For Immediate Release
Chicago, IL – February 2, 2023 – Zacks Equity Research shares Century Casinos CNTY as the Bull of the Day and Eastman Chemical EMN as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Tenaris S.A. TS, Siemens Aktiengesellschaft SIEGY and W.W. Grainger, Inc. GWW.
Here is a synopsis of all five stocks.
Bull of the Day:
It’s beginning to feel like the bulls are taking control. That can lull traders and investors into a false sense of security. It is important to remember that at the end of the day, the most important thing is earnings. Stocks with the strongest earnings trends are the ones that have the best chance at giving longstanding returns. One way to uncover these stocks is by looking at stocks in the good graces of our Zacks Rank.
One such stock is today’s Bull of the Day, Century Casinos. The company is involved in the development and management of casinos and gaming establishments, offering various games such as slot machines, table games, and racing. Century Casinos operates in several countries, including the United States, Canada, and Poland. The company's main revenue streams come from gaming operations, food and beverage sales, and hotel and resort operations.
The stock is a Zacks Rank #1 (Strong Buy). The reason for the favorable rank is analysts have increased their earnings estimates for next year. Over the last sixty days, the upside earnings revisions have pushed up our Zacks Consensus Estimate from 80 cents to $1.01. For the next year, that means that earnings growth is slated to come in at 144%. That is a big bounce-back year for a stock that saw its earnings shrink 37% this year.
Translated to the revenue side, that’s 11% revenue growth for this year and 31% growth for next year.
Bear of the Day:
The stock market has been bouncing recently, which is a great thing. We should all be celebrating the recent rally. Let’s not look a gift horse in the mouth. However, let’s not get too excited about the move here. At the end of the day, it’s going to be companies that make the most money which will eventually rise to the top. You might think that your company is going to continue to make big bucks. One way to make sure it will, is to run it through the Zacks Rank. Stocks in the bad graces of our Zacks Rank have seen earnings move in the wrong direction, to the downside.
Today’s Bear of the Day is a stock that has seen earnings move in a negative direction. It’s Eastman Chemical. Eastman Chemical produces a wide range of advanced materials, chemicals, and fibers. The company's products are used in a variety of industries, including transportation, building and construction, consumer goods, and industrial processes. Eastman's portfolio includes products such as chemicals for the production of plastic resins, performance films and fibers, specialty plastics, and chemical intermediates. The company operates globally, with a significant presence in the Americas, Europe, and Asia. Eastman's business strategy focuses on innovation and sustainability, and the company invests heavily in research and development to create new products and improve existing ones.
Over the course of the last seven days, seven analysts have cut their earnings estimates for the current year, while three have done so for next year. The bearish sentiment has cut our Zacks Consensus Estimate for the current year from $8.49 to $7.85 while next year’s number is off from $9.37 to $8.63.
Industrial Stocks Are Stronger Than You Think
The industrial sector includes some of the biggest American companies and forms the backbone of the whole economy. Since they are focused on manufacturing activity, they are usually large (which helps them generate scale advantages) and mature (which makes them good dividend payers). However, industrial stocks are cyclical in nature, which means they go down with a downturn in the economy and up in the opposite case.
That is what makes the segment so interesting in our current situation, where the likelihood of a recession is anybody’s guess, and depends to a large extent on the Fed’s actions.
On the positive side, the Fed is carefully studying the effects of its actions and treading softly as it sees fit. And inflation is being tamed, however painfully slow it may seem to be.
On the negative side, there will be more rate hikes, so more pain is likely before things get better. The manufacturing contraction in the last two months of 2022 is nothing to scoff at, either.
As far as industrials are concerned, the Fed’s actions are not bad altogether. Many of these companies have faced rising input costs in 2022 as supply chains snarled up. Oil and transportation costs added to this, as did the labor availability, which remained tight. With each spending report, we’re getting improving news about the inflation situation. So while higher rates increase the cost of capital, there are benefits in the form of lower inflation.
Another factor to consider is the broad range of companies that make up this sector, which gives it exposure to the more stable staples -- medical, agriculture and such other segments -- in addition to the manufacturing segment, which is more dependent on economic ups and downs. Some companies may also have exposure to markets with secular growth trends.
At the same time, fears of a recession have sent some of these stocks down to the levels that don’t adequately reflect their growth prospects. This creates opportunities that we may want to consider.
One big consideration for investing in industrial stocks at this time should be the analyst estimate revisions trend because this is an indication of strength that analysts are seeing in 2023. Digging down further, I came up with these three names:
Tenaris’ seamless and welded steel tubular products and related services are sold mainly to oil and gas, but also other industrial companies.
Revenue growth has picked up strongly from the pandemic lows in 2020, along with earnings and cash flow. Analyst estimates indicate that this strength will continue. Revenue and earnings are accordingly expected to grow 22.2% and 21.5% in 2023, on top of 80.0% revenue growth and 134.2% earnings growth in 2022.
Analysts also appear to be incrementally positive about the company, raising 2023 estimates by 14 cents (2.7%) in the last 30 days.
The earnings expected surprise prediction (ESP) of 0.0% for this Zacks Rank #1 (Strong Buy) stock indicates an earnings beat when Tenaris reports December quarter results on Feb 15. The company has a relatively strong earnings surprise history. Although Tenaris missed estimates in the last quarter, it was by less than a percentage point. The four-quarter average surprise was 20.9%.
Tenaris also pays a dividend that yields 1.93%.
The stock is currently trading below its median level over the past year, representing a discount of 62.9% to the S&P 500.
Siemens produces and sells a broad range of products that are intended to digitize and automate several industrial products and processes, that facilitate smart infrastructure products, systems, solutions, services and software for the energy market, that make passenger and freight transportation possible, as well as many other products and services. It operates globally.
In this case too, we see revenues picking up strongly since the pandemic dip in June 2020 although earnings and cash flows have moved around quite a bit. Since we only have estimates from three analysts, there is a certain room for error. However, current estimates represent 76.1% earnings growth in 2023 followed by 15.2% growth the following year.
Analyst estimates are also riding higher. For fiscal year 2023 ending in September, Siemens is expected to grow its earnings 76.1%. In 2024, it’s expected to grow 15.2%. The Zacks Consensus Estimate for 2023 has increased 6 cents in the last 30 days while that for 2024 has increased 11 cents.
The company posted a 12.7% positive surprise in the last quarter, and given its Zacks Rank #1 and earnings ESP of 0.0%, it looks like Siemens is headed for another earnings beat when it reports on Feb 9.
Siemens’ dividend yields 2.16%.
The shares are trading slightly above their median value over the past year, but at a discount of 8.4% to the S&P 500.
W.W. Grainger, Inc.
Grainger offers maintenance, repair and operating (MRO) products and services in the U.S., Japan, Canada and the UK. The company’s revenue, earnings and cash flows have been growing strongly since the pandemic. Production is efficient and inventory builds support the strong demand that it is seeing.
Analysts are looking for 4.6% revenue growth and 4.2% earnings growth this year. The Zacks Consensus Estimate has jumped 11 cents in the last 30 days.
The ESP is -0.12% for this Zacks Rank #1 stock, so we are unable to predict a positive surprise when it reports tomorrow). However, it’s worth noting that Grainger has a consistent history of beating estimates. It has topped the Zacks Consensus in each of the last four quarters at an average rate of 10.1%.
Grainger’s dividend yields 1.2%.
Investors have already gotten into this stock given the stability and strength of its numbers (it trades at a 3.5% premium to the S&P 500). But the growth outlook and Zacks rank seems to indicate that there’s more room to run.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
See Stocks Free >>
Zacks Investment Research
800-767-3771 ext. 9339
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index.Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report