Stocks’ Details
 

Johnson & Johnson

 
COVID-19 Update: Johnson & Johnson (NYSE: JNJ) is involved in the research and development, manufacturing and sale of a multiple range of personal care hygienic products, pharmaceuticals and surgical equipment. Recently, JNJ announced that it has picked a lead vaccine candidate for COVID-19 infection. The move was taken to detect compounds with antiviral treatment against coronavirus in January. JNJ is likely to begin a phase I study on the candidate in September 2020. Further, based on the safety and effectiveness of data, the company expects a vaccine to be accessible for emergency utilization in early 2021.
 
1QFY20 Financial Highlights: During the quarter, the company reported adjusted earnings of $2.3 per share, up 9.5% on a year over year basis. Sales of the drug and consumer products giant stood at $20.69 billion, which increased 3.3% from the year-ago quarter, depicting an operational increase of 4.8%. In the domestic market, sales increased 5.6% year over year and came in at $10.7 billion. International sales for the first quarter rose 4.5% year over year. 
 

Q1FY20 Financial Highlights (Source: Company Reports)
 
Lowered Outlook for FY20: The company lowered its FY20 view due to coronavirus outbreak. It now anticipates FY20 adjusted earnings to be in the ambit of $7.50 to $7.90, down from the prior outlook of $8.95 - $9.10. Revenue for FY20 is now expected in the range of $77.5-$80.5 billion, down from the prior outlook of $85.4-$86.2 billion. Operational constant currency sales growth is now expected to be flat to down 3.5% as compared to the previously anticipated growth range of 4.5%-5.5%.
 
Valuation Methodology: EV/Sales Multiple Based Relative Valuation

EV/Sales Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months
 
Stock Recommendation: The stock of JNJ is quoting at $151.67 with a market capitalization of $399.9 billion. The stock is currently quoting at the upper band of its 52-week trading range of $109.16 to $154.5. The stock has given positive returns of ~1.68% and ~10.29% in the last three months and one year, respectively. The company expects to report its 2QFY20 results on 16 July 2020. The company is confident that its business will grow on the back of its strong portfolio of products. Considering the aforesaid facts, outlook amid COVID-19 outbreak and current trading levels, we have valued the stock using EV/Sales multiple based illustrative relative valuation method. We have taken the peer group - Eli Lilly and Co (NYSE: LLY), Pfizer Inc (NYSE: PFE), Allergan plc (NASDAQ: AGN), to name few and arrived at a target price of higher single-digit upside (in % terms). Hence, we recommend a “Hold” rating on the stock at the closed price of $151.67, down 0.23% as on 20 April 2020.
 

Malibu Boats, Inc.

 
COVID-19 Update: Malibu Boats, Inc. (NASDAQ: MBUU) is involved in the manufacturing, distribution, and marketing of a wide range of recreational powerboats. In a recent press release, the company took necessary measures to ensure the safety and wellbeing of its key stakeholders amid COVID-19 update. In doing so, the company suspended all its manufacturing facilities, from March 24, 2020 through April 6, 2020. Further, MBUU has drawn $98.8 million on its revolving credit facility to ensure adequate liquidity. The company also withdrew its FY20 outlook, due to coronavirus led crisis.
 
Q2FY20 Financial Highlights for the period ending 31 December 2019: During the quarter, the company’s net sales stood at $180.1 million, up 8.6% year over year, bolstered by robust growth across the company’s Cobalt and Pursuit brands and best-in-class vertical integration initiatives. Notably, net sales per unit rose 6% year over year, while gross profit for the period increased 4.1% and stood at $39.9 million. The company reported net income of $17.6 million, soaring 17.3% year over year. Adjusted EBITDA stood at $30.7 million, up 4.5% on a year over year basis. 
 

Key Highlights (Source: Company Reports)
 
Valuation Methodology: EV/Sales Multiple Based Relative Valuation
 

EV/Sales Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months
 
Stock Recommendation: The stock of MBUU closed at $25.58 with a market capitalization of ~$526.5 million. The stock is currently quoting at the lower band of its 52-week trading range of $18.02 to $52.13. The stock has corrected by ~39.98% and ~37.21% in the last three month and one year, respectively. New product development, operational excellence initiatives, unparalleled vertical integration along with numerous strategies are few key positives. The company is likely to announce its 3QFY20 results on 7 May 2020. Considering the aforesaid facts, we have valued the stock using an EV/Sales multiple based illustrative relative valuation method. For the matter, we have taken the peer group - Brunswick Corp (NYSE: BC), Mastercraft Boat Holdings Inc (NASDAQ: MCFT), Polaris Inc (NYSE: PII), and arrived at a target price of lower double-digit growth (in % terms). Hence, we recommend a “Buy” rating on the stock at the closing price of $25.58, down 4.37% as on 20 April 2020. 
 
 

DXC Technology Company

 
DXC Prices Senior Notes: DXC Technology Company (NASDAQ: DXC) is a cloud-based service provider of innovative Information Technology, enhancing data and delivering security and scalability across to its users. On 14 April 2020, the company announced that it has priced $500 million aggregate principal amount of senior notes due 2023. The notes carry an interest rate of 4.000%. Further, the company also priced $500 million aggregate principal amount of senior notes due 2025, with an interest rate of 4.125%.
 
Other Recent Update: In another update, the company stated that Luxoft, a software engineering arm of DXC has completed the buyout of mobility systems developer, CMORE Automotive. The financial terms of the deal were kept under wrap.
 
Q3FY20 Operating Highlights for the Period ended 31st December 2019:  During the quarter, the company reported revenue of $5,021 million, down 3% year over year. Global Business Services delivered a revenue growth of 8.8% while Global Infrastructure Services reported a decline in revenue of 11.5% on pcp. Adjusted EBIT margin stood at 10.5%, down from 16.2% in the prior corresponding period. Profit margin from GBS unit, for the period came in at 15%, up from 18.2% in the prior year, due to investments across digital hiring followed by a slower pace of cost takeout.
 

Key Highlights (Source: Company Reports)
 
Valuation Methodology:EV/Sales Based Relative Valuation

EV/Sales based relative valuation (Source: Thomson Reuters)
 
Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: The stock of DXC closed at $15.07 with a market capitalization of $3.8 billion. The stock made a 52-week low and high of $7.90 and $67.09 and is currently trading at the lower band of the range. The stock corrected by 57.67% and 76.66% in the last three months and one year, respectively. The company remains on track to benefit from continued strength in the Digital business. Moreover, the buyout of Luxoft business is expected to be a key growth driver. Considering the aforesaid facts, current trading levels and recent price movements, we have valued the stock using an EV/sales multiple based illustrative relative valuation method and arrived at a target price of lower double-digit (in % terms). For the matter, we have taken the peer group - Accenture PLC (NYSE: ACN), Xerox Holdings Corp (NYSE: XRX), and Unisys Corp (NYSE: UIS). Hence, we recommend a ‘Buy’ rating on the stock at the closing price of $15.07, down 1.7% as on 20 April 2020.
 
 
 
Comparative Price Chart (Source: Thomson Reuters)

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