MasTec, NutriSystem and Nutanix highlighted as Zacks Bull and Bear of the Day

For Immediate Release

Chicago, IL – March 2, 2018 – Zacks Equity Research highlights MasTec MTZ as the Bull of the Day, NutriSystem NTRI as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Nutanix, Inc. NTNX.

Here is a synopsis of all three stocks:

Bull of the Day:

I last wrote about MasTec as the Bull of the Day on February 6 as earnings estimates and price targets were rising before their quarterly report this week.

The $3.75 billion E&C services (engineering & construction) provider for telecom and energy companies delivered record fourth-quarter 2017 adjusted earnings per share of 47-cents, beating the Zacks Consensus Estimate of 37-cents by 27%.

Including one-time items, MasTec reported earnings of $1.95 per share compared with 66-cents per share reported in the prior-year quarter. Earnings in the fourth quarter included an after-tax benefit of $1.46 per share related to the impact of re-measurement of the company's U.S. deferred income tax balances because of the Tax Cuts and Jobs Act enacted in December 2017.

Sales and the Backlog Surprise

The 27% EPS beat was driven by stronger than anticipated revenues in every segment, including a 16% beat in Communications, 28% beat in Oil & Gas, and a 30% beat in Electric Transmission.

\MasTec’s net sales climbed 19% year over year to $1.6 billion in the quarter, outpacing the Zacks Consensus Estimate of $1.3 billion. Earnings improved across all segments. The Oil and Gas segment’s revenues in the reported quarter surged 30% to $740 million over the fourth-quarter 2016 level.

Revenues at the Power Generation and Industrial segment improved 18% year over year to $96 million. The Communication segment’s revenues increased 11% year over year to $662 million. The Electrical Transmission segment’s revenues inched up 1% year over year to $101 million.

Equally impressive was the that the company's 18-month E&C backlog increased in every segment on year-over-year basis to total backlog of $7.087 billion, growing 30.8% year-over-year (yoy) and 41.3% quarter-over-quarter (qoq).

Stifel Nicolaus reiterated their Buy rating and $63 price target on MasTec shares. Even though the company report didn't meet some of their higher expectations, the analysts were impressed by metrics of the revenue beat across all segments and the backlog of business projects.

Communications backlog grew 28.5% yoy and 3.5% qoq, Oil & Gas backlog grew 13.6% yoy and 178.4% qoq, Electrical Transmission backlog grew 37.7% yoy and 32.1% qoq, and Power Generation & Industrial grew more than 5x yoy and 74.3% qoq.

Cost of sales in the quarter jumped 27% year over year to $1.42 billion. Gross profit slumped 18% to $181 million from $221 million recorded in the prior-year quarter. Gross margin contracted 520 basis points to 11.3% in the fourth quarter.

Encouraging, Conservative Guidance

The year 2017 marked the second consecutive year of record financial performance for MasTec. Backed by the record backlog, solid demand, the company expects to deliver another record year in 2018. MasTec is poised to gain from significant amounts of project awards across multiple segments.

Management believes strong cash flow, solid capital structure and ample liquidity will provide financial flexibility to support significant growth opportunities.

Buoyed by these factors, MasTec projects 2018 annual revenues to be at record levels of $6.75 billion, above the Zacks consensus of $6.6B. It expects record adjusted earnings per share of $3.45 which marks an 18% rise over the prior-year levels. Additionally, MasTec estimates adjusted EBITDA to increase 6% to $685 million.

Among the few negatives, Current Q1 guidance was softer than expected, but the full-year looks strong enough to more than make up for that as the backlog of business is so strong headed into the warmer construction seasons.

Based on the company's strong but conservative guidance, we should see more analysts raising estimates and push MTZ from a Zacks #2 Rank to a #1 Strong Buy by the middle of week as the revisions are verified.

Analyst Reaction Thus Far

As of Thursday morning, we heard from a handful of investment bank analysts, including Stifel Nicolaus who did not raise estimates at this time because of the softer Q1 guide and because they were already above consensus.

Canaccord Genuity raised their PT to $65 as their analyst "sees more upside" to the growth story, while William Blair downgraded shares from Outperform to Neutral as they see growth leveling off.

Bear of the Day:

NutriSystem is the $1.5 billion #3 player in weight-loss prepared meal and pre-packaged food delivery.

But the company delivered in-line fourth-quarter earnings on February 26 and prepared guidance for 2018 that was well-below expectations, sending the stock down 25% the next day.

NutriSystem reported Q4 revenue of $131.2 million, a 20% increase year-over-year, beating the Zacks consensus of $129 million. The direct-to-consumer business was up 21% on double-digit growth for its core NutriSystem brand, with $7 million in contributions from South Beach.

For fiscal 2018, NutriSystem guidance indicates that revenues and adjusted EBITDA will be relatively flat at the midpoint of the given ranges of $685-$705 million and $106-$110 million range vs. consensus $791.6 million and $132.5 million.

Consequently, analysts lowered their EPS estimates in recent days, with this year's profit projection falling from $2.28 to $2.05.

Ever Since South Beach

You may recall that in December of 2015, Nutrisystem purchased the South Beach Diet brand, which had more than 23 million books in print at the time, for only $15 million. The company developed meal plans, marketing and retail channels for the brand in 2016 with the goal of launching new products in 2017.

The investments appeared to work as the company recorded revenue growth from $463 million to $697 million in that 2-year period. And the South Beach Diet expected to contribute $70 million in sales in its second year.

And while this product innovation appears to be taking a slow growth path, the real key to revenue growth is still new customer acquisition.

Analysts at B. Riley/FBR concluded that NutriSystem management "was surprised by the deceleration in new customer additions resulting from unforeseen changes in viewership at several TV stations and a worn-out creative formula." The firm lowered its price target on NTRI shares from $74 to $52.

Additional content:

Nutanix (NTNX) Tops Q2 Earnings, Revenue Estimates

Nutanix, Inc. just released its second-quarter fiscal 2018 financial results, posting an adjusted loss of $0.14 per share and revenues of $286.7 million.

Currently, Nutanix is a Zacks Rank #3 (Hold) and is up over 2% to $37 per share in after-hours trading shortly after its earnings report was released.

NTNX:

Beat earnings estimates. The company posted an adjusted loss of $0.14 per share, beating the Zacks Consensus Estimate that called for a loss of $0.21 per share.

Beat revenue estimates. The company saw revenue figures of $286.7 million, topping our consensus estimate of $282.95 million.

Nutanix’s revenues jumped 44% from $199.2 million in the year-ago period. Looking ahead to its upcoming quarter, the company now expects revenues in the range of $275 million and $280 million—which assumes the elimination of approximately $45 million in pass-through hardware revenue.

Nutanix also projects to post an adjusted net loss per share between $0.19 and $0.21 in Q3.

“Our software and support billings also rose significantly during the quarter, demonstrating our progress as we transition to a software-centric business model,” CFO Duston Williams said in a statement. “Our strong execution on our strategic initiatives, together with our successful convertible debt offering, put us in a strong position for the future.”

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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.

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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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