Chicago, IL – March 29, 2022 – Zacks Equity Research shares JAKKS Pacific JAKK as the Bull of the Day and Wingstop WING as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Baker Hughes Company BKR, Whiting Petroleum Corp. WLL and Continental Resources, Inc. CLR.
Here is a synopsis of all five stocks:
JAKKS Pacific, a Zacks Rank #1 (Strong Buy), represents a great market turnaround story as the stock has surged more than 350% off the pandemic lows. After plunging as low as $3 per share during the March 2020 bottom, JAKK now trades at roughly $14/share and the bull run looks set to continue. A very low percentage of companies complete the journey from penny stock to mid-double digits. These companies all experience stellar growth in terms of both revenue and earnings, and JAKK is no exception.
The stock hit a 52-week high earlier this month before cooling off slightly as we head into month-end. JAKK is part of the Zacks Toys – Games – Hobbies industry group, which is currently ranked in the top 15% of all Zacks Ranked Industries. 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.
Quantitative research studies have shown that roughly half of a stock's price movement can be attributed to its industry group. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
JAKKS Pacific develops, produces, sells, and distributes toys and related products. JAKK is a multi-line, multi-brand company that also sells electronics and consumables. Its products include action figures, toy vehicles, dolls, inflatable tents, wagons, costumes, and other child-related accessories. JAKK sells its products through both in-house and independent sales teams to mass-market retail chain stores and department stores. The toy company was incorporated in 1995 and is headquartered in Santa Monica, CA.
JAKK has been benefiting from strategic, innovative collaborations with popular brands and movie franchises. The company has collaborations with Disney, Skechers, Nickelodeon, Cabbage Patch Kids, and Chico to manufacture toys and related merchandise. JAKK has realized the importance of online retailing and shifted its focus to boosting online sales.
The multi-brand company is optimistic about its robust consumer demand and has implemented a multi-tier development program focused on designing and developing products specific to certain retail channels. This includes the likes of Walmart, Target, Amazon, TJ Maxx, Ross, GameStop, and others.
JAKK has built up an impressive earnings history, surpassing earnings estimates in each of the last six quarters. Back in February, the company reported Q4 EPS of $0.14, a +115.73% surprise over the $-0.89 consensus estimate. JAKK has delivered a +63.13% average earnings surprise over the last four quarters.
Analysts covering the toy company have increased their full-year EPS estimates by +24.89% in the past 60 days. The 2022 Zacks Consensus EPS Estimate now stands at $2.81, reflecting potential growth of 8.49% relative to last year. Sales are anticipated to climb 4.41% to $648.5 million.
JAKK shares have advanced over 86% in the past year. Only stocks that are in extremely powerful uptrends are able to make this type of price move. The stock is up nearly 40% this year alone, widely outperforming the major indices. This is the kind of stock we want to include in our portfolio – one that is trending well and receiving positive earnings estimate revisions.
he stock had been making a series of higher highs through early March, and the recent pullback represents a solid buying opportunity. With both strong fundamentals and technicals, JAKK 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, JAKKS Pacific has recently witnessed positive revisions. As long as this trend remains intact (and JAKK continues to deliver earnings beats), the stock will likely continue its bullish run this year.
Despite the impressive performance, JAKK is still relatively undervalued, irrespective of the metric used.
With top-ranked 'A' marks in our Zacks Growth and Value Style Score categories, JAKK is well-positioned to gain market share. Backed by a leading industry group and robust history of earnings beats, it's not difficult to see why this company is a compelling investment.
A strong technical trend along with relative undervaluation certainly justify adding shares to the mix. Recent positive earnings estimate revisions should also serve to create a 'floor' regarding any sudden or unexpected downside moves. If you haven't already done so, make sure to put JAKK on your shortlist.
Wingstop, a Zacks Rank #5 (Strong Sell) stock, franchises and operates restaurants. Its locations offer classic and boneless wings as well as chicken tenders that are cooked-to-order and tossed in a variety of sauces. The company has franchised nearly 1,700 restaurants and operates 36 company-owned restaurants in 7 different countries. Wingstop was founded in 1994 and is based in Addison, TX.
Wingstop is part of the Zacks Retail – Restaurants industry group, which currently ranks in the bottom 35% out of approximately 250 industries. Because this industry is ranked in the bottom half of all Zacks Ranked Industries, we expect it to underperform the market over the next 3 to 6 months.
Candidates in the bottom half of industry groups can often represent solid potential short candidates. While individual stocks have the ability to outperform even when included in poor-performing industries, their industry association serves as a headwind for any potential rallies. Wingstop is fighting an uphill battle and the stock is confirming this notion as it continues to make a series of lower lows.
WING has fallen short of estimates in each of the last two quarters. The restaurant company most recently reported Q4 EPS in February of $0.24, missing the $0.32 consensus estimate by -25%.
In Q3 of last year, WING once again missed estimates when it reported EPS of $0.29. This represented a -17.14% miss versus the $0.35 estimate. Consistently falling short of earnings estimates is a recipe for underperformance, and WING is no exception.
WING has been on the receiving end of negative earnings estimate revisions as of late. For the current quarter, analysts have decreased estimates by nearly 14% in the past 60 days. The Q1 Zacks Consensus EPS Estimate is now $0.38, reflecting a -13.64% regression relative to the same quarter last year. 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.
WING is in a sustained downtrend. The stock is making a series of lower lows even as the market has rallied over the past few weeks. Also note how both moving averages have rolled over and are sloping down – another good sign for the bears.
Recent earnings misses and an unpredictable equity market don't exactly favor bullish WING investors. Our Zacks Style Scores depict a weakening outlook for this stock, as WING is rated a worst-possible 'F' in our Value category and a 'D' for our overall VGM score. A deteriorating fundamental and technical backdrop show that this stock is fighting an uphill battle.
The fact that WING is part of one of the worst-performing industry groups simply adds another headwind to a long list of concerns. Potential investors should only think about including this stock in their portfolio as part of a hedge or short strategy. Bulls will want to steer clear of an overvalued WING until the situation shows major signs of improvement.
In its weekly release, Baker Hughes Company reported that the U.S. rig count was higher than the prior-week tally of 663. The rotary rig count, issued by Baker Hughes, usually gets published in major newspapers and trade publications.
Baker Hughes' data, issued at the end of every week since 1944, helps energy service providers gauge the overall business environment of the oil and gas industry. The number of active rigs and its comparison with the prior-week figure indicates the demand trajectory for Baker Hughes' oilfield services from exploration and production companies.
Total US Rig Count Rises: The count of rigs engaged in the exploration and production of oil and natural gas in the United States was 670 for the week through Mar 25, higher than the prior-week count of 663. The current national rig count is higher than the year-ago level of 417.
The number of onshore rigs for the week ended Mar 25 totaled 653, higher than the prior-week count of 648. In offshore resources, 14 rigs were operating, higher than the prior-week count of 12.
US Oil Rig Count Grows: Oil rig count was 531 for the week ended Mar 25, higher than the prior-week figure of 524. The current number of oil rigs — far from the peak of 1,609 attained in October 2014 — is up from the year-ago figure of 324.
Natural Gas Rig Count Flat in the US: Natural gas rig count of 137 was in line with the prior-week figure. The count of rigs exploring the commodity is higher than the prior-year week's tally of 92. Per the latest report, the number of natural gas-directed rigs is 91.5% lower than the all-time high of 1,606 recorded in 2008.
Rig Count by Type: The number of vertical drilling rigs totaled 25 units, higher than the prior-week count of 21. Horizontal/directional rig count (encompassing new drilling technology with the ability to drill and extract gas from dense rock formations, also known as shale formations) of 645 compared favorably with the prior-week level of 642.
Gulf of Mexico (GoM) Rig Count Increases: GoM rig count was 14 units, all being oil-directed. The count was higher than the prior-week number of 12.
Permian — the most prolific basin in the United States — recorded a weekly oil rig tally of 318, higher than the prior-week count of 315. Thus, the basin's oil drilling rig count increased in eight of the prior nine weeks.
The West Texas Intermediate crude price is trading above $100 per barrel, marking a massive improvement from the past year. The commodity price shot up, primarily due to the escalation of Russian attacks on Ukraine. Higher oil prices will pave the way for rig additions despite a slowdown in drilling activities as upstream players mainly focus on stockholder returns rather than boosting output.
Meanwhile, investors may keep a close eye on energy stocks like Whiting Petroleum Corp. and Continental Resources, Inc. The companies are expected to benefit from the current healthy oil price scenario.
Whiting Petroleum is a leading upstream energy company and the top producer of crude oil in North Dakota. With oil prices improving at a massive pace, Whiting Petroleum is expected to continue generating handsome cash flows while maintaining a healthy balance sheet.
Headquartered in Denver, CO, Whiting Petroleum has witnessed upward earnings estimate revisions for 2022 in the past 30 days. Looking at the price chart, WLL has gained 154.8% over the past year, outpacing the 94.6% improvement of the composite stocks belonging to the industry. WLL currently carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Continental Resources is also a leading upstream energy company with proven reserves in North Dakota and Oklahoma. The oil inventories of Continental Resources are among the best in the industry.
Headquartered in Oklahoma City, Continental Resources has witnessed upward earnings estimate revisions for 2022 in the past 30 days. Considering the price chart, Continental Resources — currently carrying a Zacks Rank #3 (Hold) — has gained 152.6% over the past year, outpacing the 94.5% improvement of the composite stocks belonging to the industry.
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JAKKS Pacific, Inc. (JAKK) : Free Stock Analysis Report
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Whiting Petroleum Corporation (WLL) : Free Stock Analysis Report
Wingstop Inc. (WING) : Free Stock Analysis Report
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