Schwab, La-Z-Boy, Tesla, Fiat and Ford highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – October 28, 2016 – Zacks Equity Research highlights definitely Schwab (NYSE:SCHW – Free Report) as the Bull of the Day and La-Z-Boy (NYSE:LZB – Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Tesla (NASDAQ:TSLA –Free Report),Fiat (NYSE:FCAU –Free Report) and Ford (NYSE:F – Free Report).
Here is a synopsis of all five stocks:
Bull of the Day:
With the prospect of higher interest rates increasing each day, investors are slowly starting to position their portfolios in order to benefit from the likely trend. This results in a focus on the financial sector, since many banks benefit from a higher interest rate differential, as they make money off of the spread between the long and short term rates.
However, one area that investors often forget to think about as a rising rate beneficiary is that of the investment broker space. Investment brokers take uninvested capital in client accounts and use it to purchase a variety of ultra short-term securities. Right now, these securities earn a very low yield, but obviously as rates increase the income goes up as well. This can actually make a substantial portion of a broker’s income, so higher rates are often seen as crucial to better earnings for companies in this sector.
But with rates slowly on the rise, optimism is definitely in the air for this corner of the market. That is part of the reason why the sector has a top 20% industry rank, and why just one of nearly two dozen companies has a ‘strong sell’ rank right now. On the other side of the coin, there are about 10 companies in the segment that have a Zacks Rank of ‘buy’ or better, so how do you decide where to place your bets in this promising corner of the market?
Talk to Chuck
Well, one company that should definitely be on your radar in this market is Charles Schwab (NYSE:SCHW – Free Report). The company was actually just upgraded into ‘Strong Buy’ territory within the past week so it could be an excellent time to jump in to this top stock.
This is especially true given the recent earnings estimate revision activity for SCHW, as analysts have been racing to upgrade their estimates for the company. In just the past thirty days, we have seen five estimates go higher for the current quarter, compared to zero lower. And for the current year, we have seen ten estimates go higher in the past month, and three higher in just the past week. Once again, this is compared to zero lower.
These rising estimates are now baking in an EPS growth rate of over 33% for both the current quarter and the current year, which is pretty substantial given SCHW’s size. Meanwhile analysts are also anticipating a double digit percentage increase in revenues as well so it appears as though Schwab is on a nice momentum path.
But before you start to worry about SCHW living up to analyst expectations, consider their recent performances in earnings season. The company has only missed estimates once since the summer of 2013, and it is riding a streak of six straight beats.
Bear of the Day :
As concerns start to creep up for the housing market, it is beginning to have some knock-on effects for the tangentially-related sectors. One such market is the furniture world, as this area tends to do well when consumers are buying more homes and thus need to furnish them with new products. However, as questions start to pop up over the health of the housing market, concerns are starting to build in the furniture world too.
That is part of the reason why the segment currently has a bottom 10% industry rank, and why there isn’t a single stock in the group that has a ‘buy’ rank. One stock in this group that should be especially concerning to investors right now though, is La-Z-Boy (NYSE:LZB – Free Report), as this company is arguably one of the worst positioned for today’s market environment.
Why You May Want to Avoid LZB
LZB is obviously best known for its recliners, but the company makes a variety of other furnishings as well. And while the company has definitely participated in the recovery over the past few years, cracks are starting to appear in the story.
This is best evidenced by a nearly 25% slump in LZB stock over the past three months, and a double digit percentage slide in the past month alone. Clearly, investors are concerned about LZB’s health in the current environment, and there are worries over the long-haul too. This can be seen if we look to recent earnings estimates for LZB stock, which have all been decidedly negative.
In fact, in just the past week, we have seen two earnings estimates go lower for both the current year and the current quarter, while the company is now expected to see an earnings decline for both time periods when compared to the year ago time frame. Additionally, the Earnings ESP for both of these time periods is negative, suggesting that the consensus estimate is likely to trend lower in the weeks ahead.
If that wasn’t enough for investors, you should also consider LZB’s most recent earnings report, as the company posted an earnings miss for the first time since February 2015. No wonder LZB currently has a Zacks Rank #5 (Strong Sell) and why we are looking for more sluggishness from the company in the weeks ahead.
Additional content:
Tesla: “The People vs. Uber”
The myth, the man, the legend, Elon Musk, is back at it again folks. After the bell yesterday Tesla (NASDAQ:TSLA –Free Report) announced earnings that came in at 71 cents versus analyst expectations calling for a 54 cent loss. Aside from completely embarrassing any analyst attempting to estimate Tesla’s earnings, Elon offered up some insight to the future. Specifically Tesla’s autonomous car network of the future.
Tesla envisions a rail-hailing network where Tesla owners could rent out their cars when they weren’t being used. While you’re fast asleep, your Tesla could be operated autonomously, picking up passengers and dropping them off throughout the night, and putting money in your pocket. Elon wanted to make it clear that “It’s not Tesla vs Uber, it’s the people vs Uber.” I’m sure Uber is thrilled. That’s a good way to guarantee lifetime surge pricing for yourself. My company isn’t taking down your company, I’m just going to let all my customers take down your company.
Musk said that while Uber and Lyft take a 25% to 43% commission, the majority of the economics would go to the owner of the car. He also vowed to have a self-driving car that could make it from LA to New York by the end of next year. If they can do LA to New York, can you hook up a Chicago to Miami ride?
The tentative name for this robotic taxi network is the Tesla Network. Proving once again that while Musk may be a genius, his naming skills are mad less than average. The first Tesla car was the roadster. Because it was, well, a roadster. Then the Model S luxury sedan. S for, sedan. Then the Model X. Now comes the Model 3. Where’s the creativity?
Where he is creative is all the ways he markets the cool stuff Tesla is doing. Ultimately, this is a car company. As boring as Fiat (NYSE:FCAU –Free Report) or Ford (NYSE:F – Free Report). But the excitement comes from everything else that builds the mystique of Tesla. He’s not building a factory, he’s building a gigafactory a thousand times bigger and better. Not an electric battery charger for your car but a super charger which is so much more awesome than a regular charger. Maybe that’s what gets analysts so confused. It’s all the smoke and mirrors.
Heading into the earnings report we had Tesla as a Zacks Rank #4 (Sell). It’s not because we hate Tesla but because analysts had been dropping their earnings estimates and not just for the current quarter. If you look at current year numbers, analysts had dropped their numbers from a $2.33 loss to a $5.03 loss. But again, these analysts are having a tough time gauging EPS. Over the last 4 quarters the Zacks Consensus Estimate has been off by an average of 76 cents. May as well be a hurricane forecaster. It might hit Florida or just spin off into the ocean. I dunno.
Every time you share this video, Elon names a new model after a single character. Chime in the comments section below and tell me when you think we will have fully autonomous cars available that are safer than human drivers.Subscribe to the YouTube channel, Twitter @bartosiastics and come back here for all the Trending Stocks with Zacks.com, I’m Dave Bartosiak.
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About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
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SCHWAB(CHAS) (SCHW): Free Stock Analysis Report
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FORD MOTOR CO (F): Free Stock Analysis Report
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