Bull of the Day: KLA-Tencor (KLAC)

Headquartered in Milpitas, CA, KLA-Tencor (KLAC - Free Report) is one of the largest semiconductor equipment companies in the world. They provide process control and yield management solutions for the semiconductor, LED and related nanoelectronics industries.

The company was founded in 1997 with the merger of two companies--KLA Instruments and Tencor Instruments. They have customer operations and service centers around the world.

Impressive Results

The company reported third-quarter fiscal 2017 earnings of $1.62 per share, ahead of the Zacks Consensus Estimate of $1.54. Revenues surged more than 28% year-over-year to $913.8 million, also better than the Zacks Consensus Estimate.  

"KLA-Tencor delivered excellent results in Q3 of fiscal 2017, thanks to another outstanding performance by our employees in executing the Company's growth strategies in an exciting and dynamic period for the Company, and for the semiconductor industry," said the CEO.

Returning Capital to Shareholders

The company continues to boost shareholders’ value through dividends. They have a track record of consistently increasing their dividend payout with the growth in free cash flow. They have maintained a payout ratio of ~40 to 50%. The stock has a dividend yield of 2.11% currently.

Rising Estimates

The Zacks Consensus Estimate for FY 2017 and FY 2018 have surged to $5.88 per share and $6.62 per share respectively, up from $5.71 and $6.29, before the results.The company has an impressive record of beating estimates; they have missed only twice in the past 20 quarters.

KLA-Tencor Corporation Price and Consensus

KLA-Tencor Corporation Price and Consensus | KLA-Tencor Corporation Quote

The Bottom Line

Semiconductors have outperformed the broader market as well as most all other segments of the technology sector. “Semiconductor Equipment - Wafer Fabrication” industry is currently ranked 4 out of 265 Zacks Industries (top 2%). With rising demand from many high growth areas, this outperformance is likely to continue.

Lam Research had agreed to acquire KLAC for $10.6 billion last October but the two companies had to abandon their merger plans after the Justice Department expressed serious concerns on antitrust grounds. However, most analysts are optimistic on the company’s prospects as a stand-alone entity.

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Disclosure: I own KLAC in the Income Investor portfolio.

By Neena Mishra

Source: https://goo.gl/TkPedg

Bull of the Day: Caterpillar (CAT)

Caterpillar (CAT - Free Report) shares have rallied 8% in the past six months, nearly keeping up with the S&P 500 at +10%, on hopes for economic stimulus and infrastructure plans from Washington.
And while the stock made a new multi-year low in early 2016 under $60, the earnings picture for the company may just be beginning to bottom.

CAT is a Zacks #1 Rank this month because several analysts have raised EPS estimates, instead of lowering them like they have consistently done for most of the past two years.

In the past 30 days, the full-year 2016 profit projection has moved up from $3.07 to $3.20.

And 2017 estimates were pushed from $4.20 to $4.34, representing 35.5% annual EPS growth on the back of a projected 5.9% climb in revenues to $40.7 billion.

That's still a ways below 2012's peak at $67 billion and even 2014's flat-line around $55 billion. So it's a good time to look at what's still digging into CAT's top and bottom lines.

Short Thesis Expired?

Global investors are aware that famed short seller Jim Chanos outlined his bearish thesis on CAT last October, citing a pending real estate bubble burst in China as well as the slowdown in mining and oil & gas projects around the world.

But weeks before in September, Deutsche Bank analysts stated that they believed 2016 would be the "cyclical trough" for Caterpillar. They noted that the "bulk of the natural resource downturn in the rearview mirror" as both gold and oil recover somewhat from their bear markets.

Also Read Mother's Day Gifts :https://goo.gl/9qFb1d

Deutsche analyst Nicole DeBlase also asserted that Wall Street hadn't given Caterpillar credit for its aggressive restructuring efforts that saved the company almost $2.25 billion since 2013. When shares were trading around $82 she placed a $98 target on them.

That was a solid call by the DB analyst over one month ahead of the US presidential election. And CAT delivered at 27.7% upside earnings surprise for the December quarter to add some validity to their "trough" call. That $98 target was reached by January.

Excavation and Tax Tailwinds

As further proof, word came last week that sales of excavators in China were up 89% in March and +106% for the quarter. Sales of roughly 21,000 units are still below half of the peak in 2011.

If commodity markets have indeed bottomed and are now becoming beneficiaries of inflationary forces, this will continue to add to steady improvement in CAT sales and profits.

Finally, while tax reform from the new administration may be a thing of the future, one past change is coming home to roost and could have a positive impact on Q1 earnings for industrial companies.

According to analysts at Baird Equity Research, the Financial Accounting Standards Board (FASB) updated accounting standards requiring tax effects of stock compensation to flow through the income statement as discrete items in the reporting period in which they occur. The update was issued last March but became effective as of December 2016, with some companies being early adopters and impact on them has been notable.

The investment bank noted that CAT, Eaton (ETN - Free Report) , Dover (DOV - Free Report) , Illinois Tool Works (ITW - Free Report) and Lincoln Electric (LECO - Free Report) could all be beneficiaries in their first quarter reports.

Bottom line: CAT is clearly on the upswing from a big earnings trough. Investors who are optimistic about the global economy and emerging markets will find reason to hold CAT and accumulate on the dips. Any US infrastructure plans add incremental stability to that view.

by Kevin Cook 

Source: https://goo.gl/VXKiKS

Bull of the Day: Arch Coal (ARCH)

Over the past 8 years, the coal industry has been hampered by massive regulations, and a not so friendly relationship with the presidential administration.  But this is going to change, according to our new President Donald Trump.  President Trump envisions a coal resurgence under his administration.  Further, President Trump is in the process of eliminating some of the burdensome regulations imposed on the industry.  And one coal company, that is poised to take advantage of these changes, is our Zacks Bull of the Day, Arch Coal (ARCH - Free Report) .
This Zacks Ranked #1 (Strong Buy) company is engaged in the mining, processing and marketing of low-sulfur bituminous coal. The Company sells its coal primarily to electric utilities in the eastern United States. The Company also exports coal, primarily to European customers.

Recent Earnings Results
Management announced Q4 16 earnings on February 8th where they absolutely destroyed the Zacks consensus earnings estimate; expectations were for $0.03, and they came in at $1.65, a +5,400% positive surprise.  The company easily beat the Zacks consensus revenue estimate as well.  Coming out of restructuring, management was able to eliminate nearly $4.8 billion of debt obligations, and reduced annual interest expenses by $330 million.

Management’s Take

According to John W. Eaves, Arch's chief executive officer, “Arch achieved a strong financial and operational performance in the fourth quarter - our first earnings period following the completion of our successful restructuring.  These results demonstrate the positive momentum in our business and the potential we have to elevate our performance still further as the industry continues to evolve. We are confident in our ability to leverage our strong operating portfolio, commercial and logistical expertise and enhanced financial foundation to deliver long-term value for our shareholders."

Further, John T. Drexler, Arch's senior vice president and chief financial officer, stated, "Our successful financial restructuring has dramatically transformed our capital structure, enhanced our balance sheet and provided the kind of financial flexibility that will enable us to compete successfully in today's marketplace. Our fourth quarter performance illustrates the overall strength of the new Arch Coal, and our liquidity position will enable us to execute our strategy, capitalize fully on our low-cost operating portfolio, and generate long-term shareholder value."

Price and Earnings Consensus Graph  

As you can see in the price and earnings consensus graph below ARCH came storming out of restructuring plan with a huge beat, and analysts have responded by significantly increasing their expectations for 2017.

Arch Coal Inc. Price and Consensus

Arch Coal Inc. Price and Consensus | Arch Coal Inc. Quote

Increasing Estimates

Due to the extremely impressive earnings and management’s ability to adhere to their restructuring plan, earnings estimates have improved over the past 30 days for Q1 17, Q2 17, FY 17, and FY 18.  Q1 17 rose from $$2.24 to $2.85, Q2 17 improved from $1.42 to $2.24, FY 17 jumped up from $6.00 to $8.66, and FY 18 vaulted up from $3.84 to $7.08.

Bottom Line

With the new administration coal is back!  President Trump has been hailing clean coal as one of the major sources of energy during his campaign and as the new President of the United States of America.  By eliminating huge amounts of debt via their restructuring plan, Arch has positioned itself to take advantage of the resurgence of American coal.

by Brian Hamilton

Source: https://www.zacks.com/commentary/104522/bull-of-the-day-arch-coal-arch

Bull of the Day: AXT Inc (AXTI)

AXT Inc (AXTI - Free Report) is a chip stock that has a lot going for it. Problem is, most investors haven't heard of it as it is pretty small so it probably doesn't land on some radar screens due to its market capitalization. Luckily, it did land on my radar screen and I am making this Zacks Rank #1 (Strong Buy) stock the Bull of the Day.

Why I Like It

Small cap stocks have been out-performing of late.This is a small cap stock in a "risk on" environment.

Revenue trends are pointing to continued sequential growth.

Solid History of beating the Zacks Consensus Estimate.

In a sector that has been super hot all year (semiconductors).

The Recent Numbers

I like to do a review of the most recent quarter for stocks that I highlight as Bulls of the Day. AXTI reported the June 2016 quarter back in late July, so we are a month away from the company reporting the September quarter.

Description - The most recent quarter was a beat on top and on bottom. The company posted EPS of $0.03 when the Zacks Consensus Estimate was calling for $0.01. Revenue came in $1M above expectations for a 2.6% positive revenue surprise. As a result, the stock was bid up by 3.85% in the session following the report.

AXT Inc., designs, develops, manufactures and distributes high-performance compound semiconductor substrates, as well as opto-electronic semiconductor devices such as high-brightness light emitting devices, and vertical cavity surface emitting lasers.

Earnings History

The company has a good history of beating the Zacks Consensus Estimate. There has been one miss since 2013 and that means a truckload of beats. The miss was the December 2015 quarter and Wall Street didn’t even punish the company as the stock was only down 1.5% in the session following the results.

The following quarter was a solid beat of $0.02 for a 100% positive earnings surprise. The company also beat on top and Wall Street praised the news. Shares of AXTI were up more than 16% in the session following that beat. After the most recent beat in July, shares were higher by just 3.8%, but still going in the right direction.

Estimates

The estimate picture is a thing of beauty, with the Zacks Consensus Estimate for 2016 moving from a loss of five cents back in April to a gain of $0.08 in July and is now at $0.13. That is the sort of positive momentum that you have to love to see.

The 2017 number is also moving higher, going from a gain of $0.05 to $0.12 to $0.18 over the same time period as mentioned above.

Valuation

Investors have to pay up for this play in terms of forward PE, but no so much in terms of other metrics. AXTI has a 35x forward earnings multiple compared to a 23x multiple for the industry average. The price to book of 1.1x is well below the 2.7x industry average and we also see the stock trading at a discount in terms of price to sales. The company has a 1.9x price to sales multiple while the industry average trades at about 3.1x.

I see this stock having less revenue growth than the industry average this year, but will beat the industry next year. As far as earnings growth goes, AXTI is surpassing the industry average for this year and next as well.

Chart

Zacks has developed a chart that helps investors see how earnings estimates have impacted the price of the stock over the last several years. We call this chart the price and consensus chart, and each color-coded lines represents analyst estimates over a designated year. As estimates increase, the stock tends to follow. The Zacks Rank is impacted by earnings estimate increases, beats and incorporates the idea of analyst agreement and magnitude. As a Zacks Rank #1 (Strong Buy) we see that estimates are moving higher.

AXT INC Price and Consensus

AXT INC Price and Consensus | AXT INC Quote

by Brian Bolan 

Source: https://www.zacks.com/commentary/91057/bull-of-the-day-axt-inc-axti

Bull of the Day: CoreLogic (CLGX)

CoreLogic (CLGX - Snapshot Report) delivered the coveted "triple play" in Q1: a positive earnings surprise, a positive revenue surprise, and a significant increase in consensus estimates from analysts.

It is a Zacks Rank #1 (Strong Buy) stock.

CoreLogic is a global property information, analytics and data-enabled services provider. The company generates the majority of its revenues from clients with operations in the U.S. residential real estate, mortgage origination and mortgage servicing markets. The volume of U.S. mortgage loan originations serve as a key market driver for more than half of its business.The company reported solid double-digit revenue growth while greatly expanding profit margins. This led to a huge increase in net income year-over-year.

The company reports its results in two segments: Data & Analytics and Technology & Processing Solutions. Its D&A segment owns or licenses data assets including loan information, criminal and eviction records, employment verification, property sales and characteristic information, property risk and replacement cost, and information on mortgage-backed securities. Its TPS segment provides property tax monitoring, flood zone certification and monitoring, credit services, mortgage loan administration and production services, lending solutions, mortgage-related business process outsourcing, technology solutions and compliance-related services.

First Quarter Results

CoreLogic delivered better-than-expected first quarter results on April 22. Adjusted earnings per share (but including stock-based compensation expense) was $0.40, crushing the Zacks Consensus Estimate by 54%. It was a 264% increase over the same quarter last year.

Revenue rose 12% to $365 million, beating the consensus of $355 million. This was driven by 19% growth in Data and Analytics (including 7% organic growth), which accounted for 45% of total revenues. Technology & Processing Solutions (the other 55%) saw top-line growth of 6%.

CoreLogic delivered strong margin expansion in the quarter too due to a favorable business mix and continued cost management. The company also leveraged its selling, general and administrative expenses.

Estimates Soaring

Following the strong Q1 beat, analysts revised their estimates significantly higher CoreLogic. This sent the stock to a Zacks Rank #1 (Strong Buy).

The 2015 Zacks Consensus Estimate is currently $1.68, up from $1.38 just 30 days ago. The 2016 consensus is now $1.92, up from $1.70 over the same period. Based on the consensus estimates, analysts are projecting 45% adjusted earnings growth this year and 15% next year.

Valuation

Shares of CoreLogic have soared since the strong Q1 report. While the stock doesn't look cheap around 26x 12-month forward earnings, it does sport a strong free cash flow yield near 9%.

The Bottom Line

With strong earnings momentum, solid top-line growth and expanding profit margins, CoreLogic is well-positioned to continue running higher over the next several weeks.

Todd Bunton,

Source: http://www.zacks.com/commentary/44742/bull-of-the-day-corelogic-clgx

Bull of the Day: HealthStream (HSTM)

HealthStream (HSTM - Snapshot Report) has seen its estimates increase due to a solid Q1 earnings report where subscriber growth for the Workforce Development Solutions segment was the main driver.  Further, revenues grew +23% year over year, while contracted subscribers increased +15% year over year.  These combined factors has made HealthStream the Zacks Bull of the Day.

For all intended purposes, HealthStream has a solid grip on the healthcare education market, and is considered the industry leader.  The company boasts of having their customer base represented by over half the nation’s hospitals, and about 4.1 million healthcare professionals, who have all chosen HealthStream’s platform of products and solutions. This Zacks Rank #1 (Strong Buy) stock is known for pioneering Web-based solutions to meet the training and education needs of the healthcare industry utilizing a proprietary system.  Through strategic relationships with medical institutions and commercial organizations the company has amassed hours of training and educations courses.  The company distributes hours of these courses online to allied healthcare professionals, nurses, doctors, and other healthcare workers.

Their Workforce Development Solutions segment is the main driver for the company where each sub-segment saw growth above or in line with management’s expectations.  Also, the Patient Experience Solutions segment, second largest segment, saw +8% year over year growth, and has recently contracted two large health systems for just over $1 million in services. 

Price and EPS Surprise

The graph below shows the Price and +EPS Surprise for HealthStream.

Increasing Estimates

Over the past 7 days, estimates have increased for Q2 15, Q3 15, FY 15, and FY 16; Q2 15 rose from $0.04 to $0.06, Q3 15 increased from $0.06 to $0.08, FY 15 jumped from $0.22 to $0.32, and FY 16 rose from $0.39 to $0.43. 

Company Data

Bottom LineHealthStream’s dominate position in healthcare education and training has produced 10 consecutive quarters with revenue growth, while containing COGS and SG&A to reasonable levels.  During the same 10 quarters, the company has also increased Total Assets each quarter.  These are all indications of a solid growth company.

After their fifth consecutive earnings beat and solid client pipeline HealthStream has earned its spot as the Zacks Bull of the Day.  Further, with high expectations, and increasing estimates, it is expected that this company will continue to grow over the next few quarters.

by Brian Hamilton

Source; http://www.zacks.com/commentary/44154/bull-of-the-day-healthstream-hstm