For Immediate Release
Chicago, IL – November 7, 2018 – Zacks Equity Research highlights Upland Software (UPLD - Free Report) as the Bull of the Day, Astronics (ATRO - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Michael Kors Holdings .
Here is a synopsis of all three stocks:
Bull of the Day:
Upland Software is a Zacks Rank #1 (Strong Buy) and has the type of style scores that I love to see. As the aggressive growth stock strategist at Zacks Investment Research, I like to see a weak value score and a strong growth score. That tells that I am in the right spot, and UPLD has just that, an F for Value and a B for Growth.
Upland Software Inc. is a provider of cloud-based Enterprise Work Management software that helps organizations to plan, manage and execute projects and work. It provides services to teams in Information Technology (IT), marketing, finance, professional services and process excellences. The Company's services include Professional Services, Education and Training and Global Support. Upland Software, Inc. is headquartered in Austin, Texas.
UPLD has a solid history of beating the number. I see four straight beats with an average positive earnings surprise of 23% - most of that came from the Mach and Dec quarters where they posted back to back 42% surprises.
Estimate are ticking higher, with this year moving up from $1.50 to $1.55 and next year seeing a stronger move from $1.59 to $1.77 over the last 60 days.
The valuation here is pretty good with 20x forward earnings and 54% year over year topline growth. I see a big price to book of 7.7x but you will get that from software names. A price to sales of 5.6x is also big, but keep in mind there is big growth here.
Bear of the Day:
Astronics is a Zacks Rank #5 (Strong Sell) and this comes just after the company posted a beat of the Zacks Consensus Estimate. Let's take a look at why the stock is a Zacks Rank #5 (Strong Sell) and review the most recent quarter.
Astronics Corporation is a manufacturer of specialized lighting and electronics for the cockpit, cabin and exteriors of military, commercial transport and private business jet aircraft. A major lighting and electronics supplier to the aircraft industry, its strategy is to expand from a components and subsystems supplier to an aircraft lighting systems integrator, increasing the value and content it provides to various aircraft platforms. Luminescent Systems Inc. is Astronics' primary operating subsidiary which produces its aerospace and defense products.
ATRO reported EPS of $0.52 when $0.47 was expected. That translates into a 10% positive earnings surprise. The beat of 5 cents was good, but smaller than the 15 cent beat the company posted last quarter.
The two most recent quarters were solid beats, the two quarter before that were both misses. So the recent earnings history is more hit and miss.
The Zacks Rank looks at earnings history, but much more weight is placed on the revisions to earnings estimates.
Following the recent beat, the Zacks Consensus Estimate for the current quarter went up... and that made me wonder how this is a Zacks Rank #5 (Strong Sell).
It turns out the full year number (which is more heavily weighted than the quarterly numbers) fell from $1.60 to $1.46.
Next year also saw a decrease, with the Zacks Consensus Estimate for 2019 sliding from $2.01 to $1.77.
Michael Kors Dips Ahead of Earnings: What to Expect
Shares of Michael Kors Holdings fell 1.4% during regular hours Tuesday, the last day of trading before the luxury fashion company is releases its Q2 fiscal 2019 report tomorrow morning. Broad indexes posted gains on the day, so investors clearly displayed caution ahead of the event risk in KORS—but this nonetheless remains a key stock to watch.
Michael Kors is a global accessories, footwear, and apparel company. It offers two primary collections: the Michael Kors luxury collection and the MICHAEL by Michael Kors line, an affordably luxury brand. Michael Kors also acquired Jimmy Choo, a luxury shoes and handbags maker, last year.
The biggest news surrounding Michael Kors as of late was delivered in late September, when the company announced that it reached an agreement to buy luxury fashion house Versace for about $2.12 billion. Michael Kors Holdings will be renamed Capri Holdings upon completion of that deal.
The Jimmy Choo and Versace deals underscore Kors’ ambition to cement its status as a global leader in luxury, but until the latter of those two moves closes, investors will be eagerly anticipating a new financial update and news on the progress of its “Runway 2020” innovation and modernization plan.
So what is in the cards for KORS tomorrow morning? Let’s take a closer look.
As mentioned, Michael Kors will release its Q2 fiscal 2019 results before the opening bell Wednesday. Here’s what analysts are expecting, according to our Zacks Consensus Estimates:
Earnings:Michael Kors is projected to report adjusted earnings of $1.09 per share, which would represent a year-over-year decline of 18%.
Estimate Revisions: Kors has witnessed two negative earnings estimate revisions and just one positive adjustment within the last 60 days. The company guided light in its previous report, so earlier adjustments occurred outside this window. The Zacks Consensus for earnings is seven cents lower than it was 90 days ago as a result of this weak guidance.
Revenue: Consensus estimates have Kors’ Q2 revenue pegged at $1.26 billion. This would mark year-over-year growth of nearly 10%.
KORS is trading at about 11.4x forward 12-month earnings heading into the report. This is a steep discount to the “Textile – Apparel” group’s average of 17.3x. It is also near the stock’s 52-week low for the metric.
This implies that investors are skeptical about Kors’ growth opportunities, which, if true, is curious considering its M&A moves. Acquisitions will dilute earnings in the short term but should inspire growth in the future. Some investors might conclude that this supports a value case for KORS right now.
Michael Kors seems reasonably valued and presents interesting long-term growth prospects ahead of its report. However, the company’s latest near-term earnings trends have not been favorable. It guided lower for the to-be-reported quarter, and analysts followed suit.
Kors has not missed earnings estimates in any quarter we have on record, so that is not a particular concern tomorrow. But with a major acquisition in the works and all eyes on the Runway 2020 plan, it is likely that the post-earnings reaction will have more to do with guidance and management commentary—which can be unpredictable.
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