For Immediate Release
Chicago, IL – October 4, 2022 – Zacks Equity Research shares Dillard's DDS as the Bull of the Day and JELD-WEN JELD as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Microsoft Corp. MSFT, Roblox Corp. RBLX and Matterport, Inc. MTTR.
Here is a synopsis of all five stocks:
Bull of the Day:
Dillard's, a Zacks Rank #1 (Strong Buy), is a long-term market winner within the Zacks Retail – Wholesale sector. The stock has held up extraordinarily well this year while the general market continues to hover in bear territory. Stocks that are able to show resilience during bear markets and weather the volatility tend to lead the upside once the market turns the corner.
DDS sports the highest-possible 'A' rating in our Zacks Value Style Score category, indicating an increased likelihood that the stock continues to propel higher. Dillard's is trading at just a 7.53 forward P/E. The powerful combination of relative undervaluation and positive earnings estimate revisions should serve bullish DDS investors well into the future.
Dillard's is a component of the Zacks Retail – Regional Department Stores industry, which currently ranks in the top 37% out of approximately 250 industry groups. 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. Quantitative research studies suggest that approximately half of a stock's future price appreciation is due to its industry grouping. By targeting stocks contained within leading industry groups, we can dramatically improve our odds of success.
Dillard's operates retail department stores where it offers merchandise, cosmetics, home furnishings, and other consumer goods. DDS is also one of the nation's largest fashion retailers. The company operates approximately 280 stores as well as an online presence. Dillard's was founded in 1938 and is headquartered in Little Rock, AR.
DDS is much more than just a department store chain. The company owns a real estate investment trust (REIT), which helps it to enhance its liquidity position. In addition, Dillard's owns a captive insurance company, enabling it to manage risks more efficiently and provide access to reinsurance markets. The retailer is also engaged in the general contracting construction business.
Recent Earnings and Future Estimates
DDS has been on a hot streak in terms of earnings surprises, beating estimates in each of the past four quarters. Back in August, the company reported Q2 EPS of $9.3/share, a +222.92% surprise over the $2.88 consensus estimate. Dillard's has posted a trailing four-quarter average earnings surprise of +214.96%. When a company is consistently exceeding estimates by this wide of a margin, it typically creates a 'tailwind' and boosts price momentum.
Sales for the second quarter of $1.59 billion also topped estimates by 2.23%. DDS has surpassed revenue estimates in each of the last four quarters.
In the past 60 days, analysts have raised their full-year EPS projections by +38.34%. The Zacks Consensus EPS Estimate now stands at $36.23 per share. Revenues are anticipated to climb 4.79% to $6.8 billion.
Charting the Course
DDS is up nearly 17% this year alone, widely outperforming the major indices. Only stocks that are in extremely powerful uptrends are able to weather bear markets and corrections so gracefully. 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 the 10-month moving average (as evidenced by the blue line) is sloping up. The stock is forming a bullish cup-with-handle pattern and is showing relative strength versus the market. With both strong fundamentals and technicals, DDS has been one of the biggest winners over the past several years.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. And as we know, Dillard's has seen a recent batch of positive revisions. As long as this trend remains intact (and DDS continues to post earnings beats), the stock should continue its bullish run this year.
Other Factors to Consider
Dillard's remains focused on maintaining a strong balance sheet and liquidity. The company owns 90% of its retail stores and 100% of its corporate headquarters, distribution and fulfillment facilities. DDS has relatively low long-term debt obligations.
Earlier this year, management approved a $500 million share repurchase plan. Additionally, Dillard's board increased its quarterly dividend to 20 cents/share, equating to a yield of 0.29%.
As an established veteran in the industry, Dillard's core business remains strong despite competitive challenges. Buoyed by an undervalued and leading industry group along with a maximum overall Zacks VGM score of 'A,' it's not difficult to see why DDS is a compelling investment.
A history of large earnings surprises along with a strong technical trend certainly warrant a closer look at this top-rated stock. Recent positive earnings estimate revisions should also serve to create a 'floor' in terms of any sudden or unexpected downside moves. If you're looking for a way to diversify your portfolio, make sure to put DDS on your shortlist.
Bear of the Day:
JELD-WEN designs, manufactures, and sells doors and windows primarily in North America, Europe, and Australasia. JELD offers a line of residential interior and exterior products including patio doors, wood and vinyl windows, and sliding wall systems. The company also offers ancillary products and services such as shower enclosures, wardrobes, moldings, trim boards, lumber, and hardware and lock installation.
JELD markets its products under the JELD-WEN, Swedoor, DANA, Corinthian, Stebar, LaCantina, VPI and Breezway brands. It serves wholesale distributors and retailers as well as individual contractors and consumers. JELD-WEN Holding was founded in 1960 and is based in Charlotte, NC.
The Zacks Rundown
JELD has been severely underperforming the market over the past year. A Zacks Rank #5 (Strong Sell) stock, JELD peaked in April of last year – well before the major indices. The stock has been in a price downtrend ever since and is hitting a series of 52-week lows. JELD represents a compelling short opportunity as the market continues its volatile start to the year.
JELD-WEN is part of the Zacks Building Products – Wood industry group, which currently ranks in the bottom 31% 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.
Weak Foundation: Falling Short on Earnings and Deteriorating Forecasts
Earnings misses have been a sore spot for JELD during the past year. The window and door manufacturer has fallen short of estimates in three of the past four quarters. JELD most recently reported Q2 EPS back in August of $0.57/share, missing the $0.69 consensus estimate by -17.39%. Revenues of $1.33 billion also missed the mark by -2.08%. These are the types of negative trends that the bears like to see.
JELD has posted an average earnings miss of -14.75% over the past four quarters. Analysts have been revising earnings estimates downward as of late. For the year, analysts have reduced their EPS estimate by -10.75% in the past 60 days. The 2022 Zacks Consensus EPS Estimate is now $1.66/share, reflecting a -7.78% decline compared to last year.
JELD stock has been steadily falling since last year and has now established a well-defined downtrend. Notice how both the 50-day (blue line) and 100-day (red line) moving averages are sloping down. Shares have declined more than 64% in the past year. The stock continues to trade below both averages, while the averages have acted as steady resistance throughout the down move.
The recent earnings misses in addition to deteriorating estimates are both huge red flags and need to be respected. These will likely serve as a ceiling to any potential rallies, nurturing the stock's downtrend.
JELD's characteristics have resulted in a Zacks Growth Style Score of 'C,' indicating further downside is likely. The fact that this company is included in a bottom-performing industry group simply adds to the growing list of concerns. Investors will want to steer clear of JELD until the situation shows major signs of improvement, or possibly include it as part of a hedge or short strategy.
3 Metaverse Stocks to Keep a Tab On in October
Metaverse, which means a virtual world reachable to an umpteen number of people for communications, business, and more, might sound futuristic. But truth be told, much of our lives are now already controlled online.
In fact, initiatives to mix the digital world with reality using the Internet, and the ever-growing importance of Virtual Reality (VR), Augmented Reality and Mixed Reality are expected to help the metaverse market grow by leaps and bounds in a decade or so.
The metaverse market size, in reality, is estimated to reach $824.53 billion by 2030 from $27.21 billion in 2020. The market is expected to witness a CAGR of 39.1% from 2022 to 2030, according to Verified Market Research, citing a PRNewswire article.
Lest we forget, the increase in demand for remote work amid the coronavirus outbreak worldwide has already helped the metaverse market to grow. At the same time, the growing acceptance of non-fungible tokens and cryptocurrencies has positively impacted this space.
Astute investors should, thus, keep an eye on companies that are positioned to benefit from this growing metaverse market that is at the moment in its early stage.
Anyhow, the broader market isn't doing good, with the major indexes tumbling as the Fed turns hawkish to tame stubbornly high inflation. Thus, the growing metaverse market amid such a bloodbath in the stock market is surely encouraging news for investors.
Some of the prominent companies whose growth will be propelled by metaverse are Microsoft Corp. , Roblox Corp. and Matterport, Inc.. These companies currently carry a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank stocks here.
Microsoft's business is somehow closely linked to the metaverse. When it comes to metaverse-related hardware, Microsoft's AR headset, HoloLens 1 comes in the limelight. In fact, MSFT has already launched the second generation of HoloLens, which is now being used by several companies to save on costs and time, to say the least.
Further, Microsoft aims to be the pioneer in metaverse-based games. As a result, the company has already declared its goal to acquire Activision Blizzard (ATVI) this year, a foremost gaming organization.
The Zacks Consensus Estimate for Microsoft's next-year earnings has moved up 0.2% over the past 60 days. The company's expected earnings growth rate for the current year is 9.6%. MSFT shares have outperformed the Zacks Computer - Software industry over the past two-year period (+10.7% versus -4.2%).
Roblox is known for providing an online entertainment platform, which is actually an early-stage form of a metaverse platform. In fact, prominent artists like Lil Nas X and Tai Verdes have already conducted concerts on Roblox's online platform.
To top it, RBLX already boasts of its own digital currency, Robux, which has more than 50 million daily active users.
The Zacks Consensus Estimate for its current-quarter earnings has moved up 4.4% over the past 60 days. The company's expected earnings growth rate for the next five-year period is 5.6%. RBLX shares have outperformed the Zacks Gaming industry over the past three-month period (+2.1% versus -0.6%).
Matterport aims to merge both the digital and physical worlds. It helps companies to create "digital twins" of real-world locations, houses and complexes, which can be accessed through VR headsets and web browsers to name a few.
Having a market cap of about $1.076 billion, Matterport is one of the smallest metaverse stocks to watch for. After all, its shift from more of a hardware business to a subscription-based software business should give MTTR more potential to scale upward in the long term.
The Zacks Consensus Estimate for the company's current-year earnings has moved up 2% over the past 60 days. The company's expected earnings growth rate for the next year is 24.5%. MTTR shares have outperformed the Zacks Technology Services industry over the past three-month period (+4.7% versus -10.0%).
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