For Immediate Release
Chicago, IL – December 7, 2022 – Zacks Equity Research shares Schlumberger SLB as the Bull of the Day and HanesBrands Inc. HBI as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Universal Logistics ULH, GasLog Partners GLOP and Dorian LPG LPG.
Here is a synopsis of all five stocks.
Bull of the Day:
Schlumberger is quietly growing its earnings as energy moves into a multiyear bull cycle. This Zacks Rank #1 (Strong Buy) is expected to see double digit earnings growth this year and in 2023.
Schlumberger describes itself as a technology company that partners with customers to access energy. It deploys digital solutions and innovative technologies in the energy industry, including oil and natural gas.
It has expertise in 120 countries.
A Perfect Earnings Surprise Record
On Oct 21, 2022, Schlumberger reported its third quarter results and beat the Zacks Consensus by $0.08. Earnings were $0.63 compared to the Zacks Consensus of just $0.55.
It was another beat in a 5-year perfect earnings track record. That's impressive as it includes the pandemic and the collapse of the crude market in 2020.
Revenue rose 28% year-over-year and 10% from the second quarter to $7.5 billion. International revenue drove the quarter as it was up 13% sequentially to $5.9 billion while North America was flat sequentially at $1.5 billion.
Revenue growth was propelled by Well Construction and Production Systems as global activity strengthened, particularly in the offshore and international markets.
Well Construction revenue was up 15% sequentially, outperforming global rig count growth due to strong activity and pricing improvements in Europe/CIA/Africa and Latin America.
Production Systems revenue rose 14% sequentially on higher product deliveries and backlog conversion, mostly in international offshore basins.
Analysts Raise Earnings Estimates
Schlumberger was bullish about the fourth quarter, saying it expected to deliver further sequential revenue growth and margin expansion.
9 estimates are higher for 2022 in the last 2 months, including one in just the last week, pushing up the Zacks Consensus Estimate to $2.15 from $2.02 during that time.
That is earnings growth of 68% as Schlumberger made just $1.28 last year.
9 estimates have also been revised for 2023 in the last 60 days as well. The 2023 Zacks Consensus Estimate has jumped to $3.03 from $2.76 in that time.
That's another earnings growth of 40.6%.
Shares Up Big in 2022
Shares of Schlumberger have been on a volatile ride in 2022 but are now up 60.4% on the year. That is outperforming the S&P 500 ETF (SPY) which is down 17.6% during that time.
Shares are not cheap, even with the earnings on the rise. It trades with a forward P/E of 23.9 but has a PEG ratio of just 0.6. A PEG under 1.0 usually indicates a company has both growth and value. That's a powerful combination.
Schlumberger is shareholder friendly. It saw free cash flow of $1.1 billion in the third quarter and pays a dividend currently yielding 1.4%.
For investors looking for a growth and value energy stock, Schlumberger is one to add to the short list.
Bear of the Day:
HanesBrands Inc. is facing an uncertain retail environment. This Zacks Rank #5 (Strong Sell) is expected to see earnings decline by the double digits this year.
HanesBrands is an apparel company with well known brands such as Hanes, Champion and Bonds. It employs 59,000 associates in 33 countries.
Met the Estimate in the Third Quarter
On Nov 9, 2022, HanesBrands reported third quarter earnings and met the Zacks Consensus Estimate of $0.29.
Net sales fell 7% to $1.67 billion, but in constant currency it fell 3%. The constant currency decline was due to the macro-driven slowdown in consumer spending in the U.S. and certain Asian markets, coupled with the impact to orders as U.S. retailers were tightly managing their own inventory levels, which have spiked.
Those headwinds more than offset growth in innerwear in Australia and the Other Americas as well as Champion growth in Europe.
HanesBrands was also committed to reducing its own inventory situation. On a unit basis, inventory rose 16% year-over-year but decreased 6% as compared to the second quarter 2022. It continues to progress on its previously disclosed mitigation initiatives and continues to expect to end 2022 with lower units in inventory as compared to year-end 2021.
Guides 2022 Under Consensus
HanesBrands saw the tough conditions continuing in the fourth quarter of 2022. It gave net sales guidance between $1.4 and $1.45 billion. At the midpoint, that represents an approximately 15% decline compared to the prior year and a 19% decline on a reported basis.
For the full year, it gave earnings guidance between $0.95 and $1.02.
As a result, the analysts have cut their 2022 earnings estimates. 3 have cut in the last 30 days pushing the Zacks Consensus down to $0.97 from $1.15.
That is an earnings decline of 47% from 2021 where the company made $1.83.
3 estimates have also been cut for 2023 in the last month as well. The 2023 Zacks Consensus Estimate has fallen to $1.01 from $1.29.
Shares Plunge in 2022
Did you think it was only technology stocks that have plunged in 2022?
HanesBrands shares are down 62% year-to-date and are hitting new 52-week lows. Shares are actually lower than the March 2020 pandemic sell-off.
They are now dirt-cheap with a forward P/E of 6.5.
It is also shareholder friendly and pays a dividend of $0.60 a year. That is a yield of 8.9%. Is the dividend "safe"?
HanesBrands has paid this $0.60 dividend throughout the pandemic. It did not suspend it as many other companies did. But the only guarantees are death and taxes.
Investors looking for an apparel retailer might want to wait for a turnaround in earnings estimates before jumping in.
Buy 3 Transportation Stocks Up 50%+ This Year
The widely-diversified transportation sector, which includes airlines, railroads, package delivery companies and truckers to name a few, was one of the hardest-hit corners in the investing space during the pandemic. However, with the easing of the COVID-induced restrictions, economic activities have gained pace this year.
This improved scenario has been a boon for transportation companies that have bounced back this year after being laid low over the past few years. The favorable scenario surrounding the sector implies that investing in transportation stocks is a prudent move. We believe that stocks like Universal Logistics, GasLog Partners and Dorian LPG offer compelling investment opportunities.
Tailwinds Surrounding the Sector
The corner of the sector that houses airline stocks has been well-served by the stronger-than-expected recovery in air-travel demand as people are again booking flights, thereby boosting passenger revenues, which account for the bulk of most airlines’ top lines.
Moreover, owing to the uptick in economic activities, freight demand continues to be strong despite minor hiccups. This is supporting growth for railroad operators and transportation service providers. The Cass Freight shipments Index improved 2.9% year over year in October. The overall improving trend is evident from the fact that the measure has improved year over year in six (February, March, July, August, September and October) of the 10 months reported so far this year.
Even though economies are reopening, consumers’ urge for online shopping refuses to relent. This continued strength in e-commerce demand bodes well for packaging companies in the sector.
Moreover, owing to increased demand, the financial health of transportation companies has improved this year. As a result, we have seen many companies in the space hiking dividends. Investors are always on the lookout for dividend stocks as these provide a steady source of income and a cushion against market uncertainty, as is the current scenario. Dividend stocks are safe bets for creating wealth, as the payouts generally act as a hedge against economic uncertainty.
Owing to the abovementioned tailwinds surrounding the sector, we believe that adding transportation stocks to one’s portfolio for generating handsome returns is a prudent move. We have zeroed in on three transportation stocks by running the Zacks Stocks Screener. Our choices have had a stellar run on the bourse this year, each gaining in excess of 50% year to date.
Also, the selected stocks currently carry either a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy). The stocks have been witnessing favorable earnings estimate revisions as well. You can see the complete list of today’s Zacks #1 Rank stocks here
Universal Logistics, currently sporting a Zacks Rank #1, is a provider of customized transportation and logistics solutions. The company offers services across its entire supply chain, including truckload, brokerage, intermodal, dedicated and value-added services.
Owing to the uptick in economic activities, the contract logistics and intermodal segments of ULH are performing well, in turn boosting top-line growth. Driven by the positives, shares of ULH have surged 97.7% so far this year. The Zacks Consensus Estimate for current-year earnings has been revised 10.3% upward over the past 60 days. For 2023, the consensus mark for earnings has moved 5.8% north in the same time frame. The favorable estimate revisions reflect the confidence of brokers in the stock. ULH currently has a Growth Score of A.
GasLog owns, operates and acquires LNG carriers with multi-year charters. The firm charges customers for transporting their LNG using its LNG carriers.
GasLog currently flaunts a Zacks Rank of 1. The strong LNG market boosted the stock, which has surged 82.9% year to date. Over the past 60 days, the Zacks Consensus Estimate for 2022 earnings has moved 42.6% north. For 2023, the consensus mark for earnings has moved 48.6% north in the same time frame. GLOP currently has a Growth Score of B.
Dorian LPG is our final choice. Shares of LPG have surged 57.5% year to date, riding on the strength of the freight market. Efforts to reward its shareholders through dividends also bode well.
Over the past 60 days, the Zacks Consensus Estimate for 2022 earnings has surged 100.7% north. For 2023, the consensus mark for earnings has moved 114.7% north in the same time frame. LPG currently has a Growth Score of B and carries a Zacks Rank of 2.
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