Today’s news:
• Equitable Holdings (EQH) reports a fourth-quarter earnings beat; increases the dividend.
• Netflix (NFLX) moves from Buy to Strong Buy.
• Quanta Services (PWR) reports a fourth-quarter earnings beat; moves from Hold to Buy.
Equitable Holdings (EQH – yield 2.6%) reported fourth-quarter EPS of $1.37 vs. the consensus estimate of $1.18 yesterday afternoon, above all analysts’ estimates. Earnings growth was reflected in all four business segments. Assets under management grew from $701 billion to $735 billion during the quarter.
For full-year 2019, the company reported $4.85 non-GAAP EPS vs. the consensus $4.67, and repurchased $1.6 billion of stock. Additionally, Equitable authorized a new repurchase of $600 million of stock and increased the upcoming second-quarter dividend by 13.3%, from 15 cents to 17 cents per share.
Book value is $29.19 per share, significantly higher than the current share price of approximately 22.
Equitable owns two principal franchises: Equitable Life Insurance Co. and a majority stake in AllianceBernstein Holdings L.P. (AB), an investment management firm. Equitable Holdings was featured in the February issue of Cabot Undervalued Stocks Advisor.
The 2020 P/E is extremely low at 5. FIVE! The valuation is incredible. The stock rose to a new all-time high, earlier this month, then swiftly fell with the correction in the broader market. Since I’ve already had a Strong Buy recommendation on the stock, and the earnings growth and valuation situations remain fantastic, I’m not going to lower the rating, despite the market volatility. This stock is CHEAP. There appears to be good price support at about 22.5. Just be aware that EQH will certainly bounce around some more before recovering. Strong Buy.
Netflix (NFLX) – Do you recall, last week, that I named NFLX “The Best Coronavirus Stock”? On February 19 I wrote:
“Want a stock that’s probably going to gain customers during this virus epidemic? Look no further than Netflix (NFLX), in our Special Situation and Movie Star Stock Portfolio. There are tens of millions of people in China and surrounding countries that are quarantined, or simply voluntarily avoiding public places. What are they going to do with their time? My guess is that a significant amount of movie-watching will be taking place, with lots of folks signing up for Netflix – an internet commodity that can’t be constrained by a human virus.”
Astonishingly, the stock has not fallen with the current market correction. Wow. Since the stock is showing such incredible strength, I’m moving my recommendation from Buy to Strong Buy. NFLX just passed its 2019 high of 380, and is now heading toward its 2018 high of 420. Risk-tolerant growth investors and buy-and-hold investors should buy NFLX now. Strong Buy.
Quanta Services (PWR – yield 0.5%) reported fourth-quarter adjusted diluted EPS of $0.93 this morning vs. the consensus estimate of $0.83, and above all analysts’ estimates. Fourth-quarter revenue of $3.11 billion surpassed the $3.0 billion consensus estimate. Full-year 2019 EPS of $3.33 exceeded the estimate by 10 cents.
The company achieved record annual revenues, operating income and backlog. Quanta completed seven acquisitions during 2019 and four acquisitions during 2018.
CEO Duke Austin commented, “We believe our strategic position in the marketplace remains strong and we are well positioned for continued profitable growth in the coming years. Our outlook for 2020 reflects expectations for another record year with continued solid growth of our base business, improved profitability and growth in adjusted EBITDA, earnings per share and cash flow. We are successfully executing on our strategic growth initiatives, which, coupled with our strong financial profile, positions us well to deliver value to stockholders.”
The company is reviewing its unprofitable Latin American operations, which are included in forecasts for 2020. Quanta expects 2020 adjusted diluted EPS to range between $3.62 and $4.02 and revenues to range between $12.2 billion and $12.6 billion vs. the recent consensus estimates of $3.86 EPS and $12.86 billion revenue.
Quanta Services is a leading specialty infrastructure solutions provider serving the utility, energy and communication industries. The 2020 outlook continues to reflect approximately 15% EPS growth and a low P/E, so the stock remains attractively valued.
I
nvestors reacted well to the earnings report, with the stock up this morning during a generally bad day in the market. The stock seems to have good price support at 37, and is holding up better than most other stocks during this market correction. I’m moving PWR from Hold to a Buy recommendation. It won’t necessarily rise quickly, but I think there’s far less risk in this stock than with most other stocks right now. Buy.