For Immediate Release
Chicago, IL – November 8, 2019 – Zacks Equity Research Shares of Newell Brands, Inc. NWL as the Bull of the Day, The Mosaic Company MOS asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on USA Technologies, Inc. USAT, Digital Turbine, Inc. APPS and NeoPhotonics Corp. NPTN.
Here is a synopsis of all five stocks:
Bull of the Day:
Newell Brands, Inc.is seeing improvement from its turnaround strategy. This Zacks Rank #1 (Strong Buy) just posted a big third quarter earnings beat and raised full year guidance.
Newell Brands is a consumer goods company with many well-known brands including Paper Mate®, Sharpie®, Dymo®, EXPO®, Parker®, Elmer’s®, Coleman®,Marmot®, Oster®, Sunbeam®, FoodSaver®, Mr. Coffee®, Rubbermaid Commercial Products®, Graco®, Baby Jogger®, NUK®, Calphalon®, Rubbermaid®, Contigo®, First Alert® and Yankee Candle®.
Big Third Quarter Beat
On Nov 1, Newell reported its third quarter results and beat the Zacks Consensus by 17 cents. Earnings were $0.73 versus the consensus of $0.56.
It was the 9th consecutive quarterly earnings beat.
The company has been in a turnaround mode and has a new CEO who spent the first 30 days on the job visiting all 7 businesses, the e-Commerce Group and the Design Center.
Despite the turnaround plan, net sales still declined 3.8% year-over-year to $2.5 billion. Core sales were down 2.5% but did see an increase in 4 of the 7 operating divisions.
The Home & Outdoor Living segment saw net sales of $723 million, down from $727 million a year ago. Core sales growth of 1.3% was offset by unfavorable foreign exchange and the exit of 72 underperforming Yankee Candle retail stores in the first nine months of 2019.
The Learning & Development saw net sales of $824 million versus $829 million a year ago with core sales growth of 0.5% offest by the headwind from foreign exchange. Core sales did increase, however, at both the Baby and Writing divisions within the segment.
The Appliances & Cookware segment saw net sales of $430 million, down from $454 million in the third quarter of 2018, due to the impact of the unfavorable foreign exchange as well as a core sales decrease of 3.7%.
The Food & Commercial segment also saw a year-over-year decline in net sales of $473 million, down from $539 million. Core sales fell 11.3% and there was a headwind from foreign exchange.
Changes to the Portfolio
The company has been divesting itself of some of its underperforming businesses during its turnaround but it announced it would end its divestiture program and still retain the Mapa/Spontex and Quickie businesses that had already been classified as discontinued operations.
Therefore, beginning in the fourth quarter, the businesses will be reflected in continuing operations.
It's expected to be accretive to net sales, operating margins, EPS and operating cash flow in 2020.
Raised Full Year Guidance
With some improvement in its business and the addition of the businesses back into continuing operations, the company has raised its full year EPS and sales guidance.
2019 sales are now expected to be between $9.6 and $9.7 billion, up from $9.1 billion to $9.3 billion.
Earnings are expected to be $1.63 to $1.68 up from previous guidance of $1.50 to $1.65.
Cash flows are expected to $700 million to $850 million, up from $600 million to $800 million.
Earnings Estimates Revised Higher
Not surprisingly, given the company's outlook, analysts all moved to raise the earnings estimates for 2019.
8 estimates were revised higher in the last week pushing the Zacks Consensus up to $1.67 from $1.62. That's earnings growth of 29.5% versus 2018 as the company made $1.29 last year.
Analysts are also bullish on 2020 as 6 estimates were revised higher in the last week as well. The Zacks Consensus Estimate jumped to $1.60 from $1.50 in that time. That's a 4.6% decline year-over-year, however.
Shares Spike on the Earnings Report
Newell shares have been on a downward spiral the last 2 years, falling 29.8% during that time.
However, the earnings report appears to have put a bottom under the shares as they are actually up 7.4% year-to-date.
They're still cheap, with a forward P/E of just 12.
The company is also shareholder friendly and pays a dividend currently yielding 4.6%.
For investors looking for a cheap turnaround story with rising earnings estimates, Newell Brands is one to keep on your list.
Bear of the Day:
The Mosaic Companycontinues to grapple with the extreme weather which hit US farmers in both the spring and the fall this year. This Zacks Rank #5 (Strong Sell) is seeing further cuts to its 2019 and 2020 earnings estimates.
Mosaic makes concentrated phosphate and potash crop nutrients. It is a single source provider of phosphate and potash fertilizers and feed ingredients for the global agriculture industry.
A Miss in the Third Quarter
On Nov 5, Mosaic reported its third quarter results and missed on the Zacks Consensus Estimate by $0.19. Earnings were just $0.08 versus the consensus of $0.27.
That's a miss of 70.4%.
It was the second consecutive miss in a row.
It saw strong performance in Potash and Mosaic Fertilizantes, but the Phosphates segment is still struggling and gross margins declined there.
It has been lowering production in both phosphates and potash to match demand.
Mosaic temporarily idled the Colonsay, a potash mine in Saskatchewan in August. In the fourth quarter, the Esterhazy, a second Saskatchewan potash mine, will be temporarily idled. Those idlings will curtail 600,000 tonnes in 2019.
On Oct 1, Mosaic also announced it would reduce phosphates production by 500,000 tonnes by temporarily idlings operations in Louisiana.
All three facilities are available to resume production when demand improves.
What About Demand?
The slowdown in demand has lasted far longer than anyone in the industry originally believed. While the record rainfall hurt in the spring planting season, a rare fall polar vortex bringing snow and below freezing temperatures is expected to hit the heartland during the fall application period.
It's too soon to know the impact on the farmers.
“While the challenging market environment has persisted longer than we had anticipated, the actions we are taking give us an improved platform to deliver value and shareholder returns,” said Mosaic President and CEO Joc O’Rourke.
“We are seeing volumes move in North America and believe that strong volumes will lead to improved pricing. We believe that the bottom of the market is in and that 2020 will be a much stronger year for Mosaic and the customers we serve," he added.
Estimates for 2019 and 2020 Fall Again
Mosaic cut full year guidance and the analysts adjusted their 2019 estimates accordingly.
The 2019 Zacks Consensus has fallen to $1.06 from $1.49 in the last 3 months. That's a 50% decline in earnings as Mosaic made $2.12 in 2018.
One estimate was also cut in the last week for 2020 pushing the 2020 Consensus Estimate down to $1.68 from $1.70 the week before the earnings.
That's a return to earnings growth of 58%.
Are Shares a Bargain?
Shares of Mosaic have fallen 28.9% year-to-date but over the last 3 months they're down just 8.7%.
However, they still trade with a forward P/E of 19.5, which isn't cheap from a standard classic valuation perspective.
Mosaic is buying its own shares at these levels however. Year-to-date it has purchased $150 million in stock, with $125 million of that in the third quarter.
It has a $250 million authorization.
Mosaic also pays a dividend, currently yielding 1%.
Investors interested in the fertilizer industry may want to wait until 2020 for a clearer picture on demand.
3 Cheap Tech Stocks Under $10 to Buy with Wall Street at New Highs
All three major U.S. indexes continue to hit new highs to start November on the back of positive U.S.-China trade negotiation updates, a third Fed interest rate cut, and better-than-feared quarterly earnings results. With this in mind, Wall Street will likely continue to climb into stocks, at least for now.
So why shouldn’t investors think about adding a few low-priced stocks to their portfolios? At Zacks, we try to avoid labeling stocks as “cheap” or “expensive.” Instead, we opt to look beyond a stock’s face value, and our system puts an emphasis on earnings estimate revisions to find stocks that will hopefully be winners for investors.
Stocks trading under $10 can be more volatile than their pricier peers. But investors can still scoop up big returns with the right low-priced stocks. Today we found three stocks using our Zacks Stock Screener that fall into the broader “technology” industry that investors might want to buy with Wall Street at new highs in November…
USA Technologies, Inc.
Prior Close: $7.00 USD
Countries around the world rely less on cash for small transactions than ever before and this is where USA Technologies comes in. The company “provides end-to-end electronic payment and M2M and IoT solutions for the small-ticket, unattended retail market.” In other words, USA Technologies enables vending machines, laundromats, arcade games, taxis, and many other traditional cash-only machines or businesses to join the cashless revolution, by allowing them to accept credit and debit cards and other electronic payment options.
Interested investors should note that CEO Stephen Herbert recently stepped down amid the start of a proxy battle and the firm in early October reported up-to-date financial results for fiscal 2018 and 2019, after much delay, due to internal audits. The company also adopted a “Short Duration Shareholder Rights Plan” last month. “The rights will not prevent a takeover, but should encourage anyone seeking to acquire the Company to negotiate with the Board prior to attempting a takeover.”
Clearly, this situation might make many investors far too nervous. Yet, a possible buyout could be enticing for others, especially for a cheap stock. USA Technologies is a Zacks Rank #2 (Strong Buy) at the moment and is part of our Computer - Integrated Systems that rests in the top 30% of our 253 Zacks industries. Our current Zacks Consensus Estimates call for the company’s fiscal 2020 revenue to jump over 27%, with FY21 projected to come in 18% higher at $199.4 million. The company’s adjusted earnings are also expected to soar in 2021. Despite the uncertainty, USAT stock is still up over 80% in 2019 and sits far below its recent August 2018 highs of around $16 per share, which could give it room to run.
Digital Turbine, Inc.
Prior Close: $6.86 USD
Moving on, Digital Turbine’s situation appears more stable than its under $10 tech peer. The Austin, Texas-based company connects OEMs, mobile operators, and publishers with advertisers and app developers, and its shares have skyrocketed from under $2 last November to its current $6.84 per share price point. And the firm just landed on Deloitte's Technology Fast 500 list, which ranks the 500 fastest growing technology companies in North America, for the fifth straight year, coming in at No. 63.
More importantly, Digital Turbine topped our quarterly (Q2 fiscal 2020) estimates on both the top and bottom lines on November 4. APPS saw its revenue surge 37% and its adjusted earnings pop from $0.01 in the year-ago period to $0.05 per share. “Spearheaded by growing partner adoption of our leading mobile platform and robust worldwide demand from advertisers, we achieved strong financial results, generating more than $4.5 million in Adjusted EBITDA and $5.7 million in free cash flow during the quarter,” CEO Bill Stone said in prepared remarks recently.
Looking ahead, Digital Turbine adjusted Q3 earnings are projected to climb 50% on the back of 24% stronger sales. Meanwhile, the company’s full-year fiscal 2020 EPS figure is expected to soar 150% on over 29% revenue expansion, with double-digit top and bottom growth projected to follow in 2021. Digital Turbine is a Zacks Rank #2 (Buy) right now that sports an “A” grade for Growth in our Style Scores system and its valuation picture has become far more reasonable recently.
Prior Close: $8.50 USD
Like Digital Turbine, NeoPhotonics is coming off a strong quarter that saw it beat both our top and bottom line estimates on Halloween. The company’s adjusted Q3 2019 earnings came in at $0.11, which crushed our $0.02 estimate and marked a massive improvement from the year-ago period’s loss. NPTN shares have soared 30% since the end of October and are up nearly 100% since its Q2 release in early August—from $4.32 to Thursday’s $8.49.
NeoPhotonics designs and makes optoelectronic solutions utilized in high-speed communications networks across telecom and datacenters. Following its third-quarter earnings release, NPTN has seen its earnings estimate revision activity surge completely in the right direction for Q4, fiscal 2019, and 2020. This positivity helps NeoPhotonics earn a Zacks Rank #1 (Strong Buy) at the moment. NPTN also rocks a “B” grade for Growth and an “A” for Momentum and is part of our Semiconductor – Communications industry, which rests in the top 25% right now.
The San Jose, California-based firm’s executives are positive about the road ahead, despite continued trade uncertainty. CEO Tim Jenks said last week that the firm believes “the macro trends of the industry favor” its “core capabilities.” Peaking ahead, NPTN’s adjusted Q4 FY19 earnings are projected to climb 100% on roughly 7% stronger sales. The company’s full-year fiscal 2019 sales are then expected to jump nearly 9%, with 2020 expected to come in 7% higher. This top-line expansion is projected help NeoPhotonics’ adjusted earnings surge.
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