Today we’re reporting on earnings for Applied Materials (AMAT), and adding two stocks to the Cabot Undervalued Stocks Advisor portfolios, Archer Daniels Midland (ADM) and Total SA (TOT).
Applied Materials (AMAT), maker of memory chips and LED displays, reported a good fourth quarter yesterday (October year-end), with sales of $3.3 billion in line with consensus estimates of $3.31 billion, and up 39.2% from a year ago. News headlines announcing a revenue miss are absurd.
Earnings per share (EPS) were 66 cents, a penny above the consensus estimate.
The company guided Wall Street considerably higher than expected on its current first quarter 2017 sales and EPS. Sales are expected in a range of $3.2 billion to $3.34 billion vs. the consensus of $3.1 billion. EPS are now expected in a range of $0.62 to $0.70 vs. the consensus of $0.58. Consequently, analysts are revising their full-year 2017 earnings estimates for AMAT.
AMAT will cease reporting its orders after the company reports its January quarterly results—a practice that its semiconductor peers have already adopted. This will eliminate a typical source of volatility in the share price.
AMAT has been trading between 28 and 30.50 for three months. The price chart appears constructive. AMAT appears to have begun a new run-up. Buy AMAT right now. Strong Buy.
I’m also adding Archer Daniels Midland (ADM), an agricultural commodity company, to the Buy Low Opportunities Portfolio.
The company’s earnings outlook is turning around in fiscal 2017 (December year-end). Analysts expect EPS to grow 28.8% in the coming year. The corresponding P/E is low for a consumer staple stock, at 14.7.
Archer Daniels tends to increase its dividend annually, and per that schedule, the next dividend announcement should include an increase in the quarterly payout. The current dividend yield is 2.8%.
Archer Daniels has a moderate debt ratio of 24%.
The share price fell dramatically in 2015, and has been rebounding throughout 2016. A recent breakout from a stable trading range was foiled by the post-election drop in consumer staples stocks. Let’s take advantage of the price pullback and buy ADM.
There’s going to be a lot of upside resistance when ADM approaches its 2015 high near 51. I’m looking at ADM for a shorter-term hold, with a potential total return of about 17%. Strong Buy.
I’m also adding Total SA (TOT), a French multi-national oil and gas company, to the Buy Low Opportunities Portfolio.
This energy company fell in 2014, due to industrywide prospects of falling earnings. That situation is finally turning around. Total, and many energy peers, are expected to see large increases in EPS in fiscal 2017 (December year-end), with Total’s EPS expected to rise 33.2%.
Importantly, the 2017 P/E is only 10.1, indicating a very low valuation.
TOT has a steady dividend yield of 5.89%. The payout changes slightly each quarter, with the last seven quarterly payouts ranging between $0.67 and $0.69 per share.
The company’s 2015 debt ratio was moderate at 28%.
TOT has been trading steadily sideways for two full years, other than expected corrections and recoveries during downturns in the broader market (due to Brexit, etc.). The trading range has recently narrowed between 45 and 49, and the stock is sitting at the bottom of that stable trading range.
This is a great time to buy TOT! It offers strong earnings growth, very low P/E, large dividend, strength in the price chart, and good prospects for the energy industry. Strong Buy.
