Author: Zacks Equity Research

ILMN – Illumina (ILMN) Shares Slip on GRAIL Buyout Deal Completion

Illumina, Inc. (ILMN Free Report) recently announced the completion of its long-standing and highly-disputed acquisition of GRAIL — a healthcare company focused on life-saving early detection of multiple cancer to accelerate patient access to the latter’s multi-cancer early-detection test. The latest move follows a definitive agreement signed by Illumina to acquire GRAIL in September 2020.

It is to be noted that the European Commission’s (EC) decision is still pending regarding this $7.1-billion (in cash-and-stock as explained in September 2020) colossal takeover. According to Illumina, GRAIL will continue to operate as a separate company until the ongoing regulatory review by the EC is completed.

Following the news of this acquisition, shares of Illumina stumbled 7.9% on Aug 19 to close the session at $470.36, as the company announced that it is likely to be fined for completing its acquisition of GRAIL while the EC was still reviewing the merger. Going by a Reuters’ report, breaches can lead to fines of as much as 10% of the aggregate turnover of the companies.

Legal Implications Related to Acquisition

Illumina noted that GRAIL has no business in the European Union (EU). The company believes the EC does not have jurisdiction to review the merger as the EU merger thresholds are not met, nor are they met in any EU member state. The General Court of the EU will hear Illumina’s jurisdictional challenge later in 2021. By holding GRAIL separate while proceedings are ongoing, Illumina is positioned to follow whatever final decision is reached in the legal processes.

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Per Illumina’s management, the decision to make the acquisition and hold the companies separate allows the regulatory processes to proceed while safeguarding the life-saving, pro-competitive benefits of this transaction without the expiry of deal.

Transaction Details

As previously disclosed, Illumina’s acquisition of GRAIL included cash and shares of Illumina common stock as well as contingent value rights (CVRs) or additional shares of Illumina common stock.

GRAIL stockholders, including Illumina, are entitled to cash consideration of nearly $3.5 billion or, excluding Illumina, nearly $3.1 billion.

How Strategic is the Acquisition?

Cancer kills around 10 million people worldwide annually and 600,000 people in the United States alone. Nearly 71% of cancer deaths have no early detection screening recommended, and most cancer are detected when chances of survival are lower. As the early detection of cancer saves lives, the new genomic test will be nothing short of a revolution for human health and the economics of healthcare.

Moreover, combining the two companies is the quickest way to expand the availability and affordability of the test. As Illumina entered the non-invasive prenatal testing space, prices dropped, reimbursement expanded, the number of providers increased, and more expectant parents gained access to testing.

GRAIL’s Galleri blood test detects 50 different types of cancer before they are symptomatic. Currently, this groundbreaking test is available in the market but costs as high as $950 because it is not covered by insurance companies. According to Illumina, with the acquisition, the company’s expertise in market development and access will lead to coverage and reimbursement for this test. This will accelerate access and adoption of this life-saving test worldwide.

Industry Prospects

Per a report by RESEARCH AND MARKETS, the global cancer testing market or cancer screening market size is estimated reach a worth of $123-$133 billion as of 2018 and is expected to see a CAGR of 4.5-5.5% by 2025.

Considering the market opportunities, Illumina’s latest acquisition to accelerate patient access to the GRAIL’s multi-cancer early-detection test is well-thought of.

Recent Developments

In April 2021, Illumina entered into a new partnership with Kartos Therapeutics to co-develop a TP53 companion diagnostic based on the content of Illumina’s comprehensive genomic profiling assay — TruSight Oncology 500 (TSO 500). The partnership with Kartos builds on a solid history and varied portfolio of Illumina’s oncology partnerships with industry leaders, with the integrated goal of advancing cancer diagnostics and precision medicine.

In February 2021, Illumina entered into an agreement with the Belgian Society of Medical Oncology (BSMO) which is running a new national pilot to assess the use of comprehensive genomic profiling (CGP) in 864 patients with advanced metastatic cancer.

Price Performance

Shares of the company have gained 39.5% in a year’s time against the industry’s fall of 0.3%.

Zacks Rank and Key Picks

Currently, the company carries a Zacks Rank #3 (Hold).

A few better-ranked stocks from the broader medical space are Envista Holdings Corporation (NVST Free Report) , BellRing Brands, Inc. (BRBR Free Report) and Henry Schein, Inc. (HSIC Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of Zacks #1 Rank (Strong Buy) stocks here.

Envista Holdings has an estimated long-term earnings growth rate of 26%.

BellRing Brands has an estimated long-term earnings growth rate of 22%.

Henry Schein has a projected long-term earnings growth rate of 14%.

IDXX – Here's Why You Should Add IDEXX (IDXX) to Your Portfolio Now

IDEXX Laboratories, Inc. (IDXX Free Report) has been gaining on solid top-line growth in the second quarter driven by strong sales at the CAG, LPD and Water businesses. Sturdy gains in CAG Diagnostics’ recurring revenues, supported by sustained strong global trends in pet healthcare, buoy optimism. However, a weak capital structure and foreign exchange fluctuation remain concerns.

Over the past six months, shares of this Zacks Rank #2 (Buy) company have outperformed the industry. Shares of the company have surged 26.9% compared with 8.5% growth of the industry and 13.9% rise of the S&P 500.

The renowned manufacturer of products and services, primarily for the companion animal veterinary, livestock and poultry, has a market cap of $57.99 billion. The company projects 19.9% growth for the next five years. The company surpassed estimates in the trailing four quarters, the average surprise being 28.16%.

Let’s delve deeper.

Factors at Play

Impressive Q2 Results: IDEXX exited the second quarter of 2021, with better-than-expected results. Solid organic-revenue growth is encouraging as well. The top line in the quarter was driven by strong sales at the CAG, LPD and Water businesses. The company witnessed sturdy gains in CAG Diagnostics’ recurring revenues, supported by sustained strong global trends in pet healthcare in the quarter under review.

The company’s performance in major geographies is also encouraging. Further, veterinary software, services and diagnostic imaging system revenues grew in the reported quarter on double-digit growth in subscription-based service revenues and strong growth in new veterinary software system placements and recurring software services. The acquisition of ezyVet also contributed to growth. The raised 2021 outlook is encouraging as well.

CAG Continues to Perform Well: IDEXX derives the lion’s share of its revenues from the CAG segment. The company registered stellar second-quarter revenue growth within CAG.

In the second quarter, CAG revenues rose 32% (up 27% organically) year over year, driven by 30% reported and 26% organic growth in global CAG Diagnostics recurring revenues. This uptick in overall CAG revenues reflects 24% organic growth in the United States and 30% organic growth in international markets. Continued strength in clinical visits and related diagnostic products and services in the reported quarter aided CAG Diagnostics’ recurring revenues.

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Raised Guidance: IDEXX, boosted by the ongoing business recovery and strong quarterly performance, has raised its financial outlook for 2021. The company projects revenues for the year in the range of $3,170-$3, 205 million, suggesting year-over-year growth of 17-18.5% on a reported and 14.5-16% on an organic basis. This is significantly up from the previously-provided financial outlook where revenue growth was projected at $3,105-$3,160 million.

Further, IDEXX projects full-year earnings per share in the range of $8.20-$8.36, indicating growth of 22-25% on a reported basis (up from the earlier outlook of $7.88-$8.18).

However, IDEXX derives a majority of its consolidated revenues from the sale of products in international markets. Thus, the strengthening of the rate of exchange for the U.S. dollar relative to other currencies dented the company’s revenues derived in currencies other than the U.S. dollar.

IDEXX’s weak solvency and capital structure are concerning as well. The company’s total debt was $905.1 million for the second quarter, reflecting a marginal increase from $903.7 million in the preceding quarter. This figure, however, was much higher than the year-end cash and cash equivalent of $232.1 million.

Estimate Trends

IDEXX has been witnessing a positive estimate revision trend for the current year. Over the past 90 days, the Zacks Consensus Estimate for its earnings has moved 4.6% north to $8.35.

The Zacks Consensus Estimate for its third-quarter 2021 revenues is pegged at $793.3 million, suggesting 9.9% growth from the year-ago reported number.

Other Key Picks

A few other top-ranked stocks from the broader medical space are Envista Holdings Corp. (NVST Free Report) , BellRing Brands, Inc. (BRBR Free Report) and Henry Schein, Inc. (HSIC Free Report) , each carrying a Zacks Rank #2. You can see the complete list of Zacks #1 Rank (Strong Buy) stocks here.

Envista Holdings has an estimated long-term earnings growth rate of 26%.

BellRing Brands has an estimated long-term earnings growth rate of 22%.

Henry Schein has a projected long-term earnings growth rate of 14%.

IPG – Interpublic (IPG) Up 5.8% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Interpublic Group (IPG Free Report) . Shares have added about 5.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Interpublic due for a pullback? 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.

Interpublic Beats on Q2 Earnings & Revenues Estimates

The Interpublic Group of Companies reported better-than-expected second-quarter 2021 results.

Adjusted earnings (excluding 4 cents from non-recurring items) of 70 cents per share beat the Zacks Consensus Estimate by 55.6%. Moreover, the bottom line surged more than 100% on a year-over-year basis. Net revenues of $2.3 billion beat the consensus estimate by 8.7% and increased 12% on a year-over-year basis. The upside was caused by organic net revenues increase of 19.8% and foreign currency translation was positive 3.1%. Total revenues of $2.51 billion increased 23.6% year over year.

Operating Results

Operating income in the quarter came in at $384.4 million, up more than 100% from the prior-year quarter’s figure. Operating margin on net revenues surged to 16.9% from 2.2% in the year-ago quarter. Operating margin on total revenues also increased to 15.3% from 2% in the year-ago quarter. Adjusted EBITA came in at $405.8 million, up more than 100% from the prior-year quarter. Adjusted EBITA margin on net revenues increased to 17.9% from 9.4% in the year-ago quarter. Adjusted EBITA margin on total revenues rose to 16.2% from 8.6% in the year-ago quarter. Total operating expenses of $2.1 billion increased 7.1% year over year.

Balance Sheet

As of Jun 30, 2021, Interpublic had cash and cash equivalents of $2.34 billion compared with $2.02 billion at the end of the prior quarter. Total debt was $3.47 billion compared with $3.45 billion at the end of the prior quarter. During the second quarter, the company paid out a cash dividend of 27 cents per share, amounting to $106.1 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a flat trend in fresh estimates. The consensus estimate has shifted 6.67% due to these changes.

VGM Scores

Currently, Interpublic has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, 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 C. If you aren’t focused on one strategy, this score is the one you should be interested in.

Outlook

Interpublic has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

LSTR – Landstar (LSTR) Up 4.6% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Landstar System (LSTR Free Report) . Shares have added about 4.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Landstar due for a pullback? 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 drivers.

Earnings Beat at Landstar in Q2

Landstar’s earnings of $2.40 per share surpassed the Zacks Consensus Estimate of $2.34. The bottom line surged more than 100% year over year on higher revenues. The year-ago period was characterized by significant downturn in operations due to weak freight market conditions, thanks to the effects of coronavirus.

Revenues of $1,570.7 million also outperformed the Zacks Consensus Estimate of $1,497.4 million. The top line soared 90.7% year over year owing to strong performances of the truck transportation, rail intermodal, and ocean and air cargo carriers segments. During the second quarter, the company repurchased 150,000 shares for approximately $23.8 million.

Detailed Statistics

Gross profit (revenues excluding the cost of purchased transportation and commissions to agents) came in at $220.8 million in the reported quarter, up 95.2% year over year.

Operating income soared more than 200% from the prior-year quarter’s figure to $122.25 million. Total costs and expenses (on a reported basis) increased 82.9% to $1.45 billion.
 
Total revenues in the truck transportation segment — contributing 91.9% of the top line — amounted to $1.44 billion, up 91.7% from the year-ago quarter’s figure. Within the truck transportation segment, revenues hauled via van equipment rose more than 100% to $970.9 million. Truckload transportation revenues hauled via unsided/platform equipment climbed 79.6% to $444.3 million.

Less-than-truckload revenues increased 26.8% to $29.06 million. Overall second-quarter truck transportation revenue per load rose 38.4% year over year.

Rail intermodal revenues of $44.36 million increased 91.3% from the figure recorded in second-quarter 2020.  Revenues in the ocean and air cargo carriers segment surged 96.4% year over year to $60.24 million. Other revenues increased 34.3% to $21.93 million.

Liquidity

At the end of the second quarter, Landstar had cash and cash equivalents of $186.40 million compared with $249.35 million recorded at the end of 2020. Additionally, long-term debt (excluding current maturities) totaled $51.18 million at the end of the second quarter compared with $65.36 million at the end of 2020.

Q3 Outlook

Landstar anticipates revenues in the third quarter of 2021 to be in the range of $1.55-$1.60 billion. Earnings per share are estimated in the band of $2.20-$2.30.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month. The consensus estimate has shifted 10.77% due to these changes.

VGM Scores

Currently, Landstar has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

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

Outlook

Landstar has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

LAD – Why Is Lithia Motors (LAD) Down 11.1% Since Last Earnings Report?

A month has gone by since the last earnings report for Lithia Motors (LAD Free Report) . Shares have lost about 11.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Lithia Motors 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.

Lithia Motors Puts Up a Stellar Show in Q2

Lithia Motors reported second-quarter 2021 adjusted earnings of $11.12 per share, handily beating the Zacks Consensus Estimate of $6.56. Higher-than-expected revenues across all units led to the outperformance. The bottom line increased a whopping 199% from the prior-year quarter’s $3.72 per share. Total revenues also jumped 117.8% year over year to $6,009.4 million. Moreover, the top line surpassed the Zacks Consensus Estimate of $5,006 million. In fact, for the reported quarter, Lithia Motors claims to have reported the highest quarterly earnings and revenues in its history. Thanks to strong results, shares of the company rose 4.38% yesterday to close the session at $371.13.

Segmental Performance

New vehicle retail revenues increased 130% year over year to $3,146.2 million and topped the Zacks Consensus Estimate of $2,464 million. New vehicle units sold climbed 115.6% from the prior-year quarter to 75,176. The average selling price of new-vehicle retail rose 6.7% from the prior-year quarter to $41,852.

Used-vehicle retail revenues rose 95.7% year over year to $1,804.9 million and beat the Zacks Consensus Estimate of $1,525 million. Used-vehicle retail units sold grew 61.5% from the year-ago quarter to 70,254. The average selling price of used-vehicle retail improved 21.2% to $25,691 from the year-ago figure of $21,196. Revenues from used-vehicle wholesale skyrocketed 323.8% year over year to $217.4 million and surpassed the consensus mark of $88 million.

Revenues from service, body and parts were up 89.1% from the prior-year period to $521 million, and outpaced the Zacks Consensus Estimate of $410 million. The company’s F&I (Finance & Insurance) business recorded 115.9% year-over-year growth in revenues to $296.6 million, topping the consensus estimate of $228 million. Revenues from fleet and others were $50.3 million, jumping 197.6% year over year and surpassing the consensus mark of $28.05 million.

While same-store new vehicle sales rose 55.2% year over year, same-store used vehicle retail sales increased 48.8%. While same-store revenues from the F&I business soared 50%, that of the service, body and parts unit grew 30.5% from the prior-year quarter.

Financial Tidbits

Cost of sales jumped 113.5% year over year for second-quarter 2021. However, SG&A — as a percentage of gross profit — decreased from the prior-year level. Encouragingly, pretax and net profit margins improved from the year-ago levels.

Quarterly dividend of 35 cents a share will be payable on Aug 27 to shareholders of record as of Aug 13, 2021.

Lithia had cash and cash equivalents of $780.9 million as of Jun 30, 2021. Long-term debt was $2,521.9 million, marking an increase from $2,064.7 million as of Dec 31, 2020.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 50.34% due to these changes.

VGM Scores

At this time, Lithia Motors has a great Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, 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 Lithia Motors has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

KNX – Knight-Swift (KNX) Up 1.3% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Knight-Swift Transportation Holdings (KNX Free Report) . Shares have added about 1.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Knight-Swift due for a pullback? 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.

Earnings Beat in Q2

Knight-Swift’s second-quarter 2021 earnings (excluding 6 cents from non-recurring items) of 98 cents per share surpassed the Zacks Consensus Estimate of 87 cents. The bottom line surged 71.9% from the second quarter of 2020, which saw significantly low volumes due to weak freight market conditions caused by the coronavirus pandemic.

Total revenues of $1,315.7 million outperformed the Zacks Consensus Estimate of $1,300.8 million. The top line jumped 24% year over year driven by an increase in revenues in the Trucking, Logistics and Intermodal segments.

Total operating expenses increased 17.3% year over year to $1.12 billion. Adjusted operating ratio (operating expenses as a percentage of revenues) improved to 83.1% from 87.6% in the second quarter of 2020. Lower the value of the metric, the better. Knight-Swift’s adjusted operating income rose 65.1% year over year.

Segmental Result

Revenues in the Trucking segment totaled (excluding fuel surcharge and inter-segment transactions) $882.56 million, up 8.2% year over year. Results were driven by 10.3% increase in average revenue per tractor. Average revenue per tractor was strong in the quarter owing to an18.8% increase in revenue per loaded mile (excluding fuel surcharge and intersegment transactions). Adjusted segmental operating income surged 42.8% to $168.78 million. Adjusted operating ratio (operating expenses as a percentage of revenues) improved 460 basis points to 80.9%.

Revenues in the Logistics segment (excluding inter-segment transactions) amounted to $162.17 million, up more than 100% year over year, due to 55.3% increase in brokerage load volumes and 55.8% (including benefits from the UTXL acquisition) rise in revenue per load. Adjusted operating ratio improved to 91.1% in the second quarter from 95.5% in the year-ago period. Segmental adjusted operating income surged more than 300% to $14.45 million.

Revenues in the Intermodal segment (excluding inter-segment transactions) totaled approximately $115.29 million, up 39.4% year over year as a result of 19.9% and 16.3% increase in load counts and revenue per load, respectively. Segmental adjusted operating ratio improved to 95% in the reported quarter from 105.3% in year-ago quarter. Segmental operating income (adjusted) was $5.81 million in the quarter, against an adjusted operating loss of $4.41 million in the second quarter of 2020.

Liquidity & Share Buyback

Knight-Swift exited the second quarter with cash and cash equivalents of $179.03 million compared with $156.70 million at the end of 2020. During the first half of 2021, the company returned $53.7 million to shareholders in the form of share repurchases and $30.3 million in the form of dividends.

2021 Guidance

Knight-Swift raised its adjusted earnings per share guidance for full-year 2021. It now expects the same to be in the range of $3.90-$4.05, compared with the previous expectation of $3.45-$3.60.The company’s improved guidance is a result of the expected benefits from its recent acquisitions of UTXL and AAA Cooper Transportation as well as improved freight market conditions.

The company anticipates net cash capital expenditures in the band of $500–$550 million for 2021. The amount will primarily be spent on replacements of existing tractors and trailers, investments in terminal network and driver amenities.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 9.84% due to these changes.

VGM Scores

Currently, Knight-Swift has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. 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 Knight-Swift has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

KMI – Kinder Morgan (KMI) Down 9% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Kinder Morgan (KMI Free Report) . Shares have lost about 9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Kinder Morgan 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.

Kinder Morgan Q2 Earnings Beat on Higher Gasoline Volumes

Kinder Morgan reported second-quarter 2021 adjusted earnings per share of 23 cents, beating the Zacks Consensus Estimate of 19 cents. The bottom line also increased from the year-ago profit of 17 cents per share. 

Total revenues surged to $3,150 million from $2,560 million in the prior-year quarter and beat the Zacks Consensus Estimate of $2,959 million.

The strong quarterly results were aided by higher contribution from Texas intrastate systems and Hiland Midstream systems. Strong recovery in demand for refined products, as reflected in increased transported gasoline and jet volumes, contributed to the outperformance.

Segment Analysis

Natural Gas Pipelines: For the June quarter of 2021, adjusted earnings before depreciation, depletion and amortization expenses, including amortization of excess cost of equity investments (EBDA), rose to $1,064 million from $1,016 million a year ago. Increase in contributions Texas intrastate systems and Hiland Midstream systems primarily aided the segment. KinderHawk and Eagle Ford gathering and processing properties’ lower contributions offset the positives partially.

Products Pipelines: The segment’s EBDA for the second quarter was $293 million, reflecting a jump from $227 million a year ago. Recovery in demand for refined products, with the gradual reopening of economy, has aided the business unit.

Gasoline transported volumes increased more than 37% year over year in the June quarter, while jet fuel volumes skyrocketed 128.6%.

Terminals: Through this segment, Kinder Morgan generated quarterly EBDA of $246 million, up from the year-ago period’s $229 million. Improvement in volumes across the midstream player’s liquids network were responsible for the outperformance.

CO2: The segment’s EBDA was recorded at $151 million, down from $156 million a year ago. The underperformance was owing to a decline in CO2 sales and crude volumes.

Operational Highlights

Expenses related to operations and maintenance totaled $582 million, down from $606 million a year ago. Total operating costs increased to $3,914 million for the second quarter from $2,842 million in the corresponding period of 2020.

DCF

The company’s second-quarter distributable cash flow (DCF) was $1,025 million compared with $1,001 million a year ago.

Balance Sheet

As of Jun 30, 2021, Kinder Morgan reported $1,365 million in cash and cash equivalents. The company’s long-term debt amounted to $30,008 million at quarter-end, resulting in a debt to capitalization of 50.8%.

At second quarter-end, it had more than $3.9 billion of borrowing capacity left under the credit facility.

2021 Guidance

The company projects DCF and adjusted EBITDA for this year at $5.4 billion and $7.9 billion, respectively. The midstream firm revised its 2021 net income down to $1.7 billion from the prior range of $2.7 billion to $2.9 billion.

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 6.3% due to these changes.

VGM Scores

Currently, Kinder Morgan has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. 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 Kinder Morgan has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

KO – Coke (KO) Up 0.7% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Coca-Cola (KO Free Report) . Shares have added about 0.7% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Coke due for a pullback? 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.

Coca-Cola Tops Q2 Earnings & Sales Estimates, Raises View

Coca-Cola has delivered second-quarter 2021 results, wherein earnings and sales beat the Zacks Consensus Estimate and improved year over year. Comparable earnings of 68 cents per share beat the Zacks Consensus Estimate of 57 cents and improved 61% from the year-ago period. Favorable currency translations aided earnings by 5%. Comparable currency-neutral earnings per share rose 55%.

Revenues of $10,129 million surpassed the Zacks Consensus Estimate of $9,490 million and improved 42% year over year. Organic revenues rose 37% from the prior-year quarter. The company’s top line benefited from improved price/mix and an increase in concentrate sales. Revenues gained from the ongoing recovery in markets where the pandemic-led disruptions are subsiding. The results also reflected benefits from cycling of revenue declines witnessed in the prior-year quarter.

In the reported quarter, the company gained global value share in total non-alcoholic ready-to-drink (“NARTD”) beverages. Coca-Cola benefited from underlying share gains in both at-home and away-from-home channels. The company’s value share in total NARTD beverages has improved from the 2019 level.

Volume and Pricing

In the reported quarter, concentrate sales were up 26%, while price/mix rose 11%. However, currency tailwinds aided the company’s top line by 5%.

Price/mix benefited from favorable channel and package mix due to the lapping of last year’s pandemic-led disruptions as well as positive segment mix in Global Ventures and Bottling Investments. Concentrate sales were 9 points ahead of unit case volume, as the company lapped the period of rationalized stock levels in the prior-year quarter. Concentrate sales also benefited from the timing of shipments this year.

Coca-Cola’s total unit case volume grew 18% in the second quarter and was in line with the 2019 levels, backed by recovery across markets due to the subsiding of the pandemic-led uncertainties as well as the lapping of last year’s pandemic-led impacts. The company witnessed strength in both developed, and developing and emerging markets, driven by recovery. Both markets recorded double-digit volume growth in the quarter. It witnessed robust volume gains across China, Brazil and Nigeria, with volumes exceeding the 2019 levels. Meanwhile, the company continued to witness soft volume trends in India due to the ongoing impacts of the pandemic.

Category Cluster Performance: In the reported quarter, volume benefited from growth in trademark Coca-Cola; sparkling flavors; the nutrition, juice, dairy and plant-based beverages; and hydration, sports, coffee and tea categories.

Sparkling soft drinks’ unit case volume improved 14% (compared with 4% growth in the prior quarter), driven by robust gains in the United States, India and Brazil. Trademark Coca-Cola volumes were up 12% (compared with a 4% increase in the last reported quarter) on strong gains in Europe, Middle East & Africa, and Latin America. Moreover, the sparkling flavors category improved 18% on growth in Trademark Sprite and Trademark Fanta.

Volume for nutrition, juice, dairy and plant-based beverages was up 25%. The category primarily gained from growth in Minute Maid Pulpy in China, Mazaa in India, and Minute Maid and fairlife in North America.

Hydration, sports, coffee and tea category grew 25% in the second quarter. The company witnessed 12% growth in hydration on double-digit growth across all geographies. Sports drinks rose 35%, owing to gains in Powerade in North America. Tea volume accelerated 18% on growth witnessed in the United States, Japan and Brazil. The coffee business witnessed 78% growth on the reopening of the Costa retail outlets in the U.K. as the pandemic-led restrictions ease.

Segmental Details

Revenues rose 67% for EMEA, 41% for Latin America, 28% for North America, 27% for the Asia Pacific, 139% for Global Ventures and 38% for Bottling Investments segments.

Organic revenues improved 61% in EMEA, 39% in Latin America, 28% in North America, 27% in the Asia Pacific, 117% in Global Ventures and 29% in Bottling Investments.

Margins

Comparable currency-neutral operating income rose 46% year over year, driven by robust organic sales growth across all segments, offset by significantly higher marketing expenses compared with the prior year. In dollar terms, comparable operating income rose 48.9% to $3,209 million. Comparable operating margin expanded 170 basis points to 31.7%.

Guidance

Though uncertainties related to the coronavirus pandemic remain, the company raised its organic revenue and comparable earnings per share (EPS) growth guidance for 2021. It now estimates organic revenue growth of 12-14% for 2021 compared with high-single-digit growth mentioned earlier. It now estimates comparable EPS growth of 13-15% year over year versus a growth rate of high-single to low-double digits stated earlier. The company delivered comparable EPS of $1.95 in 2020.

Comparable net revenues are anticipated to be aided by a 1-2% currency tailwind, based on current rates and hedge positions. The company expects an underlying effective tax rate of 19.1% for 2021.

Comparable EPS is expected to include currency tailwinds of 2-3% compared with the previously mentioned 3-4% currency tailwinds.

The company now estimates generating free cash flow of at least $9 billion for 2021, with operating cash flow of at least $10.5 billion and capital expenditure of $1.5 billion. Earlier, it predicted free cash flow of at least $8.5 billion and operating cash flow of at least $10 billion.

For third-quarter 2021, it anticipates comparable net revenues to include currency tailwinds of 2% and comparable EPS to be aided by favorable currency movements of 3-4%, both based on current rates and hedge positions.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Coke has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. 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 these revisions indicates a downward shift. Notably, Coke has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

NDAQ – Nasdaq (NDAQ) Up 1.5% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Nasdaq (NDAQ Free Report) . Shares have added about 1.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Nasdaq due for a pullback? 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.

Nasdaq Surpasses Q2 Earnings & Revenue Estimates

Nasdaq reported second-quarter 2021 adjusted earnings per share of $1.90, beating the Zacks Consensus Estimate of $1.73 by 9.8%. The bottom line increased 23.4% year over year.

The improvement was primarily driven by organic growth, favorable changes in foreign exchange rates, margin expansion and solid segmental performance. Nasdaq noted that the solid results reflect strength of its diverse offerings and scalability of increasingly SaaS-oriented business model.
Performance in Detail

Nasdaq’s revenues of $846 million increased 21% year over year. The upside was primarily attributable to a $104 million impact from organic growth, a $27 million increase from the inclusion of revenues from the acquisition of Verafin, and a $16 million increase from the impact of favorable changes in FX rates. The top line beat the Zacks Consensus Estimate by 2.7%.

Adjusted operating expenses were $392 million, up 20% from the year-ago period owing to a $24 million organic increase, a $26 million impact of the Verafin acquisition and a $15 million increase from changes in FX rates.

Operating margin of 54% expanded 100 basis points year over year.

Nasdaq witnessed 135 IPOs in the second quarter, representing $32 billion in capital raised, including 88 operating company IPOs and 47 IPOs of special purpose acquisition companies. In the reported quarter, the Nasdaq welcomed 264 new listings.

Segment Details

Net revenues at Market Services were up 13% from the year-ago quarter to $312 million. This upside was largely due to higher revenues from equity derivative trading and clearing, cash equity trading, fixed income and commodities trading and clearing, and trade management services.

Revenues at Corporate Services increased 22% year over year to $154 million, driven by higher listings services revenues as well as IR & ESG revenues.

Investment Intelligence revenues rose 23% year over year to $263 million. Higher market data, index and analytics revenues drove the upside.

Revenues at Market Technology increased 39% year over year to $117 million, largely due to higher revenues at marketplace infrastructure technology as well as anti-financial crime technology.

Financial Update

Nasdaq had cash and cash equivalents of $430 million as of Jun 30, 2021, down from $2.8 billion at 2020-end level. Long-term debt decreased 1.1% from 2020-end level to $5.5 billion as of Jun 30, 2021.

Capital Deployment

Nasdaq returned $579 million in the first half of 2021, including $410 million in share repurchases and $169 million in dividends.

As of Jun 30, 2021, Nasdaq had $1.459 billion remaining under its share repurchase authorization.

Guidance

Nasdaq provided 2021 non-GAAP operating expense guidance in the range of $1.59 billion to $1.62 billion.

Non-GAAP tax rate is still estimated to be in the range of 25% to 27% in 2021.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

VGM Scores

At this time, Nasdaq has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. 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 Nasdaq has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

MC – Moelis (MC) Up 1.8% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Moelis (MC Free Report) . Shares have added about 1.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Moelis due for a pullback? 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 drivers.

Moelis & Company Q2 Earnings Beat as Revenues Improve Significantly

Moelis & Company recorded second-quarter 2021 adjusted earnings per share of $1.19, surpassing the Zacks Consensus Estimate of 82 cents. In the prior-year quarter, the company recorded a loss per share of 11 cents.

Results were driven by a substantial improvement in revenues. Moreover, the company had a solid liquidity position in the reported quarter. However, a rise in expenses was the undermining factor.

Net income (GAAP basis) was $93.2 million or $1.17 per share against a net loss of $9 million or 10 cents per share recorded in the prior-year quarter.

Revenues Improve Significantly, Expenses Rise

Total revenues jumped significantly year over year from $159.9 million to $360.9 million. The top line outpaced the Zacks Consensus Estimate of $268 million.

Total operating expenses (adjusted basis) were $242.7 million, up 37% year over year. The rise was due to an increase in both compensation and benefits costs, and non-compensation costs.

Other income was $2.8 million against other expenses of $3.3 million recorded in the prior-year quarter.

As of Jun 30, 2021, the company had cash and liquid investments of $280.7 million, with no debt or goodwill.

Share Repurchase Update

In the reported quarter, the company repurchased 0.4 million shares for $21.7 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 6.19% due to these changes.

VGM Scores

At this time, Moelis has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. 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 upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Moelis has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.