For Immediate Release
Chicago, IL – June 24, 2022 – Zacks Equity Research shares Sanderson Farms SAFM as the Bull of the day and CarMax KMX as the Bear of the Day. In addition, Zacks Equity Research provides analysis on JPMorgan Chase & Co. JPM, Wells Fargo & Co. WFC and Redfin Corp. RDFN.
Here is a synopsis of all five stocks:
Bull of the Day:
Today's Bull of the Day is Sanderson Farms. The company resides in the consumer staples sector, a realm where companies generate consistent and reliable revenues due to their products' persistent demand – in the face of good and bad times.
Headquartered in Mississippi, Sanderson Farms is a Fortune 1000 company engaged in the production, processing, marketing and distribution of fresh and frozen chicken and other prepared food items. The company maximizes stockholder value via being a highly successful producer and marketer of high-quality food products while providing superior service to the food industry.
Additionally, Sanderson Farms has strategic locations throughout the southeast, processing over 16 million chickens weekly.
Year-to-date, SAFM shares have provided investors with a stellar 12.5% return, easily outpacing the S&P 500 and undoubtedly becoming a bright spot in an otherwise dim market.
Previous Earnings
Sanderson Farms posted robust quarterly results in its latest release, beating EPS and revenue estimates extensively. Quarterly sales of $1.54 billion was more than enough to beat the Zacks Consensus Estimate, penciling in a 7.6% beat on the top-line.
In addition, the company reported quarterly EPS of $14.39, beating Zacks Consensus Estimate of $6.81 per share by a massive triple-digit 111%.
Valuation & Growth Forecasts
SAFM boasts an enticingly low 0.7X forward price-to-sales ratio, well below 2017 highs of 1.2X and nicely underneath its five-year median of 0.8X. Additionally, the current value represents a steep 79% discount relative to the S&P 500's forward price-to-sales ratio of 3.7X.
SAFM has a Style Score of an A for Value, making it look that much more enticing.
For the upcoming quarter, the Zacks Consensus EPS Estimate resides at $12.42, reflecting a massive 68% growth in the bottom-line from the year-ago quarter. Looking ahead, for FY22, the $48.02 per share estimate displays a notable triple-digit 140% increase in earnings year-over-year.
Revenue estimates display top-line strength as well. SAFM is forecasted to rake in $1.7 billion in revenue for the upcoming quarter, a considerable 26% increase in revenue compared to the year-ago quarter. Additionally, the FY22 revenue estimate of $6.3 billion represents a substantial 30% expansion in the top-line year-over-year.
Dividends
For investors looking for an income stream, SAFM has that covered with its 0.84% annual dividend yield with a payout ratio sitting very sustainably at 5% of earnings. The company has increased its dividend twice over the last five years and has a five-year annualized dividend growth rate of a notable 11.8%.
Bottom Line
One of the best ways investors can find expected winners within the market is by utilizing the Zacks Rank – one of the most potent market tools out there. A portfolio consisting of Zacks Rank #1 (Strong Buy) stocks has beaten the market in 26 of the last 31 years with an average annual return of 25%.
Additionally, the top 5% of all stocks receive the highly coveted Zacks Rank #1 (Strong Buy). These stocks should outperform the market more than any other rank.
Sanderson Farms would be an excellent bet for investors looking to add a solid stock to their portfolios, as displayed by its Zack Rank #1 (Strong Buy).
Bear of the Day:
Today's Bear of the Day is CarMax. CarMax Inc. is the largest retailer of used vehicles in the U.S. and one of the nation's largest operators of wholesale vehicle auctions.
The company is engaged in providing related services, including financing vehicle purchases and selling extended warranties, accessories, and vehicle repair services.
In addition to being a Zacks Rank #5 (Strong Sell), the company has an overall VGM Score of an F – never a combination that you want to see a stock possess.
Year-to-date, KMX shares have fallen extensively, losing nearly a third of their value and vastly underperforming the S&P 500.
Upon extending the time frame, the story remains the same – KMX shares have widely underperformed the general market, embarking on a steep downwards trajectory that started in late 2021.
Quarterly Results & Forecasted Growth
Analysts have been rapidly revising their estimates negatively over the last 60 days with nearly a 100% revision agreement across the board – a big part of why this company currently ranks as a Zacks Rank #5 (Strong Sell).
For the upcoming quarter, the $1.54 EPS estimate displays a nasty 41% decrease in earnings from the year-ago quarter, with the Consensus Estimate Trend retreating nearly 7%.
Additionally, the current fiscal year EPS estimate of $6.15 reflects a concerning 11% decrease in earnings year-over-year.
The company has posted mixed bottom-line results over its last four quarters, exceeding EPS expectations just twice. In its latest quarterly report, the company reported EPS of $0.98, well below the Zacks Consensus Estimate of $1.28, reflecting a 23% negative surprise.
Bottom Line
KMX shares have been the victim of a deep double-digit valuation slash over the last year. This, paired with the earnings picture softening, paints a grim picture for the company within the short term.
The company is a Zacks Rank #5 (Strong Sell) and a stock that investors will be better off staying away from for now. Instead, investors should pivot to stocks that either carry a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy) – the odds of reaping considerable gains are much higher within the companies that carry these ranks.
Additional content:
JPMorgan Makes Cuts in Mortgage Lending Business
JPMorgan Chase & Co. has decided to slash several jobs in its home-lending division. The decision comes after rapidly rising mortgage rates and inflation have resulted in a downturn in the housing market. The news was first reported by Bloomberg.
More than 1,000 jobs will be affected by the move this week. According to people familiar with the matter who asked not to be identified, about half of the 1,000 employees will be moved to different divisions within the bank.
A JPMorgan spokesperson stated, "Our staffing decision this week was a result of cyclical changes in the mortgage market. We were able to proactively move many impacted employees to new roles within the firm, and are working to help the remaining affected employees find new employment within Chase and externally."
During the pandemic, the housing market was red hot. However, the recent rise in mortgage rates has resulted in a drastic decline in demand within the market, resulting in a cool-down. So far this year, mortgage rates have increased to nearly 6%, driven by the rise in borrowing costs. As a result, sales of previously owned houses in the United States have fallen for a fourth month in May to the lowest level in almost two years.
In order to tame the red-hot inflation, last week, the Federal Reserve raised benchmark interest rates by 75 basis points (the biggest hike since 1994). This followed two smaller hikes, one in March and the other in May. Because of the ramp-up in rates, the thirty-year mortgage rate has already more than doubled from its record-low in January 2021.
In addition to JPMorgan, a downturn in the housing market has impacted Wells Fargo & Co.'s staffing levels. According to people familiar with the matter, WFC has also been laying off and reassigning employees in its home-lending division.
Wells Fargo's CEO, Charles Scharf, stated, "When the mortgage market is down the way it is, there's no getting around that your volumes fall dramatically, and we have to do our best to adjust our infrastructure to support that. So as much as you don't want to be in a position to have to do that, from an employee perspective, we do have an obligation to make sure we're properly staffed."
Apart from the two banks, there is a growing list of real estate companies that are downsizing their workforce to cut costs.
Online real estate platform Redfin Corp. announced that it would reduce its workforce by 8%. RDFN's CEO, Glenn Kelman, cited the slowdown in home sales and a sharp rise in mortgage rates as the reason for this decision.
Over the past year, shares of JPMorgan have lost 24.5% compared with a decline of 19.2% recorded by the industry.
Currently, JPMorgan carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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