Financial Briefing - Tuesday, November 7th 2023
From All Articles on Seeking Alpha
The Better-Than-Expected Earnings Plus Cautious Commentary Trend Continues
During the second peak week of the Q3 earnings season, Apple reported better-than-expected results for the quarter, with record iPhone sales. However, the company's outlook for the fiscal first quarter of 2024 disappointed investors, with the CFO stating that revenue would be "similar" to the same period in 2023, and warning of a significant deceleration in revenue for the iPad and Wearables categories. Investors continued to punish stocks of companies that missed earnings estimates by a larger margin, while rewarding those that beat estimates by a smaller margin. Meanwhile, the stock market reacted positively to lower-than-expected Non-farm Payrolls (NFP) data, as it suggested a lower likelihood of the Federal Reserve raising interest rates in the near future. With 81% of S&P 500 companies reporting at this point, the blended EPS growth rate for Q3 has increased to 3.7%. This week, investors will be watching for earnings reports from companies such as Disney, Uber Technologies, and eBay, among others. Sleep Number and Vertex Pharmaceuticals are two companies that have pushed their Q3 2023 earnings dates outside of their historical norms, which could signal bad news to come on their conference calls. Sleep Number is expected to report a decline in YoY EPS and sales, while Vertex Pharmaceuticals may see its revenues dip due to the popularity of its newest Cystic Fibrosis drug possibly impacting its other drugs.
BioMarin: Keeping Bullish View After Q3 Earnings
BioMarin's stock has fallen more than 12% in recent months, largely due to investor dissatisfaction with the company's quarterly results. However, the author believes that the stock's pullback presents an opportunity to accumulate positions in BioMarin. The company reported revenues of $581 million for the quarter, slightly below consensus expectations. Adjusted EBITDA totaled $100 million, with an EPS of $0.29, beating market expectations. Free cash flow was $114 million. The company also announced a change in CEO, with Alexander Hardy succeeding Jean-Jacques Bienaimé. BioMarin's mucopolysaccharidosis drug portfolio generated sales of $282 million, while the phenylketonuria drug portfolio generated $122 million. Voxzogo, one of the company's new drugs, saw revenue of $123 million, up 155% YoY. The company plans to significantly increase supply of Voxzogo in 2024 and expects no more supply constraints for the drug by mid-year. However, investors are concerned about the delayed launch and final pricing of ValRox. Despite these concerns, the author remains bullish on BioMarin's stock, although the valuation is revised to $117 per share.
Stellantis Is Still A Conviction Buy
Stellantis, a leading automotive company formed from the merger of PSA Group and Fiat-Chrysler, is trading at low financial metrics compared to its peers in the sector. Despite uncertainties in the automotive industry, such as the rise of electric vehicles and competition from Asian producers, the outlook for Stellantis remains excellent. The company has been generating shareholder value through revenue growth, profitability, and strong cash flow. Stellantis has a global presence and is focused on becoming a leader in the electric vehicle market, with plans to launch 75 electric models by 2030. The company is also investing in the vertical supply chain of automotive battery production and has strategic partnerships in battery-grade lithium hydroxide. Stellantis has seen steady revenue and profit growth in recent years, and it is committed to increasing dividends and shareholder returns. The company's stock is undervalued and presents an attractive investment opportunity.
Construction Partners: Interesting Road Ahead
Construction Partners is a road construction company that focuses on acquiring small operators in the industry. It has seen significant revenue growth since its IPO in 2018, thanks to its successful execution of its acquisition strategy. The company primarily works on small projects for the public sector, which provides a stable source of revenue compared to the private sector. Construction Partners has a strong regional presence in states like Alabama, Florida, and Georgia, and has completed 19 acquisitions from 2018 to 2022. The company's growth has led to a 227% return since its IPO, and its revenues have grown at a compounded annual growth rate of 16.1% from 2016 to the last twelve months. However, the company's margins have been thin and have decreased in recent years. Construction Partners aims to improve its margins and achieve an adjusted EBITDA margin of 13% to 14% by 2027. The stock's valuation is challenging due to its dependence on future acquisitions and margin trajectory. Based on a discounted cash flow model, the stock's fair value is estimated to be around $40.27, which is in line with the current stock price. Overall, Construction Partners is an intriguing company, but the current stock price reflects the expected future acquisitions. Therefore, a hold rating is recommended for the stock.
Tractor Supply: Buy Rating Driven By Strong Earnings And Growth
Tractor Supply Company, a retail chain known for its stores selling lawn and garden care, agricultural supplies, and work/recreational clothing, recently released its Q3 earnings report. The company's YoY revenue growth of 10.2% exceeded the peer group average in the specialty retail segment. While revenue fell slightly short of the goal of 5% YoY growth, net income grew almost 9% in that period and positive equity improved nearly 9% on a YoY basis. Looking ahead to Q4, the company's full-year outlook calls for profitability of around $1.1 billion. Tractor Supply Company saw a significant dividend growth of 157.5% over the past 3 years, beating the analyst's goal easily. However, the forward dividend yield of 2.07% is slightly below the sector average. The stock's share price has dipped about 10% below the 200-day simple moving average, offering a buying opportunity for value-driven investors. Despite concerns of overvaluation and underperformance compared to the S&P500, the overall sentiment is cautiously positive due to the company's growth plans for new stores and distribution centers. With a WholeScore rating of 7, the stock receives a buy rating.
From Business & Finance Archives | Reuters News Agency
Kenya plans $500 million Eurobond buyback with new loans 
Kenya's government is planning to buy back up to a quarter of its $2 billion international bond that is set to mature next year. This decision comes after the country secured new loans and aims to alleviate concerns about its ability to repay the debt. Central bank governor Kamau Thugge confirmed the plan at the World Bank and IMF meetings in Marrakech. As a result, the 2024 bond rose sharply. The move to buy back the bond demonstrates Kenya's efforts to manage its debt obligations and maintain investor confidence. By purchasing a portion of the bond, the government is signaling its commitment to meeting its repayment obligations. This decision may also help to reduce the overall debt burden on the country.
Lundin in talks with Japanese trading houses to develop Argentina mine 
Canadian mining company Lundin Mining is reportedly in discussions with Japanese trading houses and major miners to sell a 40%-50% stake in its copper-gold mine in Argentina. The news comes from a Reuters exclusive, with Lundin's incoming CEO, Jack Lundin, revealing in an interview that the company plans to make an announcement regarding the deal next year. Following the news, Lundin's shares turned positive and rose by up to 4.2%. The potential partnership with Japanese trading houses and large miners could provide Lundin Mining with the necessary capital and expertise to further develop the Argentina mine. This move is part of Lundin Mining's strategy to advance its copper assets amid rising global demand for the metal.
TSMC tells vendors to delay chip equipment deliveries 
Taiwan's TSMC, the world's largest contract chipmaker, has instructed its major suppliers to delay the delivery of high-end chipmaking equipment amid concerns over customer demand. The move comes as TSMC grows increasingly nervous about the weakened economic conditions, slower recovery in China, and softer end-market demand. The news had an impact on TSMC's suppliers, with shares in Dutch-based ASML, a key supplier, declining by 2.5%. ASM International, another equipment firm supplying TSMC, saw its shares fall by 5.6%, while BE Semiconductor, a packaging equipment company, dropped by 3.3%. TSMC's CEO C.C. Wei had previously noted in July that customers were becoming more cautious and mindful of controlling inventory in light of the challenging global economic landscape.