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Wesco International and Foot Locker have been highlighted as Zacks Bull and Bear of the Day

For Immediate Release

Chicago, IL – April 13, 2023 – Zacks Equity Research shares Wesco International WCC as the Bull of the Day and Foot Locker, Inc. FL as the Bear of the Day. In addition, Zacks Equity Research provides analysis on BP plc BP, Shell plc SHEL and TotalEnergies SE TTE.

Here is a synopsis of all five stocks:

Bull of the Day:

Wesco International is a global distributor of electrical, industrial, and communications products. Wesco also provides supply chain management and logistics services.

The firm posted a stellar 2022 and its outlook continues to improve as it benefits from secular trends such as electrification, cloud computing, and beyond. Wesco boasts many other solid fundamentals and it is sitting at rather attractive entry points on both the technical front and the valuation side. Plus, Wesco in early March declared its inaugural quarterly cash dividend on common stock.

Rowing with the Current

Wesco's array of products and services help the company cast a wide net, with offerings that help drive forward crucial segments of the economy such as communications & networking, power generation and distribution, electrical and lighting, security, automation, and renewable energy. Wesco beefed up its reach and portfolio when it acquired Anixter in June 2020.

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Wesco splits its business into three core operating segments: Electrical & Electronic Solutions, Communications & Security Solutions, and Utility & Broadband Solutions.

The company is set to benefit for decades to come from the never-ending need for cloud computing and other vital communication services. Wesco is also gaining steam as the U.S. ramps up its spending on renewable energy sources such as solar and battery storage. Solar and battery storage are two of the largest growth areas within all of the broader non-fossil fuel energy segment.

Wesco's electric vehicle segment should help it expand for years to come. The Alliance for Automotive Innovation said the number of EVs sold globally soared 60% last year. Plus, EVs still accounted for just 10% of U.S. vehicle sales in December 2022, up from around 2% in 2020.

Some projections call for EVs to account for upward of 40% of the market by as soon as 2030. With the massive EV expansion and other electrification efforts in the U.S. and beyond comes the need to invest heavily in revamping, updating, and building out the aging power grids.

Recent Growth and Outlook

Wesco boasts roughly 140K customers across over 50 countries. The Pittsburgh, Pennsylvania-headquarter firm reportedly holds a roughly 15% share of the U.S. electrical distribution market and it could keep slowly adding to its reach.

Wesco grew its revenue by 18% YoY in 2022 to $21.42 billion to help its adjusted earnings soar 65%—on top of 48% revenue in both 2021 and 2020.

Better yet, WCC provided upbeat guidance when it reported back in mid-February, with its FY23 consensus earnings estimates up 6% and FY24's figure 13% higher. Plus, its most recent estimate for 2024 is already 8% higher than the current consensus. All of these positive earnings revisions trends help Wesco land a Zacks Rank #1 (Strong Buy) right now. These recent revisions are part of a long-term upward revisions trend dating back to 2020.

Zacks estimates call for Wesco to follow up this huge stretch of top and bottom line growth with another 7% earnings and revenue growth in 2023 and more growth in 2024.

Price Movement, Valuation & More

Wesco stock has soared 3,000% over the past 20 years for a 19% annualized return. This performance blows away the Zacks Tech sector's 490% and the S&P 500's 350%.

More recently, WCC took off following its covid lows, with it up 430% in the past three years vs. Tech's 50% and its industry's 135%. Wesco shares have climbed 11% in the last 12 months, while Tech fell 10%.

Thankfully, investors can now scoop up Wesco stock around 20% below its March peaks. The selling came after WCC reached heavily overbought RSI levels.

WCC is now well under neutral RSI levels (50) at 41. The stock also just recently bounced back above its 200-day moving average. Wesco is also trading 45% below its average Zacks price target at around $139 per share.

Wesco's valuation levels are looking super attractive at the moment. WCC is trading at a 40% discount to its 20-year median and a roughly 66% discount to the Zacks Tech sector at just 7.7X forward 12-month earnings.

Despite its huge run over the last three years, WCC is trading 30% below its three-year median and 50% under its sector to help showcase its impressive and improving earnings outlook.

Wesco has a rather solid balance sheet and it is so confident in its business model despite near-term economic slowdown concerns that it declared on March 3 its first-ever quarterly cash dividend on common shares. The first $0.375 per share dividend was payable on March 31. WCC's current dividend yield sits at 1.1%.

Bottom Line

Wesco is a stable business that's been around since the 1920s that's benefiting from secular tailwinds across various backbones of the entire U.S. and global economy.

Cloud computing and networking infrastructure are only growing more integral. It's also worth constantly remembering that the most powerful and richest nations in the world are actively helping fuel the broader renewable and EV expansion, alongside Wall Street titans. And these are just some of the areas that Wesco operates in.

Bear of the Day:

Foot Locker, Inc. is in the midst of a rather significant overhaul of its business as it tries to adapt for the future. Foot Locker, under the stewardship of CEO Mary Dillon, is trying to move away from malls and its over reliance on Nike, among other initiatives.

The footwear retailer expects these efforts will yield long-term results to the detriment of near-term profits. Foot Locker's earnings outlook has tumbled since it released its quarterly results and provided updated guidance on March 2020.

Revamping for the Road Ahead

Foot Locker is a shoe retailer that aims to lead the "celebration of sneaker and youth culture around the globe." The company currently has roughly 2,700 stores in around 30 countries that includes its namesake, Kids Foot Locker, Champs Sports, atmos, and WSS. The company has grown within the broader sneaker revolution that's developed alongside the rise of Nike, its Jordan Brand, and other popular and trendy shoemakers.

Nike is the most powerful and popular sneaker company in the U.S., even amid a resurgent Adidas and newer challengers. This has helped Foot Locker for years, and Nike has continued to work with Foot Locker even as Nike tries to move away from many other retailers to go at it alone.

Foot Locker is actively reshaping its business to move away from its huge dependence on Nike as the footwear and apparel titan moves heavily toward its own direct-to-consumer businesses.

Nike is still very important to Foot Locker, and it is doing all it can to have the best relationship possible. Nike had at one point made up 70% of Foot Locker's overall sales. The company hopes for Nike to account for around 60% of sales in the near term, as it builds up its portfolio with New Balance, Puma, and others.

Foot Locker's 2022 revenue dipped 2% against a tough-to-compete year. Meanwhile, its adjusted earnings fell by around 30%. FL said that it expects its profits to drop by roughly 30% again in 2023 as it spends to prepare for the future.

Zacks estimates call for Foot Locker's adjusted earnings to tumble 30% on 4.3% lower revenue. "We are entering 2023 with a focus on resetting the business – simplifying our operations and investing in our core banners and capabilities to position the Company for growth in 2024 and beyond," CEO Mary Dillon said in prepared remarks.

Bottom Line

Foot Locker's negative earnings revisions help it land a Zacks Rank #5 (Strong Sell) right now. FL shares have also been on a rather up-and-down ride in 2023, having surged higher to start the year only to dive lower.

Foot Locker shares are up around 6% YTD, but they are still down nearly 40% below their 2021 levels. Some investors might, therefore, want to consider nibbling at the stock. But it might be best to wait and see how Fl's revamp goes. Plus, the stock has dramatically underperformed the market and its industry over the past decade.

Additional content:

Does the EV Revolution Pose a Serious Threat to the Oil Industry?

The rise of electric vehicles (EVs) has been one of the most significant changes in the transportation industry in recent years. As governments worldwide work to reduce carbon emissions, the push towards cleaner energy is gaining momentum, and electric vehicles are becoming an increasingly popular choice among consumers.

While EVs still account for a small share of global vehicle sales, they are poised to lead the transportation space in the coming years. This has led some to wonder whether the EV boom poses a serious threat to the oil industry, which has long been the backbone of the global energy market.

In this article, we will explore this question in detail, looking at the current state of the EV market, the potential impact on oil demand, and how oil companies may adapt to the changing landscape.

The Electric Future Is Here

The growth of the EV industry has been impressive. In 2020, despite the COVID-19 pandemic's impact on the global economy, EV sales continued to rise, reaching a record high of 3.24 million units, according to EV-volumes.com. Sales of electric cars doubled in 2021 and rose another 55% in 2022 to hit a record of 10.1 million units.  The International Energy Agency predicts that the number of electric cars on the road could reach more than 300 million by 2030, up from just 16.5 million in 2021.

This growth is being driven by several factors, including the increasing availability of affordable EVs, improvements in battery technology, and government incentives to encourage EV adoption. Legacy automakers are revving up their e-mobility game and are setting deadlines to phase out ICE models. Pure-play EV makers are focused on expanding their vehicle lineup.

Could the EV Boom Eat Away Oil Demand?

The rise of EVs presents a threat to the oil industry as EVs do not require oil as their primary fuel source. According to the International Energy Agency (IEA), transportation accounts for around 60% of global oil demand, and the rise of EVs could significantly reduce this demand. Per BloombergNEF estimates, EVs on the roads are displacing 1.5 million barrels of oil demand per day. Electric cars are expected to displace around 2.5 million barrels of oil demand daily by 2025.BNEF estimates that electric and fuel cell vehicles will displace 21 million barrels per day in oil demand by 2050.

Some industry watchers and economists view EVs as the archnemesis of the oil industry. For instance, Stanford University economist Tony Seba is of the view that EVs will destroy the global oil industry by 2030. Akshat Rathi from Bloomberg News went on record claiming that "every F-150 Lightning destroys 50+ barrels of oil demand forever." In 2016, Bloomberg predicted EVs to trigger a global oil crisis.

While there's no denying that rapid EV momentum is set to hurt the oil industry's prospects, things don't look as appalling now as predicted by some analysts and economists.

It's also worth noting that the impact on oil demand will vary by region. In countries with a strong renewable energy infrastructure, such as Norway, where EVs already account for major chunk of all new car sales (around 80% in 2022), the shift away from oil will be more rapid. In contrast, in developing countries with limited charging infrastructure and high levels of oil dependency, the transition to EVs may take longer.

Having said that, it's certain that EVs will not replace all oil demand. The petrochemical industry uses oil as a feedstock to produce plastics, fertilizers, and other products. Additionally, heavy-duty vehicles, such as trucks and airplanes, are not yet feasible for electrification and continue to rely on oil.

How Are Oil Companies Adapting to the Swift EV Transition?

The oil industry is already taking steps to adapt to the rise of electric vehicles. Many companies are investing in renewable energy, such as wind and solar power, to diversify their portfolios and reduce their carbon footprints.

For instance, BP plc has set a target of becoming a net-zero company by 2050 and plans to invest $5 billion per year in low-carbon energy by 2030.The integrated company intends to invest in and create its renewable energy generation capacity of 20 gigawatts by 2025. In February, it announced plans to invest $1 billion in EV charging stations across the United States by 2030.EV charging is one of BP's five strategic transition growth engines, wherein the company expects to grow investment over the next 10 years.

BP currently offers 22,000 EV charge points worldwide and aims for more than 100,000 by 2030, with 90% of those being quick or ultra-fast. BP has also invested $7 million in IoTecha, in sync with its objective to provide more than 70,000 public EV charging points worldwide by 2030.

Oil companies are also exploring new business models, such as offering charging infrastructure and battery storage solutions to EV owners. Shell plc, Europe's largest oil company, is investing in a network of fast-charging stations across Europe. Early this year, the company inked a deal to acquire Volta, in a bid to diversify from oil and invest in green energy management. It bought Greenlots — another company involved in EV charging and management — in 2019 and ubitricity — U.K.'s largest EV charging network — in 2021.

Shell also has the same ambitious target of becoming a net-zero emissions energy player by 2050 or earlier. By 2030, the integrated energy company plans to lower absolute emissions by 50%.

TotalEnergies SE also strives to be a net-zero carbon emission company by 2050 and has taken the necessary steps to achieve the target. TTE plans to add more renewable gross capacity in operation by 2023-end and plans to invest $5 billion to expand the Renewable & Electricity business in 2023. It is partnering with automakers to offer home charging solutions. TotalEnergies' EV charging network in Belgium is praiseworthy.

TTE has already won public contracts to install and operate more than 3,500 EV charging stations in Brussels and Antwerp, Belgium. Last September, it received a contract to install and commercially operate 4,400 EV charging points in West Flanders and Flemish Brabant, Belgium, over the next two years.

While SHEL carries a Zacks Rank #4 (Sell), BP and TTE are #3 Ranked (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Last Word

The EV revolution does present a threat to the oil industry, as it could lead to a decline in oil demand and prices. However, it is essential to note that oil remains an essential resource for many industries, and EVs are not yet a viable solution for all transportation needs. Oil companies have recognized the need to adapt and are investing in renewable energy sources to diversify their portfolios. As the world continues to shift towards sustainable energy sources, the oil industry's ability to adapt will determine its future success.

Zacks Names "Single Best Pick to Double"

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BP p.l.c. (BP) : Free Stock Analysis Report

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