EXL Service (EXLS) – $8B market cap; $68M ADV: We added EXL Service to the U.S. Focus List as the stock reclaimed its 50- and 100-DMA on above average volume following its Q1 FY25 print. EXL Service is a data analytics and business process outsourcing (BPO) company. Nine of the top 10 insurers and six of the top 10 healthcare providers in the U.S. are its clients. BPO contracts are for three or more years, providing revenue stability. Recently, the company launched a large language model for the insurance industry, which is one of the best in the space. Client activity has accelerated in H2 FY24 as banks are increasing their budgets, which is driving a recovery in the data analytics segment. Consensus expects revenue and adjusted EPS CAGR of 11% and 14%, respectively, in FY24–26. Fundamental & Technical note
Author: vipin khare
O’Neil Capital Equipment Sector Weekly
Loar (LOAR) – $9B market cap; $57M ADV: We added Loar to the U.S. Focus List as the stock broke out of a stage-one 19-week cup-with-handle base on above average volume. It generates ~85% of its revenue from proprietary products, enabling premium pricing. The company supplies key components to major aircraft platforms like the Boeing 737 and A320 and should benefit from production ramp-ups. Increased aircraft utilization is driving demand for high-margin aftermarket services. It operates in a fragmented market and is expanding market share through strategic acquisitions. Consensus expects revenue and net income to have a CAGR of 21% and 102%, respectively, during FY24–26. Fundamental & Technical note
O’Neil Capital Equipment Sector Weekly
Ex FL-idea GE Aerospace (GE), the world’s largest aerospace engine manufacturer, reported Q1 FY25 results. Revenue (+11% y/y) missed estimates by 1%, while
adjusted EPS (+60% y/y) beat estimates by 17%. Adjusted operating margin expanded to 23.8% (+460bps y/y), beating estimates by 250bps. Strong aftermarket
demand continued to drive revenue growth and margin expansion. The company will focus on cost control to offset tariff impact. It maintained FY25 guidance for lowdouble-digit y/y revenue growth (estimates: +12.3% y/y) and adjusted EPS of $5.10–5.45 (+15% y/y at the midpoint), which came 3% below consensus. The stock
gapped above its 200-DMA and reclaimed its 100-DMA on above average volume. It is 12% off its 52-week high. Next resistance is at its 50-DMA (+4%). RS line is close GEto its multi-year high, with a strong RS Rating of 86. Acc/Dist Rating is weak at D+.
O’Neil Capital Equipment Sector Weekly
Per media reports, the Chinese government has asked domestic airlines not to place new orders for Boeing (BA) aircrafts and seek approval before taking any new deliveries. The
stock is trading below all its key moving averages and is 21% off its 52-week high. Support is at its recent low of $128.9 (-17%). Weak RS Rating of 46.
Industrials Themes
Key points from this report:
· On April 10, the U.S. president stated that the country might consider purchasing advanced ships from trusted allies known for their strong shipbuilding capabilities.
· Year-to-date, South Korea (SK) shipbuilders have outperformed KOSPI by ~21%.
· 2024 marked the most active newbuild market since 2007:
o Decarbonization: Fleets replaced with more eco-friendly vessels.
o Increased natural gas demand boosted orders for high-margin LNG/LPG carriers.
· SK shipbuilders turned profitable in 2024:
o Prices for newbuilds increased due to limited shipyard capacity.
· SK dominates the high-end, eco-friendly segment (70%+ market share).
· The U.S. government seeks to revive its shipbuilding industry with SK’s cooperation.
o Tariffs on China-built ships that dock at U.S. ports to increase orders for SK.
· Included are annotated Datagraphs® for all the major SK shipbuilders: HH3.KR, OSM.KR, HUE.KR, SMH.KR, and HMO.KR.
O’Neil Capital Equipment Sector Weekly
EXL Service (EXLS) – $7B market cap; $50M ADV: We removed EXL Service from the U.S. Focus List as the stock broke below its 100-DMA and the bottom of its recent base ($43.68) on above average volume in the past couple of sessions amid general market weakness. The company reported Q4 FY24 results in February. Overall results were decent, with revenue and earnings growth accelerating, but the general market conditions could be weighing on the stock. It is testing support at its 200-DMA, with the next level of support at $38.36 (-8%). Fundamental & Technical note
O’Neil Capital Equipment Sector Weekly
Stocks in News
Cintas (CTAS), a provider of workplace uniforms, reported better-than-expected Q3 FY25 results. Revenue (+8% y/y) beat estimates by 1%, and diluted EPS (+18% y/y) beat estimates by 7%. Revenue growth was driven by increases across segments, with uniform rental services revenue growing 8% y/y and first aid and safety services revenue increasing 11% y/y. Operating margin expanded to 23.4% (+180bps y/y), beating estimates by 100bps. Management raised FY25 EPS guidance by 1.6%, 1% above estimates, and narrowed the revenue guidance range in line with consensus. The stock gapped above all its key moving averages on above average volume following the Q3 print. It faces resistance at $210.2 (+1%), followed by $215.4 (+3%). It is forming the right side of a stage-two cup base, with the pivot 9% away. RS line is close to a 52-week high, with a strong RS Rating of 88. Acc/Dist Rating of B indicates good money inflows.
Industrials Themes
Key points from this report:
Solid waste management is a defensive industry due to recurring volumes in the business. It has been a consistent compounder over the long term.
The number of landfills in the U.S. is decreasing, allowing large waste management firms that already own these assets to exercise pricing power.
WM, WCN, RSG, GFL, and CWST collectively own and operate ~50% of the landfills.
The increasing level of automation and technology adoption for business operations, with a focus on increasing waste internalization rates, is helping margins.
Acquisitions, a key growth strategy, drive volumes and market share.
Included are annotated Datagraphs® for the top five solid waste management firms in the U.S.: WM, WCN, RSG, GFL, and CWST
O’Neil Capital Equipment Sector Weekly
Rheinmetall (RHMX.DE; RHM GR) – $64B market cap; $744M ADV: We booked a 121% gain and removed Rheinmetall from the Developed Markets Focus
List as the stock has formed a climax top on the daily chart with five criteria. It has pulled back 10% from its all-time high and is testing support at its 10-DMA
(-2%). We have booked profits in strength here and continue to believe that Rheinmetall, being Germany’s largest defense contractor, is one of the biggest
beneficiaries of a multi-year defense cycle in Europe. Next support is at its 21-DMA (-8%). Fundamental & Technical note
O’Neil Capital Equipment Sector Weekly
Science Applications International (SAIC), a provider of technology integration and engineering solutions, reported better-than-expected Q4
FY25 results. Revenue (+6% y/y) beat estimates by 1% and adjusted EPS (+80% y/y) beat estimates by 23%. Ramp-up of volume on new and
existing contracts drove revenue growth. After the close of Q4, it received a $1.8B order, one of its largest recompete wins in recent years. Adjusted
EBITDA margin expanded to 9.6% (+230bps y/y), beating estimates by 60bps. FY26 revenue guidance, came 1% above consensus and adjusted
EPS guidance came 4% above consensus. The stock gapped above its 50-DMA (-5%) and faced resistance at its 100-DMA (+4%). It is 27% off its
52-week high. RS line has bounced off its lows, with a poor RS Rating of 34. Good Acc/Dist Rating of B+
