Chicago, IL – July 27, 2022 – Zacks Equity Research shares Skyline Corp. SKY as the Bull of the Day and The Scotts Miracle-Gro Company SMG as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Mastercard Inc. MA, FirstCashHoldings, Inc. FCFS and WEX Inc. WEX.
Here is a synopsis of all five stocks:
The Zacks Construction Sector has tumbled year-to-date, declining more than 20% in value. However, over the last month, the sector has posted a solid 6.3% return vs. the S&P 500’s 1.4% return, signaling that buyers are finally stepping up.
One company residing in the sector that sports the highly-coveted Zacks Rank #1 (Strong Buy) is Skyline Corp. Skyline is one of the largest homebuilders in North America that designs, produces, and distributes manufactured housing and recreational vehicles.
Skyline operates 42 manufacturing facilities, giving the company the flexibility needed to construct various manufactured and modular homes, ADUs, park-model RVs, and modular buildings.
In addition to Skyline’s core home building business, the company operates a factory-direct retail business, Titan Factory Direct, and Star Fleet Trucking, a transportation business.
The year-to-date performance of Skyline shares is undoubtedly disappointing, losing more than a fourth of their value and extensively underperforming the S&P 500. However, over the last month, Skyline shares have soared more than 17%, absolutely crushing the S&P 500’s performance. The relatively strong price action of Skyline shares as of late is undoubtedly a positive, signaling that bulls are finally starting to reappear and push bears back into hibernation.
The company sports enticing valuation metrics, further displayed by its Style Score of a B for Value. Skyline’s 11.6X forward earnings multiple is nowhere near its median of 25.1X since its IPO in 2018 and is a fraction of 43.9X highs in 2020.
In addition, shares trade at a substantial 35% discount relative to the S&P 500.
Analysts have raised their earnings estimates substantially higher across several timeframes over the last 60 days, helping push the company into a Zacks Rank #1 (Strong Buy).
The $1.58 Zacks Consensus EPS Estimate for the upcoming quarter reflects a triple-digit 110% uptick in quarterly earnings year-over-year. Additionally, current fiscal year earnings are forecasted to grow by a sizable 18% year-over-year.
Top-line growth is just as solid – Skyline is forecasted to generate $2.5 billion in revenue for the current fiscal year, penciling in a rock-solid 12.5% increase in annual revenue year-over-year.
SKY has repeatedly reported bottom-line results above expectations, exceeding the Zacks Consensus EPS Estimate in nine straight quarters, all by at least double-digit percentages. Just in its latest quarter, the company recorded a stellar 52% bottom-line beat.
Quarterly revenue results have consistently been reported above expectations as well; over the company’s previous ten quarters, SKY has penciled in eight top-line beats.
One of the best ways investors can find expected winners within the market is by utilizing the Zacks Rank – one of the most potent market tools out there that does all of the hard work.
A portfolio consisting of Zacks Rank #1 (Strong Buy) stocks has beaten the market in 26 of the last 31 years with an average annual return of 25%.
Additionally, 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.
Skyline Corp. would be an excellent bet for investors looking to add a solid stock to their portfolios, as displayed by its Zack Rank #1 (Strong Buy).
The Scotts Miracle-Gro Company is currently a Zacks Rank #5 (Strong Sell) with an overall VGM Score of an F – never a combination you want to see.
SMG is a leading producer and marketer of branded garden and consumer lawn products. The company's product portfolio includes Scotts, Miracle-Gro, and Ortho. In addition, the company markets the herbicide Roundup.
SMG shares have been stuck in a deep downtrend for the majority of the last year, with shares losing more than half of their value and extensively underperforming the S&P 500.
This price action of SMG shares tells us one clear thing – sellers have been in complete control, pushing bulls out of the arena.
In addition to disheartening share performance, the company's shares could be considered overvalued, further displayed by its Style Score of an F for Value. The company's forward earnings multiple resides at 17.6X, representing a substantial 154% premium relative to its Zacks Sector.
Analysts have extensively lowered their earnings outlook across all timeframes over the last 60 days, a reason the company is ranked as a Zacks Rank #5 (Strong Sell).
For the upcoming quarter, the Zacks Consensus EPS Estimate resides at $1.70, penciling in a nearly 60% drop in quarterly earnings year-over-year.
In addition, current fiscal year earnings are projected to plummet a double-digit 50%.
SMG's top-line appears to be in rough shape as well; the $1.2 billion quarterly revenue estimate for the upcoming quarter pencils in a double-digit 25% year-over-year decline.
Furthermore, the annual revenue estimate of $4.1 billion reflects a disheartening 16% drop in sales from the previous year.
SMG shares have been the victim of a deep double-digit valuation slash over the last year, with sellers remaining in complete control. This adverse price action, paired with overwhelmingly negative estimate revisions and elevated valuation levels, paints a grim picture for the company in the short term.
The company is a Zacks Rank #5 (Strong Sell) and a stock that investors will be better off staying away from for now.
Instead, investors should pivot to stocks that either carry a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy) – the odds of reaping considerable gains are much higher within the companies that carry these ranks.
Mastercard Inc. is set to report second-quarter 2022 results on Jul 28, before the opening bell.
In the last reported quarter, the leading global payment solutions company's adjusted earnings per share of $2.76 beat the Zacks Consensus Estimate by 27.2%, primarily due to a substantial recovery in cross-border volume, thanks to rebounding cross-border travels. Improved gross dollar volume (GDV) and higher switched transactions contributed to the upside. However, the upside was partly offset by escalating operating expenses.
Let's see how things have shaped up prior to the second-quarter 2022 earnings announcement.
The Zacks Consensus Estimate for second-quarter 2022 earnings per share of $2.36 has witnessed no movements in the past week. The estimate is indicative of a 21% increase from the year-ago reported figure. Similarly, the Zacks Consensus Estimate for revenues is pegged at $5.3 billion, suggesting a 16.3% jump from the year-ago level.
Mastercard beat earnings estimates in each of the trailing four quarters, delivering an average of 14.2%.
Mastercard Incorporated price-eps-surprise | Mastercard Incorporated Quote
Mastercard's second-quarter revenues are likely to have benefited from increased consumer spending and demand. MA's GDV (the dollar volume of activity on Mastercard-branded cards during a particular period, on a local currency basis and U.S. dollar-converted basis) is likely to have benefited from increased usage of its debit and credit cards, both within and outside the United States, in the to-be-reported quarter. The Zacks Consensus Estimate for Mastercard's total GDV for all Mastercard-branded programs is pegged at $2,070 million, which suggests an 8.7% rise from the prior-year quarter's reported figure.
Meanwhile, switched transactions (the number of transactions initiated and switched through Mastercard's network) are likely to have witnessed an uptick in the second quarter, owing to improved consumer spending and increased contactless acceptance initiatives pursued by the technology company. The consensus mark for the same indicates an 11.5% increase from the year-ago period.
Increased cross-border travel might have favored cross-border volumes of Mastercard. The Zacks Consensus Estimate for cross-border volume fees is pegged at $1,479 million, signaling a rise from $1,076 million a year ago. The consensus estimate for purchase volume in the U.S. for all Mastercard's credit charge and debit programs also indicates a 10.4% year-over-year rise.
All the above-mentioned factors might have boosted Mastercard's results for the second quarter, leading to significant year-over-year growth. Yet, the company is expected to have incurred high levels of cost under rebates and incentives in the June quarter.
This might have affected margins. Also, the company's operating costs are likely to have significantly increased in the second quarter due to higher advertising, marketing and data processing costs, thereby hurting the bottom line and making an earnings beat uncertain.
Our proven model does not conclusively predict an earnings beat for Mastercard this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here, as you will see below.
Earnings ESP: The company's Earnings ESP is -0.21%. The Most Accurate Estimate currently stands at $2.35 per share, lower than the Zacks Consensus Estimate of $2.36.
You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Zacks Rank: Mastercard currently carries a Zacks Rank #3.
While an earnings beat looks uncertain for Mastercard, here are some companies from the broader Business Services space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
FirstCashHoldings, Inc. has an Earnings ESP of +2.15% and a Zacks Rank of 2. You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for FirstCash's bottom line for the to-be-reported quarter indicates a 31% year-over-year increase. FCFS beat earnings estimates in each of the past four quarters, with an average of 20.3%.
WEX Inc. has an Earnings ESP of +2.27% and is a Zacks #2 Ranked player.
The Zacks Consensus Estimate for WEX's bottom line for the to-be-reported quarter implies a 48.9% improvement from the year-ago figure. WEX beat earnings estimates in each of the past four quarters, with an average of 8.6%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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Mastercard Incorporated (MA) : Free Stock Analysis Report
FirstCash Holdings, Inc. (FCFS) : Free Stock Analysis Report
The Scotts MiracleGro Company (SMG) : Free Stock Analysis Report
WEX Inc. (WEX) : Free Stock Analysis Report
Skyline Corporation (SKY) : Free Stock Analysis Report
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