Lam Research, FreightCar America, Twitter and Facebook highlighted as Zacks Bull and Bear of the Day

For Immediate Release

Chicago, IL – April 27, 2017 –Zacks Equity Research highlights Lam Research (NASDAQ: LRCX – Free Report ) as the Bull of the Day, FreightCar America (NASDAQ: RAIL – Free Report ) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Twitter, Inc. (NYSE: TWTR – Free Report ) and Facebook Inc. (NASDAQ: FB – Free Report ).

Here is a synopsis of all four stocks:

Bull of the Day :

Lam Research (NASDAQ:LRCX – Free Report ) delivered the goods on April 18 that I had been telling you about for two months in articles like "Give Me Sales Growth!" on February 25 and "3 Tech Stocks to Buy on This Pullback" from April 12.

Here's what I told my TAZR Trader group, where we first bought LRCX under $115 in mid-February, after Lam reported earnings last week...

Another quarter, another round of schooling the recalcitrant bears who want to short semiconductors just because the stocks have run so hard in the past year. According to the Merriam-Webster dictionary...

The origins of lambaste are somewhat uncertain, but the word was most likely formed by combining the verbs lam and baste, both of which mean "to beat severely." (Incidentally, lambaste can also be spelled lambast, despite the modern spelling of the verb baste.)

The Earnings Trifecta

Lam Research delivered the earnings "trifecta" we love: top and bottom line beats and raised guidance!

We don't really want to harm recalcitrant bears. But we don't mind severely beating Wall Street estimates.

At last glance around 6pm ET, LRCX shares were up over $6 (+4.75%) on heavy short-covering volume of 450K. Here were the details...

Revenue in the March quarter climbed to $2.154 billion, yielding EPS of $2.80.

Analysts had been modeling $2.125 billion on the top and $2.55 on the bottom, for a 1.35% sales beat and a 10% EPS beat.

For the current quarter, the company sees revenue of $2.2 billion to $2.4 billion, and EPS of $2.88 to $3.12, topping consensus of $2.19 billion and $2.65 per share.

Stifel analyst Patrick Ho, a big LRCX bull who commented positively ahead of earnings, was quick to offer commentary afterwards.

Ho noted that Lam reported 2017 Q3 beats driven by strong shipments to Korea and Taiwan. Since he probably needs time to digest management's upgraded outlook for the year before he adjusts his earnings model, he would only reiterate his $150 price target tonight.

But we should expect many analysts to raise estimates in the coming days.

Bear of the Day :

FreightCar America (NASDAQ:RAIL – Free Report ) has consistently been a Zacks #5 Rank (Strong Sell) for most of the past 2 years as demand for coal-carrying freight cars, its specialty, slowed down.

It was just last week that I wrote about another rail car maker, American Railcar Industries (ARII), in the cellar of the Zack Rank for similar reasons as the energy bear market mauled demand for its tank cars.

In that article, I referred to our resident expert on the rails, Tracey Ryniec, for correctly warning investors not to fall into some of these industrial "value traps."

Well the $162 million RAIL was never a P/E value in recent history and after earning a profit of $0.43 last year, the 2017 EPS consensus is for a big drop to -$0.56.

And Tracey was all over it a year ago too. Here's what she had to say in March of 2016 when RAIL was trading around $15 and the estimates kept slipping away...

The Best Year Since 2006 But...

On Feb 22 (of 2016), the company reported fourth quarter and full year results which were the best since 2006. Even allotting for the sale of its railcar repair and maintenance services, it was still a record year.

But, that is expected to change over the next several years. The railcar manufacturing business has always been cyclical and it is now heading into the "down" part of the cycle.

You can see the change in the earnings picture:

2015: $2.32
2016 expected: $1.50
2017 expected: $1.41

2016 is an earnings decline of 35.3% year over year.

Now, you probably notice right away, that even with that 35% EPS drop into 2016, a year ago Tracey was looking at a healthier profit outlook than has actually come to pass.

And she was still bearish on this outlook!

Here she continues on the key questions which show that Tracey was way ahead of most Wall Street analysts in forecasting further declines in sales and profits...

Backlog To Fall

The best indicator of the down side is the backlog.

Year-end manufacturing backlog peaked in December 2014 at 14,791. At the end of December 2015 it was 9840. Non-coal cars comprised 99.6% of the total backlog as of Dec 31, 2015.

I would expect it to continue to fall as the number of orders remains lighter than prior years.

Is It Cheap?

Shares have dropped to 2-year lows.

But is it a bargain? They're trading with a forward P/E of just 10 which seems cheap but with earnings expected to decline over the next 2 years, this could be a value trap.

For investors who are holding on through the down cycle, the company does pay a dividend, currently yielding 2.4%.

(end of Tracey Ryniec's excellent analysis)

That dividend holds steady at $0.36, with a 2.76% yield now. Maybe that's why the shares don't fall further, and are able to recover from scary 2-day flushes from $13 to $11 like we saw last November.

Those who like that dividend appear to hold their shares steady.

And with a fantastic Price-to-Sales ratio under 0.35, it's certainly a value stock. For now.

But with this year's sales forecast at $346.4 million -- already a 34% drop from last year -- and next year looking at a 15% fall to $293.5 million, I'd say there have to be better ways to earn a dividend then to ride these rails of declining sales.

Additional content:

Here's How Twitter (TWTR) Smashed Earnings Estimates

Shares of Twitter, Inc. (NYSE: TWTR – Free Report ) skyrocketed on Wednesday morning after the struggling social media platform reported greater than expected user growth in its first-quarter earnings report.

Twitter blew user growth estimates out of the water by adding 9 million monthly active users (MAUs) in the first quarter of 2017. The social network now boasts 328 million monthly users, which is still well below rivals Facebook Inc. (NASDAQ: FB – Free Report ) and Instagram.

Just a week ago, our consensus estimate, which was based on the independent research of 20 analysts, called for Twitter to hit 320.8 million MAUs in the quarter.

Twitter grew its U.S. user base in the first quarter by 3 million. It took Twitter all of 2016 to add roughly that many users in the U.S.

The company also reported that its daily active usage increased 14% year-over-year, which marked the fourth consecutive quarter of growth in that important revenue-generating area.

Since the micro-blogging company released its quarterly earnings report on Wednesday morning, Twitter’s stock price jumped 11.08% to $16.28 per share in morning trading. Twitter is currently a Zacks Rank #3 (Hold).

On top of the boost in users, Twitter reported revenues of $548.3 million in the first quarter, which beat Zacks Consensus Estimate of $512.1 million. Twitter lost far less than the estimated $0.16 per share, reporting a loss of $0.05 per share. The increased user numbers played a big part in both of Twitter’s relatively big beats.

Twitter reported a $40.3 million operating loss, but that figure came in much lower than the $59.1 million loss the company posted a year earlier.

The Jack Dorsey-led company’s revenues were down 7.8% year-over-year, due in large part to the fact that Twitter now makes less money per ad due to the shift to auto-play video ads. However, the positive user growth has helped give Twitter a much-needed boost, as investors continue to give the company a shot in the arm on Wednesday.

Stocks that Aren't in the News. Yet.

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About the Bull and Bear of the Day

Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

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Lam Research Corporation (LRCX): Free Stock Analysis Report
 
Freightcar America, Inc. (RAIL): Free Stock Analysis Report
 
Twitter, Inc. (TWTR): Free Stock Analysis Report
 
Facebook, Inc. (FB): Free Stock Analysis Report
 
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