For Immediate Release
Chicago, IL – January 11, 2019 – Zacks Equity Research Ubiquiti Networks (UBNT - Free Report) as the Bull of the Day, United Natural Foods, Inc. (UNFI - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Ford Motor Company (F - Free Report) , Genuine Parts Company (GPC - Free Report) and Fiat Chrysler Automobiles N.V. (FCAU - Free Report)
Here is a synopsis of all five stocks:
Bull of the Day:
Based in San Jose, California, Ubiquiti Networks is a company that designs, manufactures, and sells broadband wireless solutions worldwide. Its products and solutions include radios, antennas and management tools and other applications in the unlicensed radio frequency spectrum.
Impressive Q1 Earnings
Back in November, Ubiquiti announced better-than-expected fiscal 2019 first-quarter results, beating expectations for the third straight time thanks to its growing Enterprise Technology business.
Adjusted earnings of $1.17 per share beat the Zacks Consensus Estimate; net income was $86.2 million.
Gross margin hit 46.5%, up from 45.4% in the year-ago period.
Revenues of $283 million also beat our consensus estimate, and increased 15.1% year-over-year. Notably, enterprise technology segment revenue soared 41.3% to $177.9 million, and this includes the UniFi, mFi, and Ubiquiti’s consumer-centric AmpliFi and FrontRow products.
Looking at revenue by geography, North American revenue climbed 24.1% to $119.4 million while EMEA revenue increased 33.9%.
Management didn’t hold a conference call with analysts, but stated again that gross margin is expected to decline to between 42% and 45% in the near term due to tariffs on products imported from China.
They did add that it expects "mitigating the effect of the tariffs in the long term and therefore our long-term gross margins are expected to remain between 45% to 50%."
Over the past 12 months, UBNT has gained almost 43%. And in the last six months, shares have jumped over 30%.
Estimates have been rising lately too, pushing the stock towards a Zacks Rank #1 (Strong Buy).
For the current fiscal year, Ubiquiti’s earnings are expected to grow around 11.7% year-over-year. The Zacks Consensus Estimate has moved 24 cents higher in the past 60 days from $3.88 to $4.12 per share.
Next year looks pretty strong too. The consensus estimate sits at $4.29 per share, with two upward revisions in the last two months.
Ubiquiti also reiterated its previous outlook for full-year revenue between $1.1 billion to $1.2 billion, with EPS in the range of $4.00 to $4.80. Additional tariffs could drag full-year earnings to $3.65 or lower, however.
But, given UBNT’s strong stock performance during that volatile run recently from the broader market and other tech stocks, the company is on a good path going forward, and looks to continue its outperformance. For those investors looking for a technology stock to add to their portfolio, UBNT should definitely be on the shortlist.
Bear of the Day:
United Natural Foods, Inc. is a wholesale distributor to the natural, organic, and specialty industries in the United States and Canada. United Natural Foods serves a wide variety of sales channels including conventional supermarket chains, natural product superstores, independent retailers, eCommerce and food service.
Shares of United Natural Foods have slumped over 70% in the past six months, and mixed results in its first-quarter earnings report left investors disappointed.
The company posted revenues of $2.87 billion, which did beat our consensus estimate, but earnings of 59 cents per share came in well below the Zacks Consensus Estimate of 74 cents per share.
Additionally, margins declined yet again. Gross margin of net saleswas 14.44% of net sales compared to 14.94% last year. This decline was due to a change in the way the company estimates liabilities associated with inventory purchases, but it was also driven by a shift in customer mix.
Operating income of $51 million fell from the year-ago period and was affected by lower gross margins and higher labor costs.
The company recently closed on the previously announced acquisition of SUPERVALU, and in a press release, chairman and CEO Steve Spinner said that "The integration of the two companies is well under way and we continue to be excited about the long-term creation of value for our shareholders we expect to deliver with this combination."
Estimates are Falling
It didn’t take long for analysts to lower their estimates for fiscal 2019, and seven have slashed their earnings outlook in the last 60 days; our consensus has been slashed by more than half from $3.32 to $1.76 per share, and earnings are expected to decline 43.4% for the year.
The consensus estimate has fallen for next fiscal year, too, down well over one dollar from $3.61 to $2.33 per share. Seven analysts have also cut their estimates for this time period as well.
UNFI is a Zacks Rank #5 (Strong Sell).
Over the past year, United Natural Foods has struggled to improve margins as well as profitability, two factors that have really dampened shares. Unless the company can improve its bottom line, more quarters like Q1 may lie ahead.Additional content:
Ford to Ally with Volkswagen to Cut Costs
Ford Motor Company will reveal a closer collaboration with Volkswagen AG, which is expected to be announced next week, per Reuters. The alliance between the companies is anticipated to go beyond commercial vehicles, which will aid the companies to reduce mounting costs as they make new technological advancements.
In September 2018, it was reported that Ford and Volkswagen were analyzing partnership options to grow their business and cut costs. Per the recent updates, the companies are about to announce their global partnership during the Detroit auto show, beginning next week. It has already been confirmed by these automakers that no probable merger or equity stake transaction will take place between the two.
Ongoing trade disagreements and economic volatility compelled these automakers to reconsider vehicle manufacturing for the United States, China and Europe. High freight costs are adding to the automakers’ woes, who are already struggling with high investment for developing latest technology to cater to evolving customer preferences. Further, cash-rich companies launching their own autonomous cars are adding competitiveness in the market.
The framework of the coalition between Ford and Volkswagen will include autonomous technology, Volkswagen’s investment in Ford, and Ford licensing Volkswagen's MEB electric vehicles platform. Discussions are still on to determine the scope of collaboration for electric and self-driving car technology. Additionally, Volkswagen is expected to gain access to Ford’s manufacturing hubs, and Transit commercial van and midsized pickup truck ‘Ranger’.
In the last week, many prominent automakers announced their U.S. auto sales volume for 2018. During the year, Volkswagen’s sales rose 4.2% year over year to 354,064 vehicles while Ford witnessed a decline of 3.5% to 2.5 million. The sales decline for Ford is partly due to dropping passenger car sales and lower-than-expected sales of SUVs, trucks, and vans.
Apart from its struggling position in the United States, economic slowdown in China and Europe are other headwinds for Ford. For 2018, the company lowered its earnings guidance to $1.30-$1.50 from $1.45-$1.70 mentioned earlier. Dropping sales in China and Europe, along with high costs incurred in 2018 owing to tit-for-tat tariffs, compelled the company to cut the outlook for 2018 by almost half.
Over the past three months, shares of Ford have lost 1% compared with the industry’s increase of 10.5%.
Zacks Rank & Stocks to Consider
Ford currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader auto sector are Genuine Parts Company and Fiat Chrysler Automobiles N.V., each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Bridgestone has an expected long-term growth rate of 4.7%. Share price of the company has increased 4.7% in the past three months.
Genuine Parts has an expected long-term growth rate of 5%. Over the past three months, shares of the company have gained 1.5%.
Fiat Chrysler has an expected long-term growth rate of 25.3%. Shares of the company have gained 2.2% in the past month.
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