For Immediate Release
Chicago, IL – July 16, 2019 – Zacks Equity Research Shares of United Airlines (UAL - Free Report) as the Bull of the Day, Peabody Energy (BTU - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on IBM (IBM - Free Report) , Microsoft (MSFT - Free Report) and Netflix (NFLX - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Heading into this earnings season, there are some very lofty expectations. This season kicks off just ahead of one of the most important FOMC meetings of the last five years. The market is up at all-time highs and investors will be seeking justification for its lofty expectations. So, it’s fitting that I go ahead and put my neck on the line with a Bull of the Day that’s set to report earnings after the bell today. I’m talking about Zacks Rank #1 (Strong Buy) United Airlines.
United Airlines Holdings, Inc., through its subsidiaries, provides air transportation services in North America, Asia, Europe, the Middle East, and Latin America. It transports people and cargo through its mainline and regional operations. As of December 31, 2018, the company operated a fleet of 1,329 aircraft. It also sells fuel; and offers catering, ground handling, and maintenance services for third parties. The company was formerly known as United Continental Holdings, Inc. and changed its name to United Airlines Holdings, Inc. in June 2019.
The Transportation - Airline Industry ranks in the Top 12% of our Zacks Industry Rank. That means there are several other airline names that are sporting strong Zacks Ranks. These ranks come from earnings estimate revisions of other analysts. Stocks which have seen positive earnings estimate revisions will have a better Zacks Rank than those stocks which has seen negative earnings estimate revisions.
Currently, United Airlines is a Zacks Rank #1 (Strong Buy) because of the slew of positive estimate revisions coming in for the current year and next year. Over the last sixty days, five analysts have increased their estimates for the current year. For next year, one analyst dropped their number, while four have increased. The overall impact on the Zacks Consensus Estimate has been very positive for both time frames. Current year consensus has jumped from $11.02 to $11.20 while next year’s number has gone up from $12.04 to $12.30.
The company has beat earnings handily the last two quarters. Two quarters ago, the company reported EPS of $2.41 versus estimates calling for $1.86 while last quarter’s number came in at $1.15 versus 94 cents. Analysts are looking for $4.07 EPS this quarter on revenues of $11.38 billion. That would represent earnings growth of 26.01% on revenue growth of 5.57%.
Bear of the Day:
Today’s Bear of the Day is in a dying industry. You don’t have to take my word for it, rather, just look at earnings estimates coming from analysts all over Wall Street. As these analysts cut their earnings estimates, stocks drop down in their Zacks Rank. You can see the Zacks Rank on individual companies as well as the industry overall. We rank 256 industries using the Zacks Industry Rank. If you find a stock in a bottom industry that’s an unfavorable rank, you may want to tread lightly.
Today’s Bear of the Day is Zacks Rank #5 (Strong Sell) Peabody Energy. Peabody Energy Corporation engages in coal mining business. The company operates through Powder River Basin Mining, Midwestern U.S. Mining, Western U.S. Mining, Seaborne Metallurgical Mining, Seaborne Thermal Mining, and Corporate and Other segments. It is involved in mining, preparation, and sale of thermal coal primarily to electric utilities; mining bituminous and sub-bituminous coal deposits; and mining metallurgical coal, such as hard coking coal, semi-hard coking coal, semi-soft coking coal, and pulverized coal injection coal. The company supplies coal primarily to electricity generators, industrial facilities, and steel manufacturers.
The Coal industry ranks in the Bottom 9% of our Zacks Industry Rank. Peabody itself is a Zacks Rank #5 (Strong Sell). The reason for the negative ranks lies in recent earnings estimate revisions coming from analysts. To be fair, current quarter estimates have actually risen dramatically over the last ninety days. The current quarter Zacks Consensus Estimate has jumped from 25 cents to 45 cents. However, when you zoom out to the current year and next year, you see the reason for the unfavorable rank. Over the last sixty days, current year consensus has come down from $2.21 to $1.86. Next year’s number has dropped from $1.63 to $1.17. These consensus estimates would represent a drop of 40.95% in EPS for the current year and a subsequent drop of 37.3% for next year.
What Should Investors Expect from IBM’s Q2 Earnings After Red Hat Deal?
Shares of IBM have easily outpaced the market in 2019 and the firm officially announced the completion of its $34 billion deal to buy Red Hat last week. With this in mind, let’s see what investors should expect from the tech firm’s second-quarter 2019 financial results that are due out after the closing bell on Wednesday as Q2 earnings season heats up.
Quick Q2 Projections
The big banks help unofficially kick off earnings season Monday, with more to follow in what is the first truly busy week of earnings season. Overall, more than 140 companies are set to report their quarterly results this week. This list features nearly 60 S&P 500 members, which includes IBM’s cloud computing rival Microsoft, Netflix and others.
Total Q2 2019 earnings for the S&P 500 index are expected to be down -3.4% from the year-ago period on +3.9% higher revenues. This would follow the -0.2% decline on +4.5% higher revenues in Q1 (also read: What to Expect from Bank Earnings?).
The last five years have not been particularly kind to IBM as it has seemingly failed to impress investors with its ability to grow in a quickly-changing tech world. IBM stock is down 26% during the past five years, against its industry’s roughly 40% climb and the S&P 500’s 62% growth. IBM has, however, performed well so far this year, up 26%, compared to the S&P’s 19% gains.
Despite the recent positivity, IBM in April posted its third straight quarter of declining revenues. Like many tech firms, IBM has spent the last several years trying to expand its artificial intelligence and cloud computing units, as its equipment and services sales slow. Part of this effort now includes its newly-finalized real to buy open-source software firm Red Hat.
The purchase is projected to help IBM try to stand out in the hybrid cloud market, which is an increasingly important cloud segment. Firms around the world utilize the hybrid cloud to manage software and other systems along with various cloud offerings and their own data centers. “IBM is preserving Red Hat’s independence and neutrality and Red Hat will strengthen its existing partnerships to continue to give customers freedom, choice and flexibility,” IBM wrote in prepared remarks on July 9.
“Both companies have already built leading enterprise cloud businesses with consistent strong revenue growth, as they help customers transition their business models to the cloud.”
Last quarter, IBM topped our earnings estimate even though its adjusted Q1 EPS figure slipped 8% from the year-ago period. Meanwhile, the company’s quarterly revenue dipped 4.7% and fell short of our estimate.
Looking ahead, the Zacks Consensus Estimate calls for IBM’s top-line to slip at a similar pace in Q1, down 4.5% against Q2 2018 to hit $19.11 billion. On top of that, the firm’s full-year fiscal 2019 revenue is projected to sink 3.5% to $76.82 billion.
At the bottom end of the income statement, IBM’s adjusted Q2 earnings are expected to fall from $3.08 per share in the prior-year quarter to $3.06 a share. Meanwhile, IBM’s full-year fiscal 2019 EPS figure is expected to pop 0.60%.
Investors should also note that IBM has seen no earnings estimate revision activity over the last 60 days. Yet, its Q2 estimate is down from its previous $3.16 a share projection before IBM posted its Q1 results. It is also worth noting that the company almost always beats earnings estimates, so it will likely have to do much more than that to impress investors.
IBM is scheduled to report its quarterly results after the market closes on Wednesday, July 17. But Wall Street might be more eager to hear what the firm has to say at its annual investor briefing on August 2, since that is when it will dive into its 2019 and medium-term projections that reflect its Red Hat addition.
IBM is currently a Zacks Rank #3 (Hold) that boasts an “A” grade for Value and a “B” for Momentum in our Style Scores system. IBM is also a dividend payer that currently pays an annualized dividend of $6.48 a share, with a yield of 4.54% at the moment. The firm, which has consistently raised its quarterly payout over the years, could become more attractive with the fed projected to cut interest rates soon.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>
Zacks Investment Research
800-767-3771 ext. 9339
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.