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Electro Scientific Industries, Under Armour, Chegg and More: Why These Stocks Are Surging

It’s been a rather quiet day on Wall Street as the main indexes are relatively calm. Among the stocks that are showing movement in a good way include Electro Scientific Industries Inc. (NASDAQ:ESIO)MKS Instruments Inc. (NASDAQ:MKSI)Under Armour Inc (NYSE:UA)KLA-Tencor Corporation (NASDAQ:KLAC), and Chegg Inc. (NYSE:CHGG). Let’s find out why some traders are hitting the buy button on these stocks.

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Electro Scientific Industries Inc. (NASDAQ:ESIO) shares have surged almost 90% after MKS Instruments Inc. (NASDAQ:MKSI) agreed to buy the company for $30 in cash per share, good for a total value of around $1 billion. In terms of its reasons to make the purchase, MKS believes the acquisition will strengthen the company’s  expertise in photonics and optics, and unlock potential annualized cost synergies of $15 million within 18-36 months of closing. The deal is also expected to be accretive to MKS’ adjusted net earnings and free cash flow within 12 months post closing. In deal has been approved by the boards of both companies and is expected to close in Q1 2019. The Electro Scientific Industries Inc. (NASDAQ:ESIO) purchase is also expected to expand MKS’ addressable market by $2.2 billion. In contrast to the price action of many other acquisition announcements, shareholders of MKS are cheering the deal with the stock up 3% in late afternoon trading. Many smart money funds seem to like MKS. Of the around 650 top funds we track, 28 were long around half a billion dollars of MKS Instruments Inc. (NASDAQ:MKSI) at the end of June, up four funds from the end of March.

In other news, Under Armour Inc (NYSE:UA) is over 20% in the green after after the company reported a strong Q3 report. Adjusted EPS came in at $0.25, over double the consensus of $0.12 per share and revenue was $1.44 billion, beating the average estimate of $1.42 billion. Sales were driven in part to the company’s international business which rose 15% and 17% in currency neutral terms. Due to the strong results, some analysts, such as Jim Duffy of Stifel, think that there might be “light at the end of the tunnel looking into 2019” for Under Armour Inc (NYSE:UA).

Another stock in the green, KLA-Tencor Corporation (NASDAQ:KLAC), reported strong earnings as well this time for its first quarter, with adjusted EPS of $2.46 and revenue of $1.093 billion, versus the census of $2.21 and $1.07 billion.  Guidance is in-line with management expecting Q2 EPS of $2.02-$2.34 and revenue of $1.03-$1.11 billion, both ranges encompassing the expected numbers of $2.23 in EPS and $1.08 billion in sales. In terms of hedge fund sentiment surrounding KLA-Tencor Corporation (NASDAQ:KLAC), it’s been relatively stable. 26 elite funds owned shares of KLAC at the end of Q2, versus 29 at the end of Q1. Shares are up 7% so far.

Chegg Inc. (NYSE:CHGG) is 14% in the green after reporting solid earnings of its own. Adjusted EPS for the third quarter came in at $0.07, exceeding the estimate by $0.04 per share. Sales grew 18.6% year over year to $74.28 million, beating the street by $5.11 million. Growth was driven by Chegg Services, which notched a 37% increase. Guidance is strong as management sees full year sales of $315-$318 million versus the consensus of $310 million. Adjusted EBITDA is expected to be $81.5-$82.5 million versus the consensus of $80 million. Full year 2019 revenue is expected to be around $388 million and adusted eBITDA is expected to be $112 million. 16 top funds were long Chegg Inc. (NYSE:CHGG) at the end of June.


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