Chicago, IL – February 28, 2024 – Zacks Equity Research shares Toll Brothers TOL as the Bull of the Day and ATN International ATNI as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Dell Technologies DELL, Lenovo LNVGY and Apple AAPL.
Here is a synopsis of all five stocks:
In 2023 Toll Brothers was named the world’s most admired homebuilder by Fortune Magazine for a third consecutive year as the leading builder of luxury homes in the United States. In fact, the million-dollar homebuilder has now been named to Fortune Magazine’s most admired companies list for eight consecutive years and its stock looks poised to continue reaping lofty gains for investors.
To that point, Toll Brothers stock sports a Zacks Rank #1 (Strong Buy) and lands the Bull of the Day after impressively surpassing its fiscal first quarter expectations last week.
Driving Toll Brothers' strong Q1 results were 1,927 homes delivered at an average price of approximately $1 million which generated sales of $1.94 billion. This topped Q1 sales estimates of $1.87 billion by 4% and was up 9% from $1.78 billion in the comparative quarter.
Distinctive architecture and prestigious locations in some of the most highly desired areas and communities nationwide have catalyzed Toll Brothers' success and increased profitability. First quarter net income jumped 25% to $239.6 million and $2.25 per share which represented 32% EPS growth and crushed expectations of $1.77 a share by 27%. Piggybacking on the acknowledgment of Toll Brothers' consistency by Fortune Magazine, the company has now surpassed the Zacks EPS Consensus for 16 consecutive quarters and posted an average earnings surprise of 30.16% in its last four quarterly reports.
Further illustrating Toll Brothers' immense profitability and future earnings potential is its trailing twelve-month (TTM) Growth Margin percentage of 26.92%. This is very impressive considering the company is selling million-dollar homes and tops the Zacks Building Products-Home Builders Industry average of 21.78%. Notably, Toll Brothers’ home sales gross margin increased to 27.6% last quarter compared to 25.6% in Q1 2023.
Indicative of solid demand, Toll Brothers signed 2,042 net contracts for $2.06 billion during the first quarter which the company said was a 40% increase in units and a 42% increase in dollar value. More intriguing, Toll Brothers' inventory dollar value which is new existing homes that are either finished or waiting to be completed (Speculative Homes) ticked up 6% during Q1 to $9.58 billion.
In addition to its strong buy rating Toll Brothers stock has an overall “A” VGM Zacks Style Scores grade for the combination of Value, Growth, and Momentum. Indicative of momentum and more upside in Toll Brothers stock is that fiscal 2024 and FY25 EPS estimates have climbed 7% and 4% over the last week respectively.
Following its Q1 report Toll Brothers' annual earnings are now projected to rise 6% this year to $13.15 per share. Fiscal 2025 EPS is expected to be virtually flat but TOL shares trade at an extremely cheap forward earnings multiple of just 8.5X, especially when considering the strong price performance and lofty bottom line expansion in recent years.
Investors are always looking for a dominant industry leader and Toll Brothers has continued to assert itself as the crème of the crop in regard to homebuilders. Furthermore, now looks like an ideal time to buy Toll Brothers stock ahead of the busy spring home-buying season with it being noteworthy that the Zacks Building Products- Home Builders Industry is currently in the top 11% of over 250 Zacks industries.
Slower revenue growth has put a dent in the optimism surrounding ATN International’s diverse business operations which consist of communication companies and renewable energy assets. Unfortunately, with ATN still striving to cross the profitability line this lands its stock a Zacks Rank #5 (Strong Sell) and the Bear of the Day.
An expansive top line is often indicative of a company’s future earnings potential and can catapult speculative high-growth stocks even before their profitable with Carvana (CVNA) and crypto miners such as Marathon Digital (MARA) and Riot Platforms (RIOT) being recent examples.
However, when the revenue of a “speculative” stock slows and the company isn't turning a profit optimism in the market can fade quickly and this appears to be the case with ATNI shares.
Looking at ATN’s outlook total sales are forecasted to dip -1% in fiscal 2024 to $755.16 million with the company expected to post an adjusted loss of -$0.29 a share. ATN is projected to post a profit of $0.30 a share next year but 2% sales growth is not overly reassuring.
Adding more concern to ATN’s profitability prospects is that the infrastructure and communication services provider came up short of its Q4 earnings expectations last week. ATN incurred a net loss -$5.8 million and an adjusted loss of -$0.12 a share compared to estimates of -$0.11 a share.
This was despite Q4 sales of $198.97 million topping estimates of $192.07 million and rising 3% year over year but wasn’t enough to push market sentiment. Furthermore, ATN has now missed earnings expectations in three of its last four quarterly reports.
More concerning is that annual earnings estimates have fallen sharply following ATN’s Q4 report for both FY24 and FY25.
With ATN International’s stock down -13% in 2024 the slower revenue growth and declining earnings estimates are indicative that more short-term risk is ahead. ATN’s diverse operations should keep the company afloat but its prospects look less reassuring at the moment making its stock one to be avoid.
Dell Technologies is set to report its fourth-quarter fiscal 2024 results on Feb 29.
The company expects fiscal fourth-quarter revenues in the range of $21.5-$22.5 billion, with a midpoint of $22 billion. Earnings are expected to be $1.70 per share (+/- 10 cents).
The Zacks Consensus Estimate for revenues is pegged at $22.13 billion, suggesting an 11.63% decline from the figure reported in the year-ago quarter. Continued sluggish IT spending by corporate and global enterprise customers is expected to have hurt the company's top-line growth.
The consensus mark for quarterly earnings is pegged at $1.73 per share, indicating a 3.89% decline from the year-ago quarter's figure. The consensus estimate for earnings has been steady in the past 30 days.
Dell Technologies' earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with an earnings surprise of 35.55% on average.
Dell Technologies expects Infrastructure Solutions Group revenues to increase in the mid-single digits, driven by sequential growth in traditional servers and seasonal growth in storage. The company expects the Other business segment to decline in the low 20s sequentially.
It expects Client Solutions Group (CSG) revenues to decline in the low-single digits sequentially. CSG revenues are expected to have suffered from improving yet slow PC demand. DELL is witnessing pockets of stability in PC demand but is expected to see a broader recovery in the PC market.
Per Gartner report, global PC shipments totaled 63.3 million units in the fourth quarter of 2023, which increased for the first time after eight consecutive quarters of decline. For 2023, global PC shipments totaled 241.8 million units, down 14.8% year over year.
Dell Technologies was ranked third among all PC vendors, trailing Lenovo but beating Apple.
This Zacks Rank #2 (Buy) company shipped 9.983 million units, witnessing a 17.2% year-over-year decline in the fourth quarter of 2023, per the Gartner report. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Lenovo and Apple shipped 16.213 million and 6.349 million units, respectively.
DELL's expanding Generative AI solutions portfolio is expected to have accelerated its top-line growth.
The company is collaborating with Meta to make it easy for DELL customers to deploy the latter's Llama 2 models on premises, with Dell AI-optimized portfolio. Dell Technologies also announced a collaboration with Hugging Face to help users create, fine-tune and implement their own open-source GenAI models on Dell infrastructure.
The company announced upgraded PowerScale systems that comprise improved storage solutions for higher AI and Generative AI outcomes. The systems are well-equipped to help users access data quickly.
Dell PowerScale has an advanced smart scale-out capability to boost single-computer node performance. These utilize GPUs in a much better way, resulting in quicker storage throughput for AI training, checkpointing and inferencing. Enterprises can create, train, refine and infer AI models more quickly with PowerScale OneFS software upgrades.
Dell Technologies introduced the ObjectScale XF960, an all-flash scale-out appliance for GenAI and real-time analytics based on the company's software-defined object storage solution, which can run on Linux and Red Hat OpenShift on PowerEdge servers.
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