Blackbaud, Forward Air, Chipotle, Dominion and Berkshire Hathaway highlighted as Zacks Bull and Bear of the Day

Zacks Equity Research

For Immediate Release

Chicago, IL – July 7, 2020 – Zacks Equity Research Shares of Blackbaud BLKB as the Bull of the Day, Forward Air Corp FWRD asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Chipotle CMG, Dominion D and Berkshire Hathaway BRK.B.

Here is a synopsis of all five stocks:

Bull of the Day:

Blackbaud is a Zacks Rank #2 (Buy) and it is the Bull of the Day today. We are still seeing stocks with the smallest of positive revisions rising to the level of a Zacks Rank #2 (Buy) or a Zacks Rank #1 (Strong Buy) and that means the majority of stocks are still seeing negative earnings estimate revisions.  This stock is seeing positive revisions, so let's take a deeper look at BLKB.

Description

Blackbaud, Inc. provides cloud software solutions to nonprofits, foundations, companies, education institutions, healthcare organizations, and individual change agents in the United States and internationally. It sells its solutions and related services through its direct sales force. The company was founded in 1981 and is headquartered in Charleston, South Carolina.

Earnings History

I like to see a history of beats for any stock. It tells me that management knows how to communicate with Wall Street and properly set expectations. I see BLKB has beaten the Zacks Consensus Estimate in each of the last four quarters.

Over that time horizon, the average positive earnings surprise is 11%. A double digit average is always good to see!

Estimate Revisions

The impact of COVID is still being felt as most stocks have seen estimates move a lot lower over the last 90 days. BLKB is not immune to that, but the Zacks Rank only looks at the last 60 days of earnings estimate revisions. The current quarter has seen a decline of 2 cents over the last 60 days, while next quarter has held still.

The Zacks Rank cares more about the full year numbers and I see an increase for this year. The number was at $2.03 and it bumped higher by a penny and that is good enough to get a Zacks Rank #2 (Buy).

Valuation

The valuation is a stiff one, with the stock trading at just about 29x forward estimates. Investors also have to swallow the 7.7x book multiple and deal with topline growth of only 3.6%. Price to sales is at 3.2x while margins have stayed put at 6.7% on an operating basis. Sure there are other names with better valuations in the same space, but the reason that I choose this stock is that it is still well below the pre-crash highs. As more states reopen and the economy gets back to normal, this stock should have a decent runway ahead of it and that will make investors smile down the road.

Bear of the Day:

Forward Air Corp missed the Zacks Consensus Estimate at the end of April and the stock is a Zacks Rank #5 (Strong Sell).  Let's take a look at what happened and why this stock reached the lowest Zacks Rank in this Bear of the Day article.

Description

Forward Air Corporation, together with its subsidiaries, operates as an asset-light freight and logistics company in the United State and Canada. The company operates through three segments: Expedited Freight, Intermodal, and Pool Distribution. The Expedited Freight segment provides expedited regional, inter-regional, and national less-than-truckload services; local pick-up and delivery services; and other services, which include final mile, truckload, shipment consolidation and deconsolidation, warehousing, customs brokerage, and other handling. It also offers expedited truckload brokerage, dedicated fleet, and high security and temperature-controlled logistics services.

The Intermodal segment provides intermodal container drayage services; and contract, and container freight station warehouse and handling services. The Pool segment offers pool distribution services comprising managing high-frequency handling and distribution of time-sensitive products to various destinations through a network of terminals. Forward Air Corporation was founded in 1981 and is headquartered in Greeneville, Tennessee.

Recent Earnings

On April 30, FWRD reported EPS of $0.30 but the Zacks Consensus Estimate called for $0.41.  That 11 cent miss translated into a negative earnings surprise of 26%.  

This followed another negative earnings surprise of 8.6% and the report before that was a meet.

The earnings history plays a role in the Zacks Rank, but it is not the most important factor.  Estimate revisions are much more important to the Zacks Rank.

Estimate Revisions

The Zacks Rank will tell you right away if estimate revisions are moving higher or lower.  As a Zacks Rank #5 (Strong Sell) we know that the estimates for FWRD have moved lower.

The estimate for the current quarter slipped from 20 cents sixty days ago to the current level of 13 cents.

Next quarter saw a move lower as well, but not as steep.  That number went from 40 cents to 35 cents.

The full year numbers carry the most weight, and I see that number slipping from $1.68 to $1.37 over the last 60 days.

The number for next year also fell from $2.69 to $2.41 over the same time period.

FWRD is not alone as many stocks have seen earnings estimate revisions move lower.  

Valuation

With back to back earnings reports coming up short and lower earnings estimates you would think that the valuation would have dropped to a more reasonable level... but it hasn't.  The stock trades at 35x forward earnings and that is pretty stiff for a trucker.  Topline growth of 6.5% is nice to see, but it really needs to double to just that big forward PE multiple.  

Price to book is somewhat reasonable at 2.4x as the price to sales multiple of 1x.  I do see margins slipping of late, but that is understandable given the pandemic.

Additional content:

Economic Resurgence Leads to Fresh Market Gains

Another spirited day of stock buying kicked off a new week in the markets Monday — led once again by the tech-heavy Nasdaq, which rose 2.21% and closed at yet another record high. The Dow followed, growing 1.78% in regular Monday trading, followed by the S&P 500 at +1.59% and the small-cap Russell 2000 at +0.77%. These figures come roughly a week before Q2 earnings season heats up; Q2 is expected to bring the worst quarterly performances since at least the worst quarters of the Great Recession more than a decade ago.

Consumer Discretionary stocks led all industries on the day, up 3% — spurred by a flashy analyst upgrade of 106% growth in 2021 for Chipotle — followed by solid 2% gains in Communication Services, Financials and Tech. Natural Gas was up 5.5% on the Dominion deal with Berkshire Hathaway announced this past weekend, though the Oil market was flat on the day.

Two economic reports on the Services sector came out early Monday, and while they didn’t prompt stocks to bid up higher on the news — the indexes had already mined healthy gains by then — they did point to further improvement in the U.S. economy. The Markit Services PMI read today was a revision on the June preliminary figure, now up at 47.9 from the 46.7 originally reported, and way up from May’s 37.5. The June revision is slightly lower than the trailing 12-month average prior to the COVID-led downturn from March through May.

For ISM Non-manufacturing in June, the 57.1% headline brought the biggest increase since February, with the biggest-ever single-month percentage-point increase from the 45.4% reported in May. Business Activity grew 25 points month over month, New Orders up nearly 20 points, including impressive New Exports. Inventories, Employment and Price Increases all came out higher than May, as well.

Investors started Monday in a good mood, stoked by a positive message in China’s economic outlook which led to a big climb in the Shanghai index. It would seem the global economy is getting on its feet after months of elective dormant activity.

However, this is not the same thing as living in a post-COVID world: as of Monday afternoon, roughly 11.5 million people have tested positive for the coronavirus the world over, with more than half a million fatalities. No fewer than 132K of those fatalities have occurred here in the U.S. since February, as we are about to pass 3 million cases, nearly double second-place Brazil.

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Berkshire Hathaway Inc. (BRK.B) : Free Stock Analysis Report
 
Dominion Energy Inc. (D) : Free Stock Analysis Report
 
Chipotle Mexican Grill, Inc. (CMG) : Free Stock Analysis Report
 
Forward Air Corporation (FWRD) : Free Stock Analysis Report
 
Blackbaud, Inc. (BLKB) : Free Stock Analysis Report
 
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