For Immediate Release
Chicago, IL – October 4, 2018 – Zacks Equity Research highlights Champions Oncology (CSBR - Free Report) as the Bull of the Day, Actuant Corp (ATU - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Caterpillar (CAT - Free Report) and Boeing (BA - Free Report) .
Here is a synopsis of all four stocks:
Bull of the Day:
Champions Oncology is a Zacks Rank #1 (Strong Buy) and sports an "A" for the Zacks Style Score for Growth. As the aggressive growth stock strategist for Zacks, you know that helped get this stock on my growth stock radar. Once I dug into the stock a little, I really liked what I saw. This Bull Of The Day article aims to share exactly what got me excited about this stock.
Champions Oncology, Inc., formerly known as Champions Biotechnology, Inc., engages in the development of advanced technology solutions to personalize the development and use of oncology drugs. The Company's Tumorgraft Technology Platform is a novel approach to personalizing cancer care based upon the implantation of human tumors in immune deficient mice followed by propagation of the resulting engraftments. This technology can evaluate tumor sensitivity/resistance to various single, combination standard and novel chemotherapy agents. Champions Oncology, Inc. is based in Baltimore, Maryland.
The company reported earnings on September 13 after the close and beat the single analyst estimate of a penny by $0.04. That translates to a positive earnings surprise of 400%.
Sure small time biotech will here and there post profitability. So that wasn't the thing that caught my eye.
The company noted that they see annual revenue growth in excess of 20%. Now that is another good number, but again, not something that gets more overly excited.
This next line is the thing that got me super excited. The company stated that they have reached the inflection point at which a growing sales volume should consistently exceed costs and this produce operational profitability on a quarterly basis.
Normally biotechs that are this small are running in the red for years. The losses mount up and the goal of profitability is sometimes only that, a goal.
This is not the case for CSBR, which just posted positive EPS of $0.05 per share and looks to maintain those levels going forward.
The key idea here is that investors that only want to hold stocks that are profitable will find this stock on their radar screen. Clearly, a lot have already found it, but the run could just be getting underway. The more investors find out about a stock like this, the more demand there will be for the shares.
There is a downside to this profitability that I must mention. The fact that there are earnings means that we are going to see some sky high earnings multiples for a while. Right now, I see an 81x forward number, but given that a this is such a rare commodity I don't want to punish the stock for doing the right thing.
Bear of the Day:
Actuant Corp is a Zacks Rank #5 (Strong Sell) and despite the fact that it recently beat the Zacks Consensus Estimate, the stock dropped and estimates have fallen. Let's take a deeper look in this Bear Of The Day article.
Actuant Corporation is a diversified industrial company serving customers from operations in more than 30 countries. Actuant business operations are divided into three segments focused on the markets serve. The Actuant businesses are leaders in a broad array of niche markets including branded hydraulic tools and solutions; specialized products and services for energy markets and highly engineered position and motion control systems.
Actuant promotes economic, social and environmental practices that benefits the customers, employees, shareholders and local communities. Actuant is dedicated to working towards achieving industry best practices in areas of social objectives, corporate governance, and health, safety, security, and environment. Actuant Corporation is a diversified industrial company serving customers from operations in more than 30 countries. Actuant business operations are divided into three segments focused on the markets served.
The Actuant businesses are leaders in a broad array of niche markets including branded hydraulic tools and solutions; specialized products and services for energy markets and highly engineered position and motion control systems. Actuant promotes economic, social and environmental practices that benefits the customers, employees, shareholders and local communities. Actuant is dedicated to working towards achieving industry best practices in areas of social objectives, corporate governance, and health, safety, security, and environment.
Even with the recent earnings report coming in at $0.39 and that was $0.04 better than the Zacks Consensus Estimate, the stock and estimates dropped. Sure the beat translates to an 11% positive earnings surprise, but investors are keyed in on the future, not the past.
I see a host of revisions to the Zacks Consensus Estimate. This quarter has fallen 2 cents over the last 90 days. Next quarter is worse, falling from 24 cents to 19 cents. The full year number has also slid from $1.29 to $1.18.
The Zacks Consensus Estimate for 2019 has also moved lower. It has moved from $1.51 to $1.37 over the last 90 days.
Buy Caterpillar (CAT - Free Report) as It Cut Costs to Counter Tariffs?
Shares of Caterpillar jumped Wednesday to help extend its 15% month-long surge as investors see that its efforts to counter the Trump administration’s tariffs on steel and aluminum seem to be working. So, let’s see why Caterpillar stock looks like it might be worth buying, especially as its Q3 earnings come into view.
Recent News & Overview
Trump’s tariffs on imported steel and aluminum went into effect in June and don’t look like they will go away just yet despite the newly revised trade agreement between the U.S., Canada, and Mexico. These tariffs, along with the ongoing trade war between the world’s two largest economies, made many nervous that Caterpillar and other giants such as Boeing would see their profits take a hit. But Caterpillar vowed that it would counteract the tariffs through a series of initiatives.
The construction and mining equipment giant estimated that the tariffs will lift its costs by up to $200 million between July and December. But the Illinois-based company announced that it would offset the impact through price increases, which began in July. Caterpillar has also focused on cost cutting.
A recent Reuters’ story highlighted some of CAT’s cost-cutting measures. The company is now able to produce more equipment at one of its North Carolina plants with 30% fewer people on the floor. Plus, Caterpillar told the publication that it has redesigned all new machines it makes to use 20% fewer parts, which lowers the firm’s steel consumption. “Fewer parts numbers are a huge win," CAT executive Tony Fassino told Reuters. “It improves safety, it improves the quality, it improves the cost.”
Price Movement & Valuation
Caterpillar was already moving toward more efficiency when the tariffs were rolled out. The company also raised its full-year profit outlook in Q2 based on its confidence that it could counter the tariffs.
Moving on, shares of CAT have surged recently as more investors start to see that its pullback represented a buying opportunity. Caterpillar has seen its stock price surge nearly 20% over the past three months, which outpaces its industry’s roughly 12% climb and the S&P 500’s 8% jump.
On top of the fact that CAT sits below its 52-week high, Caterpillar stock is currently trading at 12.3X forward 12-month Zacks Consensus EPS estimates. This represents a significant discount compared to its industry’s 16X average.
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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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