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Novo Nordisk and Nutrien have been highlighted as Zacks Bull and Bear of the Day

For Immediate Release

Chicago, IL – May 10, 2023 – Zacks Equity Research shares Novo Nordisk A/S NVO as the Bull of the Day and Nutrien NTR as the Bear of the Day. In addition, Zacks Equity Research provides analysis on The Wendy's Company WEN, Chuy's Holdings, Inc. CHUY and BJ's Restaurants, Inc. BJRI.

Here is a synopsis of all five stocks:

Bull of the Day:

Novo Nordisk A/S, a Zacks Rank #1 (Strong Buy), has benefitted from a recent resurgence in the health care sector. During bear markets, the best stocks bottom out well before the major indices, and that's exactly what we saw with this pharmaceutical company last year. In fact, NVO bottomed in January of 2022 and finished the year with a 22.7% gain. The momentum is carrying forward into 2023 as NVO stock is hitting all-time highs.

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NVO is ranked favorably by our Zacks Style Scores with a best-in-class 'A' rating in our Zacks Growth category and a 'B' in our Momentum category. This indicates further upside is likely based on promising sales and earnings growth metrics. The company is part of the Zacks Large Cap Pharmaceuticals industry group, which currently ranks in the top 26% out of approximately 250 Zacks Ranked Industries. Because this group is in the top half of all industries, we expect it to outperform the market over the next 3 to 6 months, just as it has over the past several months.

Historical research studies suggest that approximately half of a stock's price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1. 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. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.

Company Description

Novo Nordisk is a global healthcare company that engages in the research, development, manufacturing, and marketing of pharmaceutical products. The company's Diabetes and Obesity care segment provides insulin, antidiabetic, obesity, and other chronic disease products. NVO's Biopharmaceuticals segment offers products in the areas of hemophilia, growth disorders, and hormone replacement therapy.

During the first quarter this year, the drugmaker saw sales of its obesity medications Wegovy and Ozempic rise over three-fold and 59%, respectively. These treatments have gained in popularity as they lead to greater weight loss than many other alternatives.

NVO maintains a strong presence in the Diabetes care market with a broad portfolio, improving its global market share to nearly 32% in the last 12 months. Drug sales have been gaining momentum, and label expansion of existing drugs is likely to boost sales further in the coming quarters. In addition, NVO has witnessed encouraging pipeline progress through its developmental drug phase process.

Earnings Trends and Future Estimates

Novo Nordisk has surpassed earnings estimates in three of the past four quarters. For the current quarter, the company is expected to deliver earnings growth of 59.5% to $1.34/share on 40% higher revenues ($8.28 billion).

Analysts covering NVO are in agreement and have raised their future earnings estimates across the board. Looking at 2023 as a whole, analysts have raised their EPS estimates by 11.96% in the past 60 days. The Zacks Consensus Estimate now stands at $4.96/share, reflecting potential growth of 43.4% relative to last year.

Let's Get Technical

NVO shares have advanced more than 80% off the bottom from last year. Only stocks that are in extremely powerful uptrends are able to make this type of price move while the general market remains volatile. This is the kind of stock we want to include in our portfolio – one that is outperforming and receiving positive earnings estimate revisions.

With both strong fundamentals and technicals, NVO 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, Novo Nordisk has recently witnessed positive revisions. As long as this trend remains intact (and NVO continues to deliver earnings beats), the stock will likely continue its bullish run this year.

Bottom Line

NVO boasts a second-best 'B' rating for our overall VGM Zacks Style Score. The Zacks Rank #1 (Strong Buy) stock has vastly outperformed the market over the past year. A resurgence in health care stocks adds to the bullish sentiment.

Robust fundamentals combined with a strong technical trend certainly justify adding shares to the mix. Backed by a leading industry group and a healthy history of earnings beats, it's not difficult to see why this company is a compelling investment. Investors would be wise to consider NVO as a portfolio candidate if they haven't already done so.

Bear of the Day:

Nutrien produces and sells fertilizers and related industrial and feed products. NTR offers potash, nitrogen, phosphate, and sulfate products. Based in Saskatoon, Canada, Nutrien also distributes crop nutrients, protection products, and seeds through approximately 2,000 retail locations internationally.

Higher costs are expected to impact company margins. During the fourth quarter of last year, Nutrien saw a 13% rise in the cost of goods sold, with increases across all segments. The company's nitrogen business is also expected to face pricing headwinds in the short-term.

The Zacks Rundown

NTR, a Zacks Rank #5 (Strong Sell), is a component of the Zacks Fertilizers industry group, which ranks in the bottom 4% out of approximately 250 Zacks Ranked Industries. As such, we expect this industry group as a whole to underperform the market over the next 3 to 6 months, just as it has recently.

Candidates in the bottom tier of industry groups can often be solid potential short candidates. While individual stocks have the ability to outperform even when included in a poor-performing industry group, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much more difficult.

Along with many other fertilizer stocks, NTR has been underperforming this year. The share price is hitting a series of 52-week lows and represents a compelling short opportunity as the market remains volatile.

Recent Earnings Misses & Deteriorating Outlook

NTR has fallen short of earnings estimates in three of the past four quarters. The company most recently reported a Q4 profit of $2.02/share back in February, missing the $2.63/share consensus EPS estimate by -23.2%. The stock has moved steadily lower since the announcement.

Over the past four quarters, NTR has delivered an average earnings miss of -13.94%. Consistently falling short of earnings estimates is a recipe for underperformance, and Nutrien is no exception.

NTR has been on the receiving end of negative earnings estimate revisions as of late. Looking into the year as a whole, analysts have decreased 2023 EPS estimates by -9.6% in the past 60 days. The Zacks Consensus Estimate is now $8.66/share, reflecting negative growth of -34.3% relative to 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.

Technical Outlook

As illustrated below, NTR is in a sustained downtrend. Notice how the stock has plunged below both the 50-day and 200-day moving averages (signaled by the blue and red lines, respectively). The stock is making a series of lower lows, with no respite from the selling in sight. Also note how both moving averages are sloping down – another good sign for the bears.

While not the most accurate indicator, NTR has also experienced what is known as a "death cross", wherein the stock's 50-day moving average crosses below its 200-day moving average. NTR would have to make a serious move to the upside and show increasing earnings estimate revisions to warrant taking any long positions in the stock. The stock has fallen more than 11% this year alone.

Final Thoughts

A deteriorating fundamental and technical backdrop show that this stock is not set to return to its former highs anytime soon. The fact that NTR is included in one of the worst-performing industry groups adds yet another headwind to a long list of concerns. A history of earnings misses and falling future earnings estimates will likely serve as a ceiling to any potential rallies, nurturing the stock's downtrend.

A series of 52-week lows indicate that the downtrend is likely far from over. Potential investors may want to give this stock the cold shoulder, or perhaps include it as part of a short or hedge strategy. Bulls will want to steer clear of NTR until the situation shows major signs of improvement.

Additional content:

What's Cooking with Wendy's (WEN) Q1 Earnings?

The Wendy's Company is scheduled to report first-quarter 2023 results on May 10, before the opening bell. In the last reported quarter, the company's bottom line beat the Zacks Consensus Estimate by 10%.

Q1 Estimates

The Zacks Consensus Estimate for first-quarter earnings per share is pegged at 20 cents, indicating a rise of 17.6% from the prior-year quarter's reported value of 17 cents per share.

The consensus estimate for revenues is pegged at $525.6 million, suggesting growth of 7.6% from $488.6 million reported in the year-ago quarter.

Factors to Note

First-quarter 2023 results of Wendy's are most likely to benefit from higher sales at company-operated restaurants. Apart from that, higher same-restaurant sales, a rise in franchise royalty revenues, advertising funds revenues and solid digital initiatives are likely to have contributed to growth. The company's initiative to expand its footprint is likely to have been a tailwind.

For the to-be-reported quarter, our model predicts sales at company-operated restaurants to increase 7.7% year over year to $225.4 million. Also, the franchise royalty and advertising funds revenues are predicted to increase 13.7% to $127 million and 12.3% to $103.9 million year over year, respectively.

The bottom line of the company is likely to have been affected by an increase in general and administrative (G&A) expenses. The increase in these expenses is likely to have been driven by a rise in salaries and benefits along with increased technology costs and travel expenses. These increases are likely to have negatively impacted the margins of the company in the to-be-reported quarter. For first-quarter 2023, our model predicts G&A expenses to increase 2.6% year over year.

What the Zacks Model Unveils

Our proven model doesn't conclusively predict an earnings beat for Wendy's this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat.

Earnings ESP: Wendy's has an Earnings ESP of -0.50%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Zacks Rank: Wendy's currently carries a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here.

Stocks Poised to Beat Earnings Estimates

Here are a couple from the Zacks Retail-Wholesale space that investors may consider, as our model shows that these have the right combination of elements to post an earnings beat.

Chuy's Holdings, Inc. has an Earnings ESP of +1.71% and a Zacks Rank #2.

Shares of Chuy's Holdings have increased 48.2% in the past year. CHUY's earnings beat the consensus mark in each of the trailing four quarters. The company has a trailing four-quarter earnings surprise of 23.4%, on average.

BJ's Restaurants, Inc. has an Earnings ESP of +0.63% and a Zacks Rank #2.

Shares of BJ's Restaurants have increased 16.1% in the past year. BJRI's earnings beat estimates in three of the trailing four quarters and missed once, the average surprise being 93%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.

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BJ's Restaurants, Inc. (BJRI) : Free Stock Analysis Report

Novo Nordisk A/S (NVO) : Free Stock Analysis Report

The Wendy's Company (WEN) : Free Stock Analysis Report

Chuy's Holdings, Inc. (CHUY) : Free Stock Analysis Report

Nutrien Ltd. (NTR) : Free Stock Analysis Report

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