Today’s news: Baker Hughes (BHGE) and Sanmina Corp. (SANM) each reported strong quarterly earnings beats.
Sanmina Corp. (SANM) reported second-quarter results on Monday afternoon, April 29 (September year end). Non-GAAP diluted earnings per share of $0.91 surpassed the consensus estimate of $0.74. Revenue came in at $2.13 billion vs. the $2.0 billion estimate.
CEO Michael Clarke stated, “We exceeded our expectations for the quarter. Revenue was stronger than anticipated driven by our teams’ excellent job in securing supply to catch up to demand. Our ability to control our costs, drive efficiencies and leverage our operating model drove operating margins to 4.1 percent. …our team made positive strides in reducing our inventory levels. We remain confident in our ability to drive profitable growth and positive cash flow from operations over the remainder of fiscal 2019.”
The earnings press release gave a third-quarter forecast of non-GAAP diluted EPS within a range of $0.72 to $0.82. The previous consensus estimate had been $0.74, so analysts will necessarily be re-working and increasing their earnings estimates. Since second- and third-quarter actual and projected results are coming in $0.20 higher (on average) than previously expected, that bumps up the 2019 EPS growth rate from 41.2% to 50.2%. The new 2019 P/E is approximately 9.9.
Sanmina Corporation is a leading integrated manufacturing solutions provider serving the fastest growing segments of the global Electronics Manufacturing Services (EMS) market. Recognized as a technology leader, Sanmina provides end-to-end manufacturing solutions, delivering superior quality and support to Original Equipment Manufacturers (OEMs) primarily in the communications networks, cloud solutions, industrial, defense, medical and automotive.
SANM is an undervalued small-cap aggressive growth stock with only a handful of analysts covering the stock. The stock is up 13% this morning at 33.5. A continued run-up could take SANM to 36 or 41 in the coming months as the stock retraces former trading ranges. Investors should have patience and expect volatility. This type of small-cap stock can move rapidly, with or without any company-oriented news serving as a catalyst. Strong Buy.
Baker Hughes, a GE Company (BHGE – yield 2.9%) reported first-quarter results this morning. The company reported adjusted diluted EPS of $0.15 vs. the $0.13 consensus estimate, while revenue came in on target at $5.6 billion.
CEO Lorenzo Simonelli commented, “BHGE delivered a solid first quarter against a backdrop of stabilizing global oil and gas markets. U.S. rig count dropped slightly less than expected, and international activity remained steady. The LNG market is very active. While the speed of the recovery varies across these markets, we see our Company positioned to benefit from multiple growth drivers.”
BHGE is an undervalued aggressive growth stock. The stock advanced steadily for three months this year, then pulled back a bit in April. BHGE is down about 4% this morning, although I can’t find any negative comments with regard to the earnings report. Therefore, I think it’s just one of those market anomalies where a stock falls on earnings day as it’s buffeted by traders. Today is a good day to buy low. Buy.