Today’s news:
• Alexion Pharmaceuticals (ALXN) delivered a strong earnings beat; recommendation raised to Strong Buy.
• Blackstone Group (BX) delivered a strong earnings beat; recommendation raised to Strong Buy.
• Commercial Metals (CMC) delivered a strong earnings beat.
Blackstone Group Inc. (BX – yield 3.9*) reported third-quarter EPS of $0.64 this morning vs. the $0.54 consensus estimate, above the full range of analysts’ estimates. Blackstone’s assets under management now total $554 billion – an industrywide record – up 21% year-over-year. Fee-related earnings per share and margin are up significantly vs. last year. Blackstone’s corporate conversion was completed on July 1.
The company has $148 billion in capital yet to be deployed, and they repurchased 2.8 million shares of stock during the quarter. The next variable quarterly dividend of $0.49 per share will be paid November 12.
Blackstone Group is the world’s largest and most diversified alternative asset manager. The company deploys capital into private equity, lower-rated credit instruments, public debt and equity, real assets, secondary funds and real estate. Watch for the November 7 semi-annual announcement of new additions to the MSCI Index. If BX is added to the index, that will create additional buying demand.
The price chart has been bullish this year, with BX currently rising within a recent trading range between 45-54. I had moved BX to a Hold recommendation on September 17 after a big run-up; then back to Buy on October 8 after an exaggerated drop. I’m now moving BX to a Strong Buy recommendation, with the intention of keeping the stock in the portfolio for many months. Strong Buy.
*The payout varies each quarter with the total of the last four announced payouts equaling $1.92 and yielding 4.4%.
Commercial Metals Company (CMC – yield 2.5%) reported fourth-quarter and full-year results this morning (August year end). Adjusted diluted EPS of $0.76 beat the $0.70 consensus estimate, reaching the top of the estimate range. Revenue was $1.54 million, below the $1.57 million Zacks estimate. Full-year adjusted diluted EPS of $2.08 beat the $2.02 consensus estimate. CEO Barbara R. Smith commented, “Key milestones in fiscal 2019 included the completion and integration of CMC’s largest acquisition to date, the ramp up of our second micro mill in Oklahoma, and the addition of hot spooled rebar capability at our Arizona micro mill. Together, they bolster the strategy that has positioned CMC to be the largest supplier of rebar and a leading producer of merchant bar for the U.S. marketplace. In addition, our Polish operations generated full year EBITDA in excess of $100 million from strong sales and margins despite the flood of imported steel into the European Union. The successful execution of these accomplishments resulted in our ability to reduce our indebtedness by $124.5 million during the fourth quarter.” Investors can refer to the press release for additional details about business segment results.
Commercial Metals is the largest rebar producer in the U.S. CMC is an undervalued small-cap stock with a market capitalization of $2.2 billion. Analysts will update their 2020 EPS estimates over the next two weeks. I will need to see the projected EPS growth rate increase from the current 8.4% in order to keep CMC in the portfolio. In the meantime, the price chart remains bullish, with resistance at 20-21. Buy.
Alexion Pharmaceuticals (ALXN) reported a big third-quarter earnings beat this morning. Non-GAAP diluted EPS of $2.79 beat the consensus estimate of $2.47 and exceeded the entire range of analysts’ estimates. Revenue was $1.26 billion when Wall Street was expecting $1.24 billion. Alexion raised full-year revenue guidance by about 2%. The new full-year earnings guidance range is about 6% higher than previous guidance, and 3%-4.6% higher than the current consensus estimate. (That’s a hefty increase in the earnings outlook, which should trigger a jump in the share price.)
The press release itemizes several corporate acquisitions and drug approvals that I’ve recently written about, plus a variety of drug therapies that are in R&D phases. The company authorized a new repurchase of $1 billion of stock.
Alexion is a biopharmaceutical company that researches and manufactures treatments of severe and rare health disorders. Current marketable drugs include Soliris, Ultomiris, Strensiq and Kanuma. I’m moving ALXN from Buy to a Strong Buy recommendation. ALXN is an extremely undervalued growth stock. The price chart shows support at 95 and resistance at 115 and 122. The only obvious risk seems to be the fact that the market has ignored ALXN this year. Patient investors should buy now. Strong Buy.