Today’s news: Alexion Pharmaceuticals (ALXN), Chipotle Mexican Grill (CMG), Knight-Swift Transportation (KNX) and Southwest Airlines (LUV) report first quarter results. Baker Hughes, a GE co. (BHGE) moves from Strong Buy to Buy. Knight-Swift Transportation (KNX) moves from Hold to Strong Buy.
Alexion Pharmaceuticals (ALXN) reported first quarter non-GAAP diluted EPS of $1.68 this morning, exceeding all analysts’ estimates. Revenue of $930.9 million beat the consensus estimate of $923.5 million. In reaction, the stock rose 11% this morning to about 118, in the middle of its 2018 trading range. The company moderately increased its guidance for full-year 2018 revenue and profits.
CEO Ludwig Hantson commented, “In the first quarter of 2018 we had strong momentum in our complement and metabolic portfolios. We continue to see robust underlying growth of Soliris and I am particularly pleased with the U.S. launch in patients with gMG. In addition, Strensiq remains a key driver of growth as we continue to serve new patients with HPP. Along with growing our in-line business, we announced positive topline results from both the ALXN1210 Phase 3 PNH Naive and Switch studies, and executed on our disciplined business development plan with the anticipated acquisition of Wilson Therapeutics to begin to rebuild the clinical pipeline.”
ALXN is a volatile and undervalued aggressive growth stock. In the coming months, I expect ALXN to rebound to its March high of 127, with lots more capital gain potential thereafter. Strong Buy.
Baker Hughes, a GE co. (BHGE – yield 2.0%) is pennies away from significant price resistance at 37. There’s a 99% chance that the share price will retreat and rest. Consider selling now and repurchasing in the 32-33 range, or simply hold your shares and buy more on dips. I’m moving BHGE from Strong Buy to Buy, and I still anticipate that the stock will perform very well in the balance of 2018. Buy.
Chipotle Mexican Grill (CMG) reported first quarter EPS of $2.13 yesterday afternoon, which far exceeded all analysts’ estimates. In reaction, the stock is trading up 23% this morning at about 418.
The earnings beat was driven by increased sales and lower marketing costs, offset by higher tax rates. The company opened 35 new restaurants during the quarter, closed two restaurants, and announced a new $100 million share repurchase authorization. New CEO Brian Niccol stated, “While the company made notable progress during the quarter, I firmly believe we can accelerate that progress in the future. We are in the process of forming a path to greater performance in sales, transactions, margins and new restaurants.”
Chipotle is a growing restaurant chain, and an aggressive growth stock. I’ll be watching for analysts to rework their full-year earnings estimates, which previously reflected 28% EPS growth in both 2018 and 2019. If the stock remains fully valued based on the new numbers (according to my stock selection criteria), I will sell shortly. Hold.
Knight-Swift Transportation Holdings (KNX – yield 0.6%) reported first quarter EPS of $0.44 when the market was expecting $0.40. Revenue of $1.27 billion slightly missed the consensus estimate of $1.30 billion. The company’s driver count began the year by falling, then stabilized, and is now expected to grow by about 2%-3% in the second half of 2018, which addresses an overriding concern among investors. The quarter came in better than expected, and consensus earnings estimates will likely increase in the coming weeks. Four investment firms changed their price targets this morning to a range of 45 to 55.
KNX is an undervalued mid-cap stock. The company is experiencing tremendous earnings growth. KNX has been falling in recent weeks, and will likely bounce here at medium-term price support at 38-39. The current price represents a tremendous buying opportunity for patient investors who are willing to wait several months for the stock to rebound to its 2018 high at 50. As such, I’m moving my recommendation from Hold to Strong Buy. Strong Buy.
Southwest Airlines (LUV -- yield 0.9%) reported record first quarter earnings per adjusted diluted share of $0.75 this morning vs. the consensus estimate of $0.74. Revenue of $4.9 billion missed the consensus estimate of $5.0 billion.
In the press release, CEO Gary C. Kelly began his opening remarks with statements of immense sorrow over the airlines’ very recent tragedy in which a passenger died. The company has since inspected about 80% of its fleet, and expects to complete all inspections in May. Second quarter bookings are lower than previously expected due to the air accident.
Kelly additionally described the company’s new air travel services: “We continue to expect to begin selling tickets in 2018 for service to Hawaii, and today we announce our intent to begin service to four Hawaiian airports: Honolulu International Airport, Lihue Airport, Kona International Airport at Keahole, and Kahului Airport. Additionally, we entered into an agreement with Alaska Airlines to lease 12 slots at New York’s LaGuardia Airport and 8 slots at Washington Reagan National Airport.”
LUV is an undervalued stock that’s experiencing aggressive earnings growth. The stock is down 3% this morning at 52, near the bottom of its one-year trading range. I’d like to reiterate that LUV is not yet ready to rebound toward its recent high of 66. That being said, patient investors who buy LUV now will be getting quite a bargain. Strong Buy.