Air Transport Services Group

A recent survey by UPS of online shoppers demonstrates the shift in consumers’ online shopping habits. More than half of participants’ purchases were online versus in physical stores, and 20% chose two day shipping, twice the number of shoppers who did so in 2014. This overwhelming trend of quick delivery is behind Amazon’s push to lease delivery planes from Air Transport (NSDQ: ATSG).

With Amazon accounting for almost 60% of all online purchases, it is scooping up as many delivery-model planes as it can. Two months after its deal with Air Transport Amazon embarked on a similar leasing program with publicly traded Atlas Air. The terms of the agreements are almost identical to those with Air Transport. The deal with Air Transport, though, will boost revenue and earnings more than it does for Atlas because of Air Transport’s smaller size.

Brunswick

Brunswick (NYSE: BC) declared a regular quarterly dividend of 15 cents per share on its common stock. The annual 60-cent dividend gives investors a 1.2% yield on an incredibly cheap stock.

In the meantime MarineMax Inc., the nation’s largest recreational boat-and-yacht retailer and a customer that accounts for 21% of Brunswick’s business, expanded its financing facility to meet the anticipated strong demand for new models.

MarineMax specifically noted strong demand for Brunswick’s Sea Ray boats and was positive about March and April sales trends. We do note that June is the largest and most important month for sales in the June quarter. So far, all indications are that boat demand is solid.

Charles River Labs

Two failed drug trials by Biogen Corp. and Alexion Pharmaceuticals dragged down the biotech index and Charles River Labs (NYSE: CRL) along with it. While failed trials are never a good thing for biotech companies, they are, perversely, good news for Charles River.

Increased funding at biotech and large drug companies is feeding demand for drug discovery. The services Charles River provides help these companies outsource the job of testing potential new drugs all the way through human clinical trials. As these companies pick up the pace for discovering new drugs, Charles River’s business grows.

A new customer agreement with privately held Moderna expands Charles River’s focus to the early-stage development of an entirely new class of drugs that produces human proteins inside patient cells.

Criteo

In early June we raised our target on Criteo (NSDQ: CRTO) to $70 from $64 after consensus estimates increased steadily. This is the second time since our March recommendation that we’ve increased our target. Our new target is more than 60% above current share price levels. Criteo’s business model and ability to improve sales for e-commerce companies make this stock our top pick.

Late last month Criteo dropped 2% on a report that Facebook had closed its ad exchange to third-party tech companies. We spoke with our contact at Criteo, who reassured us that this particular exchange is not a significant part of its business.

Criteo’s dynamic product-advertising software, which matches relevant ads to users, is still an integral part of Facebook’s ad program, specifically with Facebook Mobile and Instagram, its two fastest-growing apps.

Last month Criteo introduced new marketing software called Criteo Dynnamic Email, which sends personalized emails to a company’s website customers based on their browsing preferences. Criteo recognizes that mass distributed email ads are less effective than they used to be and can even hurt sales. Marketing manager at eBags, Larry Sweeney, said that Criteo Dynamic Email increased the open rate of eBags’ emails 30% and increased traffic to the company’s website through those emails 25%.

Drew Industries

We initiated a buy on Drew Industries (NYSE: DW) on June 1. Since then the stock is up 5%, partly due to strong results from one of the company’s customers.

That customer, Thor Industries, reported strong numbers for the third quarter on June 6. Sales of motorized RVs increased 24%, and trailer sales also improved. The backlog for towable and motorized RVs was up 50% and 36%, respectively, a positive omen for Drew’s future sales. It was also noted that dealer inventory is up only 1%, indicating a healthy channel for future order growth.

Thor management was quite positive on the tone of business and noted that new models are attracting younger buyers, a trend we note in this month’s report on Drew. This new population of buyers layered on top of a robust set of retirees is fueling demand for RVs.

SolarEdge

A Wall Street Journal article recently highlighted the trend of consumers buying solar panel systems outright instead of leasing them. The long-term economics of an outright purchase for a consumer are better than a long-term lease.

Industry expert GTM Research expects that leasing, which accounted for 72% of home solar sales in 2014, will see its share drop to 48% in 2017. Although the upfront cost for purchasing a system is high, the total cost has dropped considerably, making the outright purchase an affordable option.

SolarEdge (NSDQ: SEDG) has already benefited from this shift. In its most recent quarter the company noted that a distributor has replaced solar leasing companies as its largest customer. Distributors tend to sell to smaller regional players that in turn sell directly to homeowners and corporations.

We like the security of a less volatile and concentrated customer base and expect SolarEdge to continue to grow earnings as the industry expands further into the consumer market. According to Bloomberg’s New Energy Outlook 2016, solar and wind energy will be “the cheapest ways of producing electricity in many countries during the 2020s and in most of the world in the 2030s.”

Since April, analysts have raised their full-year earnings expectations for SolarEdge 2 cents per share to $1.72. SolarEdge has beaten analyst estimates the past four quarters by an average of 31% per quarter.

Vera Bradley

Vera Bradley (NSDQ: VRA) reported a decent quarter on June 1. Amidst the turmoil engulfing retail sales, investors were concerned Vera would deliver bad news. After a rocking start to the year, consumer stocks are dropping left and right. Express and Abercrombie were two recent victims. Vera’s stock had already wilted 25% from its April high before the recent earnings report.

The results support our investment thesis that Vera is pulling in a wave of new customers with its newly designed, more profitable bags. Revenue of $105 million was $1.5 million less than expected, but earnings per share (EPS) of 6 cents delivered one penny of upside. While the slight revenue miss is disappointing, Vera’s turnaround is predicated on fewer markdowns that might deliver lower revenue but better earnings. In addition, the 4% growth in revenue is the highest Vera has seen in at least two years.

Second-quarter estimates were lowered by one penny, but annual EPS guidance is unchanged, ranging between 90 cents and 98 cents. Management is confident that the company will be able to increase sales in the second half of the year. CEO Robert Wallstrom said that Vera Bradley would launch its new brand-positioning campaign in September ahead of the fourth quarter, which is typically the most profitable.

Vera is making the right moves holding firm on pricing and reducing the frequency of “hyper-sales.” Vera’s share price is now 8% lower than when we first recommended the stock, but the company is still expected to grow earnings 30% or more this year. Our target remains $24, 70% higher than current levels.