Erie Indemnity and Dollar Tree have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL –September 18, 2024 – Zacks Equity Research shares Erie Indemnity ERIE, as the Bull of the Day and Dollar Tree DLTR, as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Canadian Imperial Bank of Commerce CM, Barclays PLC BCS and Arch Capital Group Ltd. ACGL.
Here is a synopsis of all five stocks:
Bull of the Day:
Erie Indemnity, a current Zacks Rank #1 (Strong Buy), issues, renews, and underwrites insurance products for personal liability, property, boat, recreational vehicles, home, flood, and auto. The company’s earnings outlook is notably bullish across all timeframes.
In addition to favorable earnings estimate revisions, the stock resides in the Zacks Insurance – Brokerage industry, currently ranked in the top 4% of all Zacks industries. Let’s take a closer look at how the company currently stacks up.
ERIE Reports Strong Growth
Since becoming a Zacks Rank #1 (Strong Buy) on July 30th, ERIE shares have gained nearly 20%, widely outperforming relative to the S&P 500. Favorable quarterly results have helped the stock all year long in general, up 60% on a YTD basis.
Income-focused investors could find ERIE shares attractive, with the company currently sporting a shareholder-friendly 7.4% five-year annualized dividend growth rate paired with a sustainable payout ratio sitting at 50% of its earnings.
While the current yield has been pushed down by strong share performance, the company’s dividend growth can’t be overlooked.
Shares got a nice boost following its latest set of quarterly results, with the company posting 40% earnings growth on 18% higher sales. Earnings results have regularly exceeded our expectations, with the company beating the Zacks Consensus EPS estimate by an average of 12% across its last four releases.
Bottom Line
Investors can implement a stellar strategy to find expected winners by taking advantage of the Zacks Rank – one of the most powerful market tools that provides a massive edge.
The top 5% of all stocks receive the highly coveted Zacks Rank #1 (Strong Buy). These stocks should outperform the market more than any other rank.
Erie Indemnity would be an excellent stock for investors to consider, as displayed by its Zack Rank #1 (Strong Buy).
Bear of the Day:
Dollar Tree, a discount retailer, offers a wide range of quality everyday general merchandise in many categories, including housewares, seasonal goods, candy, food, toys, health and beauty care, and many other consumer items.
Analysts have taken a bearish stance on the stock’s outlook, lowering their earnings expectations across the board and pushing it into an unfavorable Zacks Rank #5 (Strong Sell).
In addition, the company is in the Zacks Retail – Discount Stores industry, which is currently ranked in the bottom 25% of all Zacks industries. Let’s take a closer look at the company.
DLTR Faces Post-Earnings Pressure
DLTR’s recent quarterly results haven’t been positive, with the company falling short of the Zacks Consensus EPS estimate by an average of 11% across its last four releases. Concerning its latest print, Dollar Tree fell short of both consensus earnings and revenue expectations, with EPS falling nearly 30% alongside a modest 0.7% sales increase.
Down nearly 50% in 2024, shares have regularly faced post-earnings selling pressure.
The company trimmed its current-year sales guidance following its latest release, helping explain the post-earnings share plunge. Analysts have revised their sales expectations accordingly as well, with the $30.1 billion expected for its current fiscal year (FY24) down 4% over the last year and reflecting a marginal 0.3% Y/Y climb.
A key piece of the Dollar Tree story lies in their consumer demographics. As a discount retailer, the company attracts many lower-income consumers looking for value, but the company is also more susceptible to economic slowdowns when these types of consumers get pinched the most.
Bottom Line
Narrowed guidance and weak quarterly results paint a challenging picture for the discount retailer’s shares in the near term.
Dollar Tree is a Zacks Rank #5 (Strong Sell), indicating that analysts have taken a bearish stance on the company’s earnings outlook.
For those seeking strong stocks, a great idea would be to focus on stocks carrying a Zacks Rank #1 (Strong Buy) or a Zacks Rank #2 (Buy) – these stocks sport a notably stronger earnings outlook paired with the potential to deliver explosive gains in the near term.
Additional content:
3 Financial Stocks to Buy in the Current Environment
To control inflation, the Fed raised interest rates for 10 straight policy meetings before finally opting for a rate pause in June 2023. It barely raised rates till the end of 2023 and promised at least three rate cuts in 2024. However, it is only in September of this year that we are finally going to see the first slashing of rates.
Fed Chair Jerome Powell has continued to suggest that he is fairly certain of rate cuts this year, but the Fed would embark on that journey only after reviewing further data. From his recent remarks, as well as comments made by other Fed officials, it is now amply evident that the inflation level is at the mark that the Fed wants it to be at. That also indicates that we are going to witness the much awaited rate cuts from September itself. In fact, it is the extent of the rate cuts that is currently being debated.
While a September rate cut is almost a certainty, the Fed has resisted committing to further cuts as of now. Yet, with both consumer and producer-side inflation coming in line with expectations, investor mood has been upbeat about the Fed bringing down rates more than expected earlier. Per CME’s FedWatch tool, there is a 69% likelihood that the Fed would announce a 50 basis point cut from its meeting.
This, however, does not indicate that interest rates are not going to come down rapidly. It merely addresses the problem of immediate relief needed by consumers. In reality, if rates fall by 50 basis points and are held at a target rate of 475-500, it is still pretty high. When interest rates are high, banks and other financial institutions generally see higher profitability due to increased lending rates. The gap between such lending rates is considered a long-term asset for banks. Also, short-term liabilities such as deposits increase and boost net interest margins.
Stocks of banks, insurance companies and other financial institutions go up with continuous interest rate hikes. This is because financial services companies can earn more on the money they have and on the credit they issue to their customers. As a result, the S&P 500 Financials Select Sector SPDR (XLF) soared 10.1% year to date as of June 30.
Also, financial stocks are very popular investments on their own. Most companies within the sector issue dividends and are judged on the overall strength of their financial health. It is thus prudent that one adds a few to their portfolio.
Our Choices
The stocks below flaunt a Zacks Rank #1 (Strong Buy) or Rank #2 (Buy). The search was also narrowed down with a VGM Score of A or B. Here, V stands for Value, G for Growth and M for Momentum. The score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners. You can see the complete list of today’s Zacks #1 Rank stocks here.
Canadian Imperial Bank of Commerce is a diversified financial institution that provides various financial products and services. CM’s expected earnings growth rate for the current year is 7.6%. The Zacks Consensus Estimate for its current-year earnings has improved 6.1% over the past 60 days. This Zacks Rank #1 company has a VGM Score of B.
Barclays PLC is a global financial services company. BCS’ expected earnings growth rate for the current year is 21.7%. The Zacks Consensus Estimate for its current-year earnings has improved 4.4% over the past 60 days. This Zacks Rank #2 company has a VGM Score of B.
Arch Capital Group Ltd. is a global insurance, reinsurance and mortgage insurance products company. ACGL’s expected earnings growth rate for the current year is 6.6%. The Zacks Consensus Estimate for its current-year earnings has improved 5% over the past 60 days. This Zacks Rank #2 company has a VGM Score of B.
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Barclays PLC (BCS) : Free Stock Analysis Report
Dollar Tree, Inc. (DLTR) : Free Stock Analysis Report
Erie Indemnity Company (ERIE) : Free Stock Analysis Report
Canadian Imperial Bank of Commerce (CM) : Free Stock Analysis Report
Arch Capital Group Ltd. (ACGL) : Free Stock Analysis Report