For Immediate Release
Chicago, IL – January 22, 2019 – Zacks Equity Research Office Depot (NASDAQ:ODP) as the Bull of the Day, Callaway Golf (NYSE:ELY) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Ford Motor Company (NYSE:F) , General Motors Company (NYSE:GM) and Magna International Inc. (NYSE:MGA) .
Here is a synopsis of all five stocks:
The market has been doing well since bottoming out on Christmas Eve. Since then, stocks are up 13.5% off the lows. While it may be tempting to close your eyes and buy everything that’s moving, you may be headed for disappointment when the market run finally tapers off. Regardless of what happens with the market in the short-term, there are long-term recipes for success you can apply in any market. Among them, looking for stocks with earnings estimates that are moving in a positive direction over time. One way to do that, is to look for stocks that are Zacks Rank #1 (Strong Buy) stocks. These are stocks that have seen analysts make bullish moves, increasing their profit estimates quarter after quarter.
One of these stocks is today’s Bull of the Day, Office Depot. Office Depot, Inc., together with its subsidiaries, provides various products and services. It operates in three divisions: Retail, Business Solutions, and CompuCom. The Retail division operates retail stores, which offer office supplies; technology products and solutions; business machines and related supplies; print, cleaning, breakroom, and facilities products; and office furniture in the United States, Puerto Rico, and the U.S. Virgin Islands. Its stores also provide printing, reproduction, mailing, and shipping services. As of December 31, 2017, this division operated 1,378 office supply stores.
The reason for the positive Zacks Rank lies in the recent earnings estimate revisions coming from analysts. Over the last sixty days, analysts have increased their estimates for the current year and next year. The bullish sentiment has increased the current year Zacks Consensus Estimate from 33 cents to 34 cents while next year’s number has gone up from 37 cents to 40 cents. These bullish revisions have helped underpin a move off the lows recently.
The market has been en fuego since bottoming out on Christmas Eve. So far, 2019 has seen a barrage of positive days and green candles for the broad market. With stocks behaving so well, you may be tempted to jump on in and buy stocks with both hands. Before you lay down your hard-earned money, you should take a minute to investigate the earnings trend of the stock you’re looking at. Stock prices tend to track along with earnings over the long term. Avoiding stocks in negative earnings trends can save you from headaches down the road.
One stock with a negative earnings trend you may want to avoid for now is Zacks Rank #5 (Strong Sell) Callaway Golf. allaway Golf Company, together with its subsidiaries, designs, manufactures, and sells golf clubs, golf balls, golf bags, and other golf-related accessories in the United States and internationally. The company operates through three segments: Golf Clubs; Golf Balls; and Gear, Accessories and Other. It offers drivers, fairway woods, hybrids, irons, wedges, and putters. The company also provides packaged sets, golf gloves, golf footwear, golf apparel, travel gear, lifestyle apparel and accessories, headwear, eyewear, and practice aids. In addition, it licenses its trademarks and service marks for use on golf related accessories, such as golf apparel, footwear, golf gloves, prescription eyewear, practice aids, and OGIO branded bags. The company sells its products through golf retailers, sporting goods retailers, mass merchants, Internet retailers, department stores, field representatives, and in-house sales representatives, as well as to third-party distributors in the United States and approximately 100 countries.
The reason for the unfavorable Zacks Rank lies in the recent negative earnings estimate revisions coming from analysts. Over the last sixty days, five analysts have cut their estimates for next year, while this year’s number has remained the same. Those negative revisions have dropped our Zacks Consensus Estimate for next year from $1.12 to $1.08. That would peg EPS growth down at 3%.
Will the F-Series Salvage Ford's Q4 Earnings?
Ford Motor Company is scheduled to announce fourth-quarter and 2018 results on Jan 23, after the market closes. In the last reported quarter, its bottom line was in line with the Zacks Consensus Estimate while automotive revenues missed the same.
In the past three months, shares of Ford have underperformed the industry it belongs to. During the period, the stock has gained 2% in comparison with the industry’s increase of 12.4%. Over the past seven days, the Zacks Consensus Estimate for Ford’s earnings in 2018 has moved 0.7% downward.
In recent times, rising demand for spacious and comfortable vehicles led to augmented truck, crossover and SUV sales. In fact, this continued shift can be witnessed from Ford’s three quarterly sales of 2018. During these quarters, the company’s automotive revenues were majorly driven by growing truck and SUV demand, majorly offset by waning traditional sedan sales. Among the top players, a few models of Ford that deserve mention are F-Series, Ford Expedition and Lincoln Navigator.
In 2018, Ford’s F-Series maintained its position of being the best-selling pickup in America for the 42nd year in a row. Light-weight and sturdy vehicles in the lineup are decent options to choose from a variety of pick-up trucks available in the market. In fact, immense demand aided the automaker to sell nearly 1.1 million F-Series vehicles globally in the last year compared with its target of 1 million. Further, considering the U.S. average transaction price of $46,700 on these vehicles, Ford is expected to generate $50 billion in revenues by selling more than 1 million pickups.
Despite such high annual sales of F-Series trucks, the company’s truck segment reported a sales decline in the last three months of 2018. In October, November and December, the segment’s sales fell 4.9%, 2.3% and 3.8%, respectively. With most of the company’s sales depending on its pickup line, a continuous decline in monthly sales recorded by the truck segment is a concern for Ford.
In the preliminary report, the automaker anticipates revenues of $41.8 billion and adjusted earnings of 30 cents per share for fourth-quarter 2018. For the quarter under review, the Zacks Consensus Estimate for Ford’s automotive revenues is pegged at $37.6 billion. (For details refer- Ford Set to Report Q4 Earnings: What's in the Offing?)
Frequent vehicle recalls to fix Takata airbags or other faulty vehicle parts are elevating expenses for Ford. Further, high import costs on steel and aluminum, along with weakening demand in China and stressed business in Europe, are expected to majorly hamper the company’s bottom line in fourth-quarter 2018.
Earnings Schedules of Other Major Auto Companies
Among other automotive companies, General Motors Company is scheduled to release results on Feb 6, whereas Magna International Inc. are expected to report earnings on Feb 19 and Feb 28, respectively.
General Motors currently sports a Zacks Rank #1 (Strong Buy) while Magna carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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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/performance for information about the performance numbers displayed in this press release.
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