For Immediate Release
Chicago, IL – February 15, 2018 – Zacks Equity Research iRobot Corporation (IRBT - Free Report) as the Bull of the Day, Grubhub Inc. (GRUB - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Broadcom Inc. (AVGO - Free Report) , Intel Corp. (INTC - Free Report) and Marvell Technology Group Ltd. (MRVL - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
iRobot Corporationhad record sales in 2018. This Zacks Rank #1 (Strong Buy) is expecting to see double digit sales growth again in 2019.
iRobot is a consumer robot company that builds popular home robots including the Roomba Robot Vacuum and the Braava family of mopping robots. Coming in 2019 will be the Terra, the autonomous lawn mower.
Another Beat in the Fourth Quarter
On Feb 6, iRobot reported its fourth quarter and full year results and beat the Zacks Consensus by 33 cents. Earnings were $0.84 versus the consensus of $0.51.
It hasn't missed since Zacks data began, which was in 2015. This was the 15th straight earnings beat in a row.
Revenue was a record, up 17.7% to $384.7 million from $326.9 million in the year ago period.
For the year, revenue topped a billion for the first time, at $1.092 billion up from $883.9 million in 2017.
Operating margin also came in at 10% even after absorbing the impacts of the tariffs in the fourth quarter.
Strong Revenue Growth to Continue in 2019
The company expects the good times to continue in 2019 as revenue is expected to jump another 17%-20% to a range of $1.28 to $1.31 billion.
It will be introducing a new category of robots this year called the iRobot Terra, which is its autonomous lawn mower.
And while it does manufacture products in China, in 2019 it will engage in a contract manufacturer outside of China to produce several Roomba robots.
And what about those tariffs?
"While we are navigating uncharted waters with the current tariff uncertainty, we expect our global business to deliver strong financial performance in 2019 that will in turn fund critical investments in future technologies and marketing, to further solidify our position as the unambiguous leader in robotic floor care," said Colin Angle, CEO of iRobot.
In addition to the strong revenue guidance, the company also guided earnings to between $3.00 and $3.25 for 2019.
That was higher than the Zacks Consensus.
As a result, since the report, 3 estimates have been revised higher which has pushed the Zacks Consensus up to $3.03 from $2.93. That's still on the low end of the guidance range however.
Big Rebound in 2019
Like many stocks, iRobot shares have seen big gains in 2019. The strong earnings report only added to the rally which has pushed the shares up 37% year-to-date.
They aren't cheap, with a forward P/E of 38, but it's clearly a growth stock.
Bear of the Day:
Grubhub Inc. has taken its lumps the last 6 months as spending has increased in order to expand its business model. This Zacks Rank #5 (Strong Sell) is expected to see declining earnings in 2019.
Grubhub is the nation's leading online and mobile food-ordering and delivery marketplace. It has more than 105,000 restaurant partners in over 2,000 U.S. cities and London. It's brands include the main Grubhub brand but also Seamless, LevelUp, Tapingo, Eat24, AllMenus and MenuPages.
An Earnings Miss in the Fourth Quarter
On Feb 7, Grubhub reported its fourth quarter results and missed on the Zacks Consensus by 9 cents. Earnings were $0.19 versus the consensus of $0.28.
Revenue soared 40% to $287.7 million, thanks to acquisitions of LevelUp and Tapingo during the year, as it grew active diners on its platform by 3.2 million during the quarter.
Active diners jumped to 17.7 million, up 22% from 14.5 million in the fourth quarter of 2017.
Gross food sales were $1.4 billion, up 21% from $1.1 billion in the fourth quarter of 2017.
U.S./China Trade Deal Could Pump Up These Stocks
This week’s progress in trade talks between the United States and China could finally lead to a favorable trade deal that the former had been demanding for a long time. All three major U.S. indexes closed higher on Feb 13 trading, boosted by growing investor optimism.
Investor worries around the Mar 1 deadline eased after President Donald Trump said on Feb 13 that he may consider letting the deadline “slide” if both sides were making adequate progress. According to a Bloomberg report, Trump is considering a 60-day extension of the deadline to give more time to the two-way talks.
In fact, China’s President Xi Jinping is set to meet Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer on Feb 15 to hold high-level talks in order to reach a deal before early March. The U.S. delegation is already in talks with Chinese Premier Liu He.
Given the optimism around a favorable deal and fast-paced developments on both sides, this makes it the right time to track a few stocks that might get a boost soon.
These Stocks Could Jump on a U.S.-China Trade Deal
While a trade deal would undoubtedly bring a relief rally in equity markets, it also means that some tariff-sensitive stocks could turn around the moment a deal is struck. These stocks have been underperforming the broader market in recent times because of their revenue exposure to Chinese markets. The resultant cheap valuations of these stocks offer a desirable buying opportunity at present.
Broadcom Inc. is one of those few companies that are set to benefit from the transition to 5G by virtue of its nature of business. The semiconductor devices developer focuses on a broad range of chips that enable wireless capacities in smartphones, e.g., Bluetooth and Wi-Fi. In addition, its 54% revenue exposure to China (per an HSBC report) opens doors to handsome gains in a favorable-trade-deal-scenario.
Broadcom’s expected earnings growth rate for the current year is 9.7% compared with the Zacks Electronics - Semiconductors industry’s projected rise of 4.6%. The Zacks Consensus Estimate for current year earnings has advanced 4.2% over the last three months. The stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
Intel Corp. projects itself as an end-to-end 5G services and solutions provider. Its successful diversification of its businesses over the years has made it one of the leading players in areas such as Internet of Things and autonomous driving. The networking and communications company has a 24% revenue exposure to the Chinese market (per the HSBC report).
Given the likelihood of China overtaking U.S. in data generation by 2025 by implementing technologies such as the Internet of Things, the probability of Intel making the most of China’s efforts is high. According to a study by data storage firm Seagate and the International Data Corporation, data created and replicated in China will be 3% higher than the global average, a CNBC report cited.
Intel’s expected earnings growth rate for the next year is 5.1% compared with the Zacks Semiconductor – General industry’s projected rise of 0.2%. The stock carries a Zacks Rank #3.
Shares of Marvell Technology Group Ltd. underperformed in the industry in 2018, largely driven by tariffs. The $12.75 billion market-cap company has a 50% exposure to Chinese revenues (per the HSBC report), which is likely to get a boost if a noteworthy trade deal comes through. According to a Zacks report, the company is benefiting from strong growth in storage and networking business.
In addition, Marvell’s 4G LTE products could drive growth. The company’s restructuring activities are aimed at boosting operational efficiency, which could also prove to be a growth driver.
The stock carries a Zacks Rank #3 (Hold). The company has outperformed the broader Semiconductor - Communications industry over the past three-month period (+19.8% vs +17.6%).
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