Tag: stock analysis

This Industrial Stock is Well-Positioned for 2023

Posted on by The MarketClub Team

The world’s largest manufacturer of agricultural equipment, Deere & Company (DE), beat analysts’ EPS and revenue estimates for the fiscal fourth quarter that ended October 30, 2022, despite the uncertain macroeconomic environment, higher raw material prices, and supply chain challenges.

DE’s EPS came 9% above the consensus EPS estimate, while its revenue surpassed the analyst estimates by 6.6%. The company’s Production & Precision Agriculture segment sales rose 59% year-over-year to $7.43 billion. Its operating margins came in at 23.4%, compared to 16.7% in the prior-year period.

Small Agriculture & Turf segment saw similar growth. Net sales rose 26% year-over-year to $3.54 billion, and its operating margin came in at 14.3%, compared to 12.3% in the year-ago period.

Its Construction & Forestry segment’s net sales witnessed a 20% year-over-year increase to $3.37 billion, with its operating profit rising 53% year-over-year to $414 million.

The company’s Financial Services segment’s net income rose 2% year-over-year to $232 million. Despite the challenges, DE’s strong pricing power was on display, as price realization was positive by about 19 percentage points which helped offset a three-point headwind from a higher U.S. dollar.

During a conference call with analysts, DE’s manager of investor communications, Rachel Bach, said, “Across our businesses, performance was driven by continued strong demand, higher production rates, and progress on reducing our inventory in partially completed machines.”

The Moline, Illinois-based company has provided strong guidance for 2023 based on its strong pricing, higher infrastructure spending, and healthy industry outlook. For 2023, its net income expectation is between $8 billion to $8.50 billion, which is 5% higher than consensus estimates.

DE’s Chairman and CEO, John C. May, said, “Deere is looking forward to another strong year in 2023 based on positive farm fundamentals and fleet dynamics as well as an increased investment in infrastructure.”

DE has gained 28.6% in price year-to-date and 26.7% over the past year to close the last trading session at $440.97. Credit Suisse analyst Jamie Cook has reiterated an outperform rating on the stock and has raised the target price from $447 to $582.

Despite the possibility of a recession, do you think DE will be able to meet its guidance in 2023?

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Continue reading "This Industrial Stock is Well-Positioned for 2023" →

1 Solar Stock to Brighten Your Portfolio

Posted on by The MarketClub Team

Solar tracking systems and related products manufacturer and supplier Array Technologies, Inc. (ARRY) surpassed the consensus revenue and EPS estimates for the third quarter of fiscal 2022 by 29.8% and 77.4%, respectively.

The company reported revenue of $515 million, compared to $188.70 million in the prior-year period. The revenue growth was driven by the acquisition of STI Norland and strong organic growth within its legacy Array business.

The company’s net income came in at $28 million compared to an adjusted net loss of $11.80 million in the year-ago quarter. Net income per share came in at $0.18 versus an adjusted net loss per share of $0.09 a year ago.

Additionally, ARRY produced $102 million of free cash flow during the quarter, allowing the company to pay down its revolving credit facility fully. At quarter-end, the company had access to $166.6 million of the revolving facility and $62.8 million of cash for total liquidity of $229 million, excluding the additional preferred share availability of $100 million.

“Overall, our performance in the third quarter demonstrates not only the strength of customer demand for our product and service offerings but also the continued effects of our focused efforts to improve our operational execution in all aspects of the business,” said ARRY’s CEO, Kevin Hostetler.

On August 16, 2022, the Inflation Reduction Act was passed by Congress and signed into law by President Joe Biden. It represents a significant investment by the federal government in renewable energy and related technologies. It includes tax incentives that will spur domestic solar manufacturing.

The IRA is expected to allow the U.S. solar market to grow 40% through 2027, equal to 62 gigawatts (GW) of additional solar capacity, according to forecasts in the U.S. Solar Market Insight Q3 2022 report released by the Solar Energy Industries Association (SEIA) and Wood Mackenzie, a Verisk business.

“This report provides an early look at how the Inflation Reduction Act will transform America’s energy economy, and the forecasts show a wave of clean energy and manufacturing investments that will uplift communities nationwide,” said SEIA President and CEO Abigail Ross Hopper.

Do you think the Inflation Reduction Act will impact America's energy economy anytime soon?

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Shares of ARRY have gained 23.6% over the past month and 94.9% over the past six months to close the last trading session at $21.61. The stock is currently trading above its 50-day and 200-day moving averages of $17.74 and $13.97, respectively. Continue reading "1 Solar Stock to Brighten Your Portfolio" →

3 Stocks That Won't Go Out Of Style

Posted on by The MarketClub Team

The global economic recovery may be in potential jeopardy with China caught in an unenviable dilemma between strong politics and good economics with respect to covid lockdowns.

In the world’s second-largest economy and a nation not used to dealing with widespread dissent, economic hardship may seamlessly turn into political instability, thereby risking yet another disruption in the global supply chain. Markets have also reflected the nervousness with a decline in stock futures and Brent crude at the lowest level since January.

Amid such uncertainty, consumption-driven businesses that enjoy inelastic demand and resilient margins for the essential products and services they offer can act as ideal ballast for the choppy waters we can’t find a way out of.

According to you, which sector would outperform in 2023?

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Hence, it could be wise to add Johnson & Johnson (JNJ), PepsiCo, Inc. (PEP), and Archer-Daniels-Midland Company (ADM) as some technical indicators point to sustained upsides with adequate downside protection.

Johnson & Johnson (JNJ)

JNJ is a worldwide researcher, developer, manufacturer, and seller of various healthcare products. The company operates through three segments: Consumer Health; Pharmaceuticals; and MedTech.

Over the last three years, JNJ’s revenues have grown at a 5.5% CAGR, while its EBITDA has grown at 4.6%. During the same period, the company’s net income has grown at 10.6% CAGR.

JNJ’s sales increased 1.9% year-over-year to $23.79 billion in the fiscal 2022 third quarter ended October 2, 2022. The company’s gross profit stood at $15.98 billion during the same period.

Analysts expect JNJ’s revenue for the fiscal year 2022 to increase by 1.4% year-over-year to $95.04 billion. The company’s EPS for the current year is expected to increase 2.5% year-over-year to $10.04. Moreover, JNJ has topped the consensus EPS estimates in each of the trailing four quarters. Continue reading "3 Stocks That Won't Go Out Of Style" →

Two Value Stocks To Buy On Dips

Posted on by Taylor Dart

It’s been a volatile year for the major market averages, and the Nasdaq Composite (COMPQ) remains down 28% for the year and on track for its worst annual decline since 2008.

The difference this time is that it’s coming off a multi-year win streak and a more than decade-long bull market, making the current sell-off look more similar to 2000 than the 2008/2009 lows.

That said, for investors willing to look outside of the traditional FAANG names that have massively outperformed for years, there are always opportunities to hunt down alpha. This update will look at two general market names trading at deep discounts to fair value.

Builders FirstSource (BLDR)

Builders FirstSource (BLDR) is the largest supplier of structural building products, value-added components, and services to the professional market for the single-family and multi-family construction/repair/remodeling market in the United States.

The company has ~560 distribution/manufacturing locations across 42 states and boasts a market cap of $9.7BB.

Unfortunately, though, with the housing market teetering on a recession with new and existing home sales down sharply, investors have become worried about buildings products name, and Builders FirstSource hasn’t been immune from this anxiety despite continuing to put up phenomenal results.

In fact, the company just recently reported revenue of $5.8BB (+ 5% year-over-year) and adjusted annual EPS of $5.20, a 53% increase from the year-ago period.

Notably, these results were lapping already difficult comparisons from the year-ago period, with Q3 2021 annual EPS up 308% in the year-ago period. The strong growth in earnings was driven by ~20% growth in its higher-margin value-added products combined with aggressive share repurchases, repurchasing $2.0BB in shares to date (~30% of common shares).

Normally, I would be skeptical of a company growing annual EPS through share buybacks and buying back shares to this degree, given that many companies have a bad habit of buying back shares to prop up earnings vs. doing it opportunistically.

However, Builders FirstSource’s core business is strong with growth in its key segments (core organic sales in Value-Added Products up 20%, Repair, Remodel & Other up over 30%), and the stock is significantly undervalued. Continue reading "Two Value Stocks To Buy On Dips" →

3 Stocks To Watch This Holiday Season

Posted on by The MarketClub Team

With the moderation of inflation in October and indications of the Fed following suit with a slower interest rate hike next month, the festive season promises to be merrier than expected for consumers and businesses alike.

Retail and consumer businesses whose demand and margins are resilient enough to make them relatively immune to macroeconomic headwinds stand to gain from the increased consumer spending during the holiday season.

How much do you expect the Consumer Price Index to rise?

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Hence, it would be opportune to add Walmart Inc. (WMT), Flowers Foods, Inc. (FLO), and The Simply Good Foods Company (SMPL) as some technical indicators point to sustained upsides that could leave you thankful this season.

Walmart Inc. (WMT)

The retail giant WMT offers opportunities to shop an assortment of merchandise and services at everyday low prices (EDLP) in retail stores and through e-commerce platforms.

The company operates through three segments: Walmart U.S.; Walmart International; and Sam’s Club. Over the last three years, WMT’s revenues have grown at a 4.8% CAGR.

For the third quarter of the fiscal year 2023 ended October 31, 2022, WMT’s total revenues increased 8.7% year-over-year to $152.81 billion, with strength in Walmart U.S., Sam’s Club U.S., Flipkart, and Walmex.

During the same period, the company’s adjusted operating income increased 4.6% year-over-year to $6.06 billion, while its adjusted EPS increased 3.4% year-over-year to $1.50.

WMT’s revenue and EPS for the fiscal year ending January 2024 are expected to increase 2.9% and 8.7% year-over-year to $619.49 billion and $6.60, respectively. The company has an impressive earnings surprise history as it surpassed the consensus EPS estimates in three of the trailing four quarters. Continue reading "3 Stocks To Watch This Holiday Season" →