalsshares have been on an odyssey in the past year, soaring from $360 last April up to $540 by June and then entering their own private bear market since last autumn to dip below $320 this year.
But with EPS estimates rising since January, the stock became a Zacks #1 Rank Strong Buy again last month and savvy Biotech investors are thinking they be witnessing the start of an important bottom in shares below $350.
Full-year 2018 profit projections have risen 11% from $16.82 to $18.67, representing 14.4% growth this year.
And next year's estimates rose 6.4% from $20.29 to $21.58, representing a 15.6% advance.
At $350 this puts the forward P/E multiple at around 17.5 times, using $20 EPS.
Revenue growth is also expected to be solid with this year's mark of $6.44 billion pushing 9.6% ahead of 2017 and 2019 looking for a nearly 11% advance to $7.14 billion.
With a $41 billion market cap, this puts the price-to-sales ratio around 6 times, which is not unreasonable for a mature big cap Biotech with mid-teens growth.
And that growth is expected to carry the company toward adjusted EPS of $26 in 2020.
Key Growth Franchises
Regeneron’s fourth-quarter results, reported on February 8, were impressive as both earnings and sales beat estimates driven by strong performance of eye-care drug Eylea.
Eylea (aflibercept) can treat age-related macular degeneration (AMD), diabetic macular edema (DME), diabetic retinopathy (DR), and macular edema following retinal vein occlusion (RVO).
Total revenues in the fourth quarter increased 29% year over year to $1.6 billion on the back of Eylea sales. Revenues surpassed the Zacks Consensus Estimate of $1.5 billion.
Regeneron’s Q4 profit consensus called for EPS of $4.68 and the company delivered $5.23, for an 11.75% beat and a 72% increase over the year-ago quarter.
Eylea net sales increased 14% year over year to $975 million in the US and should continue to remain the key growth driver contributing significantly to REGN's top line.
Regeneron has co-developed Eylea with the HealthCare unit of Bayer AG. The company is solely responsible for the sales of the eye drug and is entitled to the profits in the United States. However, it shares profits and losses equally with Bayer from ex-US Eylea sales, except in Japan, where the company receives a royalty on net sales.
Bear of the Day:
Caesarstoneis a $750 million maker of engineered quartz surfaces such as countertops, vanities, wall cladding, floors and other interior surfaces.
The Israel-based company was identified as a Zacks #5 Rank Strong Sell in June of last year when shares were trading $38. It has fallen 45% since then.
And the downward trend of earnings has persisted with recent analyst estimate revisions taking the full-year 2018 EPS projection from $1.66 to $1.53, representing only 5% profit growth.
CTSE's decline really picked up momentum after a Q3 earnings miss of 36%, dropping from $28 to $23 in early November.
With little improvement for Q4, which notched a 33% earnings miss, the current March quarter is projected to realize a year-over-year profit drop of 47%.
Here were some highlights from the company's year-end report delivered on February 7:
Fourth-quarter loss of $6 million, after reporting a profit in the same period a year earlier, on revenue of $148.1 million in the period.
The loss of 19 cents per share, adjusted for one-time gains and costs, came to 22 cents.
For 2017, the company reported profit of $26.2 million, or 73 cents per share. Revenue was reported as $588.1 million.
Caesarstone expects full-year revenue in the range of $612 million to $632 million, representing 5.8% growth at the midpoint.
With CSTE shares trading at 5-year lows and under 14X EPS estimates, it may be tempting to do some bottom-fishing here. But until the earnings estimates stop going down and start going back up, it may be better to fish another quarry.
The Zacks Rank will let you know when the time is right again.
Broadcom Deal Blocked, Tillerson Fired: Tech Stocks in Trouble?
After opening higher on the back of a strong February CPI, stocks tumbled into the red in early afternoon trading Tuesday. Some investors appear spooked by the latest political drama in the U.S., including the Trump administration’s decision to block the proposed Broadcom-Qualcomm merger and Rex Tillerson’s departure from the State Department.
Through 1:45pm EST, the Dow Jones Industrial Average was down about 0.15% on the day, while the broader S&P 500 index was about 0.44% lower than its Monday close. But the tech-heavy Nasdaq composite led the day’s losers, slumping more than 0.80%.
One of the worst-performing tech stocks of the day was Qualcomm, which dropped more than 4.5% in morning trading after President Donald Trump shut down the chipmaker’s proposed merger with Broadcom.
In a presidential order released on Monday, Trump said “credible evidence” led him to conclude that Singapore-based Broadcom’s buyout of Qualcomm would have impaired the national security of the United States. The deal, if it had gone through, would have marked the largest technology acquisition in history.
On Tuesday, President Trump ousted Secretary of State Rex Tillerson, the former CEO of Exxon Mobil, from his position. Tillerson was considered to be a level-headed businessman with an appreciation for global deals, so his firing could be another indication that the White House intends to shake up trade policy.
“The worry is with the Tillerson ouster and Broadcom blockage from the Trump administration that this will add fuel to the fire in a battle versus China on the horizon over the coming 12 to 18 months,” said GBH Insights analyst Dan Ives in a note.
The Trump administration has already raised concerns about an impending trade war with China by implementing new tariffs on imported steel and aluminum. Metal exports to America are not a huge piece of China’s economy, but the tariffs were seen as a direct challenge to the Asian nation.
But those tariffs will likely impact U.S.-based metal importers the most, leaving plenty of tech firms unscathed. However, Washington’s latest moves, including Tillerson’s departure and the rejection of the Broadcom-Qualcomm deal, could spell volatility for the sector.
“While most tech names including FANG stocks are relatively insulated from any China worries/headwinds, this is enough of a near term concern for tech investors to take some profits after a golden run over the last few weeks with many of these names making new highs,” Ives added.
Want more 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
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