For Immediate Release
Chicago, IL – September 25, 2019 – Zacks Equity Research Huron Consulting Group Inc. (HURN - Free Report) as the Bull of the Day, Thor Industries, Inc. (THO - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Crowdstrike (CRWD - Free Report) , Okta (OKTA - Free Report) and Fortinet (FTNT - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Huron Consulting Group Inc. is cashing in on the hot economy. This Zacks Rank #1 (Strong Buy) is expected to see double digit earnings growth in 2019.
Huron is a consulting company that specializes in serving clients in the healthcare, higher education, life sciences, and commercial sectors.
It's clients consist of more than 450 health systems, hospitals and academic medical centers as well as more than 400 colleges, universities and research institutions. It has also served hundreds of Fortune 500 and midsize commercial businesses along with 125 life sciences organizations.
Another Beat in the Second Quarter
On July 30, Huron reported its second quarter results and beat the Zacks Consensus Estimate by 16 cents. Earnings were $0.76 versus the consensus of $0.60.
It was the second earnings beat in a row.
Revenue jumped 11.7% to $220.8 million from $197.5 million a year ago thanks to a strong performance in its Healthcare and Education businesses.
Healthcare is the company's largest segment by revenue year-to-date, with 46% of the total revenue. Year-to-date, Business Advisory was 28% of the total and Education was 26%.
The average number of full-time billable consultants rose 11% to 2,362 from 2,127 in the year ago quarter. The average billing rate per hour for full-time billable consultants was $206, up from $205 in the second quarter a year ago.
Raised Full Year Revenue Guidance
Given the strong numbers in the second quarter, Huron raised its full year 2019 revenues before reimbursable expenses to a range of $830 million to $860 million, up from the previous guidance of a range of $800 million to $840 million.
The analysts liked what they heard as 3 earnings estimates have been raised for 2019 in the last 60 days pushing the Zacks Consensus up to $2.50 from $2.38.
That's earnings growth of 20.2% as the company only made $2.08 last year.
Shares Continue to Rally
Although shares are up "only" 19.3% year-to-date, over the last 2 years they've gained 78.5%.
The stock isn't cheap, with a forward P/E of 24.8 but investors are buying the growth story.
Huron is the only company that is currently a Zacks Rank #1 (Strong Buy) in the Consulting Industry on Zacks.com.
If you're looking for consulting company for your portfolio, Huron is one to keep on the short list.
Bear of the Day:
Party City Holdco Inc. designs, manufactures, and distributes party goods like paper and plastic Thor Industries, Inc.is seeing a big slowdown in its key North American market. This Zacks Rank #5 (Strong Sell) is expected to see an earnings decline of 40.5% in fiscal 2019.
Thor is the world's leading RV manufacturer with brands such as Airstream and Erwin Hymer Group (EHG).
Another Miss in the Fiscal Third Quarter
On June 10, Thor reported its fiscal third quarter 2019 results and missed on the Zacks Consensus by 9 cents. Earnings were $1.65 versus the consensus of $1.74.
It was the fifth earnings miss in a row.
Sales rose 11.3% to $2.506 billion from $2.251 billion a year ago but only because of the inclusion of $767.5 million in net sales from the new European RV segment which was acquired on Feb 1, 2019.
The North American business saw a significant decline both in Towables and Motorized RV sales.
Towable RV sales were $1.24 billion, down from $1.61 billion a year ago, which was a record for the quarter.
Motorized RV sales also fell year-over-year to $459.2 million, down from $598.5 million, which was a record third quarter, in the prior year.
The industry is in the midst of an independent dealer inventory rationalization which the company expects to continue through the end of fiscal 2019.
It did see North American independent dealer inventory steadily improving, which points to a firmer start for fiscal 2020.
Thor will report its fiscal fourth quarter results on Sep 30, before the market opens, so it will shortly be providing further guidance on its outlook for fiscal 2020.
It continues to believe that demographic trends are in its favor, especially with the Baby Boomers in the midst of retiring and Millennials also wanting to purchase towables to enjoy the outdoors on the weekends and on vacations.
Earnings Estimates Continue to be Cut
It's been a rough year.
4 estimates have been cut for fiscal 2019 in just the last 30 days pushing the Zacks Consensus Estimate down further to $5.09 from $5.24.
That's a decline of 40.5% as the company made $8.55 last fiscal year.
One analyst also cut in the last week, which is a bearish sign heading into the earnings report that is on Sep 30.
The analysts are also bearish on Fiscal 2020, with four cutting in the last month. The F2020 Zacks Consensus Estimate has fallen to $5.79 from $6.38 during that time.
That is a return to earnings growth however, as it's a gain of 13.8%.
Shares Make a Round Trip
Shareholders have been taking it on the chin even though Thor is shareholder friendly and pays a dividend yielding 2.9%.
Shares are down 56.8% over the last 2 years and have made a virtual round trip over the last 5 years.
The company has been paying down its debt. Subsequent to the end of the third quarter, it paid the remaining $60 million outstanding on the ABL facility and made payments of about $155 million on its term loan.
It reduced its overall debt levels by $40 million during the quarter.
Shares are cheap now, with a forward P/E of just 9.3.
But has the North American market stabilized?
How to Protect Your Portfolio Against Security Cloud FOMO
Cyberattacks have become increasingly common in business today – proprietary information as well as confidential customer information constantly being at risk of attack. The digital age has created a new type of criminal that we know as a “criminal hacker.” An individual who is highly proficient in programming that can get through firewalls and security hurdles to your sensitive information.
The point of entry for hackers is increasing as more and more devices becoming integrated into firms’ digital capabilities. Cyberattacks are a modern issue that requires an innovative solution. Here are a few of my favorite security cloud stocks to protect your portfolio from unwanted losses in this sector.
Crowdstrike–Mkt Cap: $15.12B, YTD: 9.3%, P/S: 26.85x
CrowdStrike is my high-risk, high-reward play. It a proliferating company with a ton growth priced in but still some good opportunity for stockholder returns if you are willing to bear the risks involved. Its reoccurring revenue streams make it an attractive investment even at excessively high multiples.
CrowdStrike was a part of the 2019 IPO frenzy of unprofitable tech firms, making its shares available to the public June 12th. CWRD IPO’ed at $34 and immediately spike 87% when the shares hit the exchanges, with investors eager to get into this hot security cloud stock.
CRWD investors have been on a wild ride since the IPO, with shares trading as high as $101.88 and now settles down to a price of $63.38.
CrowdStrike is a modern cloud-based solution for the escalating security threats that the internet age has brought. This company leverages AI, cloud computing, and graph databases for its security software. CrowdStrike’s security AI is perpetually improving as it advances from crowdsourcing and economies of scale.
CRWD’s cloud-based Falcon platform is an intelligent and evolving digital protector that detects and stops breaches in real-time.
This firm has been snowballing its customer base, having more than tripled in the past year and a half. CRWD’s Q2 results illustrated year-over-year sales growth of 94%, but profitability is not on the horizon yet.
Valuations for CRWD are exceptionally high due to its enormous future growth outlook and reoccurring revenue model. The shares’ forward P/S is 26.8x, down from its high of 42.7x last month.
CRWD is still finding its market value as shares trades all over the board. I am confident that this company has a bright future ahead, but I may wait for the share price to settle down before jumping in.
Okta–Mkt Cap: $12.27B, YTD: 60%, P/S: 18x
Okta has redefined the security cloud with identity being the central focus. The Okta Identity Cloud is the start of something brand new to the markets, and this firm is on the ground floor.
User authentication is at the core of any enterprises trust and confidence. Otka enables enterprises to implement a Single Sign-On that is secure for employees and customers alike, allowing them to use any application the business has unlocked for them. It also gives developers the tools to easily implement authentication into their applications.
This company has been growing fast with its subscription base model driving quarter-over-quarter sales growth since it went public in April of 2017. Over the last 2.5 years, this stock has driven up 334% with this year alone illustrating a 60% share price appreciation.
The company still remains unprofitable, but it is growing out its business quickly with over 7,000 customers ranging from fortune 100 to firms with less than 100 employees. The firm’s topline has grown over 50% in fiscal 2018 and ’19, and its expansion is expected to remain in the strong double-digits for the next few years.
This stock has a large amount of growth priced into it with it markedly high valuation. This stock is likely going to experience a lot of volatility as the market uncertainty escalates. I don’t believe that this firm’s subscription base will falter much in an economic slowdown considering its necessity but its valuation might come down.
Fortinet is another enterprise cloud security company that is worth looking at and is currently sitting at a Zacks Rank #2 (Buy).
Both of these security cloud stocks that I discussed have fallen harder than the market today due to their high valuation multiples. The market is scared, and the first thing that anxious investors do is evacuate perceived riskier stocks.
These two stocks have yet to turn a profit, but their topline expansion is strong. Security is always going to be a necessity for enterprises no matter what the economic environment looks like. I don’t believe that the underlying fundamentals will change much if these firms get traded down in an economic slowdown. As these stocks get cheaper, they become increasingly attractive. Keep an eye on both of these as we weather the rocky markets in the days to come.
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