For Immediate Release
Chicago, IL – September 29, 2023 – Zacks Equity Research shares Pioneer Natural Resources PXD as the Bull of the Day and Piedmont Lithium PLL as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Ryder System, Inc. R, Triton International Ltd. TRTN and Air Lease Corp. AL.
Here is a synopsis of all five stocks:
Bull of the Day:
It's back. Pioneer Natural Resources has regained the Zacks #1 (Strong Buy) rank, the top Zacks Rank, as earnings estimates are starting to be revised higher for 2023 and 2024 after they were cut as oil prices declined over the last year.
Pioneer Natural Resources is an independent oil and natural gas exploration and production company with acreage in the Permian Basin. It's one of the largest E&Ps in the industry, with a market cap of $52 billion.
Oil Back to $90
Energy earnings exploded higher last year after the Ukraine War spiked prices of both oil and natural gas to multi-year highs. Pioneer Natural Resources is unhedged, which means it does not have hedging contracts on the commodities.
Earnings soared to $30.57 in 2022 but oil and natural gas prices had been on a steady decline for the last year, which meant that earnings would be much lower.
However, WTI crude has rallied back to $90 a barrel in the third quarter of this year.
Earnings Estimates Inching Up
Average realized price for oil was $72.90 in the second quarter of this year. Analysts are betting it is higher for the third quarter.
1 estimate has been raised for the third quarter and the full year just this week.
For the full year, the Zacks Consensus is moving higher, rising to $20.62 from $18.80 just 60 days ago. This is still an earnings decline of 32.5%, but it is moving in the right direction, which is up.
Analysts are getting bullish on 2024 as well. 1 estimate is higher for 2024 in the last week as well. The 2024 Zacks Consensus Estimate has jumped to $24.23 from $21.22 just 2 months ago. This is earnings growth of 17.5% for next year.
Pioneer Is Cheap
Shares of Pioneer have been in a narrow trading range for the last year. They have really underperformed the S&P 500 though.
But the shares are cheap, with a forward P/E of just 10.8.
It also has one of the best balance sheets in the industry. As of June 30, 2023, it had net debt of $5.2 billion. It also had $1.9 billion of liquidity, comprising $91 million of cash on hand and $1.8 billion available under a $2.0 billion unsecured credit facility.
In the second quarter, Pioneer generated $742 million in free cash flow. It paid out 75% of it to shareholders in the form of a base plus variable dividend, which was $1.84 per share, as well as a $124 million share repurchase.
The dividend yielded 3.3% at the time of the release of the earnings results on Aug 1, 2023.
If you are looking for a large independent E&P which is shareholder friendly with energy prices on the rise, Pioneer Natural Resources should be on your short list.
[In full disclosure, author Tracey Ryniec owns shares of PXD in Zacks Value Investor portfolio and her own personal portfolio.]
Bear of the Day:
It's not smooth sailing for Piedmont Lithium as earnings estimates have been cut in the last 60 days. This Zacks Rank #5 (Strong Sell) is still expected to grow earnings in 2023.
Piedmont Lithium is a lithium producer. It is developing its 100%-owned Piedmont Lithium Project in North Carolina and Tennessee to supply lithium to EV and battery storage markets in the United States. It also has partnerships in Quebec with Sayona Mining and in Ghana with Atlantic Lithium.
Piedmont is Finally Shipping Lithium
On Aug 29, 2023, Piedmont announced it had taken partial payment for the sale of 15,000 dry metric tons of 5.4% Li2O lithium concentrate on an FOB vessel basis to a major international trading company.
Vessel loading was scheduled for mid-September.
The pre-payment increased Piedmont's cash position to approximately $100 million.
North American Lithium ("NAL") started commercial production in March 2023 and delivered its first joint venture shipment of 20,500 dmt to a third-party in early August.
"This is a significant day for Piedmont Lithium as we announce the first shipment of lithium concentrate under our offtake agreement with NAL and the receipt of a prepayment, which significantly increases our cash position," said Keith Phillips, President and CEO of Piedmont.
Analysts Cut Earnings Estimates
The analysts have recently gotten more pessimistic about Piedmont's earnings outlook, even though the company has started shipments.
Piedmont is expected to see its first positive earnings quarter in the third quarter of this year as it saw a loss of $0.55 per share in the second quarter and the Zacks Consensus is calling for $1.68.
2023 earnings are now expected to be $5.42 up from a loss of $2.02 last year, which is an earnings gain of 368.3%. But 2 estimates have been cut in the last 60 days which has pushed the earnings estimate down from $6.37 to $5.42. The analysts are just a little less bullish.
It is these cuts which have given Piedmont the Zacks Rank of #5 (Strong Sell).
Earnings are expected to jump again in 2024 to $13.80, which is a gain of 154.6%. But those estimates have been pared back in the last 2 months as well.
Shares at 52-Week Low
The shares of lithium producers tend to move with the price of lithium, which has fallen sharply this year. Shares of Piedmont recently hit 52-week lows.
It is down 27.2% over the last year but shares haven't broken down completely yet.
Shares are cheap on a P/E basis, trading at 7.2x forward earnings.
If you are interested in Piedmont Lithium, be sure to tune into the next earnings report for an update on its projects, deliveries, and cash position. The estimates are likely to change again at that time which means the Zacks Rank will change too. The Zacks Rank is a short-term recommendation of just 1 to 3 months.
Additional content:
3 Dividend-Paying Transport Equipment-Leasing Stocks to Watch
The Zacks Transportation - Equipment and Leasing industry is suffering from headwinds like raging inflation, higher interest rates, supply-chain disruptions and high operating costs. These headwinds are likely to hurt the demand for containers.
Despite these headwinds, the industry has gained 11.4% over the past six months, outperforming the S&P 500 Index's 9% appreciation and a 0.5% jump of the broader Zacks Transportation sector.
Given this encouraging backdrop, it would be a wise decision to invest in some dividend-paying companies like Ryder System, Inc., Triton International Ltd. and Air Lease Corp. from the Transportation - Equipment and Leasing industry. These companies have consistently announced dividend hikes, thus highlighting their pro-shareholder stance.
Stocks that have a strong history of dividend growth belong to mature companies, which are less susceptible to large swings in the market, and act as a hedge against economic or political uncertainty as well as stock market volatility. At the same time, they offer downside protection with their consistent increase in payouts.
Additionally, these companies have superior fundamentals like a sustainable business model, a long track of profitability, rising cash flows, good liquidity, a strong balance sheet and some value characteristics.
How to Pick Stocks With Solid Dividend Payouts?
In order to choose some of the best dividend stocks from the industry, we have run the Zacks Stock Screener to identify stocks with a dividend yield in excess of 2% and a sustainable dividend payout ratio of less than 60%.
Ryder: Headquartered in Miami, FL, it operates as a logistics and transportation company worldwide. Ryder pays out a quarterly dividend of 71 cents ($2.84 annualized) per share, which gives it a 2.74% yield at the current stock price. This company's payout ratio is 17%, with a five-year dividend growth rate of 3.04%. (Check Ryder's dividend history here). Ryder presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
We are impressed with Ryder's consistent efforts to reward its shareholders through dividends and share repurchases. In July 2023, Ryder announced a 14.5% hike in its quarterly dividend, taking the total to 71 cents per share (annualized $2.84). The company is also active on the buyback front. In February 2023, Ryder's board approved a new 2-million share discretionary repurchase program. The management is now authorized to buyback up to 2 million shares of common stock at its discretion from Feb 10, 2023, through Feb 10, 2025 (two years).
Triton: Headquartered in Hamilton, Bermuda, Triton engages in the acquisition, leasing, re-leasing, and sale of various types of intermodal containers and chassis to shipping lines, and freight forwarding companies and manufacturers. Triton currently carries a Zack Rank #2 (Buy).
Triton pays a quarterly dividend of 70 cents ($2.80 annualized) per share, giving it a 3.38% yield at the current stock price. This company's payout ratio is 27%, with a five-year dividend growth rate of 7.75%. (Check Triton's dividend history here).
We are impressed with Triton's efforts to reward its shareholders through dividends and buybacks. Concurrent with its third-quarter 2022 earnings release, Triton's board of directors increased its quarterly cash dividend from 65 cents per share to 70 cents, indicating a dividend hike of 8%. The company is also active on the buyback front. During the first half of 2023, TRTN repurchased 1,884,616 shares for a total cost of $125.7 million.
Air Lease: Headquartered in Los Angeles, CA, Air Lease operates as an aircraft leasing company engaged in purchasing and leasing of commercial jet aircraft to airlines worldwide. AL pays out a quarterly dividend of 20 cents ($0.80 annualized) per share, which gives it a 2.03% yield at the current stock price. This company's payout ratio is 19%, with a five-year dividend growth rate of 12.55%. (Check AL's dividend history here).Air Lease presently carries a Zack Rank #3 (Hold).
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