Steady Growth With Bigger Gains Ahead

 

Brunswick (NYSE: BC) has been a nice winner so far for Profit Catalyst. It’s up 18% since we recommended it 10 weeks ago, but could motor up another 40% as investors recognize its potential.

Brunswick will report first-quarter earnings on April 28. This will be the first quarter that includes results from newly acquired Cybex. Just to refresh your memory, the purchase of Cybex is the catalyst that led me to this stock. Brunswick bought Cybex, a maker of commercial fitness equipment, to counteract the cyclicality of its boat business. Fitness equipment has a shorter life cycle than boats, needs to be replaced more frequently and enjoys steadier growth. Brunswick’s fitness division will equal almost a quarter of revenue by year end.brunswick logo

The brokerage firm Jefferies recently increased its price target on Brunswick from $47 to $50, which I think is too low. More important, the firm’s optimistic tone resulted from a recent meeting with Brunswick management. The Jefferies analyst is quoted as saying: “We came away feeling that the biz is moving in the right direction, as U.S. boat trends seem to be solidifying, engine-pricing fears are not materializing, and European boat-pricing pressures are limited in scope.”

The March quarter gives investors the first glimpse at spring boating registrations, which influence Brunswick’s significant second-quarter sales. Brunswick’s second quarter makes up about 36% of annual profits and is driven by boat sales.


 

Closing a Deal

Since we first recommended it, Charles River (NYSE: CRL) is up 8% but has the potential to move much higher. I expect to increase my target as profits accelerate from the company cross-selling its services to a new batch of customers.charles river logo

Charles River will report its first-quarter earnings on May 4. The company closed on its strategic acquisition of WIL Research on April 4, in line with management’s expectation for an early second-quarter close. The WIL acquisition introduces a new set of agriculture and specialty chemical customers to Charles River. WIL’s focus on smaller companies also gives Charles River a wider net of customers that it can cross-sell its capabilities to.

Charles River continues to trade in conjunction with the biotech indexes, jumping 4.5% on March 18, the first day of the biotech reversal.

The news that Allergan signed a new research deal with privately held Heptares on the same day that its own deal with Pfizer broke up indicates just how hungry large biotech is for new drugs. Charles River will continue to benefit from that insatiable desire for new pipeline drugs.


 

In the Catbird Seat

In just a little over a month since we recommended Criteo, the stock is up 6%. I think it will rocket another 50% as Criteo (NSDQ: CRTO) continues to help e-tailers seal the deal with consumers. Although no official date has been released, I expect Criteo to report first-quarter earnings in early May.

criteo logoFacebook, which accounts for 10% of Criteo’s traffic, continues to improve its user experience with faster video-download times and messaging bots. Both features were introduced at F8, Facebook’s annual summit, and should continue to drive user engagement.

A company-sponsored mobile e-commerce report for the fourth quarter notes that 40% of all e-commerce transactions take place across multiple devices and that 60% of transactions are completed on smartphones. Criteo’s ability to match consumer searches made on multiple devices and deliver persuasive ads puts it in the catbird seat to profit from these trends.

Citigroup initiated coverage on the stock on April 12 with a buy rating and a $56 target.


 

The Greatest Promise

Despite SolarEdge (NSDQ: SEDG) dropping 11% since my recommendation, I’m still enthusiastic about it. In fact, this is my favorite stock right now. SolarEdge has the greatest upside potential of any of the stocks in our portfolio. The company will report third-quarter earnings, which are expected to double, the first week in May.solaredge logo

Massachusetts recently increased the amount of solar power that utilities must buy back from consumers, removing a potential obstacle for growth in that state. Despite its well-earned reputation for lousy weather, Massachusetts is the sixth largest solar-producing state in the country.

Barclays initiated coverage on the stock on April 4 with an overweight rating.


 

A Dirt Cheap Play

Photronics (NSDQ: PLAB) is slowly digging itself out of the hole it created when it lowered estimates for the first half of the year due to weakness in its low-end business. The stock is insanely cheap and will move higher as growth resumes. It has $3 per share in cash and trades at 13 times next year’s estimate.

photronics logoThe company’s quarter will not be announced until late May or early June, but the tea leaves indicate Photronic’s lower-end business is picking up. The stock is dirt cheap and gives investors a fabulous way to play the constant innovation of semiconductor chips.

Samsung, widely thought to be Photronics’ largest customer, reported a better-than-expected quarter earlier this month. Samsung’s new Galaxy S7 is a winner and helped the company maintain its position as the number one seller of smartphones globally in the fourth quarter. Huawei, another smartphone manufacturer, reported stellar numbers this month as well, backing Photronics’ management statement that industry demand is resuming its upward trend.

A portion of Photronics’ convertible debt matured this month. The company will have $181 million of cash after this maturity. Cash flow from the April quarter will add to that balance.


 

Another 35% of Upside Potential

Vera Bradley (NSDQ: VRA) was up as much as 20% before hitting a rough patch earlier this month. It is up 7% since I recommended it, but I expect another 35% of upside as revamped products boost profits.

I discussed in detail in my weekly note a possible cause for the recent weakness in Vera Bradley’s stock. I noted a shift in language from CEO Robert Wallstrom regarding current estimates. I believe that the change in language is due to the timing of the company’s presentation. When a company speaks to investors during its quiet period, which is any time during the last month of the quarter, it must be especially sensitive about giving out new data to investors.vera bradley logo

Brokerage firm Wunderlich raised its price target from $15 to $25 and believes the sales are responding well to recent marketing campaigns.

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