UnitedHealth, MercadoLibre, Alphabet and Gilead highlighted as Zacks Bull and Bear of the Day

For Immediate Release

Chicago, IL – February 5, 2018 – Zacks Equity Research UnitedHealth Group UNH as the Bull of the Day, MercadoLibre MELI as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Alphabet Inc. GOOGL and Gilead Sciences GILD.

Here is a synopsis of all four stocks:

Bull of the Day:

Earnings season is an exciting time for investors, as a plethora of new information presents a fresh opportunity to buy strong stocks. One example of a stock that still has room to run higher in the wake of its earnings announcement is UnitedHealth Group.

UnitedHealth is a managed health care company. Through its Optum segment, UNH provides health analytics, billing solutions, pharmacy benefits management, care delivery services, and other technology-forward offerings. The company’s UnitedHealthcare unit provides benefit plans. UNH is one of the largest companies in the United States and the world’s largest healthcare company in terms of revenue.

UnitedHealth reported earnings on January 15. The company posted quarterly earnings of $3.28 per share, beating the Zacks Consensus Estimate and improving 27% year over year. Revenue for the period was $58.4 billion, ahead of estimates and about 12% higher than the year-ago quarter thanks to healthy growth across both segments.

Revenue at UnitedHealthcare improved 11% year over year. Optum revenue surged 13%. Total operating costs across the whole company were up 12%, but UNH offset this through a 10 basis point improvement to operating margin. Management reaffirmed its 2019 EPS guidance and said that it expects full-year revenue in the range of $243 to $245 billion.

Bear of the Day:

It is important that growing companies work to improve margins and lock in consistent profitability in a timely manner. When that growth hits a snag, it can cause volatility in share prices. Unfortunately, that’s evident in MercadoLibre right now.

MercadoLibre is an e-commerce company. It is the largest online shopping platform in Latin America and is based in Argentina. The website attracts hundreds of millions of visitors and serves as the market leading e-commerce option in countries such as Argentina, Brazil, Chile, Mexico, and more.

Founded just 19 years ago, MercadoLibre is a young company that should continue to develop as access to the internet, delivery availability, and purchasing power improves in its key markets. However, it is currently being battered by rising costs, and that introduces a certain level of uncertainty that investors may want to avoid for the time being.

MELI is facing margin pressure from increased warehousing expenses, a transition to the public cloud, free shipping subsidies, and discounts on certain POS devices. There is also a rising tide of competition that is threatening to take a chunk out of MELI’s dominant position in the region.

Notably, MELI faces competition from the likes of Amazon, Rakuten and Cnova on the e-commerce side. MELI might have a head start in most of its markets, but these competitors certainly know how to pack a punch. MercadoLibre could also lose market share to brick-and-mortar stores that are still developing their own digital platforms.

These headwinds appear to be reflecting themselves in MELI’s earnings estimate trends. MELI is expected to release its most recent earnings report in a few weeks. For this period, analysts are projecting a quarterly loss of 15 cents per share. That’s significantly wider than the eight-cent loss seen in the consensus just 90 days ago.

This loss would mark a decline of 175% from the year-ago quarter. It would also put the company on pace for a full-year loss of $0.98 per share, down around 138% on a year-over-year basis.

Estimates are also down for fiscal 2019. Analysts now expect earnings of $0.52 per share on the year. Just 90 days ago, that consensus was as high as $0.74 per share. Moreover, while a 52-cent profit is obviously a major improvement from 2018’s loss, it is quite a ways below the $2.53 per share earned in 2017. Earnings are headed in the wrong direction from what you’d like to see out of a growth company.

After the market closed Monday afternoon, Google parent Alphabet posted Q4 earnings that came in stronger than expected. Earnings of $12.77 per share were well ahead of the $11.08 in the Zacks consensus -- provided this is an apples-to-apples comparison; Google is one company that still makes analysts work to figure out how the actuals match the estimates -- on $31.48 billion in revenues -- excluding Traffic Acquisition Costs (TAC; see what I mean?) -- that topped the $31.28 billion we were looking for.

These TAC costs came to $7.4 billion in the quarter, whereas ad revenues grew 23% and cost per click came down 29%. Its Other Bets segment grew from the year-ago quarter but also created a bigger operating loss in Alphabet's Q4 2018. Overall, Operating Income grew nearly 13% to $9.7 billion. Its number of employees grew quite notably year over year, as well -- from just over 80K this time a year ago to nearly 99K now.

Shares are trading down in the after-market, giving up the full 2+% GOOGL had gained in normal Monday trading. The company had seen a 6% upswing in stock price from the beginning of the year; perhaps we're seeing a bit of "sell the news" here. It remains obvious the company is a robust machine that will be with us a long time. The company had carried a Zacks Rank #3 (Hold) rating into the earnings report. For more of GOOGL's earnings, click here.

HIV treatment giant Gilead Sciences also reported Q4 earnings late Monday, and results here were mixed: $1.44 per share was well below the $1.74 in our consensus, yet revenues of $5.8 billion easily surpassed expectations of $5.52 billion coming in. The company also announced an increase to its quarterly dividend by 11%. But this is the fourth miss in the last 10 quarters for Gilead, and shares are selling off roughly 2.75% in the after-market.

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MercadoLibre, Inc. (MELI) : Free Stock Analysis Report
 
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