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Align, AngioDynamics and Caterpillar highlighted as Zacks Bull and Bear of the Day

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For Immediate Release

Chicago, IL – July 30, 2018 – Zacks Equity Research highlights Align Technology (ALGN - Free Report) as the Bull of the Day, AngioDynamics (ANGO - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Caterpillar (CAT - Free Report) .

Here is a synopsis of all three stocks:

Bull of the Day:

I last wrote about Align Technology as the Bull of the Day in mid-June after the stock made new all-time highs above $370. Since then, the stock has been to $385 and the company has delivered another stellar quarterly report.

Here's what I wrote June 19 to describe the opportunity that many investors missed in an exciting business all about greater smiles...

The phenomenal growth story that is Align Technology, makers of the revolutionary Invisalign clear teeth straighteners, continues to make early investors smile while apparently catching the majority by surprise. 

In the past year, ALGN shares are up 155% vs the S&P 500 at +14%. That performance certainly made members of my Healthcare Innovators portfolio smile where we owned the stock from $133 up to $333.

Now trading above $360, with an all-time high close of $370.10 hit on June 18, ALGN shares trade for over 75 times the consensus EPS estimate for this year of $4.73. And that explains why so many passed on boarding this one-way train to big gains.

What the majority missed was that the company's breakthrough dental technologies were going to maintain over 25% growth domestically and nearly 35% growth internationally as more dental professionals found the Invisalign system to be an extremely effective and highly desirable solution for their patients.

The Align Trajectory Continues

On July 25, Align delivered big beats on both the top and bottom lines. Revenues of $490 million topped the Zacks consensus of $469 million by 4.5% and EPS of $1.30 trounced the consensus of $1.09 by 19%.

But the company gave conservative guidance that didn't raise the bar very high for the rest of the year and the stock has sold off back to $350. I think it's a buying opportunity and I will explain why.

First, let's look at what analysts did with estimates after the report to keep ALGN in the upper realms of the Zacks Rank. In the past week, the EPS consensus for the year rose from $4.78 to $4.92. Assuming they actually bring home $5 EPS for the holidays, this puts the P/E back down to 70X at $350.

Driving that 26.5% EPS growth this year is an expected 32% advance on the top line to $1.95 billion.

Full-year EPS estimates for 2019 rose from $6.09 to $6.20, which puts the forward multiple solidly under 60X. And the sales growth rate is not projected to slow down much into next year with current revenue estimates for 2019 of $2.42 billion, representing a 24% advance.

This growth is driven by increasing adoption among US dental professionals who are quickly on their way to the next big milestone of 2 million teens wearing Invisalign products.

It's also about break-neck growth in emerging markets like China and India, and expanded production facilities in Costa Rica, which could be a gateway to Latin American markets (I'm still researching that potential).

Bear of the Day:

AngioDynamics (ANGO) is an $800 million provider of innovative medical devices used by interventional radiologists, vascular surgeons and other physicians for the minimally invasive diagnosis and treatment of peripheral vascular disease.

The small-cap med-tech cardio specialist designs, develops, manufactures and markets a broad line of therapeutic and diagnostic devices that enable interventional physicians to treat a broad range of peripheral vascular diseases and other non-coronary diseases. 

We recently sold ANGO for a long-term gain of 43.5% gain in my Healthcare Innovators portfolio because it had run so far and fast ahead of its fundamental growth metrics. Now, after a disappointing Q4 (FY18 ended in May) analysts have lowered their growth projections, causing the stock to fall into the cellar of the Zacks Rank. 

Quarter Details

AngioDynamics reported fourth-quarter fiscal 2018 adjusted earnings of 20 cents per share, which missed the Zacks Consensus Estimate by a penny. Earnings improved 5.3% year over year.

Net sales came in at $88.3 million, marginally missing the Zacks Consensus Estimate of $89 million. However, sales improved 1.6% from the prior-year figure.

Meanwhile, in the past year, shares of AngioDynamics have rallied over 20% against the industry’s decline of 12%.

Geographic Analysis

U.S. net revenues in the quarter under review were $70.3 million, down 1% at constant currency. Per management, the downside can be attributed to lower sales of Venous Insufficiency, PICCs, RFA (Radio Frequency Ablation) and NanoKnife product lines.

International revenues totaled $18 million, up 9% at cc primarily owing to strong performance in Europe.

Segment Analysis

Peripheral Vascular (PV) business: Sales in the segment came in at $52.6 million, which declined 2.5% on a year-over-year basis. Per management, growth in the Fluid Management, Angiographic catheters and AngioVac product lines was offset by declines in the Venous Insufficiency and Thrombolytic businesses.

AngioVac procedural volumes remained strong and were up 14% year over year in the reported quarter.

However, the Venous Insufficiency business continued to underperform. This was due to the discontinuation of exclusive use of the EVLT (Endovenous Laser System) products by the company’s largest customer.

Vascular Access net sales were $23.7 million, down 2.4% from the year-ago quarter. Per management, growth in Ports and Dialysis products was offset by declines in PICCs.

Oncology/Surgery business: Sales in this segment grossed $12.1 million, up a significant 38%. The upside can be attributed to strong growth in Solero Microwave Ablation System. However, an increase in sales of NanoKnife was partially offset by lower sales of RFA system.

Revenues for fiscal 2018 totaled $344.3 million, down 1.6% from the year-ago period.

Additional content:

Caterpilllar (CAT - Free Report) Flat Ahead of Earnings: What to Expect

Shares of Caterpillar shed just two cents during regular hours Friday, the last day of trading before the construction equipment giant releases its latest quarterly earnings report. U.S. stocks were down in general, and Caterpillar fared better than market leaders in the tech sector, but investors displayed some apathy ahead of the earnings announcement.

Caterpillar shares have been beaten down this year, tumbling about 9% since the start of 2018 and falling more than 16% from their January highs. Nevertheless, continued cost-cutting efforts and investments in expanded offerings and services should remain as growth catalysts; plus, strong GDP growth implies solid economic conditions on the domestic front.

It is always important to be paying attention to Dow components like CAT during earnings season, but what should investors expect to see from the company on Monday morning? Let’s take a closer look.

Earnings Outlook

Caterpillar will release its Q2 fiscal 2018 results before the market opens on Monday. Here’s what analysts are expecting, according to our Zacks Consensus Estimates:

Earnings: Caterpillar is projected to report adjusted earnings of $2.66 per share, which would represent year-over-year growth of nearly 79%.

Estimate Revisions: Caterpillar has seen one positive revision to its soon-to-be-reported quarter’s EPS estimates within the past 30 days. No negative revisions have taken place in that time period. The Zacks Consensus Estimate now sits a penny higher than where it did about a month ago.

Revenue: Consensus estimates have Caterpillar’s Q2 revenue pegged at $13.77 billion. This would mark growth of about 22% from the prior-year period.

Valuation

CAT is trading at about 12.5x forward 12-month earnings heading into the report. This is essentially in line with its industry’s average—but a noticeable discount compared to the broader market. Over the past year, CAT has traded as high as 24.7x and as low as 11.8x. Its 52-week median earnings multiple is 18.3x.

Bottom Line

Stocks finished the week on a rough note Friday, but Caterpillar has plenty of growth prospects to be excited about in Monday’s report. Plus, the stock is trading near its cheapest valuation in a year, meaning that investors have a chance to get in on the low ahead of earnings.

This might reduce risk and make CAT an interesting earnings play for some. Still, the stock has just a Zacks Rank #3 (Hold), and Friday’s trading suggests plenty of investors are opting to sit things out for now.

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