Chicago, IL – December 4, 2024 – Zacks Equity Research shares Gilat Satellite Network GILT as the Bull of the Day and Huntington Ingalls Industries HII as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Cheniere Energy LNG, Range Resources RRC and Shell plc SHEL.
Here is a synopsis of all five stocks.
Gilat Satellite Network is a Zacks Rank #2 (Buy) that has an A for Value and an A for Growth. The company is a leading provider of satellite based broadband communications. This company is a leader in the “very small aperture terminal satellite communications” sector. There has been a lot of hype around Space X – including Fidelity Investments increasing its stake in that company by 32% and a tender offer for $350B for the entire company. The success of space X and its fleet of satellites has brought a lot of attention to this space and GILT is positioned to take advantage of that.
Yesterday the stock closed higher by 5.36% on volume of more than 1.8M shares, well above the 226K 20 day average.
Let’s explore more about this company in this Bull of The Day article.
Gilat Satellite Networks Ltd. engages in the provision of broadband satellite communication and networking solutions and services. The company was founded in 1987 and is headquartered in Petah Tikva, Israel.
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.
Gilat Satellite Networks has only one quarter with a Zacks Consensus but it was a beat. the company posting EPS of $0.14 vs $0.08 estimate from William Blair. That works out to be a 75% positive earnings surprise.
Over the last four quarters the company has posted positive earnings of $0.11, $0.11, $0.10 and most recently the $0.14 quarter which we had an estimate for.
Earnings estimate revisions is what the Zacks Rank is all about.
Estimates are moving higher for GILT.
Following the recent beat, the estimates for this quarter increased dramatically.
The consensus has moved from $0.04 to $0.14 over the last 30 days.
That move and the beat has pushed the full year 2024 up from $0.32 to $0.48.
Next year increased from $0.44 to $0.47.
This is the section to pay attention to in this particular write up.
This year the company is looking from $311M in sales which is good for 16.8% growth.
Next year analysts are expecting $448M in sales which represents growth of 44.2%.
That is a significant acceleration in growth, from 16.8% to 44.2%
I see a great valuation given the expected growth. The forward multiple is 12x and that could easily double over the next year. The price to book of 1.13x is very low for this stock. Price to sales is right at 1.09x.
Margins have been increasing, going from 7.6% to 7.7% and most recently at 8.7%.
If we see margin hold steady (even as they have been expanding) and add in the additional revenue growth, we could see earnings grow by 40% from the current level, right now the estimate is calling for EPS contraction by 2%, so there is likely going to be a significant swing in expectations for this stock after the first quarter of this year.
Huntington Ingalls Industries is a Zacks Rank #5 (Strong Sell) after the company missed the Zacks Consensus Estimate when the last reported on October 31. The company makes ships for the US Navy and while there has been much made of the cost of the Ukraine war, there are calls for the US to curtail military spending. This idea somehow finds HII in the crosshairs despite its seemingly limited involvement in that situation. This article will look at why this stock is a Zacks Rank #5 (Strong Sell) as it is the Bear of the Day.
Huntington Ingalls Industries, Inc. engages in the shipbuilding business. It operates through the following business segments: Ingalls, Newport News, and Mission Technologies. The Ingalls segment designs and constructs non-nuclear ships, including amphibious assault ships, expeditionary warfare ships, surface combatants, and national security cutters (NSC). The Newport News segment designs and builds nuclear-powered aircraft carriers and submarines, and the refueling and overhaul and the inactivation of nuclear-powered aircraft carriers.
The Mission Technologies segment includes business groups focused on high-end information technology (IT) and mission-based solutions for DoD, intelligence, and federal civilian customers, life-cycle sustainment services to the U.S. Navy fleet and other maritime customers, unmanned, autonomous systems, and nuclear management and operations and environmental management services for the Department of Energy (DoE), DoD, state and local governments, and private sector companies. The company was founded on August 4, 2010, and is headquartered in Newport News, VA.
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 Huntington Ingalls Industries, I see three beats and one miss of the Zacks Consensus Estimate over the last year. The most recent quarter was a miss with the company posting $2.56 when the consensus was calling for $3.84. 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.
The Zacks Rank tells us which stocks are seeing earnings estimates move higher or in this case lower. For HII I see annual estimates moving lower of late.
The current fiscal year consensus number moved lower from $16.59 to $14.31 over the last 60 days.
The next year has moved from $18.89 to $15.57 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).
The U.S. Energy Department's latest inventory report showed a lower-than-expected decrease in natural gas supplies. Despite this bearish data, futures ended the week higher due to expectations of more people using the fuel to heat their homes on account of colder weather.
However, natural gas is expected to remain volatile, depending on the temperature outlook, supply/demand balance etc. In such a situation, investors should focus on resilient stocks like Cheniere Energy, Range Resources and Shell plc.
Stockpiles held in underground storage in the lower 48 states fell 2 billion cubic feet (Bcf) for the week ended Nov. 22, below analysts’ guidance of a 3 Bcf depletion. The decrease, second in succession, compared with the five-year (2019-2023) average net decline of 30 Bcf.
The weekly withdrawal put total natural gas stocks at 3,967 Bcf, 134 Bcf (3.5%) above the 2023 level and 267 Bcf (7.2%) higher than the five-year average.
The total supply of natural gas averaged 108.4 Bcf per day, up 0.8 Bcf per day on a weekly basis, due to higher dry production partly offset by lower shipments from Canada.
Meanwhile, daily consumption edged up to 107.9 Bcf from 107.3 Bcf in the previous week, mainly reflecting higher residential/commercial usage.
Natural gas prices rose last week despite a smaller-than-expected inventory draw. Prices were buoyed by strong demand forecasts on the back of colder temperatures. December futures closed at $3.363 on the New York Mercantile Exchange, marking a 2.3% increase.
However, even with this gain, one has to consider the current natural gas supply surplus and the lingering uncertainty associated with it. With current inventories remaining above both last year’s levels and the five-year average, the rally can be short-lived. Investors must remember that natural gas prices dipped to a four-month low of $1.88 in late August, underscoring the market's ongoing volatility.
The natural gas market continues to struggle with oversupply, along with shifts in weather and production dynamics. As such, investors should remain cautious. Focusing on fundamentally strong stocks like Cheniere Energy, Range Resources and Shell plc —each carrying a Zacks Rank #3 (Hold) — may offer more stability amid the uncertainty.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Cheniere Energy: Being the first company to receive regulatory approval to export LNG from its 2.6 billion cubic feet per day Sabine Pass terminal, Cheniere Energy enjoys a distinct competitive advantage.
Cheniere Energy beat the Zacks Consensus Estimate for earnings in three of the last four quarters and missed in the other. The natural gas exporter has a trailing four-quarter earnings surprise of roughly 87.5%, on average. LNG shares have moved up 27.8% in a year.
Range Resources: The company is an U.S. independent natural gas producer with operations focused in the Appalachian Basin. Range Resources’ large contiguous acreage position provides more than 30 years of low-breakeven, high-return inventory. The company produced 202.8 Bcfe from these assets in the third quarter of 2024 — 68% natural gas.
Range Resources beat the Zacks Consensus Estimate for earnings in each of the last four quarters. The upstream operator has a trailing four-quarter earnings surprise of roughly 28.8%, on average. RRC shares have gained 10% in a year.
Shell: Shell’s long-term strategy revolves around LNG. This London-based firm bought BG Group for $50 billion in 2016 to become the world’s largest producer and shipper of LNG. With LNG export demand likely to rise significantly in the near-to-medium term, Shell’s position as a major supplier should help it meet the fuel’s growing demand.
SHEL beat the Zacks Consensus Estimate for earnings in each of the last four quarters. This natural gas exporter has a trailing four-quarter earnings surprise of roughly 15.4%, on average. Shell shares have edged down 0.8% in a year.
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