In this bulletin:
American International Group reports blowout first quarter. Strong Buy.
Boise Cascade: great buying opportunity today! Strong Buy.
Quanta Services reports good first quarter. Strong Buy.
TiVo reports strong first quarter. Stock is cheap! Strong Buy.
American International Group (AIG, $63.15, yield 2.0%) reported first quarter 2017 adjusted earnings per share (EPS) of $1.36 when analysts were expecting an average of $1.08.
I recently mentioned that AIG declares sporadic dividend increases, with a decent possibility of doing so in early May, because I knew that the company was laser-focused on returning capital to shareholders this year. As it turns out, instead of a dividend increase, AIG announced a new $2.5 billion stock repurchase authorization yesterday, leaving a total of $3.8 billion outstanding in the repurchase plan. The company repurchased $3.6 billion of stock in the first quarter, and another $1.1 billion of stock since March 31.
AIG is a very undervalued diversified insurance company with strong projected earnings growth. The stock has been trading between 59 and 67 since October 2016, and is currently rising within that range. Given a neutral-to-bullish stock market, I definitely expect AIG to surpass 67 and begin another run-up this year. Buy AIG now. Strong Buy.
Boise Cascade (BCC, $29.90) Yesterday I reported on Boise’s strong first quarter. The stock traded way up to price resistance that was established in 2015, and then there was substantial profit-taking, which is perfectly normal when stocks retrace former peaks. I want to reiterate that growth stock investors should take advantage of any price at 30 or lower, and buy BCC. The sideways trading will continue for a little while before BCC launches past 33. Strong Buy.
Quanta Service (PWR, $36.02) reported a good first quarter this morning. Revenue was $2.18 billion vs. the consensus estimate of $2.0 billion. Non-GAAP earnings per share (EPS) were $0.39 vs the $0.40 estimate.
CEO Duke Austin remarked, “Our end markets are strengthening and we believe there is opportunity for our backlog to achieve record levels over the coming quarters.” The company forecasts full-year 2017 EPS between $1.82 and $2.07. The recent analysts’ consensus estimate was $1.95, in the center of the forecasted range. The company expects full-year 2017 revenue in a range of $8.1 billion to $8.6 billion, higher than the analysts’ consensus estimate of $8.22 billion.
A stock will typically react to either the one-cent earnings miss (a negative) or the higher-than-expected full-year revenue projection (a positive). In this case, PWR rose as high as 4.5% this morning, so the market appears to be pleased with the quarterly results.
PWR is an undervalued aggressive growth stock. The stock has traded between 34 and 39 since December. I expect PWR to rebound to 38 this spring, and possibly climb higher this year. Strong Buy.
TiVo (TIVO, $19.08 – yield 3.8%) reported a strong first quarter after the close yesterday, with revenue totaling $206 million vs. the consensus estimate of $188.8 million. Curiously, the company did not report non-GAAP EPS, and the market was left to calculate the number on its own. Thus, I have seen a variety of numbers reported by news and financial companies, including some obviously-inaccurate information (this morning, Schwab reported the fourth-quarter 2016 numbers as the first quarter 2017 numbers!). Suffice to say that adjusted profits came in much higher than analysts had expected. Non-GAAP pre-tax income was $54 million, and taxes were approximately $6 million.
For the full year, Tivo expects total revenue of $800 million to $835 million. The consensus estimate has been $822.4 million. The company expects full-year non-GAAP pre-tax income in the range of $200 million to $225 million, and taxes totaling approximately $23 million to $24 million.
The Board of Directors said that it will “consider additional capital allocation alternatives such as opportunistic stock repurchases.” Considering that the company announced its very first quarterly dividend in February, and is already considering share repurchases, I’d say that TiVo is confident of its excess cash flow and overall financial condition. It’s unusual to find this combination of big dividend yield and potential share buybacks in a small-cap stock.
TiVo is a digital entertainment company that provides technology licensing and related services, which enable people to access online and televised entertainment. Here’s a synopsis of the earnings report from Zacks, which includes a good description of performance in the company’s various business divisions, and here’s the earnings press release.
TiVo has the potential to provide outsized capital gains because it’s an extremely undervalued small-cap stock with rising earnings estimates. TIVO is slowing rising within its trading range between 18 and 22.5. There’s longer-term resistance at 25, which is a reasonable 2017 target price for the stock.
Today’s price chart appears to be exhibiting the second leg of a double-bottom chart pattern. (It’s actually a bullish sign when the second leg of the pattern drops a little lower than the first leg.) I would absolutely take advantage of today’s price and buy TIVO now. Strong Buy.