For Immediate Release
Chicago, IL – August 2, 2018 – Zacks Equity Research highlights Illumina Inc. (ILMN - Free Report) as the Bull of the Day, Whirlpool Corp. (WHR - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Square (SQ - Free Report) .
Here is a synopsis of all three stocks:
Bull of the Day:
Illumina Inc. is a medical company that focuses on DNA sequencing and array-based technologies; they serve their customers in the research, clinical, and applied markets. Illumina’s products are used throughout life sciences, oncology, reproductive health, agriculture, and other emerging segments.
Shares Rally on Q2 Results
Just a few days ago, Illumina, which sits at a #1 (Strong Buy) on the Zacks Rank, posted great second quarter numbers across the board. Shares rallied over 7% as a result, suggesting the market was impressed by the medical stock’s performance.
Both its top and bottom line easily beat the Zacks Consensus Estimate, with revenues surging 25% year-over-year.
Cash flow from operations hit $295 million, while free cash flow was $218 million for the quarter.
Research and development (R&D) expenses for Q2 were $151 million compared to $130 million in the prior year period. As a percentage of revenues, non-GAAP R&D expenses were 18.2%.
Additionally, sequencing consumables, array consumables, and lab and other services each grew over 30% in comparison to Q2 2017.
ILMN now expects revenue growth of roughly 20% for the fiscal year and non-GAAP EPS between $5.35 to $5.45.
Strong Earnings Outlook
For ILMN, its bottom line is trending upward for the foreseeable future.
Earnings are expected to grow about 7% for the current quarter, and three analysts have revised their estimates higher over the past two months compared to none lower.
Current fiscal year figures are looking pretty good, with two upwards estimates in the last 60 days. The Zacks Consensus estimate trend has jumped five cents from $4.86 per share to $4.91 per share.
Next year is looking solid as well, with earnings expected to grow over 17%; the consensus has increased 17 cents in the past two months.
What’s Next for ILMN?
Shares of Illumina have gained more than 85% in the past one-year period and have increased about 48% year-to-date. In comparison, the S&P 500 has gained 14% in the same time period and 5.3%, respectively.
Bear of the Day:
One of the biggest names in kitchen and home appliances, Whirlpool Corp. markets and distributes various products under popular brand names like Whirlpool, Maytag, KitchenAid, Jenn-Air, and Amana, among may others. The company sells its products, which range from washers and dryers to stand mixers, to retailers, distributors, dealers, builders, and other manufacturers.
Whirlpool’s recent second quarter was a disappointing one, with earnings and revenues falling short of expectations. The stock is currently sitting at a #5 (Strong Sell) on the Zacks Rank. What’s next for this appliance giant?
Disappointing Q2 Results
About a week ago, Whirlpool reported second quarter fiscal 2018 results where both its top and bottom line missed the Zacks Consensus Estimate.
Q2 “ongoing” earnings were $3.20 per share and revenues were $5.1 billion, both fall short of our consensus as well as declining year-over-year; sales were down 4.5%.
Whirlpool North American reported flat net sales of $2.8 billion, down 2.8% year-over-year, while the company’s Europe, Middle East and Africa division saw sales of $1.1 billion, falling 12.3% from the prior-year period. Whirlpool Latin America sales also declined year-over-year, but its Asia division actually increased 14.5%.
The company did provide guidance, and expects ongoing earnings in the range of $14.20 to $14.80 per share, with free cash flow of about $850 million and cash from operating activities of approximately $1.5 billion.
Estimates took a hit in the days following the report.
For the current quarter, one analyst cut their outlook in the last 60 days (though one has upped their view for the same period), and the consensus has dipped nine cents from $4.31 to $4.20 per share.
Five analysts have revised their estimates downward for fiscal 2018, and earnings are projected to only grow about 3.4%. The consensus has decreased from $15.30 to $14.20 per share.
Looking at the next fiscal year, earnings could grow 17.5%, but the current consensus sits at $16.70 per share, falling 80 cents in the past 60 days.
Square (SQ - Free Report) Beats Q2 Earnings, Revenue Estimates
Square just came out with quarterly earnings of $0.13 per share, beating the Zacks Consensus Estimate of $0.11 per share. This compares to loss of $0.04 per share a year ago. These figures are adjusted for non-recurring items.
This quarterly report represents an earnings surprise of 18.18%. A quarter ago, it was expected that this mobile payments services provider would post earnings of $0.05 per share when it actually produced earnings of $0.06, delivering a surprise of 20%.
Over the last four quarters, the company has surpassed consensus EPS estimates four times.
Square, which belongs to the Zacks Internet - Software industry, posted revenues of $814.94 million for the quarter ended June 2018, surpassing the Zacks Consensus Estimate by 5.10%. This compares to year-ago revenues of $551.51 million. The company has topped consensus revenue estimates four times over the last four quarters.
The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.
Square shares have added about 86.5% since the beginning of the year versus the S&P 500's gain of 5.3%.
What's Next for Square?
While Square has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?
There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.
Ahead of this earnings release, the estimate revisions trend for Square was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $0.13 on $808.30 million in revenues for the coming quarter and $0.46 on $3.11 billion in revenues for the current fiscal year.
Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Internet - Software is currently in the bottom 39% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
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