For Immediate Release
Chicago, IL – August 9, 2019 – Zacks Equity Research 1-800-Flowers.com (FLWS - Free Report) as the Bull of the Day, Macy’s (M - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Power Integrations, Inc. (POWI - Free Report) , NeoPhotonics Corp. (NPTN - Free Report) and Taiwan Semiconductor Manufacturing Company Ltd. (TSM - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
The market has returned from the brink. Wednesday’s brutal selloff led to a tepid session yesterday which is now being erased by the return of buyers. That nasty 3% down day may give some investors pause before making their next portfolio addition. One way to ease that trepidation is by looking for stocks with strong underlying earnings trends. Stocks with the strongest earnings trends tend to outperform those with weak trends over time. Afterall, stock price is really a function of earnings and the multiple investors apply to those earning.
One suck stock is today’s Bull of the Day, 1-800-Flowers.com. 1-800-FLOWERS.COM, Inc., together with its subsidiaries, provides gourmet food and floral gifts for various occasions in the United States. It operates in three segments: Consumer Floral; Gourmet Foods & Gift Baskets; and BloomNet Wire Service. The company offers a range of products, including fresh-cut flowers, floral and fruit arrangements and plants, gifts, popcorn, gourmet foods and gift baskets, cookies, chocolates, candies, wine, and gift-quality fruits, as well as balloons, candles, keepsake gifts, jewelry, and plush stuffed animals.
The reason for the favorable rank lies in the series of earnings estimate revisions to the upside coming from analysts. This bullish activity has pushed the stock up to a Zacks Rank #1 (Strong Buy). Analysts have been increasing their earnings outlook for both the current year and next year. Over the last sixty days, there have been earnings estimate increases for both those periods as well as the current quarter.
Next year is really where the growth is set to come in. The current year will round up with a contraction in earnings of 18%. Next year, the return to growth is estimated to come in at 14.67% for earnings. That’s on projected revenue growth of 5.7%. Revenue growth has not been a problem for FLWS. Current quarter sales growth is on pace for 11.16%.
Bear of the Day:
The market has had its fair share of whipsaw action recently. In that sort of environment, it’s important to make sure you’re investing in what matters. Since the beginning of the stock market, ultimately stock prices have been about one thing; earnings. It’s earnings that drive the market. With strong trends, you can have long-term investments which reap rewards year after year. Weak trends can lead to ruin. One way to pick out the weaker trends is by leaning on the Zacks Rank. Stocks with favorable Zacks Ranks have strong earnings trends while those with lower rankings have negative earnings trends.
Today’s Bear of the Day is retailer Macy’s. Macy's, Inc., an omnichannel retail organization, operates stores, Websites, and mobile applications. The company sells a range of merchandise, including apparel and accessories for men, women, and children; cosmetics; home furnishings; and other consumer goods. As of April 1, 2019, it operated approximately 680 department stores under the Macy's and Bloomingdale's names; and 190 specialty stores, such as Bloomingdale's The Outlet, Bluemercury, Macy's Backstage, and STORY in 43 states, the District of Columbia, Guam, and Puerto Rico.
Macy’s is a Zacks Rank #5 (Strong Sell) because of the series of negative earnings estimate revisions coming from analysts. Over the last week alone, four analysts have cut their estimates for the current year and next year as well. The bearish sentiment has dropped the Zacks Consensus Estimate for the current year from $3.12 to $2.92. Next year’s number has come down from $2.95 to $2.71. That means analysts are expecting earnings contraction of 30% this year and 7% next year.
The Retail – Regional Department Stores industry ranks in the Bottom 4% of our Zacks Industry Rank.
Chipmakers on a Roll This Earnings Season: 3 Solid Buys
At the start of this earnings season, chipmakers have been in quite a fix mainly due to the U.S.-China trade issues. But not just the trade war, semiconductor stocks were facing a weaker pricing environment for memory chips and lesser-than-expected growth in applications such as PCs, servers and smartphones. This compelled many agencies, including International Data Corp and IHS Markit, to lower chip sales projections for this year.
But, chipmakers defied all odds and came out with encouraging earnings results. Prominent among them are Nvidia and Applied Materials. Nvidia’s fiscal second-quarter earnings and sales topped analysts’ expectations. What’s more, Nvidia’s gaming revenues also surpassed Wall Street estimates.
Nvidia founder and CEO Jensen Huang recently said that “we achieved sequential growth across our platforms.” Huang added that “NVIDIA accelerated computing momentum continues to build as the industry races to enable the next frontier in artificial intelligence, conversational AI, as well as autonomous systems like self-driving vehicles and delivery robots.”
Rival player Applied Materials also registered a beat on the top and bottom lines in its recent quarter. President and CEO Gary Dickerson said in a statement that “we are excited about the company’s future opportunities and are fully funding our R&D programs to develop new products and capabilities that will accelerate customers’ roadmaps and underpin our growth in the years ahead.”
In fact, Teradyne and Texas Instruments were two of the best performers in recent times that topped Wall Street forecasts and issued better-than-expected outlooks for the full year. Teradyne earned 66 cents per share, surpassing the Zacks Consensus Estimate by 4 cents. The figure climbed 11.9% on a year-over-year basis.
Revenues of $564 million surpassed the Zacks Consensus Estimate of $538 million and were higher than the guided range of $520-$550 million. Nearly 67% of revenues came from semiconductor testing platforms, 13% from Industrial Automation, 13% from the System Test business and the remaining 7% from the Wireless Test business.
The company, in the meantime, has issued a stronger-than-expected outlook. Management expects third-quarter revenues and earnings per share in the band of $540-$580 million and 64-74 cents, while the Zacks Consensus Estimate for third-quarter revenues and earnings per share are pegged at $547.9 million and 63 cents, respectively.
Nonetheless, such a strong performance is attributable to continued growth in memory test spending, networking, infrastructure and 5G.
And when it comes to Texas Instruments, the company earned $1.36 per share in the second quarter, topping the Zacks Consensus Estimate of $1.21 and surpassing management’s guided range of $1.12-$1.32. In fact, Texas Instruments now expects third-quarter earnings per share of $1.31 to $1.53, while market pundits had estimated $1.38 a share.
Revenues of $3.668 billion also outpaced the Zacks Consensus Estimate of $3.605 billion, while the figure was within the company’s guided range of $3.46-$3.74 billion. The company, by the way, expects revenues between $3.65 billion and $3.95 billion in the third quarter.
Texas Instruments’ revenue results in particular are commendable. After all, blacklisted Chinese telecom giant Huawei, a big customer of U.S. chipmakers, accounts for 3% to 4% of Texas Instruments’ overall revenues.
And how can we forget chip bellwether Micron Technology. The stock has been on fire ever since the flash memory specialist squashed fiscal third-quarter earnings estimates last month. To top it, the firm has raised its 2019, 2020 and 2021 earnings per shares estimates. And now Goldman Sachs has upgraded Micron and raised its price target from $40 to $56. This new target is around 20% higher from current levels.
Goldman Sachs’ Mark Delaney said that “we are now more positive on global memory stocks. ... We believe that Micron’s stock will trade more on memory pricing trends and intermediate term EPS expectations than FY20 earnings.”
3 Winning Stocks
With semiconductor stocks smashing earnings estimates, it will be judicious to invest in some winning players. To top it, China’s latest plan to spur economic growth will surely boost semiconductor stocks, especially those in the region, in the near term as well. China is expecting to roll out a plan to improve disposable income this year.
We have, thus, selected three fundamentally sound semiconductor stocks that also flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Power Integrations, Inc. designs, develops, and markets analog and mixed-signal integrated circuits (ICs), and other electronic components and circuitry used in high-voltage power conversion. The stock currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has increased 3.8% over the past 60 days. The company’s expected earnings growth rate for the next quarter is 37% against the Semiconductors - Power projected decline of 28.6%.
NeoPhotonics Corp.develops, manufactures, and sells optoelectronic products that transmit, receive, and switch high speed digital optical signals for communications networks. The stock currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has increased 15% over the past 60 days. The company’s expected earnings growth rate for the current quarter is 140%, compared with the Semiconductor - Communications estimated rally of 9.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Taiwan Semiconductor Manufacturing Company Ltd.engages in manufacturing, selling, packaging, testing, and computer-aided design of integrated circuits and other semiconductor devices. The stock currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved up 2.5% over the past 60 days. The company’s expected earnings growth rate for the next year is 17.33%, compared with the Semiconductor - Circuit Foundry estimated rise of 17.3%.
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