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Schlumberger and Digital Turbine have been highlighted as Zacks Bull and Bear of the Day

For Immediate Release

Chicago, IL – September 19, 2022 – Zacks Equity Research shares Schlumberger SLB as the Bull of the Day and Digital Turbine APPS asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on AT&T Inc. T, Qualcomm Inc. QCOM and Verizon Communications Inc. VZ.

Here is a synopsis of all five stocks.

Bull of the Day:

Schlumberger is finally bullish about its business as energy moves into a multiyear up cycle. This Zacks Rank #1 (Strong Buy) is expected to see double digit earnings growth this year and in 2023.

Schlumberger describes itself as a technology company that partners with customers to access energy. It deploys digital solutions and innovative technologies in the energy industry, including oil and natural gas.

It has expertise in 120 countries.

5 Years of Beating on Earnings

Even when market conditions weren't favorable for Schlumberger, it still put together an incredible earnings surprise track record. It hasn't missed on earnings in 5 years.

On July 22, 2022, it continued with that record as it beat on earnings again for the second quarter, reporting $0.50 versus the Zacks Consensus of $0.40.

Revenue rose 20% year-over-year to $6.8 billion as North American revenue rose 42% to $1.5 billion from $1.1 billion a year ago and International revenue jumped 15% to $5.2 billion from $4.5 billion a year ago.

Schlumberger was bullish.

"Growth was broad-based, driven by an increase in activity internationally, in North America, and across all Divisions," said Olivier Le Peuch, CEO.

"The quarter was also characterized by a favorable mix of exploration and offshore activity and the increasing impact of improved pricing, resulting in the largest sequential quarterly growth since 2010," he added.

Raised Full Year Guidance

In July, business was looking so strong that Schlumberger raised full year guidance.

The analysts also did the same.

The 2022 Zacks Consensus Estimate jumped to $2.02 from $1.86 over the last 60 days as 8 estimates were revised higher. That is earnings growth of 57.8%.

The analysts are bullish about 2023 as well. 7 estimates were raised over the last 2 months and it has pushed up the Zacks Consensus to $2.77 from $2.60 during that time.

That is further earnings growth of 37.3%.

Shares Up on the Year

After shares tumbled to new 5-year lows during the start of the pandemic, they have turned it around with a multi-year rally.

Shares are up 28% this year but they peaked in June and have fallen 7.6% over the last 3 months.

Is Schlumberger a deal?

It has a forward P/E of 19.7, which isn't altogether cheap, but it does have a PEG ratio of 0.5. A PEG ratio under 1.0 usually indicates a company is undervalued.

Schlumberger is giving some of its cash back to shareholders. It pays a dividend yielding 1.8%.

For investors looking for a company with rising earnings estimates this year and next, Schlumberger should be on your short list.

Bear of the Day:

Digital Turbine is seeing challenging macro conditions. This Zacks Rank #5 (Strong Sell) is expected to see declining earnings in 2022.

Digital Turbine, headquartered in Austin, Texas, is a mobile growth platform for advertisers, publishers, carriers and OEMS. By integrating a full ad stack with proprietary technology built into devices by wireless operators and OEMs, it supercharges advertising and monetization.

It has offices in large cities across the United States, and in London, Berlin, Singapore, and Tel Aviv.

A Beat in Q1 Fiscal 2023

On Aug 8, Digital Turbine reported its fiscal first quarter 2023 results and beat on the Zacks Consensus by $0.03. It has beat 3 out of the last 4 quarters.

Revenue jumped 19% to $188.6 million.

The company said it was experiencing "challenging macro conditions" but was making progress on several strategic initiatives.

Light Guidance

Digital Turbine provided second quarter guidance which was a little light. It guided to second quarter earnings of a range of $0.32 to $0.34 which was below the Zacks Consensus of $0.41.

As a result, the analysts have cut their fiscal 2023 earnings estimates which has pushed down the Zacks Consensus to $1.43 from $1.72 just 60 days ago.

This is an earnings decline of 13.9% compared to last year where the company made $1.66.

Analysts are more bullish for next year, however, with earnings expected to jump 23% to $1.76 but that is down from $2.31 just 60 days ago.

Shares Sink in 2022

Growth stocks are out of favor and Digital Turbine is no exception. The shares have sunk 68.6% this year.

Are they cheap after the big sell-off?

Digital Turbine trades with a forward P/E of just 12.4 so it's a value stock.

But investors should be cautious with companies in the digital advertising market as the economy slows. They might want to stay on the sidelines until the next earnings report.

Additional content:

3 Blue-Chip Communications Stocks to Profit from the Dip

The U.S. equity markets witnessed a sharp decline in the past few trading sessions that wiped off nearly all the recent rallies, as the August consumer price index report turned up with a higher-than-expected inflation reading. Despite a fall in gasoline prices, inflation rose 0.1% from July while core inflation was up 0.6% month over month. On a year-over-year basis, inflation was up 8.3%.

Economists had broadly expected an 8.1% increase with a 0.3% rise in core inflation. This apparently annulled broad-based expectations of monetary easing and fueled speculations that the Fed is likely to announce a 75-basis point hike in interest rates for the third consecutive time in its policy meeting scheduled next week to rein in inflationary pressure.

As the economy offers mixed signals with tempered retail activity and a vibrant labor market amid falling jobless claims, the markets appear ripe for bargain hunters who look to buy blue-chip stocks on the dip. With the Fed vowing to maintain its aggressive rate hike regime to curb inflation, latent forces continue to keep the markets on tenterhooks amid the faltering bear market rally. With uncertainty becoming the norm of the day, investors could be better off if they snap up some high fliers with inherent growth potential like AT&T Inc., Qualcomm Inc. and Verizon Communications Inc. at low prices.

5G, IoT Fueling Communications Sector Demand

Despite high inflationary pressures and supply chain woes related to continued chip shortage, the communications sector appears well-poised to benefit from pent-up demand with the gradual revival in post-pandemic market conditions. The industry is benefiting from higher demand for scalable infrastructure for seamless connectivity amid a wide proliferation of IoT devices. A steady pace of 5G deployment and investments by leading carriers to upgrade their network infrastructure and increase their fiber footprint to meet the increasing demand for flexible data, video, voice and IP solutions also seems to have buoyed the industry growth.

The industry participants are rapidly transforming themselves from legacy copper-based telecommunications firms to technology powerhouses, with capabilities to meet the growing demand for seamless data connectivity. At the same time, the sector continues to focus on leveraging wireline momentum, expanding media coverage, improving customer service and achieving a competitive cost structure to generate higher average revenue per user while attracting new customers. Also, the sector is leveraging indigenous software-defined networks to enable low-latency, high-bandwidth applications for faster access to data processing.

3 Stocks to Watch from the Communication Sector

We have tried to handpick some communication stocks with a market cap in excess of $100 billion that are currently trading near their 52-week lows. Each of the stocks carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AT&T Inc.: The carrier is striving to become the leading broadband provider in the country, focusing on 5G and fiber network connectivity. The company is aiming to profitably increase its postpaid subscriber base by leveraging its network quality and market penetration capabilities. Riding on its go-to-market strategy, AT&T expects to witness healthy subscriber momentum with the migration of customers to its unlimited plans.

The company is increasingly focusing on its customer-centric business model to attract and retain customers for a lower churn rate. Over the past few quarters, AT&T has been focusing on aggressive fiber build-out initiatives as it seeks to connect 3.5-4 million additional locations with fiber each year to significantly increase its existing fiber footprint to more than 30 million locations by the end of 2025. The company expects that 75% of its network footprint will be either served by fiber or 5G, which will likely halve its legacy copper services exposure. These simplification initiatives are likely to drive additional cost savings while creating new revenue-generating opportunities.

While optimizing operations, AT&T intends to deploy 120 MHz of mid-band spectrum to considerably expand its 5G coverage, which currently spans more than 16,000 cities and towns, covering above 255 million people. In order to upgrade its existing infrastructure facilities for 5G and fiber deployment, AT&T plans to invest $24 billion each in 2022 and 2023 and about $20 billion starting from 2024. As a standalone company, it intends to pay more than $8 billion in dividends to shareholders, representing a payout of about 40% against the expected free cash flow of $20 billion in 2023. It further plans to reduce its net debt to adjusted EBITDA ratio to the 2.5 range by the end of 2023.

The company is currently trading at $16.76, which is near the 52-week low of $16.63. With a market cap of $119.5 billion, it has a long-term earnings growth expectation of 3.4% and delivered an earnings surprise of 5.3%, on average, in the trailing four quarters. It has a VGM Score of A and a healthy dividend yield of 6.6%.

Qualcomm Inc.: Qualcomm is one of the largest manufacturers of wireless chipsets based on baseband technology. The company is focusing on retaining its leadership in 5G, chipset market and mobile connectivity with several technological achievements and innovative product launches. It is likely to help users experience a seamless transition to superfast 5G networks, delivering low-power resilient multi-gigabit connectivity with unprecedented range and Qualcomm's best-in-class security. This, in turn, would further offer the flexibility and scalability needed for broad and fast 5G adoption through accelerated commercialization by OEMs.

Qualcomm is reportedly the only chipset vendor with 5G system-level solutions, spanning both sub-6 and millimeter wave bands, and one of the largest RF (radio frequency) front-end suppliers with design wins across all premium-tier smartphone customers. The company is currently aiming to diversify its business. It is witnessing healthy traction in EDGE networking that helps to transform connectivity in cars, business enterprises, homes, smart factories, next-generation PCs, wearables and tablets. The automotive telematics and connectivity platforms, digital cockpit and C-V2X solutions are also fueling emerging automotive industry trends such as the growth of connected vehicles, the transformation of the in-car experience and vehicle electrification.

The company is currently trading at $124.98, which is near the 52-week low of $118.23. With a market cap of $143.2 billion, it has a long-term earnings growth expectation of 15.8% and delivered an earnings surprise of 8.5%, on average, in the trailing four quarters. It has a VGM Score of A and a dividend yield of 2.4%.

Verizon Communications Inc.: With one of the most efficient wireless networks in the United States, Verizon deploys the latest 4G LTE Advanced technologies to deliver faster peak data speeds and capacity for customers, driven by customer-focused planning, disciplined engineering and constant strategic investment. The company remains focused on making necessary capital expenditures due to the expansion of 5G mmWave in new and existing markets, the densification of the 4G LTE wireless network to cater to huge traffic demands across multiple verticals and the continued deployment of the fiber infrastructure.

Verizon’s 5G mobility service offers an unparalleled experience that impacts industries as diverse as public safety, health care, retail and sports. The company’s 5G network hinges on three fundamental drivers to deliver the full potential of next-generation wireless technology. These are massive spectrum holdings, particularly in the millimeter-wave bands for faster data transfer, end-to-end deep fiber resources and the ability to deploy a large number of small cells.

In order to expand coverage and improve connectivity, Verizon has acquired 161MHz of mid-band spectrum in the C-Band auction for a total consideration of $45.5 billion. These airwaves offer significant bandwidth with better propagation characteristics for optimum coverage in both rural and urban areas.

The company is currently trading at $41.03, which is near the 52-week low of $40.71. With a market cap of $173.4 billion, it has a long-term earnings growth expectation of 4.2%. It has a VGM Score of B and a dividend yield of 6.2%. The company recently increased its quarterly dividend for the 16th consecutive year.

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QUALCOMM Incorporated (QCOM) : Free Stock Analysis Report
 
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