RPC and Thor Industries have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – March 20, 2023 – Zacks Equity Research shares RPC Inc. RES as the Bull of the Day and Thor Industries, Inc. THO as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Microsoft MSFT, Apple AAPL and Meta Platforms META.
Here is a synopsis of all five stocks:
Bull of the Day:
Investors have fled RPC Inc. in 2023 as crude prices have fallen. But that has created a buying opportunity in this Zacks Rank #1 (Strong Buy). RPC is expected to grow earnings by 67% in 2023.
RPC provides specialized oilfield services and equipment to the oil and natural gas exploration and production companies throughout the United States, including the Gulf of Mexico, mid-continent, southwest, Appalachian and Rocky Mountain regions, and in selected international markets.
RPC is a small cap company, with a market cap of $1.6 billion.
Another Beat in Q4 2022
On Jan 25, 2023, RPC reported its fourth quarter and full year 2022 results. It beat the Zacks Consensus Estimate for the third straight quarter, reporting $0.41 versus the consensus of $0.30.
The oilfield services environment remained robust through the end of the year. Revenue jumped 79.7% to $213.8 million in the fourth quarter of 2023 compared to the prior year due to improved pricing, higher customer activity levels and a larger active fleet of revenue-producing equipment.
As a percentage of revenues, cost of revenues decreased year-over-year to 64% from 74.8% in Q4 2021 due to improved pricing for RPC's services and leverage of direct employment costs.
"As we begin the first quarter of 2023, we expect continued robust drilling and completion activities based on indications from most customers," said Ben M. Palmer, CEO.
Earnings Estimates on the Rise for 2023 and 2024
As RPC is a small cap company, Zacks only has one earnings estimate on the company for 2023 and 2024. But it was raised for both years in the last 60 days.
The Zacks Consensus for 2023 is calling for $1.71 per share up from $1.02 the company made in 2022. That's earnings growth of 67.7%.
2024 is also looking bullish with the Zacks Consensus of $1.84, or another 7.6% in earnings growth.
Doubled the Dividend to Start 2023
RPC's cash balance grew by $90.5 million during the fourth quarter to $126.4 million despite increasing activity and capital expenditures of $49.3 million during the quarter.
On Jan 23, 2023, the board of directors doubled the quarterly dividend to $0.04 per share from $0.02. It is currently yielding 2%.
Shares Sell-Off: Is This a Buying Opportunity?
WTI crude fell below $70 for the first time in 2023 in March 2023. The Street sold off all the energy stocks, even those in the services side, like RPC.
Shares of RPC have fallen 17.8% in just the last month. But they are also now dirt-cheap on a forward P/E basis.
RPC trades at just 4.6x.
If you're looking for an oilfield services stock that's on sale, RPC should be on your short list.
Bear of the Day:
Thor Industries, Inc. is coming down off its COVID pandemic record highs as the market for RVs and towables softens. This Zacks Rank #5 (Strong Sell) is expected to see sales fall 31% in Fiscal 2023.
Thor Industries manufactures RVs and towables in North America and Europe under many different brands including, but not limited to, Jayco, Starcraft and Airstream.
A Big Miss in the Fiscal Second Quarter
On Mar 7, Thor reported its fiscal second quarter 2023 results and missed on the Zacks Consensus Estimate by $0.60. Earnings was $0.50 versus the Zacks Consensus of $1.10.
Thor had put together quite an earnings surprise streak during the pandemic. It had beat 11 quarters in a row. This was its first earnings miss since Mar 2020, when the pandemic hit.
Net sales fell 39.4% to $2.35 billion from $3.88 billion in fiscal 2022, but the prior year's quarter was a record. However, it was still a decrease of 14% over the second quarter of the prior year, which was 2021.
Consolidated gross profit also plunged by 530 basis points to 12.1% from 17.4% in the second quarter of 2022.
"During the quarter, we continued to proactively and decisively balance wholesale production with the pace of softening retail sales through the traditionally slower winter retail season," said Bob Martin, CEO.
"This commitment to a disciplined production approach, combined with a softer-than-expected order intake, resulted in second quarter North American wholesale shipments of 25,372 units," he added.
But Thor expects this softness in demand to be temporary. Attendance at the spring retail show season across the country had been encouraging with high attendance and solid retail activity.
Thor Cuts Full Year Guidance
However, the slowdown won't rebound in fiscal 2023. Thor expects that the macroeconomic pressures will persist through the balance of the fiscal year. The newly revised guidance assumes the higher interest rates, elevated prices and a full North American dealer inventory will result in slower product pull through for the balance of the fiscal year.
Remember, many RV buyers purchase using financing. Loan rates have risen as the Fed has raised rates.
Full year net sales are now expected in the range of $10.5 billion to $11.5 billion, down from the previous guidance of $11.5 billion to $12.5 billion.
Earnings per share are expected in the range of $5.50 to $6.50, down from the prior guidance of $7.40 to $8.70.
It shouldn't be surprising that the analysts responded by cutting their own full year estimates. The F2023 Zacks Consensus Estimate fell to $5.94 from $7.89 in the last month as 4 estimates were cut. That's an earnings decline of 71.2%, as Thor made $20.59 during last year's record year.
Remember when we were all desperate to travel but didn't want to stay in a hotel? The pandemic RV buying surge has come to a halt.
Shares Down Big Over the Last Two Years
Shares of Thor Industries actually peaked in 2021 even though the company went on to have record earnings last fiscal year. Apparently, Wall Street thought the earnings were peaking in Fiscal 2022 and sold the stock ahead of the news.
Shares are down 45.2% in the last two years. But they fell again in the last month, by 17.8%, after the guidance was cut.
Thor remains a cheap stock, with a forward P/E of 13.2. But the falling earnings make it a value trap.
It still has solid free cash flow and is still paying a dividend, currently yielding 2.3%.
For investors interested in picking up shares of Thor on the cheap, they may want to wait a bit longer until the macroeconomic conditions bottom, including the Fed pausing on its rate hikes.
The Baby Boomers, and the Millennials, are likely to continue to drive demand for RVs and towables well into the future, but for now, many are on the sidelines. As an investor, you might want to be too.
3 Big Tech Stocks Holding Up the Entire Market
The start of 2023 was so promising, but it didn't last. Fears of recession have returned, and a banking crisis is underway. Additionally, the energy market, the sector that dominated 2022 is now getting crushed by lower oil prices.
One area of the market that has performed well YTD, and held up over the last month is Tech. Following a brutal 2022 for the sector, and with financials and energy now out of favor, it seems now may be an opportunity to rotate back into technology stocks.
Over the last month, while the S&P 500 and broad market have been rolling over, Microsoft has significantly outperformed. You can see the last week was very good for MSFT right as the worst of the banking crisis happened.
Microsoft, is of course, the PC and software giant that dominates the industry with more than 80% of computer operating systems market share. Over the last 10 years MSFT has returned more than 5x the benchmark, but over the last year it has underperformed.
This underperformance has allowed MSFT's valuation to cool off and trade back to a more reasonable level. Today it is trading at 28x one-year forward earnings, which is in line with its five-year median, and well off its high of 38x. This isn't what you would call a value stock, but as one of the largest, most robust, and consistent companies in the world, you have to pay a premium.
Microsoft holds a Zack Rank #3 (Hold), indicating a mixed earnings revision trend. Earnings have indeed been revised lower, but analysts still expect sales and earnings growth for the tech giant. If tough times are coming for the markets, sometimes you have to focus on stocks that act as havens. Earnings revisions may not be higher, but relatively speaking MSFT is going to be a safer bet than many others.
Microsoft is also leading the way with its investment in the leading artificial intelligence technology. MSFT is a major investor in OpenAI, who is revolutionizing the newest innovations in AI through its ChatGPT software. The two have already partnered on a few projects such as the Microsoft Teams application.
Microsoft also offers a tidy 1% dividend yield. The dividend has been raised by an average of 10% annually over the last five years.
Apple is another tech giant that has acted as a haven amid the banking fallout. Although it too currently earns a Zacks Rank #3 (Hold), indicating a mixed earnings revision trend, the stock has performed well. Both Apple and Microsoft make up the largest positions in many of the leading tech and broad market indexes. Thus, their strong performances can really drag the whole market higher.
Like Microsoft, Apple and its products are cemented as absolute necessities in today's economy. Even during the very challenging last year AAPL stock has barely budged. It has traded sideways though, which has allowed its valuation to cool off over the last year.
Today, Apple is trading at a one-year forward earnings multiple of 25x, which is just below its three-year median of 26x. Apple also offers a small dividend yield of 0.6% and has increased it by an average of 7% annually over the last five years.
Apple also carries out massive share buyback programs with no signs of slowing. Over the last decade apple has bought back $550 billion of its own shares, which is more than any US corporation. And in 2022 alone AAPL bought $90 billion worth. This has reduced shares by nearly 40% over the last ten years and has been a boon to share price.
Meta Platforms has quickly turned into one of the best performing stocks in the market YTD. This performance follows one of the worst performances last year, with the stock was down nearly -80% in 2022. Meta has also made significant cuts to its workforce over the last year to dramatically rein in costs and boost profitability.
Meta boasts a Zacks Rank #2 (Buy), indicating upward trending earnings revisions. Last quarter META beat earnings expectations by 42%, and next quarter is projected to beat by 7%.
Over the last 90 days META has seen its earnings estimates revised significantly higher, with next quarter's earnings being upgraded by 33%.
After trading as low as 10x one-year forward earnings last year, META is now trading at 20x one-year forward earnings. This is still below its five-year median of 23x.
Big tech is coming off one of its worst years in recent history, and Meta, Apple, and Microsoft have only cemented themselves deeper into society. The strength of their business models makes these stocks akin to bonds, with earnings and sales growth nearly guaranteed.
Sometimes, when markets are getting volatile the best thing to do is look for stocks that will do less bad than other stocks.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
See Stocks Free >>
Zacks Investment Research
800-767-3771 ext. 9339
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
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.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Apple Inc. (AAPL) : Free Stock Analysis Report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
Thor Industries, Inc. (THO) : Free Stock Analysis Report
RPC, Inc. (RES) : Free Stock Analysis Report
Meta Platforms, Inc. (META) : Free Stock Analysis Report
To read this article on Zacks.com click here.