Yahoo Finance Immersion and Day and Arrow have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL –June 11, 2024 – Zacks Equity Research shares Immersion IMMR, as the Bull of the Day and Arrow Electronics ARW, as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Servotronics, Inc. SVT.
Here is a synopsis of all three stocks:
Bull of the Day:
Immersion is a Zacks Rank #1 (Strong Buy) that has a B for Value and an C for Growth. This is company makes peripheral computer equipment that is used in smartphones, game controllers and there are expanding deeper into the automotive segment as well. Let’s explore more about this company in this Bull of The Day article.
Description
Immersion Corp. engages in the creation, design, development and licensing of patented haptic innovations and software. The firm offers touch sense platform and design services. It focuses on the following target application areas: mobile devices, wearable, consumer, mobile entertainment and other content, console gaming, automotive, medical, and commercial. The company was founded in 1993 and is headquartered in Aventura, FL.
Earnings History
When I look at a stock, the first thing I do is look to see if the company is beating the number. This tells me right away where the market’s expectations have been for the company and how management has communicated to the market. A stock that consistently beats has management communicating expectations to Wall Street that can be achieved. That is what you want to see.
For Immersion, I see two beats, one earnings meet and one miss of the Zacks Consensus Estimate over the last year. The average positive earnings surprise over the last year works out to be a positive 39%.
Two quarters ago the company posted EPS of $0.49 when $0.19 was expected. That 30 cent beat translated into a positive earnings surprise of 158% and skewed the average over the last year.
Earnings Estimates Revisions
Earnings estimates revisions is what the Zacks Rank is all about.
The consensus estimate for the current quarter has increased from $0.14 to $0.15.
Next quarter has held still over the last sixty days.
The full fiscal year 2024 estimate has moved from $1.11 to $1.17 over the last 60 days.
Next year does not have an estimate at this time.
Valuation
The forward PE multiple for IMMR is 8.3x which is well below the market multiple and the multiple of many of its peers. The price to book multiple comes in at 1.5x and the price to sales multiple checks in at 4.4x. The company has seen operating margins steadily increase from 5.26% to 5.75% and most recently at 6.35%. When a company has growing revenue (519% in the most recent quarter) and expanding margins we often expect to see higher earnings.
Bear of the Day:
Arrow Electronics is a Zacks Rank #5 (Strong Sell) as earnings estimates have tracked lower after a recent earnings beat. The company makes electronic components for a wide range of industries. This article will look at why this stock is a Zacks Rank #5 (Strong Sell) as it is the Bear of the Day.
Description
Arrow Electronics, Inc. engages in the provision of products, services, and solutions to industrial and commercial users of electronic components and enterprise computing solutions. It operates under the Global Components Business and Global Enterprise Computing Solutions (Global ECS) segments. The Global Components segment focuses on the marketing and distribution of electronic components enabled by a comprehensive range of value-added capabilities and services. The Global ECS segment is involved in providing comprehensive computing solutions and services. The company was founded by Robert W. Wentworth and John C. Waddell in 1935 and is headquartered in Centennial, CO.
Earnings History
When I look at a stock, the first thing I do is look to see if the company is beating the number. This tells me right away where the market’s expectations have been for the company and how management has communicated to the market. A stock that consistently beats has management communicating expectations to Wall Street that can be achieved. That is what you want to see.
In the case of Arrow Electronics, I see four straight beats of the Zacks Consensus Estimate. The most recent quarter was a beat with the company posting $2.41 when $2.31 was expected. This alone does not make the stock a Zacks Rank #1 (Strong Buy) and it doesn’t make it a Zacks Rank #5 (Strong Sell) either.
The Zacks Rank does care about the earnings history, but it is much more heavily influenced by the movement of earnings estimates.
Earnings Estimates
The Zacks Rank tells us which stocks are seeing earnings estimates move higher or in this case lower. For ARW, I see annual estimates moving lower of late.
The current year (2024) consensus number moved lower from $11.53 to $10.37 over the last 60 days.
The next year has moved from $15.61 to $14.45 over the last 60 days.
Negative movement in earnings estimates like that is why this stock is a Zacks Rank #5 (Strong Sell).
It should be noted that a lot of stocks in the Zacks universe are seeing negative earnings estimate revisions. That means that the stocks that are seeing small but negative earnings estimate revisions are falling to a Zacks Rank #5 (Strong Sell).
Additional content:
Zacks Initiates Coverage on Servotronics with Outperform
Zacks Investment Research has recently initiated the coverage of Servotronics, Inc. with an “Outperform” recommendation. This coverage follows a detailed analysis of the company's impressive first-quarter 2024 performance and strategic initiatives that position it for continued growth and profitability.
Servotronics reported strong financial results for the first quarter of 2024, with revenues rising 15.3% year over year to $10.4 million, driven by higher volumes and a favorable product mix. Notably, gross profit soared 75.6% to $1.7 million, underscoring the company's focus on cost management and operational efficiencies. A significant 29.3% increase in foreign sales further bolstered this performance, highlighting SVT's expanding international footprint.
In 2023, Servotronics divested its unprofitable Consumer Products Group segment, allowing it to concentrate on its core servo control component business. This strategic move has already shown positive results, enhancing profitability and enabling the company to target high-growth markets, such as aerospace, defense, energy and industrial sectors.
Servotronics is dedicated to maintaining zero-defect quality standards, which are crucial for its competitiveness in the aerospace and defense markets. The company's commitment to innovation is evident as it continues to add products based on market demand and expands its services in the repair and overhaul segments.
Servotronics boasts a strong balance sheet, with an operating cash flow of $2.8 million in the first quarter of 2024, providing the financial flexibility needed to invest in growth initiatives. The company replaced its previous line of credit with a new three-year financing agreement, ensuring continued support for its operations and expansion plans.
SVT is leveraging the recovery in the commercial aerospace sector and is planning to expand into the repair and overhaul markets. Additionally, Servotronics is exploring opportunities in the energy and industrial sectors, which present significant growth potential. This strategic diversification is expected to drive revenue growth and reduce dependency on any single market segment.
The research report highlights several key factors that could drive SVT’s growth. Servotronics' customer concentration remains high, with four major customers accounting for 90% of revenues in 2023. This highlights the importance of maintaining strong relationships with key clients. Similarly, supplier concentration is notable, with one supplier accounting for 10% of purchases, necessitating careful management of supply-chain dynamics.
However, potential investors should be aware of the risks highlighted in the report. Despite the positive outlook, Servotronics faces several challenges, including high inventory levels, dependence on a line of credit with a high interest rate and significant customer concentration. Ongoing legal proceedings and post-retirement benefit obligations add an element of risk to the company's financial performance.
In terms of valuation, SVT shares have shown a mixed performance over the past year, reflecting both sector volatility and company-specific factors. Compared to industry benchmarks, the stock is currently undervalued, presenting an attractive opportunity for investors.
For a comprehensive analysis of Servotronics’ financial health, strategic initiatives and market positioning, you are encouraged to view the full Zacks research report. This detailed report explores the company's operational strategies and financial performance, highlighting potential risks and opportunities that may impact its direction.
Read the full Research Report on Servotronics here>>>
Note: Our initiation of the coverage on Servotronics, which has a modest market capitalization of $30.8 million, aims to equip investors with the information needed to make informed decisions in this promising but inherently risky segment of the market.
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Arrow Electronics, Inc. (ARW) : Free Stock Analysis Report
Immersion Corporation (IMMR) : Free Stock Analysis Report
Servotronics, Inc. (SVT): Free Stock Analysis Report
