For Immediate Release
Chicago, IL – October 8, 2021 – Zacks Equity Research Shares of Mesa Laboratories, Inc. MLAB as the Bull of the Day, Equinox Gold Corp. EQX as the Bear of the Day. In addition, Zacks Equity Research provides analysis on General Motors Company GM, Tesla, Inc. TSLA and Ford Motor Company F.
Here is a synopsis of all five stocks:
Bull of the Day:
Mesa Labs is a $1.6 billion provider of quality control monitoring and validation instruments serving niche markets in healthcare, industrial, pharmaceutical, medical and food processing applications.
The Zacks Rank first put MLAB on my radar in 2018 at $185. At the time in my Healthcare Innovators portfolio, we took a quick swing trade out of the shares back to its old highs of $225.
And the stock has provided plenty of trading opportunities since then, with over half a dozen swings between $200 and $270 as investors and analysts (myself included) had their doubts about whether the small-cap should trade for over 10 times sales.
Now, MLAB is back in the upper realms of the Zacks Rank after analysts raised estimates to account for a key acquisition that will allow expansion into a critical new healthcare arena. This deal has also vaulted shares to new highs above $300.
MLAB Adds a Clinical Genomics Division
On September 14, Mesa Laboratories announced that it has entered into a definitive agreement to acquire Agena Bioscience for a cash purchase price of $300 million. Headquartered in San Diego, Agena is a leading molecular diagnostics tools company that develops, manufactures, and supplies highly sensitive, low-cost, high-throughput, genetic analysis solutions to clinical labs and development partners globally.
Peter Dansky, CEO of Agena, will join Mesa to lead the new Clinical Genomics Division.
Excluding the impact of COVID-19 related revenues, Agena is expected to add between $63 million to $67 million of revenues — about a 50% increase — during the first 12 months of ownership, deliver high single digit organic revenues growth over the next several years and excluding the impact of purchase accounting, generate gross profit percentages in the mid to high 60’s.
Additionally, excluding the impact of COVID-19 related revenues, purchase accounting and integration expenses, Mesa expects adjusted operating income as a percentage of revenues to approach 20% for the same first 12 months of ownership.
One Analyst Who Saw the Potential
A year ago in September, after a weak quarterly report and downward guidance, here’s what I wrote about Mesa Labs…
Despite this outlook, investors are not running away from MLAB shares, even after a $135 million secondary offering in June. Mesa priced 600,000 shares at $225 on June 9 and the deal size was increased from $100M to $135M and priced below the last close of $236. Jefferies, JPMorgan and Evercore ISI are acting as joint book running managers for the offering.
In a September 1 model update from Jefferies, analyst Brandon Couillard and his team wrote about MLAB as “a high-quality small-cap compounder with a defensive growth profile that is relatively insulated from the macro.”
The analysts noted that while near-term demand conditions had been impacted by the pandemic, they continue to believe that improved execution under new management, who are former Danaher executives, would offer new stability and organic growth opportunities.
And with over $200 million of cash on hand, they also like the possibility of additional M&A as a likely catalyst for the stock. They maintained their $290 PT.
(end of September 2021 article excerpt)
The Jefferies team nailed the potential of this small-cap. While I don’t have an updated report from them, I do have this like-minded view from KeyBanc…
Former Danaher executive Gary Owens, who was head of Genomics and now CEO of Mesa Labs, announced the acquisition of Agena Biosciences. Agena is significantly non-GAAP EPS accretive, increases overall growth of Mesa, and like most diversified LST companies establishes a diagnostic platform.
We increase our FY23 EPS from $5.54 to $7.60 and estimate a blended organic growth rate 200-300 bps above the prior pace of 4-6%. Using a new sum-of-the-parts model, we raise our Fair Value from $300 to $330 per share.
Bear of the Day:
The last time I wrote about Equinox Gold as the Bear of the Day was mid-April when shares were still trading above $9.
By August, they fell over 30% to $6 as their precious yellow metal dropped from $1900 to $1700.
What may surprise some gold miner investors is that during gold’s last big 15% surge — from a double-bottom in March at $1675 up to those June highs above $1900 — EQX was able to manage a 22% rally from $7.80 to $9.50, but now it is much lower while gold seems to find some support again at $1675.
The main theme is that a drop in gold hits the forward earnings outlook of the miners more dramatically.
For instance, in April I was describing the drastic downward trend in earnings estimate revisions for EQX. In early Q1, the Zacks EPS consensus for 2021 was cut from $1.35 to $1.05.
By April 18, the current year EPS consensus estimate among three covering analysts had been slashed another 27.6% to $0.76. Since then, that profit outlook has been cut in half again to just $0.37.
It’s worth noting that the ETF basket, the VanEck Vectors Gold Miners, is also below its March lows, confirming the widespread pain for the diggers.
The Last Stand of the Barbarous Relic
To put this collapsing earnings outlook for one miner in perspective, here’s what I wrote this spring…
This is not an isolated trend for this one gold miner. On Sunday March 21, when I wrote about Gold Fields as a Zacks #5 Rank for its deteriorating EPS outlook, I took the time to explain several factors driving the poor performance of the gold diggers.
But the biggest fact I wanted investors to recognize was that in most every major rally since the highs of 2011, the diggers had done worse than their precious. We can easily compare that performance for individual mining stocks and GDX vs the barbarous relic.
Here’s some of what I wrote that weekend and then expanded into a special report for Zacks Confidential members…
It’s time to put the final nail in the gilded sarcophagus. Because many investors are still fighting the last war against inflation and throwing money away on gold and its miners while all around there are Software, Semiconductor, Bitcoin, and Biotech riches to be made.
So here is my latest screed against the barbarous relic and some fresh stock picks for great alternatives to grow and preserve your wealth.
Are you really ready for the bear case for gold and gold mining stocks? While I would love to pick on all the gold-digging dreamers, I found that a few prominent names are joining Equinox in the cellar of the Zacks Rank as the Gold Miner industry group lurks in the bottom 8% of over 250 industries.
As you might imagine, since the price of spot gold retreated from new all-time highs above $2,000 hit last August, the earnings momentum of many gold miners also fell back just as quick.
And many analyst projections for the diggers into 2022 are looking for a decline in revenues and profits, almost as if their forecast for the price of gold doesn’t include a magical trip to $3,000 — can you imagine?!
Here are 4 important messages I have for gold bulls and their disciples.
If you click on that link, it will take you to those 4 messages.
Bottom line: Gold miner fortunes are leveraged to the price of the yellow metal, in often painful ways. Before you buy one, keep your eye on the earnings revisions and try to catch one on the upswing. The Zacks Rank will let you know.
General Motors (GM) Strikes Deals with Wolfspeed and GE
General Motors and Wolfspeed, Inc. recently entered into a strategic agreement to develop and supply silicon carbide power device solutions for the automaker’s future electric vehicle (EV) programs. The U.S. auto giant also recently signed a non-binding memorandum of understanding with GE Renewable Energy (“GE”) to evaluate the opportunities for enhancing supplies of heavy and light rare earth materials and magnets.
GM- Wolfspeed Team Up for Silicon Carbide Solutions
Per the deal with Wolfspeed, its technology will be used in integrated power electronics contained within General Motors’ Ultium Drive system for its upcoming EVs. Additionally, Wolfspeed’s silicon carbide devices will enable General Motors to install more efficient EV propulsion systems that will boost the range of its rapidly-widening EV product menu.
North Carolina-based Wolfspeed dominates the market in the global adoption of silicon carbide and gallium nitride technologies. Wolfspeed’s product portfolio includes silicon carbide materials, power-switching devices and RF devices targeted for various applications, such as electric vehicles, fast charging, 5G, renewable energy and storage, and aerospace and defense. Wolfspeed makes chips out of silicon carbide, which is more energy efficient than the standard silicon for tasks, such as transmitting power from an electric car’s batteries to the motors.
In addition to having more than 30 years of experience in the industry, Wolfspeed is currently building the largest silicon carbide semiconductor fabrication facility in the world in Marcy, NY. Scheduled to go online in 2022, this innovative facility will drastically enhance the capacity for the company’s silicon carbide technologies, demand for which is shooting up in the EV sector as well as in the other advanced technology sectors around the world.
Amid the aggravating climate change concerns, automakers across the globe are transiting their fleet to EVs to enable zero-emission transportation. The rising adoption of silicon carbide as an industry-standard semiconductor for transportation supports the automotive industry’s goal of providing green transportation solutions. Silicon carbide provides enhanced system efficiency that results in a longer EV range, while reducing the weight and conserving space.
The latest agreement is beneficial for both companies. For General Motors, it represents another step forward in its target to achieve an all-electric future. The EV customers are constantly on the lookout for a greater range, and silicon carbide is an essential material in the design of chips used in EVs. This deal provides assurance for a long-term supply of silicon carbide power device solutions.
Moreover, the agreement showcases the automotive industry’s persistent commitment to bring innovative EV solutions to the market by taking advantage of the latest innovations in power management to enhance the overall vehicle performance. For Wolfspeed, this agreement ensures the long-term supply of silicon carbide to an auto giant to help them deliver their promise of an electrified future.
As part of the agreement, General Motors will participate in the Wolfspeed Assurance of Supply Program (WS AoSP), aimed at procuring domestic, sustainable and scalable materials for EV production.
The news of the deal comes as Wolfspeed changed its name from Cree Inc. Cree Inc’s shares previously traded on the Nasdaq Global Select Market, and the newly-renamed Wolfspeed will now trade on the NYSE.
GM-GE Deal to Create EV Material Supply Chain
The primary focus of General Motors’ collaboration with GE will be on creating a critical supply chain of vertically-integrated magnet manufacturing in North America and Europe, which both companies will use in the future to reduce carbon emissions. The companies will also join forces to create new supply chains for additional materials, such as copper and eSteel, that are used in automotive traction motors and renewable power generation.
Metal alloys and finished magnets are produced from rare earth materials and are crucial ingredients used in manufacturing electric motors for automotive and renewable power generation.
GE has one of the broadest portfolios in the renewable energy industry that provides end-to-end solutions for customers demanding reliable and affordable green power. The deal with General Motors gives GE access to reliable, sustainable, and competitive source of key materials and aids the company to lower the cost of renewable energy. This will help accelerate the transition to clean energy by making EVs a more affordable option for consumers.
A secure, sustainable, and resilient local supply chain for EV materials is the key to achieving General Motors vision of an all-electric future. The combined scale of both companies will enable them to procure low-carbon footprint, environmental-friendly, and cost-effective material for EVs.
General Motors, peers of which include Tesla and Ford and Stellantis N.V., currently carries a Zacks Rank of 4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Infrastructure Stock Boom to Sweep America
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Ford Motor Company (F): Free Stock Analysis Report
General Motors Company (GM): Free Stock Analysis Report
Tesla, Inc. (TSLA): Free Stock Analysis Report
Mesa Laboratories, Inc. (MLAB): Free Stock Analysis Report
Equinox Gold Corp. (EQX): Free Stock Analysis Report
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Zacks Investment Research
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Gold Price Analysis – Mesa Labs, Equinox Gold, General Motors, Tesla and Ford Motor highlighted as Zacks Bull and Bear of the Day
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