🍼 Fertility Finances

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THE STREET SAYS

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The majority of respondents said it would be GOOD for the world (74%) while just over a quarter said it would be BAD (26%).

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REVIEW

US stocks fell precipitously Friday, as the previous day’s tech rally was derailed by a negative earnings report from Amazon. The ecommerce giant contributed to the S&P 500’s slide when it delivered downbeat guidance and posted its slowest quarterly growth since the dot-com era bust.

April was a dismal month for equities, as the market faces a series of ongoing challenges, including the war in Ukraine, persistent inflation, coming rate hikes, and new COVID-19 lockdowns in China.

Zooming out, the tech sector has experienced a broad sell-off as rates have risen, negatively impacting growth stocks. Rising bond yields have put further pressure on equities, amid what have been generally volatile market conditions marked by investor uncertainty.

The benchmark 10-year US Treasury saw its yield rise over 2.9% on Friday. Meanwhile, natural gas prices moved higher as well. This could be in response to Russia’s decision to cut off gas supplies to Poland and Bulgaria, leading to concerns of further disruptions.

On the economic front, the PCE or Personal Expenditures Index showed inflation rising by 5.2% in March, year-over-year. This reading strips out food and energy costs and is considered to be the Fed’s preferred measure of inflation. Consumer spending increased by 1.1% in March from the previous month.

In company-specific news, outside of Amazon’s less-than-stellar earnings, fellow tech giant Apple warned COVID-19 lockdowns could cost the company $8 billion in sales during the current quarter.

Tesla CEO Elon Musk disclosed he sold around $4 billion worth of the electric car maker’s shares in order to partially fund his Twitter takeover.

Intel reported weak guidance for its fiscal second quarter.

Online brokerage Robinhood reported a wider-than-expected loss, decreased revenue, and fewer monthly active users.

For the month as a whole, the Nasdaq fell roughly 13% in April, its worst monthly performance since October 2008. The S&P 500 tumbled 8.8%, its worst month since March 2020, and the Dow lost 4.9%.

PREVIEW

On Monday, the ISM manufacturing index for April is due, which broadly tracks activity within the manufacturing sector. While inflation and the disrupted supply chain continue to cause problems, March’s index came in higher than the previous reading. S&P Global’s final manufacturing PMI for April and March’s construction spending are also due.

Tuesday, March’s JOLTS report is set for release, formally known as the Job Openings and Labor Turnover Survey. Job openings fell slightly in February to 11.3 million, a trend that could continue given unemployment declined last month. Also watch for March’s factory orders and April’s seasonally adjusted motor vehicle sales.

Wednesday, ADP will publish its employment report for April. The US economy added 455,000 private jobs in March in what continues to be a robust labor market. The Federal Reserve will also issue its FOMC statement with all eyes on inflation, while Chair Jerome Powell is slated to give a press conference afterwards.

Thursday, weekly jobless claims will be published. The most recent report showed 5,000 fewer Americans filed for unemployment benefits, with the total number checking in at 180,000. Initial claims remain at their lowest level in decades while existing claims also hit a 52-year low.

Friday, watch for the April unemployment rate, as March’s number fell to 3.6%. The US economy has added 400,000 jobs during each of the past 11 months. Nonfarm payrolls and labor participation rate are also due for April. March’s consumer credit is also set for release.

Here are some important names to keep your eye on for this week’s earnings reports:

Monday, Clorox (CLX) will share results from its most recent quarter. The company’s earnings have been on a steady decline from the highs posted in 2020.

Tuesday, American biotech company Biogen (BIIB) will report earnings. Last month the company received a setback when Medicare declined to cover certain treatments.

Wednesday, Allegiant Travel (ALGT) will hand in its most recent report card. It’s been a busy earnings season for airline stocks, as the sector has plenty of pent up demand following the COVID-19 pandemic.

Thursday, Crocs (CROX) will share its first-quarter earnings. Market watchers have praised the casual shoemaker for making the brand hip and relevant with Generation Z consumers.

Friday, sports apparel retailer Under Armour (UAA) will post its most recent earnings data. While the stock has failed to gain much traction in the past decade, some analysts contend that’s about to change.

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Is Under Armour an Underestimated MVP

Don’t Count This Underdog Out

It’d be hard to blame investors for ignoring Under Armour (UAA), as the sports apparel and sneaker maker has suffered a series of missteps recently. These include less-than-stellar decisions from management, questionable acquisitions, and accounting irregularities. These factors have combined to push Under Armour’s share price lower. All of that aside, continuing to underestimate the company now could prove to be a mistake.

Since Patrik Frisk took over as CEO at the beginning of 2020, Under Armour has been in turnaround mode. It's starting to show in the company’s earnings data. Under Armour has beaten Wall Street expectations in each quarter since September of 2020, paid down debt, and its return on equity has increased. Still, the stock is down more than 30% on the year. That could present an opportunity for bargain-hunting investors.

Under Armour Getting Buff

Prior to the pandemic Under Armour was teeming with products, flooding the market and arguably diluting its brand. The pandemic was an opportunity for bloated companies to trim the fat and reset. It appears Under Armour took advantage. It cut the number of products it sells nearly in half, focusing on a smaller number of offerings that have better margins. 

As a result, some Wall Street analysts expect the company's EBITDA to set records in the coming years, driven by gross margins up near 50%. The company is also bringing in more cash than it did previously, ending 2021 with $1.17 billion in the coffers.

Wall Street Still Isn’t Sold 

Despite all the good news at Under Armour, Wall Street doesn’t appear overly impressed. The stock trades at a discount when compared to Nike (NKE) and Lululemon Athletica (LULU), two Wall Street darlings. That’s despite expectations that Under Armour will report sales growth of 6% in 2022. Only about half the analysts that follow the stock rate it as a buy. 

Admittedly, supply chain issues and soaring inflation may be driving analysts’ caution. It may take a few more quarters of solid results for Under Armour to win over Wall Street, but investors willing to take the field early on could watch the sports apparel retailer come out a winner.

Infertility Stock Progyny Poised for Rebirth

Strong Demand for Fertility Treatments

Infertility is a problem in the US, plaguing about 19% of women ages 15-to-49. Many of these women turn to their employers for help with the cost. That’s where Progyny (PGNY) comes in. It offers companies low-cost plans to cover fertility treatments for their staff.

Prior to the pandemic, demand for Progyny’s services was booming. Then COVID-19 struck, prompting many people to hold off on trying to get pregnant. That sent the stock plummeting, with its share price down nearly 30 percent so far in 2022. Still, with the pandemic easing the thinking is more would-be parents will restart their family-building efforts. For that and other reasons, some investors see long-term upside in Progyny.

Fast Growth Coming to Progyny  

Demand for Progyny’s products is a good place to start, as infertility will soon be the top medical focus for many young families, as COVID-19 moves into endemic status. Over the past five years, the number of fertility treatments performed has grown by 26% annually. Analysts expect that trend to continue through the next decade.

Oddly enough, the tight labor market may have an impact on fertility treatment spending. Simply put, companies are fighting to recruit and retain workers. Offering access to affordable fertility treatments gives them an edge. This trend and the already strong demand for Progyny’s product have the company in growth mode. In 2021 sales were up 45% year-over-year. Wall Street expects sales growth of 50% this year and 39% in 2024. 

Progyny is also consistently adding new clients, ending Q4 2021 with 4 million members, nearly double the number they had a year ago. When Progyny went public it said the aim was to eventually sign up over 70 million customers.

Infertility Here to Stay

Digging deeper into the company’s fundamentals, Progyny’s margins may improve in the coming quarters. The company is spending a lot on sales and marketing, but that’s expected to slow. The same goes for the number of care coordinators it hires. The combined effect of trimmed spending and reduced hiring expenses is expected to boost EBITDA margins to more than 15% in 2025. In 2021 it was 13%. Analysts, according to FactSet, expect EPS to hit $2.49 in 2025, up from $0.66 last year. 

Infertility isn’t going away any time soon, and with demand growing, Progyny stands to benefit. The company is in growth mode, presenting an opportunity for investors looking to breathe some life into their portfolios. 

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Not All Food Stocks are Full

Despite Tough Comparisons Some Food Stocks Can Grow 

Food stocks had their moment in the spotlight during the pandemic as many consumers stopped eating out entirely, opting instead to cook at home. That sent sales soaring higher for the nation’s food producers as demand hit unprecedented levels. That same trend also set up tough comparisons for many of the leading food stocks, which are struggling to maintain that red-hot pandemic growth.

That said, some are bucking the trend and maintaining a healthy appetite for growth. Cal-Mine Foods (CAL), Lamb Weston (LW), Sanderson Farms (SAFM), and J&J Snack Foods (JJSF) are all part of the conversation, and none are prohibitively expensive. They each have a market capitalization of $1 billion or more and Wall Street expects them to post double-digit earnings growth this year.

The Chicken and the Egg

Cal-Mine, the egg producer, tops the list of food producers that are still in growth mode. Wall Street expects Cal-Mine to have full-year earnings of $2.79 per share in 2022, marking a 56% year-over-year increase. The stock is trading at about 20 times forward earnings. In its most recent quarter, Cal-Mine was able to beat Wall Street’s estimates for sales. Admittedly, Cal-Mine’s profile as a stock does have at least one negative. Its dividend yield is a paltry 0.1%.

Meanwhile, poultry producer Sanderson Farms is the cheapest of the group. Its shares are trading at about 8 times forward earnings, but analysts argue it has a lot of growth potential. Wall Street expects full-year earnings to hit $27.95 this year, marking a close to 37% year-over-year rise. Its dividend yield checks in at 0.9%.

Cheap Snacks and French Fries 

J&J Snack Foods may sell largely affordable products, but it’s the most expensive stock on this list, trading at around 34 times forward earnings. It also arguably has the most room for growth. Wall Street expects earnings of $3.98 per share in 2022, which is close to 37% higher than last year. Its dividend yield is 1.6%.

Sticking with finger foods, Lamb Weston makes frozen items including french fries and potatoes. Throughout the pandemic comfort foods like fries have seen a major uptick in demand. Analysts say Lamb Weston’s earnings are poised to grow over 48% this year. The stock is trading at just below 25 times forward earnings and its dividend yield is 1.1%.

Food producers' may never have more favorable conditions than those associated with COVID-19 lockdowns, but some remain in growth mode, and that’s something hungry investors can chew on.

This communication from The Street Sheet is for informational purposes only. It is not intended to serve as a recommendation to buy, sell, or hold any security and is not an offer or sale of a security.  Information contained within should not be perceived as a research report and is not intended to serve as the basis for any investment decision. Any third-party views reflected herein do not reflect the opinion of The Street Sheet. All investments involve risk and the past performance of a security does not guarantee future results or returns. There is always the potential for financial loss when investing in securities or other financial products. Investors should consider their investment objectives and risks before investing.