For Immediate Release
Chicago, IL – January 30, 2020 – Zacks Equity Research Shares of UniFirst Corporation (UNF - Free Report) as the Bull of the Day, CSX Corporation (CSX - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Microsoft (MSFT - Free Report) , Facebook (FB - Free Report) and Tesla (TSLA - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
UniFirst Corporationis benefiting from the strong labor market. This Zacks Rank #1 (Strong Buy) beat for the fourth quarter in a row recently.
UniFirst supplies and handles servicing of uniform and workwear programs, as well as the delivery of facility service programs. It has 260 service locations with over 300,000 customer locations. It outfits nearly 2 million workers each business day.
Another Beat in the Fiscal First Quarter
On Jan 8, UniFirst reported its fiscal first quarter 2020 results and beat the Zacks Consensus for the fourth quarter in a row.
The earnings came in at $2.52 versus the Zacks Consensus of $2.01, or a 25.4% beat.
Revenue was up 6.1% to $465.4 million. Core laundry operations rose 6.6% to $416.3 million.
Operating margin in laundry rose to 12.9% from 11.5% a year ago. The increase was primarily due to lower energy and selling payroll and depreciation and amortization as a percentage of revenues as well as the effect of other revenue adjustments.
The second segment, Specialty Garments, saw a 3% decrease in revenue to $33.4 million. This was mostly due to decreased outage activity in the US and Canadian nuclear operations which was partially offset by strong growth in the cleanroom operations.
Specialty Garments' results can vary significantly due to seasonality and the timing of reactor outages and projects.
Reduced the High End of its Full Year Guidance
UniFirst reduced its full year EPS guidance, but only on the high end. The new range is $7.60 to $7.92 due to reduced business activity and wearer levels in the energy dependent markets. The energy industry suffered a slowdown in 2019 and that has shown up in related businesses.
The company doesn't assume any significant further deterioration in the energy sector or the overall economy.
The analysts are more bullish than the company, however.
4 estimates have been raised for fiscal 2020 since the earnings report, pushing the Zacks Consensus up to $8.16 from $8.02. That's above the guidance range.
4 estimates were also raised for fiscal 2021, pushing up the Zacks Consensus to $8.68 from $8.44 over the last month. That's earnings growth of 6.5%.
Good News Priced In?
Shares have soared 52% over the last year and are near 5-year highs.
They trade with a forward P/E of 25.6, so you can't call them cheap.
However, the company has no long-term debt and has been buying back shares. It also pays a dividend, currently yielding 0.5%.
UniFirst is the only Zacks Rank #1 (Strong Buy) stock among the uniform makers.
Bear of the Day:
CSX Corporationsaw its revenue fall in the fourth quarter as coal remains a headwind. This Zacks Rank #5 (Strong Sell) is expected to see little earnings growth in 2020.
CSX is an east coast railroad based in Jacksonville, Florida. It provides rail, intermodal and rail-to-truck transload services to customers in many markets including energy, industrial, construction, agricultural and consumer products.
A Beat in the Fourth Quarter
On Jan 16, CSX reported its fourth quarter 2019 results and beat the Zacks Consensus by $0.02, reporting $0.99 versus the consensus of $0.97.
It was the second beat in a row, after the company had posted a rare miss in the second quarter of 2019.
Revenue fell 8% to $2.89 billion due to lower volumes and a negative mix from coal market headwinds.
However, expenses fell 9% to $1.73 billion, drive by continued efficiency gains.
Guidance Light for 2020
Volumes are expected to be flat to down 2% in 2020 as coal is expected to remain a headwind at least through the first half of 2020.
As a result, the analysts have been lowering both 2020 and 2021 estimates.
For 2020, 7 estimates were lowered, and one raised, in the last 30 days which pushed the Zacks Consensus down to $4.20 from $4.46 just 90 days. That's earnings growth that is up just 0.7% as the company made $4.17 in 2019.
These cuts are the reason for the Zacks Rank of Strong Sell.
Estimates for 2021 were also cut in the last month, pushing the 2021 Zacks Consensus down to $4.54 from $4.79 during that time period. That's a rebound in earnings.
Shares Up Year-to-Date
Investors haven't soured on the rails, even as some have had a slowdown in volumes. CSX shares are up 5.9% year-to-date even as the estimates were being cut.
It still has attractive valuations, with a forward P/E of 18.1.
It also pays a dividend, currently yielding 1.3%.
The Zacks Rank is terrible in the entire industry. None of the railroads are a Zacks Rank #1 (Strong Buy) or #2 (Buy) stock.
Microsoft, Facebook and Tesla All Better than Expected
Three of the top companies in the S&P 500 have posted better-than-expected results in quarterly earnings and sales in their most recent quarters reported this afternoon.
Microsoft has posted another positive surprise on fiscal Q2 2020 earnings and revenues after hours Wednesday afternoon, with earnings of $1.51 per share on $36.91 billion in quarterly sales. These compare favorably with expectations for $1.32 per share (itself a 20% year-over-year upswing) on $35.7 billion. Today’s actuals amount to a 14% gain on the top line.
Office 365, up 27% in the quarter, is part of the Productivity & Business segment, which grew 17% in Q4. Intelligent Cloud rose 27%, with Azure revenues up 62% on revenue growth. This was a big quarter, even for a company which has posted an average of nearly 10% positive surprise on earnings over the trailing 4 quarters. Microsoft’s last miss was way back in fiscal Q3 2016. Shares are up 3.5% in today’s late trading.
Facebook also posted positive results in its Q4 results, beating bottom-line estimates by 4 cents to $2.56 per share on $21.08 billion in revenues, up nearly 25% year over year. Daily Active Users (DAU) were slightly above expectations at 1.66 million, while Monthly Active Users (MAU) also grew, to 2.5 billion.
While these mark “good” numbers for Facebook, shares are selling off more than 7% in late trading. Part of this must be a “sell the news” moment for a company that had grown 60% in 2019. And beating earnings estimates for Facebook is not a given — two of the last five quarters have disappointed the street, for a trailing 4-quarter average of -20%. So today’s sell-off in the face of moderately better actuals may be a short-term event.
Tesla also posted better-than-expected Q4 earnings and sales: $2.14 per share was well beyond the $1.62 in the Zacks consensus, as well as better than the $1.93 per share reported in the year-ago quarter. Revenues of $7.38 billion also improved on the $7.05 billion expected, and ramped-up expectations from the company on auto production for 2020 is now at 500K, moving the stock upwards 6.4% in late trading. By comparison, 360K autos were built in 2019, which also surpassed expectations.
Just Released: 5 Stocks Set to Double
Four Zacks experts each announce their single favorite pick with potential to gain +100% and more in the months ahead. Today, download the private Special Report that names these stocks and spotlights why their upside is so exceptional. See Stocks Now >>
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.