Chicago, IL –December 9, 2024 – Zacks Equity Research shares Zebra Technologies Corp. ZBRA, as the Bull of the Day and Jack in the Box Inc. JACK, as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Oklo Inc.’s OKLO, GEV Vernova GEV and Constellation Energy Corp. CEG.
ZBRA posted a beat-and-raise quarter in late October, citing “continued momentum in demand” from its clients ranging across manufacturing, energy, logistics, and beyond. Zebra Technologies’ growth outlook is strong, boosted by a resilient U.S. economy, highlighted by booming data center expansion, infrastructure spending, and reshoring.
ZBRA stock has doubled the S&P 500 during the past 10 years and crushed its Industrial Products sector. Yet, Zebra Technologies stock trades 30% below its records even as the market is at all-time highs and appears a bit frothy in the near term.
Zebra Technologies helps boost the productivity of frontline workers in the modern, digital-everything world. ZBRA makes handheld computers, wearables, tablets, scanners, vehicle-mounted tech, interactive kiosks, and much more alongside multiple software solutions.
Zebra Technologies products are essential in the tech-driven economy, with its various equipment and software utilized across healthcare, manufacturing, energy and utilities, warehouse and distribution, retail, and beyond.
Zebra Technologies plays a critical role since its various customers must utilize the most advanced tech to operate these days where nearly every pocket of the economy is supported by digital tech, from sorting warehouses to working on telecom equipment and mining operations.
Zebra Technologies grew its third quarter revenue by 31%, with double-digit sales growth across all vertical markets. Digging deeper, U.S. sales climbed 47%, with North American sales up 22%, led by mobile computing and printing.
Its other regions performed well, highlighted by strength in Southeast Asia and India. Zebra Technologies also critically experienced stabilization in China.
Zebra Technologies boosted its gross margin by over 4% last quarter to 48.8% and completed its restructuring actions. Some of its streamlining efforts included consolidating its North American distribution centers into a single Chicago area facility.
Zebra Technologies boosted its adjusted earnings by 301% in Q3 against what looks to be the bottom of its business cycle.
The digital solution provider offered upbeat guidance. “We have increased our full year outlook for profitable growth to reflect our recent performance and continued momentum in demand,” ZBRA CEO Bill Burns said in prepared Q3 remarks in late October.
“We continue to be well positioned to advance our industry leadership with our innovative solutions that digitize and automate our customers’ workflows across the supply chain.”
Zebra Technologies is projected to grow its revenue by 8% in 2024 and add 6% to the top-line next year to climb from $4.58 billion in FY23 to $5.25 billion in FY25.
Better yet, ZBRA isprojected to boost its adjusted earnings by 43% in 2024 and 14% next year to climb from $9.82 last year to $15.97 a share in FY25.
ZBRA’s Q4 earnings estimate has popped 17% since its Q3 release, with its estimates for 2024 and 2025 up 10% and 5%, respectively.
ZBRA’s upward earnings revisions earn Zebra Technologies a Zacks Rank #1 (Strong Buy) and extend a rebound that began in early 2024.
ZBRA stock has soared roughly 1,500% in the last 25 years to blow away its Industrial Products sector’s 360% and the S&P 500’s 370%. Shares of Zebra Technologies have also climbed 450% in the last 10 years to roughly quadruple its sector and double the benchmark.
The impressive outperformance came even though ZBRA stock is down 33% from its December 2021 records. During this time, the S&P 500 is up nearly 30% and the Industrial Products sector popped 25%.
Thankfully, ZBRA is on the comeback trail, with the stock ripping 75% higher in the last year to trade at 52-week highs.
Zebra Technologies has retaken its 200-week moving average and its 21-and 50-month. ZBRA isn’t that overheated either in terms of RSI levels. On top of that, Zebra Technologies trades near its five-year median at 27.6X forward 12-month earnings.
Zebra Technologies stock might continue to build on its recent momentum as Wall Street looks ahead to its solid earnings and revenue growth. It is worth stressing that investors are starting to search for strong stocks that have plenty of near-term upside while the broader market starts to appear a little overheated.
On top of that, ZBRA stands to benefit from key megatrends across the U.S. and global economy by selling an array of products and software that become more essential by the day.
Jack in the Box Inc. offered disappointing guidance when it reported its fourth quarter and full-year 2024 results on November 20. The fast-food company pointed to a “difficult top-line macro environment” as part of the reason for its lackluster showing.
Jack in the Box shares have tumbled 40% in the last year, highlighting a rough decade compared to the market and its industry.
Jack in the Box operates and franchises Jack in the Box, one of the biggest hamburger chains in the U.S., with around 2,200 restaurants across 23 states. The company’s portfolio also includes Del Taco, which boasts approximately 597 restaurants across 17 states.
The San Diego, California-headquartered company’s sales slumped 7% in fiscal 2024 (period ended on September 29). Same-store sales fell 2.1% in Q4 for Jack in the Box, driven by a decrease in transactions and an unfavorable menu mix. Meanwhile, Del Taco’s same-store sales decreased 3.9% in the fourth quarter.
Looking ahead, Jack in the Box’s overall revenue is projected to drop by 2.5% in FY25 to $1.53 billion. More importantly, its adjusted earnings are projected to decline by 11% to $5.52 a share. Jack in the Box’s FY25 earnings estimate has tumbled 17% since its Q4 release, with its FY26 outlook 21% lower.
Jack in the Box’s downward earnings revisions help it earn a Zacks Rank #5 (Strong Sell). Wall Street is also lukewarm on JACK, with 13 of our 21 brokerage recommendations at a “Hold.”
Jack in the Box stock has fallen 40% in the past 10 years while its Retail sector has climbed 180% and its Restaurants industry has surged 135%. JACK’s 40% decline in the last year looks even worse next to its industry’s 12% jump and the S&P 500’s 32% surge.
JACK is trading below its 200-month moving average for only the second time ever (the other was during the initial Covid selloff). Even though Jack in the Box opened 30 restaurant openings in FY 2024, marking “the highest openings since 2012,” it might be best to stay away from the stock until it proves a turnaround is close.
Oklo Inc.’s shares have surged an impressive 90.1% in the year-to-date period, outperforming the Zacks Alternative-Energy industry’s return of 60.8% as well as the broader Zacks Oils-Energy sector’s growth of 6.8%. It also outpaced the S&P 500’s surge of 27.7% in the same period.
With rapidly increasing demand for clean energy sources as the preferred choice to generate electricity, Oklo rides on its recently signed partnerships and other initiatives that reflect its strong commitment toward offering reliable, commercial-scale clean energy to its customers.
A similar stellar performance has been delivered by other industry players, such as GEV Vernova and Constellation Energy Corp., whose shares have surged 148.6% and 119.1%, respectively, year to date.
With Oklo riding high, individuals may rush to add the stock to their portfolio. However, before making any hasty decision, it would be prudent to take a look at the reasons behind the surge, the stock’s growth prospects as well as risks (if any) to investing in the same. The idea is to help investors make a more insightful decision.
Increasing data center growth across the globe, along with rising electricity consumption, particularly in emerging nations and developing economies, backed by strengthening economic activities and prosperity in these countries, has been boosting global electricity demand. To this end, it is imperative to mention that Oklo is developing next-generation fast-fission power plants called “powerhouses.” In particular, its Aurora powerhouse product line is designed to produce 15-50 megawatts electric (MWe) from recycled nuclear fuel and fresh fuel, with the potential to increase the figure to 100 MWe.
The company has achieved several significant deployment and regulatory milestones in recent times for deploying its Aurora powerhouses, which must have boosted investors’ confidence in this stock. This, in turn, got reflected in OKLO’s share price hike.
Evidently, in September 2024, the company signed a Memorandum of Agreement (“MOA”) with the DOE Idaho Operations Office, which offered the former access to conduct investigations at its preferred site in Idaho to construct power plants. Oklo has also signed additional non-binding letters of intent with Equinix, Diamondback Energy and Prometheus Hyperscale (formerly Wyoming Hyperscale) and received two other letters of intent to provide an additional 750 MWe for data center customers. This is expected to bring OKLO’s current total deployment of Aurora powerhouses to more than 2,100 MWe in capacity, which reflects nearly a 200% increase since July 2023.
Oklo's strategic partnership agreements with multiple companies, like one with Equinix earlier this year for 500 MW of power, reflect the attention and potential demand surrounding its Aurora powerhouse product line in the electricity market.
The United States is the world's largest producer of nuclear power, accounting for about 30% of the worldwide generation of nuclear electricity (as per the latest report by the World Nuclear Association). Thus, Oklo's long-term growth prospects remain significant.
However, the company has not yet started generating revenues. With its first Aurora powerhouse targeted for deployment in 2027, we may not expect it to deliver any solid top-line performance in the near term. Meanwhile, it is continuing to incur significant operating expenses to successfully develop its powerhouses, which in turn has been putting downward pressure on its bottom line. So, the performance of the company in terms of generating formidable revenue and profit remains slick in the near term, which might be a cause of concern for its investors.
The downward revision observed in its near-term earnings estimate mirrors a similar picture. Such downward revisions are indicative of analysts’ dwindling confidence in the stock of late.
A quick sneak peek at the company’s return on equity (ROE) over the past year compared to that of its peer group shows a dismal scenario. OKLO’s ROE is lower than that of its peer group. A negative ROE indicates that a company is making a loss, as is evident from its recent quarterly results.
To conclude, investors interested in OKLO stock should wait for a better entry point, considering the downward revision in its earnings estimate and a negative ROE.
However, those who already have this Zacks Rank #3 (Hold) stock in their portfolio may continue to do so, considering its long-term growth prospect and impressive share price performance so far this year.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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