This weekly update includes an earnings report from Delta Air Lines (DAL), which you may scroll down to review in the Growth & Income Portfolio. I’ve plucked one statistic from Delta’s third quarter report, because it might be the beginning of a larger trend this earnings season.
Delta’s management raised full year 2018 guidance on capital expenditures from $4.0 billion to $4.9 billion, as plans to purchase new aircraft now supersede previous lease plans. This is noteworthy because in early 2018 corporations made a big show of spending tax savings and repatriated cash on employees’ wages and bonuses, and on dividend increases and share repurchases. Public critics of the Tax Cuts and Jobs Act argued that the effect of the corporate cash influx would be temporary.
Behind the scenes, though, Wall Street analysts went about their business calculating reality, which pointed toward increased capital expenditures beginning in the third quarter. Think about it: if you are running a large corporation, and a whole bunch of money unexpectedly lands in your lap, it’s going to take a while for you to properly plan how best to use that money to benefit your company and its employees. You will most likely use some of that money to grow your business, and it’s fairly common for business growth to include capital expenditures.
What’s more, the tax cuts were not a one-shot deal. The tax cuts are ongoing, which means that businesses are going to have more money to save, distribute and invest in the years to come.
The reason that a potential trend toward increasing capital spending is interesting to me is that there’s another trend afoot: several large-cap banks reported slowing commercial & industrial (C&I) and commercial real estate (CRE) loan growth last week. That phenomena has already harmed bank stocks in the weeks approaching earnings season.
So which is it? Will we see increasing capital spending, which often creates a demand for business loans, or will we see declining C&I loan numbers? I suppose it’s technically possible that we could witness both events, if corporations are (a) financing capital spending via cash flow and/or (b) borrowing money from non-bank sources such as insurance companies and private equity firms in lieu of bank borrowing.
What’s missing from bank stocks’ share prices is the impact of the good things happening at banks right now. Rising net interest margins and lower net charge-offs are each contributing to banks’ profitability. Banks that hold a high percentage of variable rate loans, like Comerica (CMA), additionally benefit as interest rates increase.
As earnings season unfolds, I’ll be very interested to learn more about the broader capital expenditure landscape. Americans haven’t experienced such a strong economy in many years. And frankly, younger adults have never experienced a strong economy! Perhaps for the millennial generation, witnessing strong economic growth is a bit like being a cow that’s released from the barn after a long winter.
Send questions to Crista@CabotWealth.com.
PORTFOLIO NOTES
Be sure to review the Special Bulletin from October 11 in which I mentioned news, rating changes and/or price action on Alexion Pharmaceuticals (ALXN), Blackstone Group (BX), Delta Air Lines (DAL), DowDuPont (DWDP), Marathon Petroleum (MPC), Royal Caribbean Cruises (RCL)* and Total S.A. (TOT).
*Not currently included with the Cabot Undervalued Stocks Advisor portfolios.
Investors who held KLX Inc. (KLXI) shares until the Boeing acquisition might be interested in this press release: Boeing Completes Acquisition of Leading Aerospace Parts Distributor KLX Inc. to Enhance Growing Services Business.
Quarterly Earnings Release Calendar
October 16 am: Comerica (CMA) – 3Q
October 18 am: BB&T Corp. (BBT) and Blackstone Group (BX) – 3Q
October 18 pm: Skechers (SKX) – 3Q
October 19 am: Interpublic Group (IPG), Schlumberger (SLB) and Synchrony Financial (SYF) – 3Q
October 23 am: CIT Group (CIT) and Regions Financial (RF) – 3Q
October 24 am: Alexion Pharmaceuticals (ALXN) – 3Q
October 24 pm: Knight-Swift Transportation (KNX) – 3Q
October 25 am: Baker Hughes, a GE Co. (BHGE) – 3Q and Commercial Metals (CMC) – 4Q
October 26 am: Total S.A. (TOT) – 3Q
October 30 pm: Voya Financial (VOYA) – 3Q
late-October: Marathon Petroleum (MPC), and Southwest Airlines (LUV) – 3Q
November 1 am: DowDuPont (DWDP) – 3Q
November 5 am: WestRock (WRK) – 4Q
early November: Delek US Holdings (DK), D.R. Horton (DHI) – 4Q, Martin Marietta Materials (MLM), Quanta Services (PWR), Supernus Pharmaceuticals (SUPN), TiVo (TIVO), Universal Electronics (UEIC), second half of November: GameStop (GME), Guess? (GES) and KLX Energy Services (KLXE)
Virtually all companies offer extensive information on their websites pertaining to their quarterly earnings releases, including press releases, conference calls, slide shows and/or webcasts.
Earnings Season Scorecard
Earnings on Target or Slight Variance (within 5%): Delta Air Lines (DAL)
Today’s Portfolio Changes:
Blackstone Group L.P. (BX) moves from Hold to Strong Buy.
CIT Group (CIT) moves from Strong Buy to Hold.
Commercial Metals (CMC) moves from Strong Buy to Hold.
D.R. Horton (DHI) moves from Strong Buy to Hold.
Southwest Airlines (LUV) moves from Buy to Strong Buy.
Last Week’s Portfolio Changes:
Alexion Pharmaceuticals (ALXN) moved from Buy to Strong Buy.
Knight-Swift Transportation (KNX) moved from Strong Buy to Hold.
Quanta Services (PWR) moved from Strong Buy to Hold.
Schlumberger (SLB) moved from Hold to Buy.
Skechers (SKX) moved from Strong Buy to Buy.
WestRock (WRK) moved from Strong Buy to Hold.
Updates on Growth Portfolio Stocks
CIT Group (CIT – yield 2.0%) operates both a bank holding company and a financial holding company that provide financing, leasing and advisory services to small and middle market businesses, consumer markets, and the real estate and railroad industries. CIT Group has a very strong and stable earnings outlook, low valuation and an attractive dividend yield. CIT Group was featured in the October issue of Cabot Undervalued Stocks Advisor.
The company is expected to report third quarter EPS of $1.14 within a range of $1.00-$1.27 on the morning of October 23. Full year 2018 earnings estimates rose again last week. Third quarter revenue is estimated to be $476.6 million, within a range of $463-$492 million. Expect volatility. Analysts now expect CIT Group’s full year EPS to grow aggressively at 25.4% and 24.9% in 2018 and 2019. The corresponding P/Es are low at 12.7 and 10.1. I’m moving CIT from Strong Buy to Hold until the price chart turns bullish. Hold.
D.R. Horton (DHI – yield 1.3%) is America’s largest homebuilder, also providing mortgage, insurance and title services. In each of the last three years, D.R. Horton announced dividend increases of 25% to 27% in November. A similar increase in 2018 would take the quarterly payout from 12.5 cents per share to 15.5 or 16 cents. DHI is an undervalued growth stock. I’m moving DHI from Strong Buy to Hold until the price chart turns bullish. Hold.
KLX Energy Services Holdings (KLXE) was spun off from KLX Inc. (KLXI) in a 4-for-10 ratio and began trading on September 17. (A person with 100 shares of KLXI received 40 shares of KLXE.) At a current price of 32.97, KLXE now represents a value of 13.19 per your original KLXI share. I’m awaiting the publication of the cost basis allocation between shares of KLXI and KLXE. I’ll share that with you as soon as it’s available. Consensus earnings and revenue estimates will not likely be available until quarterly results are reported. Hold.
Knight-Swift Transportation Holdings (KNX – yield 0.8%) is a truckload carrier formed from the September 2017 merger between Knight Transportation and Swift Transportation Company. Knight-Swift is an undervalued industry leader with an exemplary management team. The company is expected to report third quarter EPS of $0.58, within a range of $0.56-$0.63, on the afternoon of October 24. Third quarter revenue is estimated to be $1.4 billion, within a range of $1.3-$1.4 billion. KNX is a mid-cap aggressive growth stock. Analysts expect full year EPS growth of 65.2% and 17.5% in 2018 and 2019. The corresponding P/Es are 13.6 and 11.6.
KNX is currently the kind of stock that causes a lot of confusion among newer stock investors. The share price is suffering, while earnings estimates remain very strong, and near their high points for the year. Stock investing is difficult because the process is not always logical. It’s not remotely uncommon, over short periods of time (less than one year), that companies with poor finances can have big share price gains while companies with strong finances can have big share price drops. Investors can’t really know this until they experience it. Living through such undeserved turmoil is neither enjoyable nor profitable. Given time, these situations usually work themselves out to a logical conclusion. When the price chart turns bullish, I’ll move KNX back to a buy recommendation. Hold.
Marathon Petroleum (MPC – yield 2.3%) is the nation’s second-largest energy refiner, with interests in processing facilities, 10,000 miles of oil pipelines, and product sales in 8,000 retail stores. Investors might like to read this Moody’s commentary on Marathon’s financial health in the wake of the recent Andeavor (ANDV) acquisition. Consensus earnings estimates have reached a high point for the year. The market is now expecting aggressive EPS growth of 40.4% and 45.2% in 2018 and 2019. Corresponding price/earnings ratios (P/Es) are quite low at 14.3 and 9.9. The price chart is much stronger than those of most other stocks right now. Buy MPC now. Strong Buy.
Martin Marietta Materials (MLM – yield 1.1%) is a supplier of crushed stone, sand, gravel, cement, concrete and asphalt. Management is bullish on the construction recovery in the U.S. accelerating in the second half of 2018 and continuing next year. MLM is an undervalued growth stock. The price chart remains bearish. Hold.
Quanta Services (PWR) provides specialized infrastructure and network services to the electric power, oil and natural gas industries. PWR is an undervalued mid-cap growth stock. Full year earnings estimates haven’t fluctuated by more than a penny per share since mid-July. Wall Street expects full year EPS to grow 38.6% and 16.5% in 2018 and 2019. The corresponding P/Es are 11.5 and 9.9. The share price is weak right now, and has not yet stabilized. Hold.
Southwest Airlines (LUV – yield 1.1%) is the largest U.S. domestic air carrier, transporting over 120 million customers annually to over 100 locations in the U.S., Central America and the Caribbean. Wall Street expects full year EPS to grow aggressively at 18.3% and 20.5% in 2018 and 2019. The corresponding P/Es are 14.0 and 11.6.
LUV dropped down to 57 last week, where it last traded in August. I moved the stock’s rating down from a Strong Buy recommendation in mid-September after it enjoyed a big run-up. Now that LUV is cheap again, I’m moving the recommendation back to a Strong Buy. A typical surge in airline stocks during the fourth quarter could push LUV to new highs before year end. Strong Buy.
Supernus Pharmaceuticals (SUPN) focuses on the development and commercialization of products for the treatment of central nervous system diseases and psychiatric disorders, including epilepsy, migraine and ADHD. Supernus posted an October Investor Presentation on their website. SUPN is an undervalued, small-cap aggressive growth stock. Analysts expect EPS to increase 49.2% and 30.3% in 2018 and 2019. The corresponding P/Es are 24.9 and 19.1. The stock is low within a recently-stable trading range. Buy SUPN now. Strong Buy.
Voya Financial (VOYA – yield 0.1%) is a retirement, investment and insurance company serving approximately 14.7 million individual and institutional customers in the United States. Voya is expected to report third quarter EPS of $1.18, within a range of $1.13-$1.22, on the afternoon of October 30. The company will host an Analyst Day on November 13, which could easily generate new and bullish research reports for Voya. The biggest question among institutional investors is whether Voya might sell its life insurance division. It seems not to be a problematic piece of the company, although the life division might be sold if an attractive price is offered.
VOYA is an undervalued aggressive growth stock. Wall Street expects Voya’s full year EPS to grow 123% and 24.5% in 2018 and 2019. The corresponding P/Es are 11.0 and 8.8. VOYA fell to the bottom of its trading range as the market dropped last week. Strong Buy.
Updates on Growth & Income Portfolio Stocks
BB&T Corp. (BBT – yield 3.5%) is a 145-year-old financial holding company with $222 billion in assets and 2,100 financial centers that serves businesses and individuals. The company is expecting to report strong loan growth in the third quarter. BB&T is expected to report third quarter EPS of $1.00, within a range of $0.96-$1.03, on the morning of October 18. Third quarter revenue is estimated to be $2.9 billion, within a range of $2.8-$3.0 billion. The market expects BB&T to make a significant acquisition in the coming year. Analysts expect full year EPS to grow 41.9% and 9.6% in 2018 and 2019. Corresponding P/Es are 11.8 and 10.8. The stock fell through price support recently, so it will be a while before it resumes trading between 50 and 55. Hold.
Blackstone Group LP (BX – yield 6.4%*) is the world’s largest and most diversified alternative asset manager with $439 billion in client assets. The company deploys capital into private equity, lower-rated credit instruments, hedge funds and real estate. Blackstone is expected to report third quarter revenue of $1.8 billion; and economic net income (ENI)** of $0.74, within a range of $0.60-$0.81, on the morning of October 18. Presuming that Blackstone does not become a C-corp, analysts expect Blackstone’s full year ENI to grow 9.6% and 5.5% in 2018 and 2019. The P/Es are 11.3 and 10.7.
Now that the stock has pulled back with the market, I’m moving BX from Hold to Strong Buy. Buy now while BX is at the bottom of a stable trading range and lock in the higher yield, while also potentially earning 14% upside to its recent high. Speculative investors have an opportunity to make even more profit if BX converts from an L.P. to a C-corp. next year. (In error, I hadn’t officially notified investors that I meant to change BX to a buy recommendation when I published last week’s Special Bulletin.) Strong Buy.
*The payout varies each quarter with the total of the last four announced payouts yielding 6.4%.
**As of first quarter 2016, Blackstone no longer issues its earnings release via a third-party newswire. Blackstone continues to distribute earnings releases via other existing channels, including its website, email lists and Twitter account.
Comerica (CMA – yield 2.8%) is a financial services company engaged in domestic and international business banking & lending, wealth management and consumer services. Comerica is one of the most asset-sensitive banks in the U.S., with a very high percentage of variable rate loans, thus benefiting from rising interest rates. Comerica is expected to report third quarter EPS of $1.76, within a range of $1.69-$1.84, on the morning of October 16. Full year 2019 earnings estimates have edged upward in recent weeks. Analysts now expect EPS to increase by 48.1% and 12.8% in 2018 and 2019. The corresponding P/Es are 12.0 and 10.7.
CMA is an undervalued growth & income stock. All of the pertinent numbers – EPS, P/E, dividend payout and yield – are much more attractive than they were a year ago, yet the share price has come down to early January levels. The stock is cheap and the share price is suffering. I expect CMA to eventually perform well. Buy.
Commercial Metals Company (CMC – yield 2.5%) is a recycler and manufacturer of steel and metal products, including rebar and fence posts. Commercial Metals specifically benefits from recently-increased tariffs on Turkish steel products. The company is expected to report fourth quarter EPS of $0.44, within a range of $0.34-$0.56, on the morning of October 25 (August year-end). That’s a very wide range of earnings estimates coming from twelve Wall Street analysts, and lots of investors will be watching and reacting. Therefore, expect a big price swing when results are reported. Quarterly revenue is expected to be $1.3 billion, within a range of $1.2-$1.5 billion.
CMC is an undervalued aggressive growth stock. Wall Street analysts expect full year EPS to grow 101% and 58.7% in 2018 and 2019. The 2019 P/E is 8.3. The share price is languishing, with upside resistance at 22.5. I’m moving CMC from Strong Buy to Hold, until the price chart turns bullish. Hold.
Delta Air Lines (DAL – yield 2.7%) is a U.S. and international passenger and cargo airline with an extensive and efficient hub complex. The company participates in multiple joint ventures with foreign airlines, and recently increased its stake in Mexico’s Grupo Aeromexico to 49%. Delta Air Lines was featured in the October issue of Cabot Undervalued Stocks Advisor.
Last week, Delta reported third quarter non-GAAP EPS of $1.80 when the market expected $1.74, and also achieved record quarterly revenue of $11.8 billion. Quarterly highlights included tight cost controls and strong corporate travel demand. Rising fuel prices were offset by increases in ticket prices and baggage fees. The company expects only minimal impact from Hurricane Michael, and even less from rising interest rates. Full year 2018 revenue is expected to rise about 8%, and margins are expected to rise in 2019.
Wall Street expects Delta’s full year EPS to grow from $4.93 in 2017 to $5.53 in 2018 and $6.34 in 2019, reflecting growth rates of 12.2% and 14.6% in 2018 and 2019. The stock’s 2018 and 2019 PEs are quite low at 9.4 and 8.2 respectively.
Following the release of third quarter results, Morgan Stanley and Evercore ISI raised their price targets on DAL to 68 and 70, respectively. DAL has traded sideways since reaching a new all-time high in January 2018. There’s more than 10% upside within the stock’s steady trading range, and additional capital gain opportunities thereafter. Buy DAL now. Strong Buy.
DowDuPont (DWDP – yield 2.5%) intends to break up into three companies by June 2019. DWDP is an undervalued growth stock with an attractive dividend yield. Analysts expect third quarter EPS of $0.72, within a range of $0.64-$0.80, to be reported on the morning of November 1. The company is expected to see strong full year EPS growth rates of 23.2% and 16.7% in 2018 and 2019. The corresponding P/Es are 14.3 and 12.3.
News of higher ethane prices – a feedstock for various DowDuPont products – pushed DWDP down toward the bottom of its 2018 trading range in recent weeks. Jim Cramer commented on the stock on October 12: “I think you should [buy shares] right here…because it’s that cheap. It’s come down a lot.” There’s no hurry to buy DWDP because the stock is probably going to remain near 60 while it slowly gathers strength for its rebound. Patient investors can buy low right now. Strong Buy.
GameStop (GME – yield 10.2%) is a potential buyout candidate. Management states that they are actively pursuing a strategic review, which could lead to the sale of the company. There’s upside price resistance at 16.75 and again at 18. Hold.
Guess?, Inc. (GES – yield 4.3%) is a global apparel manufacturer, selling its products through wholesale, retail, ecommerce and licensing agreements. Revenue growth largely stems from expansion in Asia and Europe, while rising operating margins are contributing to multi-year earnings per share (EPS) growth. Wall Street expects EPS to grow 55.7% and 22.0% in 2019 and 2020 (January year-end). Corresponding P/Es are low in comparison to earnings growth rates, at 19.3 and 15.8. The share price is low and appears relatively stable. Buy GES now. Strong Buy.
The Interpublic Group of Companies (IPG – yield 3.9%) is a large conglomerate of advertising, marketing, communication and public relations companies serving all global markets. Interpublic is expected to report third quarter EPS of $0.46, within a range of $0.44-$0.48, on the morning of October 19. Analysts relatively unanimously expect third quarter revenue to be $1.9 billion. IPG is at the bottom of a steady trading range that dates back to February. Hold.
Regions Financial Corp. (RF – yield 3.2%) is an Alabama-based superregional bank serving the South, Texas and the Midwest via 1,500 banking offices. The bank offers commercial and consumer loans, wealth management, and insurance products and services. Regions is expected to report third quarter EPS of $0.36 within a range of $0.34-$0.38 on the morning of October 23, which ostensibly includes a notable increase in third quarter net interest income and also a nice drop in both operating expenses and the outstanding share count. Full year EPS are expected to increase by 31.5% and 11.3% in 2018 and 2019. The corresponding PEs are 12.2 and 10.9. RF hasn’t traded higher than 20 since 2008, so once it breaks through 20, I think it can achieve a nice run-up. And of course, if we’re lucky, Regions could become a buyout target. Strong Buy.
Schlumberger (SLB – yield 3.4%) is the world’s largest oilfield service company. The number of U.S. rigs drilling for crude oil and natural gas rose by eleven last week to a total of 1,063, up 135 vs. a year ago. Schlumberger is expected to report third quarter EPS of $0.46, within a range of $0.43-$0.48, on the morning of October 19. Third quarter revenue is estimated to be $8.6 billion, within a range of $8.4-$8.7 billion.
SLB is an aggressive growth stock, undervalued based on 2019 numbers. Earnings estimates have been trending downward in recent months. Analysts now expect full year EPS to grow 18.7% and 37.5% in 2018 and 2019. The corresponding P/Es are 33.3 and 24.3. The stock is sitting at one-year lows. Expect volatility. Buy.
Total S.A. (TOT – yield 4.8%) is a French multinational oil and gas company—one of the industry’s seven “supermajors”—operating in over 130 countries. Total signed a joint venture with Saudi Aramco last week, in which the two companies will eventually build a $5 billion petrochemical complex in Saudi Arabia. Total is expected to report third quarter EPS of $1.44, within a range of $1.37-$1.50, on October 26. Analysts expect full year EPS to grow 33.3% and 18.8% in 2018 and 2019. The corresponding P/Es are low in comparison at 11.3 and 9.5. The stock rose above its trading range in late September, then pulled back. Buy TOT now before the run-up commences. Strong Buy.
WestRock Company (WRK – yield 4.0%) is a global packaging and container company. The company was harmed by Hurricane Michael when its containerboard and pulp mill in Panama City received extensive damage this month. WRK is an undervalued growth & income stock. WestRock is expected to report fourth quarter EPS of $1.25, within a range of $1.20-$1.29, on the morning of November 5 (September year end). Analysts expect full year EPS to increase 54.6% and 10.1% in 2018 and 2019. The corresponding P/Es are 10.5 and 9.6. Any stock like WRK that’s at a low price for the year is likely to remain low until tax-loss selling season is over at year end. I therefore expect very little upside to the stock until January. Hold.
Updates on Buy Low Opportunities Portfolio Stocks
Alexion Pharmaceuticals (ALXN) is a biopharmaceutical company that researches and manufactures treatments of severe and rare health disorders. Alexion Pharmaceuticals was featured in the October issue of Cabot Undervalued Stocks Advisor. The company is expected to report third quarter EPS of $1.75, within a range of $1.56-$1.96, on the morning of October 24. Third quarter revenue is estimated to be $1.0 billion, within a range of $990 million to $1.1 billion.
ALXN is an undervalued aggressive growth stock. Potential net income from the Syntimmune acquisition and from the new Soliris label indication is not yet figured into consensus earnings estimates. Analysts expect full year EPS to grow 23.7% and 18.2%. The corresponding P/Es are 16.8 and 14.2.
ALXN shares do not languish. At 122, there’s about 14% capital gain potential within the current trading range. The best case scenario this year—barring a takeover offer—is that ALXN could rise to the upper 140’s by year end, where it will still be undervalued. Strong Buy.
Baker Hughes, a GE co. (BHGE – yield 2.3%) offers products, services and digital solutions to the international oil and gas community. Baker Hughes’ management expects good international revenue growth in the second half of 2018. Last week, Baker Hughes agreed to invest $550 million to own 5% of Abu Dhabi National Oil Company’s (ADNOC) drilling unit, becoming the first foreign company to own a piece of an ADNOC services company.
The number of U.S. rigs drilling for crude oil and natural gas rose by eleven last week to a total of 1,063, up 135 vs. a year ago. Baker Hughes is expected to report third quarter EPS of $0.21, within a range of $0.18-$0.24, on the morning of October 25. The company announced a small dividend increase in October 2017, but there’s no long-term track record that would help us know whether the company is likely to do so again this month.
BHGE is an undervalued aggressive growth stock with a very low debt-to-market cap ratio. Analysts expect full year EPS to grow 65.1% and 103% in 2018 and 2019. The corresponding P/Es are 43.4 and 21.4. BHGE is trading between 31 and 37, and will probably trade higher next year, barring a downturn in the broader market. Strong Buy.
Delek U.S. Holdings (DK – yield 2.7%) is a diversified downstream energy company, with businesses that include petroleum refining, transportation, marketing, renewables (producing biodiesel fuel) and asphalt operations. DK is an undervalued, aggressive growth, small-cap stock. Analysts expect EPS to grow 360% and 46.8% in 2018 and 2019. The corresponding P/Es are ridiculously low at 7.3 and 5.0. I’ll move DK back to a Buy recommendation when the price action becomes bullish. Hold.
Skechers USA Inc. (SKX) is an apparel company that designs and manufactures affordable footwear for people of all ages. Skechers is the third largest footwear brand globally, behind Nike and Adidas. International revenue is growing dramatically, including huge growth in China. Skechers remains a successful company with huge ongoing growth opportunities in international markets. Skechers is expected to report third quarter EPS of $0.51, within a range of $0.49-$0.54, on the afternoon of October 18. Analysts unanimously expect third quarter revenue of $1.2 billion. Full year EPS are expected to fall (2.2%) in 2018 and then rise 12.6% in 2019. The share price is weak. Expect volatility upon the earnings announcement. Buy.
Synchrony Financial (SYF – yield 2.8%) is a consumer finance company with 74.5 million active customer accounts. Synchrony partners with retailers to offer private label credit cards, and also offers consumer banking services and loans. Last week, Synchrony and JCPenney (JCP) agreed to a multi-year extension of their decades-long partnership. Synchrony is expected to report third quarter EPS of $0.80, within a range of $0.72-$0.89, on the morning of October 19. Full year EPS are expected to increase by 30.9% and 31.5% in 2018 and 2019 (December year end). The corresponding price/earnings ratios (P/Es) are extremely low at 8.7 and 6.6.
SYF came down with this month’s market correction. There’s about 12% upside to its September high, and lots more upside as SYF rises to a more fair valuation. My price target on SYF is 40, where the stock reached an all-time high in January. Strong Buy.
TiVo (TIVO – yield 6.3%) creates products and licensable technology that enable the world’s leading media and entertainment providers to nurture more meaningful relationships with their audiences. TIVO is an undervalued growth stock with a very attractive dividend yield. Management is in strategic discussions with entities that are considering buying TiVo’s product and/or IP licensing divisions. Investors should expect a final, lucrative M&A announcement any time between now and year end. Buy TIVO now. Strong Buy.
Universal Electronics (UEIC) is a manufacturer and cutting-edge world leader of wireless and voice remote control products, software and audio-video accessories for the smart home; with a strong pipeline of new products in the areas of safety and security, climate control and lighting. UEIC is an undervalued micro-cap stock. UEIC has been sliding down toward price support at 35. Strong Buy.
