Today’s news:
• Earnings reports from The Mosaic Company (MOS), Supernus Pharmaceuticals (SUPN), Universal Electronics (UEIC) and Voya Financial (VOYA).
• Supernus Pharmaceuticals moves from Buy to Hold.
The Mosaic Company (MOS – yield 0.9%) reported disappointing second-quarter results on Tuesday. The quarter’s adjusted non-GAAP EPS was $0.12, missing the consensus of $0.29. Revenue of $2.18 billion lagged the consensus $2.3 billion.
The press release said that “unprecedented wet weather in the Midwest United States has negatively impacted its North American spring fertilizer sales volumes and phosphates margins. These same factors have driven grain prices higher and provide significant opportunities in fall 2019 and beyond.” Mosaic is the world’s largest producer of finished phosphate and potash.
There was a variety of good news in the quarter as well. Mosaic Fertilizantes plans to complete tailings dam remediation activities and return to full operations more than a month ahead of schedule, and to achieve its targeted $275 million in net synergies in 2019. Potash and Mosaic Fertilizantes businesses continued to perform well.
The accelerated ramp-up of the low-cost Esterhazy K3 potash project is on schedule. The company commenced with the temporary idling of the higher cost Colonsay potash mine. These actions are expected to lower Mosaic’s cost of production, accelerate inventory depletion, avoid $40 to $50 million in cash expenditures in 2019, and increase the company’s leverage to strengthening markets into 2020.
Mosaic lowered full-year 2019 earnings guidance to a range of $1.10-$1.50 vs. the recent consensus of $1.58.
Six investment firms lowered their price targets on MOS to a range of 25-36. The stock has traded between 22-25 since stabilizing after the May downturn in the broader market. Traders could profit within that trading range. Buy.
Supernus Pharmaceuticals (SUPN) reported disappointing second-quarter results on Tuesday. Earnings per share of $0.61 beat the expected $0.58, but sales of $104.7 million missed the $108.7 million estimate. Prescriptions of epilepsy drug Oxtellar and migraine drug Trokendi XR rose 7.4% year-over-year, and product sales rose 5.5%, which reflect Trokendi’s natural slowing process for aging drugs. Lower sales rebates for Trokendi caused the company to lower full-year net sales and operating earnings projections. The company cut its 2019 sales forecast by about 9%, equaling 2018 sales levels. Investors may listen to the earnings webcast.
Supernus focuses on the development and commercialization of products for the treatment of central nervous system diseases and psychiatric disorders, including epilepsy and migraine. Supernus’ submission of a New Drug Application (NDA) for SPN-812, which treats ADHD, is on track for the second half of 2019. The company aims to launch SPN-812 in the second half of 2020. New treatments for bipolar disorder and for impulse aggression in ADHD patients continue to work through their pipelines.
SUPN is an undervalued small-cap growth stock. Three investment firms lowered their price targets to a range of 48-55, and several firms reiterated Buy recommendations this week. SUPN fell below its recent price support on the earnings disappointment. I’m moving SUPN from Buy to Hold until the share price stabilizes. Hold.
Universal Electronics (UEIC) reported record second-quarter results on Thursday. Non-GAAP EPS of $0.83 and revenue of $193.9 million beat the consensus estimates of $0.72 and $182.1 million, respectively.
Universal Electronics is the worldwide leader in sensing and control technologies for the smart home. The company expects momentum from the second quarter to carry into the third quarter. As a reminder, Universal Electronics recently moved a significant amount of manufacturing from China to a new facility in Mexico.
CEO Paul Arling commented, “Our record second-quarter results and 19% year-over-year net sales growth reflect increases across the board, notably in subscription broadcasting, consumer electronics (CE), and home security. Our customers are beginning to more rapidly adopt advanced, 2-way, IP-connected home entertainment systems. Further, new and existing customers recognize UEI as the voice technology expert. As such, we are selected for sophisticated new device initiatives that require greater intellectual property and carry higher average selling prices. In addition to this transition in home entertainment, our home automation business continues to gain traction. In 2019, we are positioned to deliver the best year in our history.”
The company gave third-quarter EPS guidance of $0.85-$0.95. The consensus estimate had been $0.85. Investors can now expect full-year 2019 EPS to increase approximately 38%, vs. the previous estimate of 31%.
UEIC is an undervalued micro-cap growth stock with very little analyst coverage, appropriate for risk-tolerant investors and traders. The stock rose over 9% this morning, trading at 46. That’s significant, indicating that UEIC is ready to surpass its previous trading range (with upside resistance at 45) and begin a new run-up toward more significant price resistance at 55. Expect volatility. Strong Buy.
Voya Financial (VOYA – yield 1.2%) reported second-quarter results on Tuesday. The quarter’s operating earnings came in at $1.52 per share vs. consensus $1.47. Adjusted for alternative investments, EPS was $1.30, disappointing the market. The company achieved strong organic growth in each of their core businesses. Voya Financial is a retirement, investment and insurance company.
Voya lowered future earnings expectations, largely due to a lower interest rate outlook, which caught analysts by surprise. Voya holds a significant amount of floating-rate securities in their investment portfolio, which will now bring in lower yields. Higher expenses in the quarter were associated with strong new business wins, which should add to future earnings.
The company repurchased $446 million of stock during the quarter.
VOYA is an undervalued growth stock. Five investment firms lowered their price targets on VOYA to a range of 50-66 this week. Since the share price will not likely fall further, and the earnings growth outlook remains very strong, I’m not lowering my recommendation on the stock. Strong Buy.