For Immediate Release
Chicago, IL – September 06, 2016 – Zacks Equity Research highlights Cotiviti (COTV) as the Bull of the Day and Luxottica Group (LUX) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Haylard Health (HYH).
Here is a synopsis of all three stocks:
Cotiviti (COTV) is a leader in payment accuracy solutions for major healthcare payers in the U.S., along with audit and recovery for top retailers across the U.S., U.K. and Canada. The company acts as payment auditors for primarily the healthcare industry, but also focuses in retail. Cotiviti provides services to eight of the top ten U.S. healthcare payers and helps clients capture over $3 billion annually through improved payment accuracy. The recent IPO is a Zacks Rank #1 (Strong Buy) and todays Bull of the Day after an impressive EPS beat and rising estimates.
Cotiviti has a market cap of $3 billion with a Forward PE of 27. The stock has been strong since its IPO pricing back in May at $19, which it has surged over 65% since. In addition, the company also sits in a strong industry that is ranked 67 out of 265 (Top 25%) in the Zacks Industry Rank.
The company’s recent earnings, recent estimate revisions higher and broker upgrades make the stock very tempting to buy here at post IPO highs.
Q2 Earnings
Q2 was reported on August 9th, when the company beat by 9 cents and beat on revenue. Q2 was seen at $0.37 versus the $0.29 expected, with revenue coming in above expectations at $158.3 million verse $146 million. The company also guided fiscal year 2016 above the 600 million expected, and now sees $610-615 million in revenue. In addition, adjusted EBITDA was seen almost 20% higher year over year, going from $52.6 million to $63 million.
The stock responded to the strong Q2 earnings report, by spiking from $24 to $33 over a period of two weeks. After a one-day pullback of 15% the stock has rallied and take out post-earnings highs. This pullback under $30 was a fantastic opportunity to get long, as the stock looks poised to go even higher along with its estimate revisions.
Estimates
Since the EPS report, revisions to estimates have gone higher for both fiscal year 2016 and 2017. For 2016, estimates have ticked 42% over the last 30 days, from $1.06 to $1.17. For 2017, estimates have been revised 24% higher, from $1.21 to $1.28. The stock next reports in November where estimates have stagnated over the last 90 days. If the company sees another beat, expect investors to rush into the stock in anticipation of more revisions higher.
Broker Upgrades
In the days following the EPS report a couple brokers raised price targets for the stock. JP Morgan raised from $22 to $28, while Barclays (LON:BARC) raise from $22 to $31. The stock was trading at $24 before earnings and the price targets have already been hit, so look for future upgrades from these two.
Recently Baird Equity Research was out with another upgrade and a $39 price target. They base their target on a 15X multiple applied to the 2018 estimates. Baird’s note went onto say that the need to curb healthcare spending, combined with payment complexity should support their 10-12% growth outlook. In addition, the Cotiviti’s high margins and low capex results in strong cash flow and capital deployment optionality.
In Summary
When a company comes to market in form of an IPO, the first six months’ performance is an important indicator of future performance. So far Cotviti has impressed investors and analysts alike. Look for the stock to continue to drift higher into the next EPS report and possibly be a future Wall Street favorite
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Luxottica Group (LUX) is the world leader in the design, manufacture and marketing of high quality eyeglass frames and sunglasses in the mid and premium priced market segments. The Manufacturing segment of the company offers its products under proprietary brands, such as Ray-Ban, Oakley, Vogue Eyewear, and Arnette; and licensed brands, including Giorgio Armani, Brooks Brothers, Burberry, Chanel, Coach, Michael Kors, Prada, Ralph Lauren (NYSE:RL), Tiffany & Co (NYSE:TIF), Tory Burch, Valentino, Versace and more. The Retail Distribution segment operates prescription eyewear stores primarily under its retail brands, including LensCrafters, Sunglass Hut, OPSM, Laubman & Pank, Oakley, David Clulow, and GMO; and licensed brands, such as Sears Optical and Target Optical.
The company was founded in 1961, is based in Milan Italy and employs almost 80,000 people. The stock is the Bear of the Day after being downgraded to a Zacks Rank #5 (Strong Sell) and after the company cut 2016 guidance.
Luxottica is valued around $23 billion and has a Forward PE of 24. The stock sports Zacks Style Scores of “D” in Value, due to its high end valuation. The stock has not had a pleasant year as its down over 30% from its high last July at $74, a share to now $48.50. While some investors might be buying the dip, the company’s last earnings report along with falling estimates might force most to wait.
Q2 results
Only July 25th the company actually beat on both the top and bottom line. However, Luxottica cuts its revenue outlook for fiscal year 2016, saying it now expects +2-3% instead of the previous +5-6%. They also cut net income to “inline” with fiscal year sales.
On a presentation the company said that the sun season is rebounding after a soft start, but investors weren’t impressed as the stock traded down after EPS. Since the report, the stock has been treading water and falling estimates aren’t helping the situation.
Estimate Revisions
Over the last 30 days, estimates have been revised lower for all time frames. For fiscal year 2016, the numbers have been taken down 13%, from $2.31 to $1.99. For 2017, estimates are now seen at $2.15, down from $2.34 or 8%.
A Better Option
If you’re looking at Luxottica as a medical supply play, then perhaps Haylard Health ( HYH) would be a better choice. Haylard is a Zacks Rank #1 (Strong Buy) that sells surgical and infection prevention products for the operating room. The company was founded in 2014, has 12,000 employees and is headquartered in Georgia.
The company has a market cap of $1.6 billion and a Forward PE of 20. The stock sports a Zacks Style Score of “B” in Value.
On August 3rd the company beat EPS by 9 cents and beat on revenue estimates. Revisions to earnings estimates have spiked higher over the last year. For fiscal year 2016, estimates have been revised 10% higher over the last month, while 2017 has seen a 9% jump.
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COTIVITI HLDGS (COTV): Free Stock Analysis Report
LUXOTTICA ADR (LUX): Free Stock Analysis Report
HALYARD HEALTH (HYH): Free Stock Analysis Report
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