For Immediate Release
Chicago, IL – July 12, 2018 – Zacks Equity Research highlights Bonanza Creek Energy, Inc. (BCEI - Free Report) as the Bull of the Day, Yum China Holdings, Inc. (YUMC - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Workday, Inc. (WDAY - Free Report) , Adobe Systems Inc. (ADBE - Free Report) and Progress Software Corp. (PRGS - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Bonanza Creek Energy, Inc. is cashing in on higher crude prices and strong demand. This Zacks Rank #1 (Strong Buy) is expected to see earnings jump nearly 300% in 2018.
Bonanza Creek is a small cap exploration and production company headquartered in Denver, Colorado. With a market cap of $720 million, it has operations in the Wattenberg Field in Colorado and the Cotton Valley sands of Southern Arkansas in the Mid-Continent.
Another Beat on EPS and Production Guidance
On May 8, Bonanza Creek reported its first quarter results. It easily blew by the Zacks Consensus Estimate, reporting $1.07 versus the consensus of $0.71 which was a beat of 50.7%.
It beat its first quarter production guidance estimate, reporting 16.8 MBoe/d versus the guidance range of 16.0-16.6 MBoe/d. That was due to strong new well completions and consistently low line pressures on the company's Rocky Mountain Infrastructure system.
Production, however, actually fell 5% year-over-year due to minimal drilling and completion activity throughout the first half of 2017.
The product mix for the first quarter was 59% oil, 17% NGLs and 24% natural gas.
Crude was 81% of total revenue.
Net revenue jumped to $64.2 million from $52.6 million in the first quarter of 2017 thanks to increased commodity price and greater oil-weighted production.
Oil averaged $57.89 per Bbl versus $48.59 in the year ago period.
The Mid-Continent was cash flow positive in the first quarter with 3.0 Mboe/d of production.
Strong Balance Sheet
Investors need to pay attention to the balance sheets of the energy companies as it's been tough the last few years.
At the end of the first quarter, Bonanza had liquidity of $182.5 million including cash on hand of $5.8 million and $176.7 million in borrowing capacity under its credit facility.
As of May 8, it had no outstanding term debt and had just $15 million outstanding on its credit facility.
Huge EPS Gains Expected in 2018
With crude surging above $70, it's not surprising that analysts believe Bonanza is poised to cash in.
1 estimate was raised in the last week for both the second quarter and 2018.
The second quarter Zacks Consensus Estimate jumped to $1.26 from $0.97.
For the year, the Zacks Consensus rose to $5.32 from $4.52 over the last week. That's earnings growth of 293% as it made only $1.34 last year.
Shares are Still Cheap
The energy stocks finally caught a bid in 2018.
Bonanza shares are up 29% year-to-date but they're still cheap due to the surge in earnings.
Bear of the Day:
Yum China Holdings, Inc. is caught in the crosshairs of a possible US-China trade war. This Zacks Rank #5 (Strong Sell) has sold off in the last month as jitters about trade increased.
Yum China is the largest restaurant chain in mainland China. It started as a single restaurant in 1987 and now operates over 8,100 restaurants in over 1,200 cities and towns.
Formerly a division of Yum! Brands, Yum China was spun off into its own independent company in 2016.
It has the exclusive rights to operate and sub-license the KFC, Pizza Hut and Taco Bell brands in China. It also owns the East Dawning and Little Sheep restaurant concepts outright and acquired a controlling interest in the holding company of DAOJIA.com.cn in 2017.
Another Beat in Q1
On May 1, Yum China reported its first quarter 2018 results and beat the Zacks Consensus by 4 cents. It reported $0.53 versus the consensus of $0.49.
It was the third beat in the last four quarters.
Revenue rose 15% to 2.2 billion from $1.9 billion.
Same-store-sales, one of the most important metrics in the restaurant industry, rose 3%, with KFC seeing a 5% increase which was partially offset by weakness at Pizza Hut, which declined 5%, excluding F/X.
Restaurant margins also fell to 17.9% from 20.4% in the prior year primarily due to the investment in product upgrades and promotions at Pizza Hut and its sales deleveraging.
But Yum China's sheer size in China is impressive. It has 120 million loyalty program members for KFC, up 50 million year over year. Pizza Hut now has 40 million, up from 20 million a year ago.
Delivery also continues to gain popularity.
Online delivery jumped to 16% o company sales, up from 13% in the prior year period. It's now available in 970 cities, up from 700 cities a year ago.
Estimates Being Cut
With the first quarter mostly being good news, at least for the KFC brand, why is Yum China a Zacks Rank #5 (Strong Sell)?
One estimate for 2018 and 2019 has been cut in the last week.
That has pushed the 2018 Zacks Consensus down to $1.59 from $1.60. The 2019 Zacks Consensus has also fallen to $1.70 from $1.72 in the last 7 days.
It's still earnings growth of 12% and 6.7%, respectively.
Shares Off Big in the Last Month
Investors, however, are more jittery about the trade and tariff implications on the company than they are with the estimate cuts.
Shares have fallen 13% in the last month.
3 Cloud Stocks to Buy Right Now
In a matter of just a few years, “the Cloud” has evolved from a budding new tech feature to one of the main factors driving growth in the technology sector. Cloud computing is now an essential focus for software-related companies, and cloud stocks have piqued the interest of many tech-focused investors.
New technologies and changing consumer behavior have changed the shape of the technology landscape, and an industry that was once centered on the personal computer has adapted to survive in the world of mobile computing and the Cloud. The markets have been paying attention, and some of the best tech stocks have been those that are either primarily cloud-based companies, or those that have shown growth in their cloud operations.
With this in mind, we’ve highlighted three stocks that are not only showing strong cloud-related activity, but also strong fundamental metrics. Check out these three cloud stocks to buy right now:
1. Workday, Inc.
Workday designs enterprise cloud applications for human resources and finance. It provides its customers—which fall in the tech, financial services, business services, healthcare, retail, and other industries—with the tools to manage critical business functions using industry-leading cloud solutions.
WDAY is holding a Zacks Rank #2 (Buy) and is certainly an explosive growth pick. Based on current analyst estimates, we expect Workday to report EPS growth of 23% and revenue growth of 26% this fiscal year. Its valuation is stretched, but the stock also looks interesting from an earnings momentum perspective, having added 37% to its full-year EPS estimates within the past quarter. This means analyst sentiment has remained positive recently.
2. Adobe Systems Inc.
Adobe Systems is a provider of graphic design, publishing, and imaging software for Web and print production. The company’s main offering is its “Creative Cloud,” which is a software-as-a-service (SaaS) product that allows users to access all of Adobe’s tools at one monthly price. The stock currently has a Zacks Rank #1 (Buy).
ADBE has been on an absolute tear lately, surging more than 70% in the past year. Interestingly enough, however, the stock sold off a bit after its latest earnings beat, giving investors a unique opportunity to buy as it continues to rebound.
Shares are now trading at their lowest forward earnings multiple in a year. Plus, the company has plenty of expansion opportunity left. Earnings growth is expected to reach 53.6% in the current fiscal year, and Adobe is projected to see a long-term annualized EPS growth rate of more than 16% in the coming years.
3. Progress Software Corp.
Progress develops software and cloud-based products that assist clients with application deployment, application management, data connectivity, web content management, and predictive analytics. The company has shifted its focus to cloud computing and is looking to expand its cloud subscription offerings. Currently, PRGS is a Zacks Rank #2 (Buy).
In its recently-reported quarter, the firm surpassed earnings estimates for the seventh-consecutive period, inspiring some positive estimate revisions for upcoming quarters. This is a stock to love based on its earnings growth, with consensus estimates calling for EPS expansion of 21% this quarter and 31% for the full fiscal year. But shares are also trading at an attractive 15.3x forward 12-month earnings.
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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.
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