For Immediate Release
Chicago, IL – February 16, 2024 – Zacks Equity Research shares KKR & Co. KKR as the Bull of the Day and Malibu Boats MBUU as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Dell Technologies DELL, Qualcomm QCOM and IBM IBM.
Here is a synopsis of all five stocks:
Bull of the Day:
KKR & Co. is a leading global investment firm, with a long and successful history in the private equity industry. KKR & Co. operates a diversified platform across three primary segments: Private Equity, Credit, and Alternative Asset Management.
Over the last ten years these businesses have been booming, and KKR has executed the strategies with some of the best returns across the industry. Such success has led to annualized returns of 34% over the last five years, considerably outperforming many of its competitors and the broad market.
For the average retail investor, access to private equity, credit and alternative investment opportunities are extremely limited. But with KKR now trading as a public company, any investor can get access to these powerful opportunities.
Additionally, KKR & Co. currently enjoys a Zacks Rank #1 (Strong Buy) rating, further increasing the odds of a near-term rally in the share price.
Here, I will highlight several further bullish factors powering KKR stock and share why it makes for a worthy consideration in many investors' portfolios.
Earnings Estimates: Perking Up
The proprietary methodology used at Zacks is one of the most powerful techniques there is for picking stocks as it aggregates the earnings estimates of all analysts' forecasts. The strategy has been quantitatively tested and shows strong market outperformance over the long term.
KKR & Co. boasts the highest Zacks Rank, with nearly all analysts covering the stock upgrading the EPS outlook over the last two months.
Current quarter earnings estimates have increased by 9.5% over the last two months and are expected to climb 42% YoY to $1.15 per share. FY24 earnings estimates have been boosted by 3.6% and are projected to jump 43.3% YoY to $4.90 per share.
KKR's topline is set to expand nicely over the next two years as well, with sales forecast to grow 17.9% this year and 18.2% next year.
Valuation: Cheap Based on Growth Estimates
KKR is trading at a one year forward earnings multiple of 21.7x, which is about in line with the broad market. However, because of KKR's exceptional EPS growth estimates, the stock is potentially undervalued.
EPS at the asset manager are forecast to grow 25% annually over the next 3-5 years. Not only is this an impressive growth rate, but because its below the forward earnings multiple it means its PEG Ratio is below 1x, indicating undervalued status based on the metric.
KKR currently has a PEG Ratio of 0.86x.
Bottom Line
Private equity and KKR's other businesses are very strong business models and are executed at the highest level. This means investors can now access these strategies as easily as buying an ETF.
The advantages of these strategies are numerous as well. Private equity is known for offering lower volatility than public markets, potentially higher returns, and uses active management to identify the best business opportunities.
Furthermore, Credit and Alternative Assets offer additional diversification from equities. Credit provides regular income through lending, and Alternatives give exposure to projects like infrastructure.
KKR & Co. is trading at an appealing valuation, with a powerful business model, and upward trending earnings revisions. Because of these multitude of bullish catalysts, I think investors can consider investing in KKR at current levels.
Bear of the Day:
Malibu Boats, a leading designer and manufacturer of sport boats, is bumping into some considerable slowdowns in top and bottom-line expectations, giving it a Zacks Rank #5 (Strong Sell) rating.
The bout of consumer exuberance which followed the Covid-19 lockdown pulled forward considerable buying of large-ticket items like boats. Because of this, sales at Malibu Boats jumped well above trend and while it was welcome at the time, is limiting sales over the next year or two.
As buying a boat is not something that is done regularly, the company is likely to see a slowdown in growth moving forward and should be avoided for now.
Earnings Estimates
The dynamic troubling Malibu Boats has not been missed by analysts, as they have unanimously lowered earnings estimates for the company. Current quarter sales have been revised lower by -53% over the last two months and are projected to fall -71% YoY to just $0.77 per share. FY24 earnings estimates have been lowered by -37% and are expected to fall -43% YoY.
Top-line growth is expected to tank in the coming year. Current quarter sales are expected to decline -39% YoY to $228 million and FY24 by -32% to $940 million.
It seems every time I come back to this stock both sales and earnings estimates have been revised lower.
Valuation
What concerns me further is that even with the falling top and bottom line, Malibu Boats still has a historically premium valuation. With a one year forward earnings multiple of 14.9x, it is almost 50% above its five-year median of 9.9x.
Bottom Line
While Malibu Boats is experiencing near-term challenges, the stock is by no means a zero. However, based on the current setup, I think investors should seek out other opportunities in the market.
Additional content:
3 Tech Stocks to Buy for Passive Income
Technology's momentum is undeniably attractive to investors, with the high-flying sector delivering notable gains and boosting sentiment over the last year. In fact, the Zacks Computer and Technology sector has gained nearly 48% over the period compared to the S&P 500's impressive 25% gain.
Investors also love dividends, as they provide a nice buffer against drawdowns and provide a passive income stream, undoubtedly a solid pairing. And for those seeking exposure to both technology and dividends, three stocks – Dell Technologies, Qualcomm and IBM– fit the criteria nicely.
On top of rewarding shareholders with quarterly payouts, all three sport a favorable Zacks Rank, reflecting optimism among analysts. Let's take a closer look at each.
Dell Technologies
Dell Technologies, a current Zacks Rank #2 (Buy), provides information technology solutions. The company's shares currently yield 1.7% annually paired with a sustainable payout ratio sitting at 26% of its earnings.
The outlook for its current fiscal year has been notably positive, with the $6.66 Zacks Consensus EPS estimate up 8% over the last year. Better-than-expected quarterly results over the last year have helped drive share performance, with DELL exceeding the Zacks Consensus EPS estimate by an average of 36% across its last four releases.
It's worth noting that the company's growth is expected to cool in its current fiscal year (FY24), with consensus expectations alluding to a 12% pullback in earnings on 13% lower sales.
Qualcomm
Qualcomm, a current Zacks Rank #2 (Buy), designs, manufactures, and markets digital wireless telecom products and services based on the Code Division Multiple Access (CDMA) technology. Analysts have bumped their earnings expectations higher across the board.
QCOM shares pay investors nicely, currently yielding 2.1% annually. The company has shown a commitment to increasingly rewarding shareholders, as reflected by its 6.3% five-year annualized dividend growth rate.
The company's latest set of quarterly results came in above expectations, posting a 15% beat relative to the Zacks Consensus EPS estimate and reporting sales 4.5% ahead of the consensus. Headline numbers exceeded the high end of prior guidance, with the company also returning $1.7 billion to shareholders through buybacks and dividend payouts.
IBM
IBM, a current Zacks Rank #2 (Buy), is an information technology (IT) company. Analysts have moved their earnings expectations higher across the board over the last several months. Shares presently yield 3.6% annually, crushing the Zacks Computer and Technology sector average of 0.6%.
IBM's latest set of quarterly results came in above expectations, with Software sales climbing 8% year-over-year as customers increasingly adopt its watsonx AI and data platform. Cash-generating abilities also saw a notable boost, with operating cash flow of $3.1 billion well higher than the $1.9 billion mark in the year-ago period.
IBM shares have moved higher post-earnings in back-to-back releases.
Bottom Line
Dividend-paying stocks don't always have to be 'boring,' as many exciting companies from the technology sector also reward their shareholders with payouts.
And for those interested in gaining exposure to the sector paired with quarterly payouts, all three stocks above fit the criteria nicely.
On top of quarterly payouts, all three currently sport a favorable Zacks Rank, reflecting positive outlooks among analysts.
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QUALCOMM Incorporated (QCOM) : Free Stock Analysis Report
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