Herman Miller, AeroVironment, Medicines Company, Ormat Technologies and Prothena highlighted as Zacks Bull and Bear of the Day
Chicago, IL - September 30, 2015- Zacks Equity Research highlights Herman Miller ( MLHR ) as the Bull of the Day and AeroVironment ( AVAV ) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Medicines Company ( MDCO ), Ormat Technologies Inc. ( ORA ) and Prothena Corporation plc ( PRTA ).
Here is a synopsis of all five stocks:
Earnings estimates have been rising for Herman Miller ( MLHR ) after the company delivered strong fiscal 2016 first quarter results. Not only did sales and earnings beat expectations, management provided Q2 EPS guidance above consensus. It is a Zacks Rank #1 (Strong Buy) stock.
The valuation picture looks very reasonable too with shares trading at just 13x 12-month forward earnings.
Herman Miller designs and manufactures interior furnishings such as seating, freestanding furniture, storage, casegood and textile products, which are used in various environments including office, healthcare, educational, and residential settings. The company also acquired Design Within Reach in July 2014.
Strong First Quarter Results
Herman Miller delivered strong fiscal 2016 first quarter results on September 16. Earnings per share came in at $0.56, beating the Zacks Consensus Estimate of $0.47. It was a 19% increase over the same quarter last year.
Net sales rose 11% to $565.4 million, also ahead of the consensus of $555.0 billion. Excluding acquisitions and foreign currency translation, sales increased 8% year-over-year.
Its North American Furniture Solutions segment, which accounted for approximately 60% of net sales, delivered organic sales growth of 7%.
The company also delivered meaningful profit margin expansion. Gross profit as a percentage of net sales expanded 190 basis points to 38.3%. And its operating margin expanded to its highest level in more than six years at 9.7%.
Earnings estimates have fallen sharply for AeroVironment ( AVAV ) after the company delivered disappointing first quarter results on September 1. The drop in consensus estimates was large enough to send the stock to a Zacks Rank #5 (Strong Sell), placing it in the bottom 5% of all stocks that Zacks ranks.
While shares are trading near their 52-week lows, the stock does not look cheap at 120x forward earnings.
AeroVironment designs and manufactures Unmanned Aircraft Systems (i.e. drones) for military, public safety and commercial activities around the world. It also develops Efficient Energy Systems for electric transportation solutions.
Approximately 85% of sales come from its Unmanned Aircraft Systems segment with the remainder coming from its Efficient Energy Solutions segment.
First Quarter Results
AeroVironment reported disappointing first quarter results on September 1. Adjusted earnings per share came in at -$0.24, below the Zacks Consensus Estimate of -$0.18. The company also burnt through more than $11 million in operating cash flow in the quarter.
Total revenue fell 9% to $47.1 million, missing the consensus of $56.0 million. Revenue declined in both segments. Unmanned Aircraft Systems saw a 2% decline in revenue while revenue in its Efficient Energy Systems segment fell 36%.
Despite the drop in revenue, selling, general and administrative expenses climbed 14%. And research and development costs jumped 38%. These factors led to a 40% plunge in operating income to -$9.1 million.
Following disappointing first quarter results, analysts revised their earnings estimates significantly lower for the remainder of the year. This was sharp enough to send the stock to a Zacks Rank #5 (Strong Sell), placing it in the bottom 5% of all stocks that Zacks ranks based on earnings momentum.
3 Stocks Have Gained Over 25% -- Time to Book Profits?
The fall of the bull market in the U.S. came too fast with the economic activities currently expanding at a moderate pace. The year-to-date decline of nearly 9% in the S&P 500 index has given investors no reason to cheer so far in this year.
While extreme volatility of the market has led to valuation corrections of certain stocks -- providing a golden opportunity to buy them, the irrational movements and exuberance related to the anticipated rate hike have unduly escalated certain asset values.
The elevated prices may seem attractive to investors in the dull local market, which remains highly impacted by the global weakness.
However, the prices of such stocks have deviated from their intrinsic valuation levels, which tend to correct themselves quickly, raising doubts about a company's value and strategic direction in the long run. While making tactical decisions regarding their portfolios, investors need to understand the reasons for such short-term prices changes and stick to their long-term strategic plans.
One way of doing this is to select and add stocks with strong fundamentals and steady dividend income. However, the other alternative is equally effective, which is to book profits on the overpriced stocks with no potential for future growth.
3 Stocks to Book Profits
Selecting stocks to dump could be a tricky proposition. However, with the assistance of our Zacks Stock Screener , one can locate stocks with a red flag.
Here we have zeroed in on three stocks that have gained more than 25% year-to-date despite weak fundamentals. The catch is, however, that these stocks are either a Zacks Rank #4 (Sell) or #5 (Strong Sell) with a negative projected EPS growth rate (F1/F0), thus sounding an early warning of danger ahead.
New Jersey-based The Medicines Company ( MDCO ) acquires, develops and commercializes biopharmaceutical products in late stages of development. The U.S. Food and Drug Administration intends to approve its first product, Angiomax, for use in the treatment of patients with unstable angina undergoing coronary balloon angioplasty.
Though the company's shares have gained over 38% year-to-date, the disappointing outlook for the second-half of 2015 signals a reversal in the price chart soon enough. Moreover, generic competition for Angiomax, pipeline setbacks as well as slow Cleviprex sales justify its Zacks Rank #5 and projected EPS growth rate of -482% as against the industry average of 4.9%.
Headquartered in Nevada, Ormat Technologies Inc. ( ORA ) is a provider of alternative and renewable energy technology. The company engages in the geothermal and recovered energy power business worldwide and operates in two segments, Electricity and Product.
Despite over 25% year-to-date rise in share prices, the material impact on the company's Electricity segment owing to oil and natural gas prices continue to be a major concern. Though the company's latest results showed better cost control, pressurized revenues and compressed margin substantiates its Zacks Rank #4 and projected EPS growth rate of -3.0%, compared with the industry average of 28.5%.
The Ireland-based Prothena Corporation plc ( PRTA ) is a biotechnology company focused on the discovery and development of therapeutic monoclonal antibodies for disease-causing proteins. The company is developing the following programs: NEOD001 for Amyloidosis, NEOD002 for Parkinson's disease, MCAM for Inflammatory disease and Metastatic Cancer and Tau for Alzheimer's disease.
This Zacks Rank #4 company witnessed a more than twofold increase in its ADRs on a year-to-date basis despite reporting loss in the first-half of 2015. Being a development-stage biotechnology company, it does not have any approved product in its portfolio yet. Hence, the company's top line mainly comprises collaboration revenues including reimbursements under its license agreement with Roche.
Moreover, higher research and development expenses as a result of elevated spending for pipeline development as well as personnel costs further weighs on the future growth prospects of the company. The company's projected EPS growth rate stands at -786.2% as against the industry average of 4.9%.
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