For Immediate Release
Chicago, IL – September 26, 2022 – Zacks Equity Research shares Bank OZK OZK as the Bull of the Day and Spirit AeroSystems SPR asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Exxon Mobil Corp. XOM, Chevron Corp. CVX and Schlumberger Ltd. SLB.
Here is a synopsis of all five stocks.
Bull of the Day:
The Zacks Finance Sector has displayed a marginal amount of relative strength in 2022, down roughly 18% vs. the S&P 500’s 21% decline.
A highly-ranked stock residing in the sector, Bank OZK, offers financial products and services, including savings accounts, personal and business loans, debit and credit cards, mortgages, cash management, online banking services, and many others.
The company’s earnings outlook has turned visibly bright over the last several months, pushing the stock into a favorable Zacks Rank #1 (Strong Buy).
For investors seeking a strong stock currently displaying favorable characteristics, let’s take a deeper dive into the company.
Over the last three months, Bank OZK shares have been notably strong, increasing by nearly 6% in value and widely outperforming its sector.
And over the last month, OZK shares have continued to display relative strength, declining 5% vs. its sector’s 7% decline.
The favorable price action of OZK shares indicates that market participants have defended the stock at a much higher level than most, undoubtedly a positive in the historically-volatile 2022.
Further, valuation levels appear enticing – the company’s 8.9X forward earnings multiple sits nicely below its five-year median of 10.8X and represents a sizable 35% discount relative to its Zacks Sector.
Bank OZK’s growth profile is impressive – earnings are forecasted to climb a marginal 1% in FY22 and a further 7.7% in FY23.
Further, top-line estimates reflect sizable growth; revenue is forecasted to climb 7.5% in FY22 and an additional 9% in FY23.
Who doesn’t enjoy getting paid? Fortunately, for those seeking an income stream, OZK has that more than covered with its sector-beating annual dividend yield of a sizable 3.2%.
The company has upped its dividend payout a jaw-dropping 20 times over the last five years, paired with a 12.4% five-year annualized dividend growth rate.
OZK has been on an impressive earnings streak, beating revenue and earnings estimates in its previous nine quarters.
Just in its latest print, Bank OZK penciled in an 8% bottom line beat and a 2.4% revenue beat.
One of the best ways investors can find expected winners within the market is by utilizing the Zacks Rank – one of the most potent market tools out there.
A portfolio consisting of Zacks Rank #1 (Strong Buy) stocks has beaten the market in 26 of the last 31 years with an average annual return of 24%.
Additionally, the top 5% of all stocks receive the highly coveted Zacks Rank #1 (Strong Buy). These stocks should outperform the market more than any other rank.
Bank OZK would be an excellent stock for investors to keep on their watchlists, as displayed by its Zack Rank #1 (Strong Buy).
Bear of the Day:
The Zacks Aerospace Sector has mightily struggled over the last five years, down nearly 30% and coming nowhere near the general market’s performance.
A stock undergoing some turbulence in the sector, Spirit AeroSystems, has landed itself into an unfavorable Zacks Rank #5 (Strong Sell), telling us its near-term earnings outlook is under pressure.
Spirit AeroSystems Holdings, Inc. is one of the most prominent independent non-OEM aircraft parts designers and manufacturers of commercial aerostructures worldwide.
Further, the company’s core product catalog includes fuselages, pylons, nacelles, and wing components.
In fact, SPR resides in the Zacks Aerospace – Defense Industry, which is currently ranked in the bottom 16% of all Zacks Industries.
Due to its unfavorable industry ranking, we expect it to underperform the market over the next three to six months.
Let’s take a deeper look at the company.
Year-to-date, it’s been a challenging road for SPR shares, down more than 40% and widely underperforming the S&P 500.
And over the last month, shares are down 25%.
The unfavorable price action SPR shares have undergone tells us sellers have had the upper hand all year long.
Spirit AeroSystems has struggled to exceed quarterly estimates, falling short of the Zacks Consensus EPS Estimate in six of its previous ten quarters. Just in its latest print, SPR registered a triple-digit 425% bottom-line miss.
However, top-line results have been notably strong, with SPR exceeding revenue estimates in seven of its last ten prints.
Unfavorable price action and negative estimate revisions from analysts paint a grim picture for the company in the short term.
Spirit AeroSystems is a Zacks Rank #5 (Strong Sell), telling us it has a weak near-term earnings outlook.
Instead, investors should pivot to stocks that either carry a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy) – these stocks have a much stronger earnings outlook.
3 Top Large-Cap Energy Stocks to Buy on the Dip
Broad inflationary pressures are increasing. To rein in inflation, which is near a 40-year high mark, the Federal Reserve announced the approval of its third successive interest-rate rise of 0.75 percentage points. There are signals from the Fed that in the upcoming meetings, additional significant rate hikes are likely, thereby increasing fears of recession and spurring market volatility. The energy sector is known for its volatile business scenario, and a slowdown in economic activities could significantly dent energy fuel demand.
Companies belonging to the sector have been witnessing a choppy business environment since the onset of the coronavirus pandemic. The initial pandemic period, when there were no vaccines, saw an environment of heightened uncertainties. The commodity’s price plunged to a negative $36.98 per barrel on Apr 20, 2020.
However, with the rapid developments of vaccines by the scientists, which in turn led to the gradual opening of the economies, the pricing scenario of West Texas Intermediate (WTI) crude improved drastically over time to reach $123.64 per barrel on Mar 8, 2022. Oil price data are per the U.S. Energy Information Administration.
Considering the backdrop of heightened uncertainties engulfing the energy market, it would be wise for investors to bet on large-cap stocks like Exxon Mobil Corp., Chevron Corp. and Schlumberger Ltd.
Large-Cap Energy Players to the Rescue
Operations of large-cap energy companies are more stable than mid or small-cap players. This is because they have large, diversified and well-established operations, and client goodwill. Hence, large-cap companies have strong capabilities to sail through business uncertainties, banking on strong financials. Also, big energy companies have a steady dividend payment history, making those stocks relatively less volatile in uncertain times. Along with protecting a portfolio in uncertain times, these stocks have long-term steady growth prospects.
Hence, it’s an ideal time to buy large-cap stocks from the energy space, especially when prices are down due to the overall volatile business environment fueled by recession fears. We have employed our Stock Screener to zero in on three such stocks with a market capitalization value of significantly higher than $10 billion. All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
3 Stocks to Buy
ExxonMobil: ExxonMobil has a pipeline of key projects in the Permian – the most prolific basin in the United States – and offshore Guyana. In the Permian, ExxonMobil has an inventory of more than 8,000 well locations, with the integrated energy major estimating a net of 10 billion oil-equivalent barrels of recoverable resource. In offshore Guyana, it made several oil and gas discoveries. Like upstream businesses, ExxonMobil also benefits from its strong refinery utilization.
In the past month, XOM has lost 8.1%, creating a buying opportunity since the stock is likely to see earnings growth of 23.7% in the next five years, surpassing the industry’s 11.9%.
Chevron: CVX is banking on its low-cost assets, comprising the prolific Permian. Chevron’s conservative capital spending discipline has cleared the path for solid cashflow generation. Among the companies in the energy sector, Chevron’s balance sheet is among the strongest, giving the company an edge to counter any business downturn.
In the past month, CVX has lost 5.1%, creating a buying opportunity since the stock is likely to see earnings growth of 14% in the next five years, surpassing the industry’s 11.9%.
Schlumberger: SLB believes strong upstream E&P spending will continue because of an urgency to increase oil and gas production capacity. This is going to aid Schlumberger’s oilfield services.
In the past month, SLB has lost 4.2%, creating a buying opportunity since the stock is likely to see earnings growth of 38.8% in the next five years, surpassing the industry’s 35.3%.
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Chevron Corporation (CVX) : Free Stock Analysis Report
Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
Schlumberger Limited (SLB) : Free Stock Analysis Report
Spirit Aerosystems Holdings, Inc. (SPR) : Free Stock Analysis Report
Bank OZK (OZK) : Free Stock Analysis Report
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