Southwest Airlines, Samsara, Nathan's, and More Stocks See Action From Activist Investors — Barrons.com

Each week, Benzinga’s Stock Whisper Index uses a combination of proprietary data and pattern recognition to showcase five stocks that are just under the surface and deserve attention.

Investors are constantly on the hunt for undervalued, under-followed and emerging stocks. With countless methods available to retail traders, the challenge often lies in sifting through the abundance of information to uncover new opportunities and understand why certain stocks should be of interest.

Read Also: EXCLUSIVE: Top 20 Most-Searched Tickers On Benzinga Pro In October 2024 — Where Do Tesla, Nvidia, Apple, DJT Stock Rank?

Here's a look at the Benzinga Stock Whisper Index for the week of Nov. 8:

Insmed Inc : The biopharmaceutical company saw increased interest from investors over the week, which comes after the company reported third-quarter financial results and provided a company update in late October. The company said ARIKAYCE had revenue of $93.4 million in the quarter, up 18% year-over-year.

Insmed also said its NDA submission for Brensocatib in Bronchiectasis is on track for the fourth quarter and is expected to launch in the U.S. in mid-2025.

H.C. Wainwright reiterated a Buy rating and $90 price target on the stock after the quarterly results. Truist reiterated a Buy rating and raised the price target from $100 to $105. Investor interest could increase in the coming weeks with the company scheduled to participate in several conferences including ones from Guggenheim (Nov. 11), UBS Global (Nov. 12), Wolfe Research (Nov. 20) and Jefferies (Nov. 21).

Insmed shares were up over 8% in the last five trading days, as seen on the Benzinga Pro chart below, and are up over 140% year-to-date in 2024.

Nathan's Famous, Inc. NATH reported earnings per share (EPS) of $1.47 in the second quarter of fiscal 2025, which increased 5% from the year-ago EPS of $1.40.

NATH’s Revenues in Detail

Nathan's Famous registered revenues of $41.1 million in the fiscal second quarter, up 6.1% year over year.

Higher revenues from the majority of its segments drove the topline.

Shares of this company had closed nearly 1.7% lower at yesterday’s close.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Nathan's Famous’ Segment Details

Nathan's Famous derives revenues from five segments — Branded Products, Company-owned restaurants, License royalties, Franchise fees and royalties, and Advertising fund revenue.

For the quarter under review, Branded Products revenues were $24.5 million, up 5.1% from the year-ago quarter. During the second quarter of fiscal 2025, the volume of hot dogs sold in the Branded Product Program increased 4% year over year. Nathan's Famous average selling prices increased 1.4% year over year.

Revenues from Company-owned restaurants totaled $5.3 million, up 2.9% year over year. Restaurant sales were impacted by higher sales at NATH’s Coney Island locations resulting from an increase in its average check, offset by lower sales at its locations in Oceanside and Yonkers, NY.

Revenues from License royalties totaled $9.5 million, up 13.8% year over year. Total royalties earned on sales of hot dogs from Nathan's Famous’ license agreement with Smithfield Foods, Inc. at retail and foodservice, increased 14.5% year over year to $8.6 million for the second quarter of fiscal 2025. The uptick resulted from an 18% increase in retail volume which was partially offset by a 4% decrease in net selling price.

The foodservice business earned higher royalties of $39,000 as compared with the second quarter of fiscal 2024. Royalties earned from all other licensing agreements for the manufacture and sale of Nathan's Famous’ products increased $64,000 during the second quarter of fiscal 2025 compared with the second quarter of fiscal 2024 primarily due to higher royalties earned on sales of proprietary spices, franks-in-a-blanket, mozzarella sticks and other hors d’oeuvres.

Franchise fees and royalties generated revenues of $1.2 million in the fiscal second quarter, down 9.1% year over year. Total royalties were $1.1 in the second quarter fiscal 2025, down 7.1% year over year. Royalties earned under the Branded Menu Program were $248,000 in the second quarter of fiscal 2025, down 8.8% year over year.

Virtual kitchen royalties were $11,000 in the second quarter of fiscal 2025, down 38.9% year over year. Traditional franchise royalties were $807,000 in the fiscal second quarter, down 5.9% year over year. Franchise restaurant sales decreased 2.6% year over year to reach $18.7 million, primarily due to lower traffic at international locations and other seasonal entertainment venues.

Comparable domestic franchise sales (consisting of 59 Nathan's Famous’ outlets, excluding sales under the Branded Menu Program) were $14.9 million in the second quarter of fiscal 2025, down 2.1% year over year.

As of Sept. 29, 2024, 243 franchised locations, including domestic, international and Branded Menu Program units, were operating compared with 235 as of Sept. 24, 2023. Total franchise fee income was $108,000 in the second quarter of fiscal 2025, down 24.5% year over year. Domestic franchise fee income was $35,000 in the second quarter of fiscal 2025, up 25% year over year. International franchise fee income was $59,000 in the fiscal second quarter, down 1.7% year over year.

Advertising fund revenues were $0.6 million, down 1.6% from the year-ago quarter.

NATH’s Geographic Segment

Nathan’s Famous’ derives revenues from two geographic regions — United States and International.

Revenues from the United States were $40.5 million, up 8.1% year over year. International revenues were $0.6 million, down 50.4% year over year.

Nathan's Famous, Inc. Price, Consensus and EPS Surprise

Nathan's Famous, Inc. price-consensus-eps-surprise-chart | Nathan's Famous, Inc. Quote

Nathan’s Famous’ Gross Margin

Nathan’s Famous’ gross profit was $3.9 million (with a gross margin of 12.9%) during the second quarter of fiscal 2025, down 11.5% year over year. This compares with $4.4 million (with a gross margin of 15.3%) during the second quarter of fiscal 2024.

NATH’s Adjusted Operating Expenses Analysis

Restaurant operating expenses increased 3.7% to $1.4 million, while general and administrative expenses increased 0.7% to $3.3 million.

Nathan’s Famous’ Profitability

Operating profit totaled $9.6 million, which increased 5.8% from the prior-year quarter.

In the second quarter of fiscal 2025, Nathan’s Famous’ net income was $6 million, up 5.6% from the year-ago quarter.

Adjusted EBITDA during the reported quarter was $10.4 million, up 5.9% from the year-ago quarter.

NATH’s Liquidity & Debt Management

Nathan’s Famous exited second-quarter fiscal 2025 with cash and cash equivalents of $31.2 million compared with $25.9 million at the fiscal first-quarter end. Total long-term debt (net of unamortized debt issuance costs) at the end of second-quarter fiscal 2025 was $59.6 million compared with $61.5 million at the fiscal first-quarter end.

Cumulative net cash provided by operating activities at the end of second-quarter fiscal 2025 was $14.8 million compared with $11.4 million a year ago.

Our Take

Nathan’s Famous exited the second quarter of fiscal 2025 with solid top-line and bottom-line results. Strength in the majority of the segments and robust revenues from the United States were also encouraging. The uptick in Domestic franchise fee income was promising.

However, a decline in Franchise fees and royalties during the reported quarter was disappointing. The decline in Franchise restaurant sales and Comparable domestic franchise sales was also discouraging. Royalties earned under the Branded Menu Program and Virtual kitchen royalties also declined during the reported quarter. International franchise fee incomes also decreased during the quarter, further raising our concerns. During the reported quarter, the gross margin contracted, which do not bode well.

Zacks Investment Research

Backblaze, Inc. (BLZE) came out with a quarterly loss of $0.10 per share versus the Zacks Consensus Estimate of a loss of $0.11. This compares to loss of $0.21 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of 9.09%. A quarter ago, it was expected that this company would post a loss of $0.12 per share when it actually produced a loss of $0.11, delivering a surprise of 8.33%.

Over the last four quarters, the company has surpassed consensus EPS estimates four times.

Backblaze, which belongs to the Zacks Internet - Software industry, posted revenues of $32.59 million for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 0.16%. This compares to year-ago revenues of $25.3 million. The company has topped consensus revenue estimates four times over the last four quarters.

The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.

Backblaze shares have added about 5.3% since the beginning of the year versus the S&P 500's gain of 24.3%.

What's Next for Backblaze?

While Backblaze has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Backblaze: mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is -$0.08 on $33.71 million in revenues for the coming quarter and -$0.44 on $127.53 million in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Internet - Software is currently in the top 25% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

Samsara Inc. (IOT), another stock in the same industry, has yet to report results for the quarter ended October 2024. The results are expected to be released on December 5.

This company is expected to post quarterly earnings of $0.04 per share in its upcoming report, which represents no change from the year-ago quarter. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days.

Samsara Inc.'s revenues are expected to be $310.65 million, up 30.8% from the year-ago quarter.

Zacks Investment Research