Yahoo Finance Sherwin-Williams and Cracker Barrel have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – July 27, 2023 – Zacks Equity Research shares Sherwin-Williams SHW as the Bull of the Day and Cracker Barrel Old Country Store CBRL as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Accenture plc ACN, CME Group Inc. CME and HIVE Digital Technologies Ltd. HIVE.
Here is a synopsis of all five stocks.
Bull of the Day:
Sherwin-Williams is a Zacks Rank #1 (Strong Buy) that engages in the manufacture, distribution, and sale of paints, coating, and related products to professional, industrial, commercial, and retail customers.
The stock has hit 2023 highs after struggling for much of 2022. Positive earnings momentum has investors hopeful that the stock can continue higher and set new all-time highs for the first time since 2021.
About the Company
Sherwin-Williams was founded in 1866 and headquartered in Cleveland, OH. The company operates through three segments: The Americas Group, Consumer Brands Group, and Performance Coatings Group.
The stock has a Zacks Style Score of “A” in Momentum, but “D” in Value. The valuation is an issue for some investors as its PE is over 30.
Sherwin-Williams currently employs over 60,000 and has a market cap of $70 billion. It pays a small dividend of 0.9%.
Q4 Earnings Beat
The company recently reported an earnings beat of 21%. This was the fourth straight EPS beat, and the seventh upside surprise out of the last ten quarters.
The company saw EPS of $3.29 v the $2.71 expected. Revenues came in at $6.24B, which was better than the expected $6.02B. Adjusted EBITDA was up 31.4% y/y and margins were 20.6%. The Consumer Brands Group revenue was higher by 5.1% y/y, while U.S. and Canada net sales were higher by 9.5%.
FY23 was raised to a range of $9.30-9.70 vs the $8.75 expected.
Management cited a year-over-year gross margin improvement of 46% as the reason for the positive earnings report. Strong sales volume combined with moderating raw materials costs helped bottom-line results.
Analyst Estimates
Looking at analyst estimates since earnings, we see numbers going slightly higher across all time frames.
Over the last 7 days, estimates for the current quarter have gone from $2.54 to $2.55. For the next quarter, we see a similar tick higher, with estimates going from $1.42 to $1.43.
Looking at the bigger picture, next year’s estimates have gone from $10.05 to $10.21 over the last 30 days. This move of 1.5% is not huge but is trending in the right direction after a period of falling estimates.
In addition to hiking estimates, analysts were quick to lift their price targets for SHW. Wells Fargo reiterated its Equal Weight but lifted its target from $275 to $300. Goldman Sachs reiterated their Buy rating and raised targets to $314 from $275. RBC reiterated its Outperform and lifted from $272 to $315.
The Technicals
The stock rallied over 200% after the COVID crash as work from home was a tailwind for paint-related products. After business slowed in 2022, the stock pulled back over 40%.
The low of the pullback lined up perfectly with a 61.8% retracement and after a double bottom test of that support, the stock accelerated higher to 2023 highs.
Since early June, the stock has been above the 200-day MA and the 21-day MA has supported every down move since.
Those looking to get into the stock should target the moving averages. The 21-day is currently at $264, the 50-day at $249, and the 200-day at $235.
Bottom Line
Sherwin-Williams is a steady company that has gotten its earnings momentum back on track.
On the fundamental side, positive earnings beats should continue due to management’s ability to improve margins. On the technical side, the bulls are in full control and any dip should be targeted for a potential long-term move to all-time highs.
Bear of the Day:
Cracker Barrel Old Country Store is a Zacks Rank #5 (Strong Sell) that is engaged in the ownership and operation of full-service restaurants with a restaurant and a retail store in the same unit.
The restaurants serve home-style country food, including meatloaf, homemade chicken n' dumplings as well as its signature biscuits using an old family recipe. Meanwhile, the retail stores offer unique gifts and self-indulgences.
The stock has struggled all year and is trading close to recent lows as earnings disappoint and analyst estimates continue to move lower.
While the dividend is attractive, investors might want to shop elsewhere for their next investment.
About the Company
Cracker Barrel was founded in 1969 and is headquartered in Lebanon, TN.The company operates over 660 stores and employs over 73,000 people.
CBRL is valued at $2 billion and has a Forward PE of 17. The stock holds Zacks Style Scores of “B” in Momentum, but “C” in both Growth and Value. The stock pays a healthy dividend of 5.5%
Q3 Earnings
Cracker Barrel last reported earnings in early June, missing expectations by 9%. This was the second miss over the last three quarters, which has kept the stock from going higher in a strong year for the stock market.
Looking closer at the quarter, the company reported Q3 at $1.21, below the $1.33 expected. Revenues also missed, coming in at $832.7M v the $845M expected.
Management commented that the near-term environment will remain challenged due to heightened economic uncertainty, lower discretionary spending, and weaker consumer confidence. While that narrative doesn’t line up with the overall economic tone, management is clearly seeing issues with its business.
One issue was Same Store Sales were down 4.6% v the +2.8% expected. The company now sees Q4 +1-3% year over year.
Estimates
Earnings estimates have been trending lower as that Q3 report and revenue guide has forced analysts to continue to lower numbers.
Over the last 60 days, numbers for the current quarter plummeted from $2.03 to $1.70 or 16%.
For the current year, analysts have lowered estimates or 8% over that same time frame.
Looking at the longer term, things do not improve. For next year, estimates have fallen from $6.98 to $6.58 over the last 60 days or almost 6%.
Technical Take
The stock is trading at multi-year lows in a market that has been very strong. This relative weakness is concerning, especially with a 5% dividend to offer investors.
CBRL has had trouble at the $120 level and is now threatening to take out 2023 lows. If the company disappoints on earnings again, look for new lows and a possible test of the COVID lows.
For bulls looking to buy, the 200-day moving average at $105 needs to be taken first. A combination of that technical breakout and an earnings turnaround would bring investors back into the name.
In Summary
The relative weakness shown in CBRL should signal to investors to shop elsewhere for their next investment. Don’t let that dividend tempt you and be patient with this one if you like the name.
Additional content:
3 Crypto Stocks to Watch on the 2023 Ethereum Rally
While Bitcoin had a great first half of 2023, so did another crypto coin: Ethereum. Ethereum, which trails only Bitcoin in the crypto world, is known for its uses as a blockchain-powered, open-ended decentralized software platform.
Since the “crypto winter” of 2022, the network completed a significant update, known as the Shanghai Upgrade, under which it shifted its blockchain validation system from proof-of-work to proof-of-stake, and marked one of the most significant developments in the relatively small history of cryptocurrency.
Under the proof-of-stake system, miners of Ethereum will rely on Ether holders who will act as validators, thus lending more assurance to the system. In essence, proof-of-stake allows holders of Ether to lock up their funds as collateral to validate transactions and create new blocks, reducing the need for extensive computation and energy consumption.
Powered by this development and what has largely been hailed as a crypto rebound, the price of Ethereum has soared in 2023, going up 54.9% year to date, as of Jul 25. In this endeavor, it lags behind Bitcoin, which has gone up 76.4% in the same period. But one must remember that while Bitcoin is primarily a digital currency, Ethereum is a programmable blockchain platform. Ethereum’s blockchain has a reputation for being highly versatile and adept in building complex applications.
Historically, a state of fast-rising interest rates has not proven conducive to the crypto market. However, a recent spate of data, which showed cooling inflation and market speculation that the Fed might be ending its hawkish monetary policy stance soon, means that things are looking up again for the sector.
So, with a “crypto spring” in the offing and Ethereum already starting to make good of the state of the market, it might be prudent to keep a watch on stocks exposed to this open-source, decentralized blockchain platform.
Accenture plc: This global system integrator, which provides consulting, technology and other services, markets Ethereum-based blockchain solutions to businesses to make it easier to process payments.
Accenture’s expected earnings growth rate for the current year is 8.2%. The Zacks Consensus Estimate for its current-year earnings has improved by 0.1% over the past 60 days. Accenture currently carries a Zacks Rank #3 (Hold).
CME Group Inc.: This company operates as one of the world's largest futures exchanges and offers a wide range of derivatives contracts. It provides various solutions to invest in cryptocurrencies like Ethereum.
CME Group’s expected earnings growth rate for the current year is 11.5%. The Zacks Consensus Estimate for its current-year earnings has improved 1.6% over the past 60 days. CME Group currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
HIVE Digital Technologies Ltd.: This cryptocurrency mining company operates in Canada, Sweden and Iceland. It engages in the mining and sale of digital currencies, including Ethereum Classic.
HIVE’s expected earnings growth rate for the current year is 78.1%. The Zacks Consensus Estimate for its current-year earnings has improved 55.3% over the past 60 days. HIVE currently carries a Zacks Rank #1.
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CME Group Inc. (CME) : Free Stock Analysis Report
Accenture PLC (ACN) : Free Stock Analysis Report
Cracker Barrel Old Country Store, Inc. (CBRL) : Free Stock Analysis Report
The Sherwin-Williams Company (SHW) : Free Stock Analysis Report
HIVE Digital Technologies Ltd. (HIVE) : Free Stock Analysis Report