Day: January 16, 2021

NAV – Why Is Navistar (NAV) Down 0.5% Since Last Earnings Report?

A month has gone by since the last earnings report for Navistar (NAV Free Report) . Shares have lost about 0.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Navistar due for a breakout? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Navistar Posts Mixed Q4 Results

Navistar reported fourth-quarter fiscal 2020 adjusted earnings of 62 cents per share, surpassing the Zacks Consensus Estimate of 23 cents. The bottom line, however, deteriorated from the year-ago profit of $1.14 per share amid lower year-over-year revenues due to the coronavirus pandemic. The truck maker registered revenues of $2,065 million for the October-end quarter, missing the Zacks Consensus Estimate of $2,090 million. Moreover, the top line marked a 25.7% year-over-year plunge due to coronavirus-led lower demand in core markets.

Segmental Performance

The Truck segment’s total net sales came in at $1,478 million for the reported quarter, plummeting 30% year over year. The segment witnessed a net loss of $10 million against profit of $86 million reported in the year-ago quarter. This was due to lower volumes on weaker industry conditions resulting from the pandemic.

The Parts segment net sales dropped 9.3% from the year-ago quarter to $496 million. The segment’s profit was $129 million, down 19.8% on a year-over-year basis. The segment’s results were impacted by lower volumes in the United States and Canada.

Net sales in the company’s Global Operations summed $87 million, down from $93 million recorded in the year-ago quarter. Unfavorable forex translations and depressed volumes from South American operations amid temporary production halts due to the coronavirus crisis resulted in this downside. The segment reported a profit of $12 million, turning around from the year-ago quarter’s loss of $10 million that stemmed from a restructuring charge. 

Net sales in Navistar’s Financial Services segment came in at $47 million, reflecting a 34% decrease from the year-ago quarter. The segment recorded a profit of $14 million compared with the year-ago quarter’s $30 million. This deterioration resulted from lower average finance receivables due to dismal volumes and reduction in finance fees on lower interest rates.

Financial Position

The Illinois-based trucking giant had cash and cash equivalents of $1,843 million as of Oct 31, 2020, higher than $1,370 million on Oct 31, 2019. At fiscal fourth quarter-end, long-term debt was $4,690 million, up from $4,317 million as of Oct 31, 2019.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted 33.33% due to these changes.

VGM Scores

Currently, Navistar has a great Growth Score of A, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren’t focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision looks promising. It’s no surprise Navistar has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

RAD – Rite Aid (RAD) Down 9.1% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Rite Aid (RAD Free Report) . Shares have lost about 9.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Rite Aid due for a breakout? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Rite Aid Beats Earnings & Revenues Estimates in Q3

Rite Aid posted impressive third-quarter fiscal 2021 results. Strength in Elixir, rise in pharmacy sales and robust online performance aided quarterly results. Further, it remains on track with its RxEvolution strategy. Additionally, cost-cutting actions contributed to quarterly growth.

Q3 in Detail

The company delivered adjusted earnings of 40 cents per share, which came ahead of the Zacks Consensus Estimate of a loss of a penny. However, the bottom line declined 25.9% from the year-ago quarter’s figure of 54 cents. This might be due to weak adjusted EBITDA and elevated costs related to lease termination and impairment, which more than offset reduced interest expenses and contribution from the sale of its distribution center at Perryman, MD.

Revenues grew 12% to $6,117 million and surpassed the Zacks Consensus Estimate of $5,846 million. This uptick was mainly due to solid performance in the Retail Pharmacy and Pharmacy Services segments. Apart from these, the company’s top line gained from strength in Elixir, driven by 29% increase in Medicare Part D memberships which more than offset drab acute script volumes.

During the quarter, Retail Pharmacy segment revenues grew 5.1% due to higher same-store sales. In the Pharmacy Services segment, revenues rose 29.2% owing to a rise in Medicare Part D membership. Retail pharmacy same-store sales advanced 4.3%, thanks to a 6.1% rise in pharmacy sales. Excluding cigarettes and tobacco products, front-end same-store sales rose 0.3% on the back of growth in certain product categories including immunity, first aid and paper products. Further, prescription count at same-store sales, adjusted to 30-day equivalents, grew 3.1% on the back of a rise in maintenance prescriptions and increased home deliveries, which were somewhat offset by lower acute prescription count to the tune of 1.9%.

Online revenues skyrocketed 225% year over year in the quarter under review on the back of revamped website and mobile app. Also, strategic partnerships with for the sale of its products, and Instacart for home delivery, acted as upsides.

During the reported quarter, adjusted EBITDA fell 13.1% year over year to $137.4 million, driven by higher revenues and lower costs. Meanwhile, adjusted EBITDA margin contracted 60 bps at 2.5% in the quarter under review. In addition, SG&A expenses grew 1.9% year over year to $1,156.4 million.

Financial Status

Rite Aid ended the quarter with cash and cash equivalents of approximately $50.8 million, long-term debt (net of current maturities) of $3,200.6 million and total shareholders’ equity of $610.5 million.

Further, the company generated cash from operating activities of $222.7 million in fiscal third quarter. Rite Aid boasts liquidity of roughly $1.6 billion, which is likely to help it stay afloat during the pandemic.

Business Development

During the quarter, Rite Aid launched its new brand and logo. Some other notable efforts include improving product mix, revamping more than 700 stores, launching three new Store of the Future prototypes and integrating two legacy PBMs. Further, the company redesigned its website and mobile app. Also, it is on track to launch the first phase of its new member portal at Elixir. Apart from these, Rite Aid’s pilot stores have been performing well in terms of sales and margins, following which it now intends to rollout the next phase of these stores in the fiscal fourth quarter.

Management has already reached the milestone of 1 million COVID-19 tests in partnership with the U.S. Department of Health and Human Services. Going ahead, it is joining forces with the CDC to distribute vaccines for the second phase of the rollout.

Fiscal 2021 Outlook

The company revised its fiscal 2021 guidance, keeping in mind lower Medicare Part D membership, the demand for flu immunizations, enhanced pharmacy network management at Elixir and cost savings. The company now expects revenues to be $23.9-$24.2 billion with same-store sales growth of 3.5-4.5%. The bottom line is envisioned between 45-85 cents. Moreover, adjusted EBITDA is expected to be between $490 to $520 million. Capital expenditure is anticipated to be roughly $325 million. Also, it expects free cash flow of $50-$100 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 109.26% due to these changes.

VGM Scores

Currently, Rite Aid has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren’t focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Rite Aid has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

SAFM – Sanderson Farms (SAFM) Down 7.3% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Sanderson Farms (SAFM Free Report) . Shares have lost about 7.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Sanderson Farms due for a breakout? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Sanderson Farms Q4 Earnings Beat Estimates, Sales Up

Sanderson Farms, Inc posted fourth-quarter fiscal 2020 results, with the top and the bottom line surpassing the Zacks Consensus Estimate as well as increasing year on year. Results gained from favorable trends for chicken products. Moreover, feed costs also remained low during the quarter.

However, management informed that the company continued to struggle with weak food services, as demand from restaurants remained low due to the coronavirus pandemic-induced social distancing. Market prices were weak for boneless breast meat as well as other products from the company’s big bird food service plants

Nevertheless, the demand for products sold at retail grocery stores, especially for chicken products were strong. Management expects such trends to continue until away from home dining trends resume in large numbers. As a result, the company is focusing on boosting the production of tray packs, which are in high demand at retail grocery stores.

Q4 in Detail

The company reported earnings of $1.26 per share, which beat the Zacks Consensus Estimate of a loss of 8 cents. Moreover, the bottom line depicted a considerable improvement from a loss of $1.05 per share in the year-ago quarter.

Net sales came in at $940 million, which surpassed the Zacks Consensus Estimate of $909.4 million. Moreover, the metric increased 3.7% from $906.5 million posted in the year-ago quarter. The top line benefited from increase in realized prices for poultry.

During the fiscal fourth quarter, average boneless breast meat market prices increased 2.8% year over year. Average market price for Jumbo wing were up 9%, while average market price for bulk leg quarters fell nearly 42.8% year on year.

For the fourth quarter, the overall cash cost for grain delivered to feed mills was higher than the year-ago quarter. Prices paid for corn delivered declined 15.2% and soybean meal increased 4.7%. Soybean meal and corn are part of the company’s primary feed ingredients.

We note that cost of sales declined 4.1% to $848.3 million in the reported quarter. Further, SG&A expenses fell 3.3% to $49.5 million in the reported quarter. The company reported operating income of $42.3 million compared with operating loss of $32.4 million.

Balance Sheet

Sanderson Farms ended the quarter with cash and cash equivalents of $49 million, long-term debt (less current maturities) of $25 million and total shareholders’ equity of $1,419 million. As of Oct 31, 2020, the company had working capital of $354 million.

Management highlighted that for fiscal 2020, the company incurred expenses worth $202.4 million on capital improvements. Also, it paid out dividends worth $31.1 million during the year. In fiscal 2021, the company expects capital expenditures of nearly $163.8 million related to special projects, construction and maintenance work.  

Outlook

The USDA lowered its crop yield estimates for corn and soybean in 2020, while increasing its estimates for export demand. As a result, market prices for both corn and soybeans have increased since September. Accordingly, management expects feed grain costs to rise in 2021. Based on fiscal 2020 volumes, cash costs for corn and soybean meal in fiscal 2021 is likely to increase by $193.2 million year on year.

Apart from this, the company is cautious regarding soybean and corn crops in Brazil and the rest of South America owing to pockets of dry hot weather. Additionally, the company continues to keep a close watch on chicken production numbers. The USDA expects chicken production to increase nearly 1% in 2021.

Moving on, the company expects that demand from food service customers is likely to be under pressure, until traffic at restaurants picks up pace. Nevertheless, management is encouraged regarding the demand for products sold at retail grocery stores. The company expects favorable conditions for the away-from-home food category, as consumers continue adhering to at-home cooking.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions. The consensus estimate has shifted 7.41% due to these changes.

VGM Scores

Currently, Sanderson Farms has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren’t focused on one strategy, this score is the one you should be interested in.

Outlook

Sanderson Farms has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

AAPL – Apple Reportedly Considering iPhone With Foldable Screen

Apple (NASDAQ:AAPL), always trying to stay competitive in the cutthroat global smartphone market, is apparently considering the development of a flip phone. That’s according to a report published Friday in Bloomberg, citing a “person familiar with the matter.”

That source says that Apple has created foldable screen prototypes for testing purposes, although that’s as far as the company has gone for now; it seems that no prototype phones yet exist. And the tech giant hasn’t devised concrete plans for developing such a device, and bringing it to market.

A generic foldable smartphone.

Image source: Getty Images.

The report did not state the size of the prototype screen. Theoretically, with a foldable phone/tablet Apple could make products with screens larger than its existing models. Its largest current offering, the iPhone 12 Pro Max, stretches 6.7 inches. Certain foldable devices reach 8 inches when opened.

Current technology gives manufacturers the scope to make foldable phones and tablets that have sufficient display resolution and other features expected of current mobile customers.

In 2019, Samsung rolled out such an offering to great fanfare, the Galaxy Fold, which found its way into the hands of many a gadget geek. Subsequently, Motorola introduced a new version of its Razr phone with similar “flip” technology. Other manufacturers make comparable products.

If Apple goes ahead with developing, testing, and eventually manufacturing and selling a foldable phone, it will be a clear effort to steal share from such rivals. We can expect at least some success in this regard, as Apple devices have more snob appeal than those of Samsung, Motorola, and the like.

Apple, a fairly tight-lipped company, has not yet commented on the Bloomberg story and is unlikely to.

 

LMND – Short Seller Andrew Left Goes Sour On Lemonade, Says Company Lies To Shareholders

Andrew Left

Citron Research’s Andrew Left criticized insurance company Lemonade Inc (NYSE: LMND) on Friday, saying its stock multiple is based on empty marketing tactics.

The Lemonade Bear Case: In a Twitter live video, Left dismissed Lemonade Inc‘s claims of bringing new technology to the insurance industry, saying the company’s technology is no different from insurers like Progressive Corp. (NYSE: PGR) or State Farm.

“They’ve been lying to their customers and their shareholders,” said the noted short seller.

The company has not responded to a request for comment.

Not An ESG Company: He also blasted Lemonade’s claims of being a “social good” company as an easy marketing ploy.

Left said Lemonade is taking advantage of younger investors’ interest in supporting companies that have a positive social impact, like Tesla Inc (NASDAQ: TSLA).

“It’s playing on the millennial investors,” he said, adding that the company has a higher multiple than Zoom Video Communications (NASDAQ: ZM), Uber Technologies Inc (NYSE: UBER) or Tesla Inc (NASDAQ: TSLA).

Lemonade insiders have sold $400 million in the past six months but gave just $1 million to charity last year, he said.

Left said the Securities and Exchange Commission and the Federal Trade Commission should look more closely at companies that make claims of being socially responsible.

Price Action: Shares of Lemonade ended Friday’s trading down 6.79% at $147.74 on Friday. Left’s video posted to Twitter at 11:30 a.m.

Related Link: XL Fleet Spikes On CEO’s CNBC Plug, Citron’s Long Call

© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

HPQ – Is HP Stock a Buy?

In the FAANG-dominated investing landscape, it’s easy to forget that HP (NYSE:HPQ) was the original Silicon Valley stock. The company’s roots date back to 1939, when its namesake founders, Bill Hewlett and Dave Packard, launched the company in a Palo Alto garage. In recent years, shares of the “old tech” company continue to underperform the overall technology sector, gaining 17% in the last three years versus 95% for the greater Nasdaq 100 index.

Many value investors are wondering if there’s an opportunity here due to the company’s attractive valuations: HP currently trades at 9.5 times forward earnings estimates. Additionally, the company’s 3% dividend yield is enticing in a depressed yield environment. However, long-term investors should understand the risks before they buy shares of the company.

Man in front of computer, deep in thought.

Image source: Getty Images.

HP’s days of growth are long behind it

Investors can expect little revenue growth from HP, and that’s partially by design. In 2015, then-CEO Meg Whitman spun off HP’s higher-growth cloud computing and consulting services into a new company named Hewlett-Packard Enterprise.

The goal for the remaining legacy company, renamed HP Inc., was two-fold: maximize cash return from the existing personal systems (notebooks, workstations, and desktops) and printing businesses, and make a targeted bet on 3D printing for growth. To date, however, HP’s foray into 3D printing hasn’t been the significant growth driver management envisioned.

HP’s other products are firmly in the no/low-growth mature stage of their lifecycles and are increasingly under threat from competition, most recently from software partner Microsoft‘s line of Surface computing devices. Furthermore, HP’s printing division continues to be disrupted by digital transformation from the likes of companies like DocuSign.

In fiscal 2020, the company reported that full-year revenue decreased 4% from the prior year, yet the stock rallied because it beat expectations by $1 billion. Due to the pandemic, revenue for notebook computers posted double-digit sales growth. However, the pandemic negatively impacted HP’s printing division, with sales down 12% year over year.

The long and short of the top and bottom lines

Eventually the pandemic will wind down, which should provide mixed results for HP. In its personal systems division, look for the top line to be negatively impacted. The pandemic created significant demand for notebooks that will eventually decrease, and this decline will not be fully offset by growth in work computers like desktops and workstations.

The personal systems segment provides the bulk (69%) of HP’s total revenue, so it’s likely the company will not post another significant top-line beat post-pandemic. However, the post-pandemic return to work should power HP’s bottom line, as demand for products in its higher-margin printing division (17% versus 4.5% in personal systems) is temporarily reinvigorated.

However, these are all short-term effects and investors should consider the company’s long-term prospects. The story there is more bearish. The shift toward increased mobile computing will persist — especially as 5G connectivity adoption takes off — and continue to crimp demand for traditional computing devices. Printing is also in a long-term decline. The pandemic increased the adoption of digital documents, and many businesses are likely to implement digital document processes going forward.

The company understands that it is in a mature industry and is responding by doubling down on its goal of returning shareholder capital. In February of 2020, HP announced its strategic value creation plan, which targeted $16 billion in capital return over the next three years, approximately half of its current market capitalization.  

The company said it would return 100% of free cash flow generation, “unless higher-return opportunities emerge,” which is increasingly seeming unlikely. Perhaps the returns from buybacks and dividends can fully offset the lack of top and (eventually) bottom-line growth. But there are other companies with yields greater than 3% that have better risk/reward profiles.

GTT – ROSEN, GLOBAL INVESTOR COUNSEL, Reminds GTT Communications, Inc. Investors of Important Deadline in Securities Class Action First Filed by Firm – GTT

NEW YORK–(BUSINESS WIRE)–Rosen Law Firm, a global investor rights law firm, reminds purchasers of the securities of GTT Communications, Inc. (NYSE: GTT) between May 5, 2016 and November 9, 2020, inclusive (the “Class Period”), of the important March 15, 2021 deadline in the securities class action first filed by the firm. The lawsuit seeks to recover damages for GTT investors under the federal securities laws.

To join the GTT class action, go http://www.rosenlegal.com/cases-register-1927.html or call Phillip Kim, Esq. toll-free at 866-767-3653 or email pkim@rosenlegal.com or cases@rosenlegal.com for information on the class action.

According to the lawsuit, defendants throughout the Class Period made false and/or misleading statements and/or failed to disclose that: (1) the Company’s internal controls suffered from issues related to the recording and reporting of Cost of Telecommunications Services; (2) the Company’s previously reported Cost of Telecommunications was inaccurate or accounted for unsupported adjustments; (3) inadequate internal controls would result in delays in the Company’s 10-Q quarterly reports; and (4) as a result of the foregoing, Defendants’ public statements were materially false and/or misleading and/or lacked a reasonable basis.

A class action lawsuit has already been filed. If you wish to serve as lead plaintiff, you must move the Court no later than March 15, 2021. A lead plaintiff is a representative party acting on behalf of other class members in directing the litigation. If you wish to join the litigation, go to http://www.rosenlegal.com/cases-register-1927.html or to discuss your rights or interests regarding this class action, please contact Phillip Kim, Esq. of Rosen Law Firm toll free at 866-767-3653 or via e-mail at pkim@rosenlegal.com or cases@rosenlegal.com.

NO CLASS HAS YET BEEN CERTIFIED IN THE ABOVE ACTION. UNTIL A CLASS IS CERTIFIED, YOU ARE NOT REPRESENTED BY COUNSEL UNLESS YOU RETAIN ONE. YOU MAY RETAIN COUNSEL OF YOUR CHOICE. YOU MAY ALSO REMAIN AN ABSENT CLASS MEMBER AND DO NOTHING AT THIS POINT. AN INVESTOR’S ABILITY TO SHARE IN ANY POTENTIAL FUTURE RECOVERY IS NOT DEPENDENT UPON SERVING AS LEAD PLAINTIFF.

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Rosen Law Firm represents investors throughout the globe, concentrating its practice in securities class actions and shareholder derivative litigation. Rosen Law Firm was Ranked No. 1 by ISS Securities Class Action Services for number of securities class action settlements in 2017. The firm has been ranked in the top 3 each year since 2013. Rosen Law Firm has achieved the largest ever securities class action settlement against a Chinese Company. Rosen Law Firm’s attorneys are ranked and recognized by numerous independent and respected sources. Rosen Law Firm has secured hundreds of millions of dollars for investors. Attorney Advertising. Prior results do not guarantee a similar outcome.