Even though the COVID-19 pandemic has proven to be the biggest economic crisis of the century, the stock market has recovered and galloped ahead since a correction last March. This positivity has been reflected in the primary stock market too as we witnessed a surge in initial public offerings (IPOs) on the U.S. exchanges last year. FactSet data shows that the volume of IPOs in 2020 more than doubled from 2019 to a record 494 IPOs, the highest number in the past two decades.
An unprecedented rally by technology sector stocks since the onset of the pandemic has been justified by a heightened reliance worldwide on technology during the health crisis. As a result, tech IPOs attracted the most investment flows as investors jumped to invest in companies such as Palantir Technologies (PLTR), a data analytics company that builds and deploys software platforms for the intelligence community of the U.S. government.
However, the near-term prospects of PLTR appear bleak. Despite generating a large portion of its revenue from the government, PLTR has still not generated profits after operating for nearly two decades. In fact, some of its contracts, especially the one with Immigration and Customs Enforcement (ICE) to track undocumented immigrants, are controversial. In addition, the stock has retreated more than 30% over the past month but still appears overvalued by traditional measures.
In contrast, Carrier Global Corp. (CARR), Otis Worldwide Corp. (OTIS) and Playtika Holding Corp. (PLTK) are three recently listed companies that failed to garner much investor attention despite possessing solid fundamentals. As such, we think these stocks are better positioned to deliver robust returns in the coming months.
Carrier Global Corp. (CARR)
CARR is a leading global provider of innovative heating, ventilating, and air conditioning (HVAC), refrigeration, fire, security, and building automation technologies under its brand portfolio that includes Carrier, Kidde, Edwards, LenelS2 and Automated Logic. The company has an extensive global footprint, with approximately 53,000 employees. It offers solutions in more than 160 countries. CARR operates primarily through three segments – HVAC, Refrigeration, and Fire & Security.
CARR is a spinoff from former industrial multinational conglomerate United Technologies Corporation (UTC) and debuted as an independent, publicly traded company on April 3, 2020. Since CARR was carved out from UTC no new shares were offered to the public. Instead, each UTC shareowner received one share of CARR common stock worth $12 for each UTC share, . CARR opened at $13.75 per share and closed the day at $16.92. The stock is up a whopping 170% since then to close yesterday’s trading session at $37.12.
CARR’s fourth quarter (ended December 31, 2020) sales were up 2% year-over-year, to $4.6 billion, largely driven by continued strong demand in North America residential HVAC, which advanced 25% compared to the prior year, and an improved economic climate. In addition, , most businesses saw sequential improvement in the quarter. However, its adjusted EPS for the quarter was $0.31, compared to the year-ago value of $0.53.
CARR’s previously announced Carrier 600 program, which targets $600 million in cost savings over three years to fund strategic initiatives, was recently increased by $100 million and renamed Carrier 700. The company is benefiting immensely from volume growth in its HVAC business and improved order trends driven by growing urbanization and an accompanying rise in demand for indoor climate control. Wall Street analysts expect CARR’s current year revenue and EPS to rise 7.7% and 15.7%, respectively.
CARR’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which translates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
CARR also has an A grade for Industry and B for Value. It is ranked #20 of 43 stocks in the Technology – Electronics industry.
In total, we rate CARR on eight different levels. In addition to the POWR Ratings grades I’ve just highlighted, you can see the CARR’s ratings for Growth, Momentum, Stability, Sentiment and Quality here.
Otis Worldwide Corp. (OTIS)
OTIS is the world’s leading elevator and escalator manufacturing, installation and service company. It maintains more than two million customer units in more than 200 countries and territories worldwide. It operates through two segments – New Equipment and Service.
OTIS was also a spin off from UTC. The stock also debuted as a publicly traded company on April 3, 2020. Each UTC shareowner received 0.5 share of OTIS common stock for each share of UTC. OTIS opened at $43.75 per share on its first trading day and closed the session at $47.32. The stock has since gained 48.4% to close yesterday’s trading session at $64.93.
In the fourth quarter (ended December 31, 2020), OTIS’ net sales increased 4.2% year-over-year to $3.5 billion, with organic growth of 1.3%. Organic sales increased 4.8% in the New Equipment segment despite new equipment orders declining 3.5% during the quarter. Its adjusted operating profits were up $36 million, with 50 bps of margin expansion. Moreover, its backlog increased 6% year-over-year. Its adjusted diluted EPS came in at $2.52, rising 12.5% compared to the year-ago value.
In February, OTIS agreed to supply hundreds of elevators and escalators for six distinct Rail Projects in three Canadian cities. The deal aims to support a critical infrastructure segment as Canada expands its public transportation. In addition , the Brazilian subsidiary recently signed maintenance contracts with Gazit Group across six properties. The contract adds 51 units to OTIS’ service portfolio and renews the contracts for an additional 37 units. In line with improving OTIS end market demands, Wall Street analysts expect the company’s revenue and EPS to improve 6.2% and 8.3%, respectively.
OTIS’ sound fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary ratings system. The stock also has a B grade for both Growth and Stability. In the 88-stock, A-rated Industrial – Machinery industry, it is ranked #21.
Beyond what we’ve stated above, we have also given OTIS grades for Value, Momentum, Sentiment and Quality. Get all the OTIS ratings here.
Playtika Holding Corp. (PLTK)
Israel-based PLTK is a leading mobile gaming company and monetization platform with more than 35 million monthly active users across a portfolio of games titles. The company builds best-in-class live game operations services and a proprietary technology platform to support its portfolio of games. In fact, PLTK was among the first to offer free-to-play social games on social networks and now on mobile platforms.
PLTK was founded in 2010, but was listed as recently as January. The pandemic triggered a rally in gaming stocks because the stay-at-home norm caused people to spend more time on this form of entertainment. So, it wasn’t surprising when PLTK listed its stock at $27 for its January 15, 2021 IPO rather than within the expected $22 to $24 price guidance. The company sold 69.5 million shares and raised $1.88 billion. The shares surged by as much as 34% on the close of their first day of trading at $30.24. However, PLTK closed yesterday’s trading session at $26.76.
In the fourth quarter, ended December 31, 2020, PLTK reported $573.5 million in revenues, an increase of 17.5% year-over-year. In fact, its total revenue surpassed $2 billion for the first time in 2020. The company recorded average daily users of 10.5, while its average daily payer conversion rate was 2.6%, compared to its e year-ago value of 2.2%. Moreover, PLTR reported EPS of $0.19, surging 137.5% from the prior year value of $0.08.
PLTK had an incredible year of growth and achievement in 2020. Its casual portfolio exceeded $1 billion in revenue for the first time. Both Bingo Blitz and Solitaire Grand Harvest achieved record revenues of $443 million and $147 million in the fourth quarter, surging 38% and 95%, year-over-year, respectively. PLTK’s management anticipates revenue to come in at $2.44 billion for the full-year 2021.
It’s no surprise that PLTK has an overall rating of A, which equates to Strong Buy in our POWR Ratings system. PLTK also has an A grade for Quality and B for Sentiment. In the 24-stock B-rated Entertainment – Toys & Video Games industry, it is ranked #1.
Click here to see the additional POWR Ratings for PLTK (Growth, Value, Momentum and Stability).
The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
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CARR shares were trading at $38.58 per share on Wednesday morning, up $1.46 (+3.93%). Year-to-date, CARR has gained 2.28%, versus a 4.41% rise in the benchmark S&P 500 index during the same period.
About the Author: Sidharath Gupta
Sidharath’s passion for the markets and his love of words guided him to becoming a financial journalist. He began his career as an Equity Analyst, researching stocks and preparing in-depth research reports. Sidharath is currently pursuing the CFA program to deepen his knowledge of financial anlaysis and investment strategies. More...
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