Today’s news: Alexion Pharmaceuticals (ALXN) and Supernus Pharmaceuticals (SUPN) each move to Hold recommendations; Blackstone Group (BX) announced a conversion to a corporation, and moves to a Strong Buy recommendation; Schlumberger (SLB) reported a good first quarter; Sleep Number (SNBR) fell after reporting a strong earnings beat; Synchrony Financial (SYF) reported a big earnings beat.
Discussion of “Medicare for All” among political candidates is causing havoc among healthcare stocks. Yesterday, Alexion Pharmaceuticals (ALXN) and Supernus Pharmaceuticals (SUPN) each fell in reaction to the fear of such a policy being implemented. I’m moving both SUPN and ALXN from Strong Buy to Hold recommendations while I assess the fallout in the coming days. Hold.
Blackstone Group LP (BX) reported first quarter results and also announced that they will convert from a limited partnership to a corporation. This is great news for investors, because the conversion will open BX for inclusion into all kinds of institutional and mutual fund portfolios which were previously prohibited from buying the shares. (It wasn’t illegal for them to buy BX. Rather, the investment policy statements and prospectuses of many financial organizations steered portfolio managers away from buying shares of limited partnerships.) Read more and watch the video announcement here.
Blackstone’s assets under management (AUM) rose to $512 billion during the quarter.
The fluctuating dividend yield was 6.0% earlier this week, and will change in the coming months. I will quote a more exact yield after reviewing the relevant corporate guidance.
In the interest of brevity and timeliness to more promptly publish this report, I will write about the details of the C-corp conversion in the coming days. For now, I would like to encourage all shareholders to hold their shares. The stock will rise significantly today, and I expect additional capital gains in the coming months. I’m moving BX from Buy to a Strong Buy recommendation for investors who plan to hold the stock for 3-24 months. Strong Buy.
Schlumberger (SLB – yield 4.2%) reported first quarter EPS and revenue of $0.30 and $7.9 billion this morning, when the market was expecting $0.30 and $7.8 billion. CEO Paal Kibsgaard commented, “Looking beyond the headline numbers for the quarter, our international business results were strong, with Reservoir Characterization, Drilling, and Production combining to deliver year-on-year revenue growth of 8%, tracking our expectation of high single-digit growth in the international markets in 2019.” Here’s the press release for further reference.
During the quarter, Schlumberger repurchased 2.3 million shares of its common stock for a total cost of $98 million.
The stock is reacting well to the earnings report in pre-market trading, up about 1%. In recent days, SLB emerged from a stable trading range. I believe there’s immediate upside that could deliver a $10-$20 per share gain in the coming months. Buy.
Sleep Number (SNBR) reported first quarter EPS of $0.80 after yesterday’s market close vs. the $0.73 analysts’ consensus estimate. The range of estimates was $0.66-$0.79. The company reported $426.4 million revenue vs. the expected $427.5 million estimate. Sleep Number is the leader in sleep innovation, and a designer, manufacturer, marketer, retailer and servicer of a line of Sleep Number beds, bases and bedding accessories in 580 stores in all 50 U.S. states.
Sleep Number reaffirmed their full-year 2019 guidance for EPS within a range of $2.25-$2.75. The consensus estimates for 2019 and 2020 stood at $2.45 and $2.80 on April 17, prior to the release of first quarter results, representing EPS growth rates of 27.6% and 14.3%.
In addition, the company reiterated their February projection of 6%-10% net sales growth in 2019. Net sales totaled $1.53 billion in 2018. Therefore, investors can expect full-year 2019 net sales within a range of $1.62-$1.68 billion. The analysts’ consensus revenue estimate stands at $1.6 billion.
The company repurchased $41 million of stock during the quarter and is aiming to repurchase $125-$145 million of stock during full-year 2019. The basic outstanding share count fell by 5.5% in the first quarter and 44% since December 2013.
Sleep Number is one of the featured stocks in my annual publication, Top 10 Buy and Hold Stocks for 2019, and was also my top growth stock pick for 2019 as cited by MoneyShow and other publications.
SNBR rose 51.4% year-to-date through April 17, from 31.73 to 48.03. SNBR then fell 14% in yesterday’s after-hours trading to 41.31. It’s not an uncommon occurrence for a company with a very small market capitalization to experience a dramatic price swing upon an earnings release. The stock has already risen more than anyone could have reasonably expected this year.
SNBR is not a member of any of the Cabot Undervalued Stocks Advisor portfolios. Traders and growth stock investors might consider keeping SNBR on their radar for a potential near-term rebound opportunity.
Synchrony Financial (SYF – yield 2.5%) reported first quarter diluted EPS of $1.56 when the market was expecting $0.89. The outsized EPS number included a benefit from reserves released related to the reclassification of the Walmart portfolio to loans held for sale during the quarter. The company repurchased $966 million of stock during the quarter. Review the press release here.
SYF is an undervalued mid-cap growth & income stock. The price chart indicates that SYF is immediately ready to begin another run-up, to a maximum of 39, where SYF last traded in January 2018. Buy SYF now. Strong Buy.