Chicago, IL – February 6, 2024 – Zacks Equity Research shares Booz Allen Hamilton BAH as the Bull of the Day and Precision Drilling Corp. PDS as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Pinterest, Inc. PINS, NVIDIA Corp. NVDA and Silicon Motion Technology SIMO.
Here is a synopsis of all five stocks.
Booz Allen Hamilton, a Zacks Rank #1 (Strong Buy), provides management and technology consulting services to governments, corporations, and not-for-profit organizations in the United States and internationally. The company’s differentiated business model has led to increases in client acquisitions and future revenue opportunities. As we’ll see, BAH stock is displaying relative strength, recently surging to all-time highs. Increasing volume has attracted investor attention as buying pressure accumulates in this market leader.
BAH is part of the Zacks Government Services industry group, which currently ranks in the top 6% out of more than 250 Zacks Ranked Industries. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform the market over the next 3 to 6 months, just as it has over the last year.
Quantitative research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1. It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
Booz Allen Hamilton offers analytics, engineering, mission operations, and cyber services to a diversified client base. The company provides transformational solutions in the areas of artificial intelligence, machine learning, and predictive modeling.
In addition, Booz Allen Hamilton focuses on quantum computing and computer network-related operations in the areas of data science, engineering, visualization, and analysis-centric capabilities. It is also engaged in user interface development along with graphic and web design.
The company has commercial clients across various industries including aerospace, health and life sciences, energy, financial services, and transportation. Booz Allen boasts a large addressable market; the government is one of the world’s largest consumers of technology and management consulting services. Furthermore, the agencies of the U.S. intelligence community offer an additional market.
The consulting provider has strung together an impressive earnings history, surpassing earnings estimates in each of the past four quarters. Less than two weeks ago, the company reported fiscal third-quarter earnings of $1.41/share, a 24.8% surprise over the $1.13/share consensus estimate. Booz Allen Hamilton has delivered a trailing four-quarter average earnings surprise of 12.7%.
Looking ahead to fiscal Q4, BAH shares received a boost as analysts covering the company have been increasing their earnings estimates lately. Fourth-quarter earnings estimates have risen 3.51% in the past 60 days. The Zacks Consensus EPS Estimate now stands at $1.18/share, reflecting a potential growth rate of 16.8% relative to the year-ago period. Revenues are projected to climb 9.14% to $2.66 billion.
BAH stock has advanced nearly 50% in the past year alone. Only stocks that are in extremely powerful uptrends are able to experience this type of outperformance. This is the kind of stock we want to include in our portfolio – one that is trending well and receiving positive earnings estimate revisions.
Notice how both the 50-day (blue line) and 200-day (red line) moving averages are sloping up. The stock has been making a series of 52-week (and all-time) highs, widely outperforming the major indices. With positive fundamental and technical indicators, BAH stock is poised to continue its outperformance.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, Booz Allen Hamilton has recently witnessed positive revisions. As long as this trend remains intact (and BAH continues to deliver earnings beats), the stock will likely continue its bullish run this year.
Booz Allen Hamilton is ranked favorably by our Zacks Momentum Style Score, with a best-in-class ‘A’ rating in this category. This indicates that BAH stock is likely to move higher based on a powerful combination of earnings and price momentum. In addition to the favorable growth metrics, Booz Allen Hamilton also pays a $1.88 (1.32%) dividend.
Backed by a top industry group and impressive history of earnings beats, it’s not difficult to see why this company is a compelling investment. Robust fundamentals combined with an appealing technical trend certainly warrant a closer look. The future looks bright for this highly-ranked, leading stock.
Disclosure: BAH is a current holding in the Zacks Income Investor portfolio.
Precision Drilling Corp. is an oilfield services company that offers contract drilling, well servicing, and strategic support in North America and internationally. The company provides land drilling, directional drilling, distribution of oilfield supplies, as well as camp and catering services.
In addition, the company offers service rigs for well completion and workover services, wastewater treatment services, well control equipment, and wellsite accommodations. Precision Drilling is headquartered in Calgary, Canada and serves companies in the oil, natural gas, and geothermal industries.
Precision Drilling, a Zacks Rank #5 (Strong Sell), is a component of the Zacks Oil and Gas – Drilling industry group. This industry ranks in the bottom 18% out of more than 250 Zacks Ranked Industries. As such, we expect this industry group as a whole to underperform the market over the next 3 to 6 months, just as it has over the past several months.
Stocks in the bottom tiers of industries can often be potential candidates for short positions. While individual stocks have the ability to outperform even when they are part of a lackluster industry group, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much more difficult.
Despite a rebound in stocks with the Dow and S&P 500 hitting new all-time highs, PDS shares have not been participating lately. The stock has experienced considerable volatility over the past year.
PDS has fallen short of earnings estimates in two of the last four quarters. Heading into today’s quarterly release, the company had delivered a trailing four-quarter average earnings miss of -13.9%. Note that stocks can experience heightened volatility (in both directions) surrounding earnings announcements.
The company has been on the receiving end of negative earnings estimate revisions as of late. As we look ahead to the first quarter, analysts have decreased EPS estimates by 7.57% in the past 60 days. The Q1 Zacks Consensus Estimate stands at $2.93/share, reflecting negative growth of -28.9% relative to the year-ago period.
Falling earnings estimates are a huge red flag and need to be respected. Negative growth year-over-year is the type of trend that bears like to see.
PDS stock has witnessed considerable volatility, all while the general market reaches new heights. Notice how shares have swung above and below the widely-followed moving averages signaled by the blue and red lines. The stock is not showing much in the way of a clear direction, making it very difficult to profit from the long side.
Precision Drilling would have to make a surprising move to the upside and show increasing earnings estimate revisions to warrant taking any long positions in the stock. PDS shares have fallen more than 30% since the S&P 500 bottomed out back in late 2022.
A deteriorating fundamental and technical backdrop show that this stock is not set to hit new highs anytime soon. The fact that PDS stock is included in one of the worst-performing industry groups provides yet another headwind to a long list of concerns. A history of earnings misses and falling future earnings estimates will likely serve as a ceiling to any potential rallies, nurturing the stock’s downtrend.
Highlighted underperformance bodes well for the bears. Potential investors may want to consider including this stock as part of a short or hedge strategy. Bulls will want to steer clear of PDS shares until the situation shows major signs of improvement.
Pinterest, Inc. is scheduled to report fourth-quarter 2023 results on Feb 8, 2024 after the closing bell. The company pulled off a trailing four-quarter earnings surprise of 37.3%, on average. In the last reported quarter, it reported an earnings surprise of 33.3%.
The company is taking multiple initiatives to bring more actionable content on the platform from a wide range of sources such as users, creators, publishers and retailers for enhancing customer engagement activities. It is also emphasizing on building new ad tools and formats to help grow the scope of monetization on the platform. An approach to leverage their unique features by elevating their presence and designing engaging contents is likely to result in a top-line expansion year over year during the quarter.
During the quarter, Pinterest introduced various product updates and unique features that enable advertisers and agencies to better connect with 482 million monthly users, a major chunk of them being Gen Z population. The coveted spotlight feature brings premium advertising spaces on the platform to enhance ad visibility. The company has extended this feature from search results to home feed, which will enable advertisers to reach users from the moment they access the platform.
Pinterest offers a robust search feature, allowing users to search content as per their choices. The platform uses visual search technology, enabling users to discover ideas based on images they find appealing. These initiatives are likely to have increased their reach beyond its existing user base and translated into higher revenues in the quarter.
The acquisition of the AI-powered, high-tech fashion-shopping platform, The Yes, has enabled it to create a strategic organization to help steer the evolution of its features and merchants. Pinterest and The Yes share a common vision of making it easy for customers to find products matching their tastes and style. The combined company has been making continuous efforts to absorb creators publishing videos and live streams in order to make the shopping experience swift and easy for customers.
Pinterest is witnessing greater engagement on the platform from its existing user base. The company’s focus on improving operational rigor and incorporation of sophisticated AI models to enhance relevancy and personalization is likely to bring long-term benefits. The company is also emphasizing on building new ad tools and formats to help grow the scope of monetization on the platform. Pinterest has partnered with Amazon to further capitalize on the commercial intent of its user base and increase shop ability on its platform. This is likely to have been reflected in the upcoming quarterly results.
For the December quarter, the Zacks Consensus Estimate for total revenues is pegged at $989 million, suggesting an increase from the year-ago quarter’s reported figure of $877 million. The consensus estimate for adjusted earnings per share is pegged at 51 cents, up from 29 cents reported in the prior year.
Our proven model does not conclusively predict an earnings beat for Pinterest this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here.
Earnings ESP:Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%, with both pegged at 51 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Pinterest, Inc. price-eps-surprise | Pinterest, Inc. Quote
Zacks Rank: Pinterest currently sports a Zacks Rank #1.
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post a beat this season:
NVIDIA Corp. is set to release quarterly numbers on Feb 21. It has an Earnings ESP of +3.68% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Silicon Motion Technology has an Earnings ESP of +4.92% and carries a Zacks Rank of 2. The company is set to report quarterly numbers on Feb 6.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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NVIDIA Corporation (NVDA) : Free Stock Analysis Report
Precision Drilling Corporation (PDS) : Free Stock Analysis Report
Silicon Motion Technology Corporation (SIMO) : Free Stock Analysis Report
Booz Allen Hamilton Holding Corporation (BAH) : Free Stock Analysis Report
Pinterest, Inc. (PINS) : Free Stock Analysis Report
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