For Immediate Release
Chicago, IL – December 7, 2018 – Zacks Equity Research Spirit Airlines (SAVE - Free Report) as the Bull of the Day, American Woodmark Corporation (AMWD - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Amazon (AMZN - Free Report) and Delta (DAL - Free Report) .
Here is a synopsis of all four stocks:
Bull of the Day:
Spirit Airlinesjust gave bullish revised fourth quarter guidance. This Zacks Rank #1 (Strong Buy) is at new 52-week highs as earnings are expected to jump by the double digits in both 2018 and 2019.
Spirit Airlines is a low cost airline that operates 500 daily flights to 70 destinations in the US, Latin America and the Caribbean.
Raised Fourth Quarter Guidance
On Nov 26, Spirit raised its fourth quarter total revenue per available seat mile (TRASM) by 5 points to 11% year-over-year versus its initial guidance of about 6% year-over-year.
The big boost is primarily being driven by higher non-ticket revenue and higher load factor expectations. The non-ticket gains were in its new dynamic pricing on seats, bags and bundled service offerings.
The company's recent network re-alignment, and its initiative to optimize peak and off-peak scheduling, has also resulted in higher-than-expected load factors.
It also believes that a stronger industry environment, especially around the busy peak travel periods, is contributing to some of the improved revenue outlook.
Lower Fuel Prices a Boost
Additionally, the sudden November plunge in crude prices is going to boost EPS in the fourth quarter dramatically as well.
In its third quarter earnings update in October, Spirit gave guidance on fuel cost per gallon of $2.46.
On Nov 26, it revised that downward to just $2.27.
Estimates Revised Up for 2018 and 2019
The analysts are bullish on the end of the year and the outlook for 2019 with the duel market conditions of lower fuel costs and higher RASM.
9 analysts have revised their 2018 estimates in the last 30 days, with one even revising it higher in just the last week.
The 2018 Zacks Consensus Estimate has jumped to $4.22 from $3.66 during that time. That's earnings growth of 26% as the company made just $3.33 in 2017.
2019 looks solid as well with 8 analysts raising estimates, pushing the 2019 Zacks Consensus up to $5.47 from $4.51 over the last month. That's earnings growth of another 30%.
Shares Hit New 2-Year High
While the rest of Wall Street was mired in the red, Spirit shares have been soaring.
They've gained 39.3% year-to-date and are hitting new 2-year highs.
Bear of the Day:
American Woodmark Corporation is facing cost pressures across multiple channels. This Zacks Rank #5 (Strong Sell) is struggling as more tariffs loom.
American Woodmark makes kitchen, bath and home organization products for the remodeling and new home construction markets including kitchen cabinets and vanities.
It operates 18 manufacturing facilities in the United States and Mexico and 7 primary service centers located throughout the United States.
Big Miss in the Fiscal Second Quarter
On Nov 29, American Woodmark reported its fiscal second quarter 2019 results and missed the Zacks Consensus by $0.29. Earnings were $1.60 versus the consensus of $1.89.
Excluding the RSI Home Products acquisition, which closed on Dec 29, 2017, sales were up 8% to $297.7 million and the company saw growth across all channels.
However, it is getting crushed across multiple channels as costs rise in logistics, which is transportation, labor, and materials. In materials, it continues to see increases in hardwood, plywood and paint.
Then the tariffs are another added cost on top of that.
American Woodmark is still looking to mitigate the impacts that a possible 25% tariffs would have on its business but it can't mitigate it all.
With fiscal 2019 still remaining a challenge due to the cost pressures, the analysts moved to cut their fiscal 2019 and fiscal 2020 earnings estimates.
2 estimates were cut in the last month for fiscal 2019 pushing the Zacks Consensus down to $6.92 from $7.62. That's still earnings growth of 32% compared to fiscal 2018, however.
2 estimates were also slashed for fiscal 2020, pushing the 2020 Zacks Consensus Estimate down to $8.07 from $8.66. That's 16.6% earnings growth.
Shares At 2-Year Lows
Investors have been fleeing the housing and remodeling stocks since the summer of 2018. If a recession is coming, who wants to own them?
Shares of American Woodmark are no exception. They have plunged 52% year-to-date and are at 2-year lows.
They're cheap, with a forward P/E of just 9 but it's not clear when the inflationary pressures will moderate.
Maybe Facial Recognition Isn't the Best Way
Along with every other technological advancement, facial recognition has also joined in. Many companies and softwares use it in their products to identify the person(s) opening a device or for security reasons. In recent news, Amazon and the U.S. Secret Service have been receiving criticism for their decision to install facial recognition biometrics in their chosen areas.
Your Face Might Not Be Safe Out There
Amazon launched its facial recognition system, Rekognition, in 2016 and since then, there has been quite a lot of controversy over it. Amazon was accused of giving away the facial recognition software/tools to different law enforcement agencies, according to a FOIA request that the ACLU submitted. Many civil rights groups and organizations have reached out to Amazon to put a stop to this, as it could be a potential threat to vulnerable individuals and communities.
Although a tool used by many businesses and that has proven to be somewhat successful, it still poses as an ethical concern to many. According to The Washington Post, facial recognition allows strangers using the software to identify individuals who don't wish to be identified.
ACLU ran a test using Amazon’s recognition software where the software ended up misidentifying people of color in the database. They cross referenced 25,000 mugshots with photos of Congress members. From the test, the people of color who were “identified” accounted for 40% of the wrongly matched faces when they actually accounted for only 20%.
Technology and Civil Liberties Director for the ACLU in Northern California, Nicole Ozer, mentions that once powerful surveillance systems like these are built, the harm can't be undone. Yes, it is true that many companies and organizations do use facial recognition and that there are benefits to it, but once it gets out of hand it has the power to track protestors, target immigrants, and spy on neighborhoods, according to The Washington Post.
Similarly, the Secret Service has just started testing a facial recognition system as a means of protection for the president and members of the White House. Although they haven’t revealed what company’s facial recognition system they are using, the Secret Service had security cameras installed outside the White House. These cameras installed with the facial recognition technology allows images of people to be taken and then matched those images to “people of interest”.
This could potentially pose a problem, seeing as numerous studies, as well as research by the U.S. Government Accountability Office, shows a lot of facial recognition technology is more likely to mistakenly identify people of color, which can lead to wrongful accusations and arrests.
Just like Amazon’s software was a concern to many privacy and civil rights groups, the same goes for the Secret Service's actions. According to NBC, these groups worry that the government can "target" anyone with these cameras and software. Hence, it was advised by the Secret Service that if you don't want to be identified, avoid the area until they are done testing out the surveillance program.
So much of our everyday lives are controlled by one technology or another. Whether it’s our cameras on our smartphones or Delta’s facial recognition terminal, there are opportunities everywhere to capture anyone’s photograph and have it analyzed, identified and stored in some database.
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