For Immediate Release
Chicago, IL - November 30, 2015 - Zacks Equity Research highlights Neophotonics Corp ( NPTN ) as the Bull of the Day and Diodes Incorporated ( DIOD ) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Simon Property Group, Inc. ( SPG ), Taubman Centers ( TCO ) and EPR Properties ( EPR ).
Here is a synopsis of all five stocks:
There are a few companies that specialize in high-speed communication networks, but there is one that is best positioned to take advantage of the demand for these networks worldwide. This company most recently destroyed the Zacks Consensus Earnings and Revenue expectations, and pointed to increased activity in the next few quarters. Further, this company has produced 5 consecutive quarters of pro forma profitability. Due to these strong data points, Neophotonics Corp ( NPTN ) is the Zacks Bull of the Day.
This Zacks Rank #1 (Strong Buy) is engaged in the design and manufacture of photonic integrated circuit, or PIC, based modules and subsystems for bandwidth-intensive, high-speed communications networks. Products offered by the Company includes high-speed products that enable data transmission at 10Gbps, 40Gbps and 100Gbps, agility products such as ROADMs that dynamically allocate bandwidth to adjust for volatile traffic patterns, and access products that provide high-bandwidth connections to more devices and people over fixed and wireless networks.
According to Tim Jenks, Chairman and CEO, "We are pleased to report our fourth straight quarter of GAAP profitability and year over year revenue and margin expansion, which resulted in our generating $43 million of Adjusted EBITDA over the last four quarters. We are excited about the renewed momentum we are seeing in the 100G market and the progress we are making with our strategy of increasing our content per 100G port and extending our products to 400G and beyond."
In their most recent quarter, revenues improved +2.4% YoY, gross margins rose +15.5% YoY, non-GAAP gross margins advanced +12.5%, and net income improved from -$1.9 million in Q314 to +$1.4 million in Q315. Further, the company has a solid balance sheet with cash and cash equivalents valued at $103.6 million.
Going into the fourth quarter 2015, management expects revenues in a range of $82 million to $86 million, above the previous consensus of $80.5 million. Also, the company sees non-GAAP gross margins in the range of 30%-40%.
Down cycles during times of weak demand makes it difficult for a company to manage any excess capacity, and it tends to negatively impact margins for several quarters at a time. Further, the company is then left waiting for improvements in the macro environment to enable them to rebound from the down cycle. This is the situation that Diodes Incorporated ( DIOD ) is currently facing, who is also the Zacks Bear of the Day.
This Zacks Rank #5 (Strong Sell) is a leading manufacturer and supplier of high-quality discrete and analog semiconductor products, primarily to the communications, computing, industrial, consumer electronics and automotive markets. The Company's corporate sales, marketing, engineering and logistics headquarters is located in Southern California, with two manufacturing facilities in Shanghai, China, a wafer fabrication plant in Kansas City, Missouri, engineering, sales, warehouse and logistics offices in Taipei, Taiwan and Hong Kong, and sales and support offices throughout the world.
In their most recent quarter, Diodes saw revenues decline -10.6% YoY, gross profits fell -17.5% YoY, and GAAP net income plummeted -85.6% YoY. Further, gross profit margins fell from 32% to 29.5% YoY. Also, management guided Q4 revenues about $10-12 million below current expectations of $200 million.
Looking forward Dr. Keh-Shew Lu, President and CEO, stated, "We currently expect this weak environment and the distributor inventory adjustments to extend into the fourth quarter so we have taken additional measures to carefully manage expenses, including reductions in travel and vendor expenses as well as a freeze on new hires."
Complete Holiday Weekend Shopping with These 3 REITs
If Thanksgiving Day celebrates nature's bounty, Black Friday and the month thereafter is for retailers to rejoice in abundant sales. And can there be a better way to start the annual shopping bonanza than with optimism brimming in the market?
Specifically, a bigger-than-expected drop in initial Jobless Claims, a stronger-than-expected durable goods reading and better-than-expected income levels point to a healthy economic recovery. Moreover, high savings on cheap gasoline prices essentially indicate fatter purses this holiday season.
Also, data compiled by eMarketer suggest a 5.7% jump in holiday sales (November and December) to $885.7 billion and the National Retail Federation (NRF) estimates a 3.7% sales rise for the period to $630.5 billion (excluding autos, gas and restaurant sales). Moreover, online sales for the season are expected to increase 6-8% to approximately $105 billion.
Well, if all these numbers have made you upbeat on the retail sector, don't forget to add some real estate stocks that house the retailers. Since increased retailing implies more activities at the retail properties, this is the right time to add these stocks to one's buying list.
Jingle All the Way for REITs?
And why not? Won't a rise in sales at physical stores and restaurants involve greater footfall at malls and shopping centers, creating further demand for space? You may say that the online buying is the now the name of the game, but how can one forget about the need for real space for storage and efficient distribution even that medium of retailing needs?
Importantly, while landlords give their malls a facelift, renovate them as swanky one-stop destinations for shopping, dining and entertaining, and make them distribution hubs, they also opt for overage rent agreements. Under such agreements, tenants (retailers) need to pay additional rent when sales attain a pre-specified target. So a good shopping season - whether online, or in physical stores or restaurants - can well translate into fatter wallets for landlords.
Moreover, despite the hype surrounding online retail, we find that firms have increased the number of planned store openings for the next two years, per an article from the National Real Estate Investor site (citing an August report from RBC Capital Markets). The study reveals 42,554 planned store openings for next year and 79,655 for the following two, reflecting a year-to-date hike of 4.1% and 4.2%, respectively, for the 12-month and 24-month periods. This strongly implies that space in malls and shopping centers is greatly in demand, giving retail landlords enough reasons to cheer.
Also, placed in the top 15% of the Zacks Rank list (this methodology ranks all of the 260+ industries based on the earnings outlook for the constituent companies in each industry), this category of REITs enjoys an overall positive outlook for the near term.
Therefore, despite high chances of a Fed-lift off next month, this favorable seasonal backdrop can add holiday cheer to the retail real estate investment trust (REIT) stocks.
Stocks to Buy
Here are the 3 stocks that we have handpicked for your Black Friday cart. Aside from having solid fundamentals and a decent dividend yield, these REITs hold a favorable Zacks Rank which indicates high chances of market outperformance over the next 1-3 months. These stocks are witnessing estimate revisions too reflecting analysts' positive view on these stocks.
We suggest investing in Simon Property Group, Inc. ( SPG ) which holds a Zacks Rank #2 (Buy). This retail REIT, which has a long-term earnings growth rate of 8.5%, has been a steady performer delivering an average earnings surprise of 4.35% over the trailing four quarters. The stock has a dividend yield of 3.40%.
Estimate revision activities have been solid too, with the Zacks Consensus Estimate for 2015 moving up 9 cents to $10.14 for 2015 and 5 cents to $10.81 for 2016 over the past 30 days.
Taubman Centers ( TCO ) is another stock to bet on. Carrying a Zacks Rank #2 and with a long-term earnings growth rate of 7.4%, this Bloomfield Hills, MI-based retail REIT delivered an average positive earnings surprise of 7.09% over the trailing four quarters. The stock has a dividend yield of 3.13%.
This stock is also witnessing estimate revisions in the positive direction, reflecting investors' bullish view on the stock. For 2015, the Zacks Consensus Estimate moved up 2 cents to $3.41 and 5 cents to $3.62 for 2016 over the past 30 days.
You can bet on EPR Properties ( EPR ), as well. This retail REIT stock carries a Zacks Rank #2 and has projected sales growth of 10.72% for the current year as against the industry average of 2.50%. This Kansas City, MO-based company also has beaten the Zacks Consensus Estimate in the past four trailing quarters and delivered an average positive earnings surprise of 4.25%. The stock has a dividend yield of 6.47%.
Analysts are bullish on its prospects, reflected in its estimate revisions. For 2015, the Zacks Consensus Estimate has moved up 4 cents to $4.44 and for 2016 climbed 8 cents to $4.76 over the past 30 days.
About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
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