For Immediate Release

Chicago, IL – October 03, 2014– Zacks Equity Research highlights Rambus (RMBS-Free Report) as the Bull of the Day and DistributionNOW (DNOW-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Powersecure International (POWR-Free Report), Amazon (AMZN-Free Report), Google (GOOGL-Free Report) and eBay (EBay-Free Report).

Here is a synopsis of all six stocks:

Bull of the Day:

Headquartered in Sunnyvale, CA, Rambus (RMBS-Free Report) is a technology solutions company, focusing on the semiconductor industry. It was founded in 1990 and had its IPO in May 1997. They have regional offices in France, India, Japan, Korea and Taiwan.

The company designs, develops, licenses and markets technology solutions for memory systems for smartphones and tablets and advanced security solutions for cloud computing and mobile devices.

According to the company, they are “futuristic technologists who bring invention to market from architectural licensing, to the creation of products and services”.

Diversified Portfolio with Leadership in Memory Solutions

While historically the company focused on technologies for electronic memories and chip interfaces, they have been expanding in new areas including chip and system security and LED based lighting.

Since 1994. Rambus has maintained substantial lead in introducing innovative solutions in memory technology. The company’s Memory and Interface Division (MID.TO) designs memory and serial link interfaces, primarily for mobile servers, and accounts for about 70% of the revenue.

Cryptography Research (CRI), which accounts for about 20% of revenues, delivers DPA countermeasures, content protection, anti-counterfeiting and key management technologies for mainly for smart cards and smart phones/tablets.

Excellent Second Quarter Results

Rambus reported its Q2 2014 results on July 21. Revenue for the quarter was $76.5 million, which was at the high end of their upwardly revised guidance of $75 million to $77 million, and was up 32% year-over-year.

Pro forma net income for the quarter was $18.9 million also above their guidance. Net income per share was $0.13, significantly ahead of the Zacks Consensus Estimate of $0.05 per share.

The management provided their guidance for the third quarter with the results; they now expect revenue to be between $68 million and $73 million and pro forma net income to be between $12 million and $18 million. They however maintained their guidance for FY 2014 provided earlier this year.

Guidance was slightly lower compared to street estimates and thus the stock did slide after the results.

Rising Earnings Estimates

After solid results, analysts have increased their estimates for the company. Zacks Consensus Estimates for FY 2014 and 2015 are now $0.21 per share and $0.34 per share respectively, up from $0.20 per share and $0.30 per share, 30 days ago.

Rambus has delivered positive surprises consistently in last nine quarters.

Looks Poised to Beat Earnings Consensus in Q3

With an ESP (Expected Surprise Prediction) of 20.0%, Rambus looks well positioned to deliver a positive earnings surprise for the third quarter. Zacks Earnings ESP is a proprietary tool that helps investors find expected earnings surprises by focusing on the most recent analyst revisions.

Long-Term Growth Drivers

Rambus management sees significant growth opportunities in both mobile and server verticals.

In the new era of “The Internet of Things (IoT)”, enormous amount of data will be generated and carried across the networks and will lead to substantial growth opportunities for companies that can provide services and solutions for capturing, securing and moving this data. Rambus look well positioned to capitalize on this trend with its innovative solutions for connected clients, cloud datacenters and networks.

Rambus expects to growth its revenue by 12-18% per year in the longer-term. Licensing agreements continue to be stable and recurring revenue source for Rambus as it continues to monetize its patents.

The Bottom-Line

Memory industry continues to be attractive with memory and links being the key enablers for mobile and cloud systems. Rambus’ memory business looks well positioned to provide growing cash flows going forward. Further, with increasing security breaches at all levels, security is becoming an increasing concern, which will help the company expand its technology and products portfolio and provide more effective data security solutions.

Bear of the Day:

With a comprehensive network of more than 270 branches and 60 supply chain locations worldwide, DistributionNOW (DNOW-Free Report) is one of the largest distributors to the energy and industry. They support major land and offshore operations for key energy producing regions around the world.

DistributionNOW was spun off from National Oilwell Varco in May this year.

Disappointing Results

On August 6, the company reported its Q2 results. Revenues for the quarter were $952 million, down 12% from Q1 and down 11% from the same quarter a year ago. Net income for the quarter was $27 million, or $0.25 per share, compared to Q1 net income of $41 million, or $0.38 per share.

Results were much worse compared to the Zacks Consensus Estimate of $0.35 per share. According to the management, results were impacted by short term effects related to both an ERP implementation and spin-off activities coupled with the effects of a seasonal Canadian decline.

Downward Revisions

Analysts have been cutting their estimates for the company after quarterly results. Zacks Consensus Estimates for the current and next year are currently 1.36 per share and $1.76 per share respectively, down from $1.55 per share and $1.89 per share, 60 days ago.

Declining estimates sent the stock back to Zacks Rank # 5 last week.

The Bottom Line

With its leading position in a large and growing global market, DNOW may recover when its key end markets rebound. However as of now, declining energy prices and short-term disruptions related to the spin-off continue to present headwinds for the stock.

The Zacks industry rank for “Oil Field-Machinery & Equipment” is currently 223 out of 265 (Bottom 16%), suggesting substantial weakness in the coming months.

Better Play in the Industry?

Investors seeking exposure to the industry could look at Powersecure International (POWR-Free Report), which currently enjoys a Zacks Rank # 1 (Strong Buy). The company delivered a solid earnings beat for Q2. With its focus on its core business and operational improvements, it looks well positioned to reward its investors.
Additional content:

Google/Amazon Take Back Seat as DHL Starts Drone Service

German delivery company DHL, which launched its “parcelcopter” research project in Dec 2013, announced a regular drone delivery service for the first time last week.

DHL will fly the drones along the 7.5 miles stretch from the passenger port of Norddeich to a chosen launch pad in Juist. After that, a local courier service will transfer the goods to the customer. The drone, however, will only operate if the weather permits. It is designed to fly for 45 minutes and will be under constant supervision of a ground station.

The service will improve the availability of medicines and other urgent goods on the island. The island can only be reached by aircraft and ferry as it is a car-free zone.

Both Amazon (AMZN-Free Report) and Google (GOOGL-Free Report) have been contemplating such a service for some time, but their efforts have not resulted in any commercial service as yet. Part of the problem is their size and the regulatory scrutiny that they naturally receive as a result. Unmanned aircraft are subject to greater restrictions in both the U.S. and the UK. So it’s not that easy for these technology giants.

The other thing is the difference in their business models. Amazon is a retailer and logistics is a growing ancillary function. The reason it wants to use drones for parcel delivery is to bring down costs. This requires a certain amount of scale. DHL's service for remote areas would not serve its purpose. For Amazon to have an effective drone delivery service, it would need to send out a large volume of drones that have to fly in close proximity of civilians. This makes it harder for a company like Amazon to get regulatory approval.

Moreover, Amazon would benefit from the service only if the drones are able to carry a good bit more than the 1-1.5 kilos the DHL drones are carrying. Constant monitoring would also drive up its wage costs and therefore make the exercise less attractive for Amazon.

When Amazon proposed a drone delivery service called “Amazon Prime Air”, no one took it seriously. When Amazon said that the full-fledged launch of the service was still a few years out, it probably wasn’t because it couldn’t have a similar service as DHL but because it needed something different to serve its own purposes.

And same is the case with Google. The search giant is currently retailing digital goods through its Play store and testing same day delivery through its Shopping Express service. While AmazonFresh involves the delivery of groceries, companies like Google and (EBay-Free Report) have limited themselves to same-day delivery of durable goods.

But for all these players, drones are required for cost reduction, not to serve remote areas. So Google’s efforts are also not expected to be commercially viable for a few more years.

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