As 2018 staggers to the finish line, it is tempting to become paralyzed by some of the unknowns looming in 2019:
- Will global growth slow to the point of recession?
- What will be the outcome of the U.S. vs China trade dispute?
- Will political instability in the EU reach a critical threshold?
- Will the Fed raise rates too quickly? Or not enough?
- Will the New York Giants finally find Eli Manning's replacement?
When consensus discourse is dictated by fear, it may be the best time to look for opportunity. Therefore, to start the new year with a positive outlook, the Amenity Viewer text analytics platform was used to identify 5 under the radar companies that could ride positive momentum into 2019.
Please note: This in no way represents investment advice. All transcript text provided by S&P Global Market Intelligence.
Amenity Viewer provides the benefit of text analytics at massive scale, allowing anyone to data mine the earnings call transcripts of nearly every public company, identify outliers, and perform queries on key topics.
Best of all, this analysis spanning hundreds of companies across every sector was performed in a few hours compared to traditional means requiring days of research and multiple analysts. For this analysis I decided on the following criteria to come up with our 5 companies:
Regular readers of our articles are well aware of the supply chain (shipping, freight, and transportation) headwind facing the retail sector. Lands’ End stands out with their ability to more than offset that universal headwind.
"Overall, gross margin improvement was driven by a 570 basis point increase in the Retail segment, partially offset by a 20 basis point decrease in the Direct segment. The strength in Retail was a result of favorable full-priced selling mix, greater promotional productivity and improved quality of seasonal inventory, which led to higher sell-through and reduced markdowns.
"The decrease in the Direct segment was from higher shipping cost during the quarter. As we look to the fourth quarter, we continue to expect margins to improve, as we drive promotional productivity and continue to manage our seasonal markdowns."
"We saw accelerated growth in our Direct segment, which grew approximately 8% as compared to last year. We were particularly excited to see that the growth was led by the strength in our U.S. e-commerce business,which grew double-digits."
"...we expect to end the year with no more than 49 Lands’ End Shops at Sears. We project our revenue from these locations to be approximately $100 million for fiscal 2018 (CY17), and based on the remaining 49 stores, we forecasted approximately $30 million for fiscal 2019(CY18).
"While we cannot predict what will happen with Sears, we estimate the closure of these stores collectively will have very little impact to our earnings on an annual basis."
"We’re also seeing nice early momentum in key market segments for our subscription-based pricing model, the Evergreen Storage Service."
"Our ability to deliver consistent industry-leading gross margin highlights the value we deliver to our customer base and validates our technological differentiation."
"We’re adding 5 net new customers per day compared to the competition, who stopped talking about their customer adds."
Highlighting bullish commentary across Roper’s portfolio, the belief is that metrics such as net subscriber adds, SaaS-based applications, and BladderScan suggest Roper is a technology company with an outdated industrials label:
"Verathon had a tremendous quarter growing double-digits. Demand for our new BladderScan technology was robust."
"...we also saw strong fluid handling growth across multiple end markets and applications. RoperPump and Cornell Pump continued their share gains and were also aided by favorable end-market conditions."
"We saw very solid growth across the majority of our niche application software businesses serving health care markets. For instance, Strata continued to gain share in its SaaS-based cost accounting and decision support applications."
"...outstanding growth at our Freight Matching business due to network expansion with increase in net subscriber adds and favorable end-market conditions."
"Importantly, the software businesses within the RF segment grew organically 6%."
"We have these very small, nimbly oriented businesses that compete based on how quickly they can answer customers’ needs. As you know our businesses are not gigantic. So as a result the supply chains are very nimble. And the management teams ability to execute through a tariff issue with either slightly rebalancing the supply chain or working through a pricing increase or pricing policy to offset that, we saw that in the quarter."
"It’s a tough market for fixed income. All the headwinds that business could possibly face are occurring. The direction of rates is not helpful. The level of rates is still low."
"...with our asset-sensitive balance sheet, that (Fed increases) provides a tailwind."
"And although industry mortgage origination volumes were down, we’ve been able to grow the business by increasing market share."
"So even though industry mortgage originations are starting to moderate as the long end of the curve is moving higher, we think their ability to take market share is going to provide us tailwind as well, and so we expect that to continue."
"...if you look at where our return profile is, and we’re confident that we can continue to maintain and improve that into 2019 and then you juxtapose that with what our forward earnings look like, what our price-to-book, what our price to tangible book likes like, and we’re very bullish on where we’re taking the company, and this could very well be a great opportune time to buy back some of our shares."
PBI's legacy mail business is in secular decline. However, the company has repositioned itself to benefit from the secular shift to e-commerce, just in time for the holidays:
"Commerce Services continues to turn in a solid top-line performance. Newgistics once again had very strong top-line growth,which indicates the market attractiveness of the capabilities in this business. That said, Commerce Services continues to be impacted by headwinds around a higher dollar and higher transportation and labor costs."
"...we expect an improved performance in Q4 versus the previous quarter as result of the holiday season."
"As our portfolio shifts with the growth of our Global Ecommerce business,inclusive of Newgistics, our seasonality will also shift even more towards the fourth quarter."
"When you look at holiday volumes and driving scale. This is the driver for e-commerce and Newgistics. I mean, this is a big lift for both those businesses."
At the same time, PBI has implemented cuts to drive cash flow from the legacy side of the business to fuel the secular growth in e-commerce highlighted above:
"North America Mailing revenue declined less than 2%, and their EBIT margin expanded significantly."
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Transcript text provided by S&P Global Market Intelligence.
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