The Zacks Analyst Blog Highlights: Ford Motor, JetBlue Airways, Cal-Maine Foods, GoPro and Shoe Carnival
For Immediate Release
Chicago, IL – August 13, 2015 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Ford Motor Co. (F), JetBlue Airways Corporation ( JBLU), Cal-Maine Foods, Inc. (CALM ), GoPro, Inc. (GPRO) and Shoe Carnival Inc. ( SCVL).
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Here are highlights from Wednesday’s Analyst Blog:
Oil Slump Boosts These Sectors: 5 Picks
The slump in oil prices has now continued for over a year. A relief this year in March when crude prices moved up seemed a blip, as they are back below $50 mark again.
The nosedive is obviously impacting the energy shares, which in turn are weighing on benchmarks. As of Aug 5, total second quarter earnings for energy sector were down 60.5% year over year on 31.5% lower revenues.
However, certain sectors seem to enjoy a blessing in disguise amidst the oil market rout. These sectors benefit from the oil slide in certain ways. While auto and transportation are direct beneficiaries, sectors such as retail, consumer discretionary and consumer staples also gain from low oil prices. Thus, to buy certain favorably ranked stocks from these sectors will be a prudent move.
Recent Oil Slide
WTI crude oil prices plunged around 21% in July, witnessing its biggest monthly decline since Oct 2008. Meanwhile, the price of Brent crude oil went below $50 mark last week of July for the first time since Jan 29 and is still trading below this level. Both the crude prices are trading at multi-month low levels.
Weak demand in China, stronger dollar, increase in rig counts and concerns regarding over supply of oil emerged as the main reasons behind the slump. Recently released economic data indicated that China, the second biggest economy of the world, is suffering from sluggish growth environment. This has curbed the demand for oil by a significant proportion.
Meanwhile, the nuclear deal between Iran and the US raised concerns about increased oil supply. The deal aims to restrict Iran from manufacturing nuclear weapons in exchange for lifting economic sanctions including limits on Tehran’s crude oil exports.
Moreover, foreign oil companies are finding it more profitable to sell crude in an environment of stronger dollar, which in turn is putting pressure on oil supply. Meanwhile, buoyed by higher output from Iraq and Saudi Arabia, the Organization of Petroleum Exporting Countries (OPEC) is currently producing about 32 million barrels a day against its target of 30 million barrels a day. Also, Baker Hughes Incorporated (BHI - Analyst Report) reported that rigs engaged in exploration and production in the U.S. totaled 884 for the week ended Aug 7, 2015. This was up by 10 from the previous week’s rig count.
Auto & Transportation: Direct Beneficiaries
Recently released auto sales data indicates the benefits from the low oil price environment. U.S. auto sales came ahead of expectations in July, fueled by demand for light trucks and sport-utility vehicles rather than fuel-efficient cars.
The seasonally adjusted annual sales rate (SAAR) climbed 3.2% from June to 17.6 million in July, its second highest tally in a decade. Meanwhile, domestic vehicle sales rose 5.2% to an annualized rate of 14.2 million in July, which exceeded the consensus estimate of 13.5 million.
Meanwhile, the Dow Jones Transportation Average (DJT) has gained 3.1% in the past one month while oil prices slumped. Airlines industry, included in this sector, is a major gainer from this situation. In the second quarter, the aviation industry is said to have amassed record quarterly profit of more than $5 billion. Plunge in fuel prices coupled with strategic investments to bring in more passengers on board have buoyed profit margins.
Retail: Indirect Beneficiary
Along with strong labor market conditions, decline in oil prices has played an important role in increasing consumer spending in recent times. According to the “advance estimate” released by the U.S. Department of Commerce, Real Personal Consumption Expenditure rose 2.9% during the second quarter, higher than the first quarter’s growth rate of 1.8%.
Over the past three months, Consumer Discretionary Select Sector SPDR (XLY) and Consumer Staples Select Sector SPDR (XLP) gained 3.3% and 2.9%, respectively. During this same period, the oil price decline has dragged the Energy Select Sector SPDR (XLE) by 16.7%. These sectors attract major part of consumer expenditure.
Meanwhile, as of Aug 7, total earnings for 21 S&P 500 retailers that released second quarter earnings results are up 7.7% from the same period last year, on 12.6% higher revenues. It is one of the top performers of second quarter earnings season.
5 Sectoral Picks
It is evident that the sectors discussed above are clearly benefiting from the crude slump. This is anticipated to continue in near future. Thus, investing in stocks from auto and transportation, and retail which have strong fundamentals and impressive growth prospects may prove to be profitable. Our selection in also backed by good Zacks Growth Score and Zacks Rank.
We narrowed down our choices with the help of our new style score system.
Our research shows that stocks with Growth Style Scores of ‘A’ or ‘B’ when combined Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy) offer the best investment opportunities in the growth investing space.
Auto – Ford Motor Co. (F)
Michigan-based Ford is one of the leading global auto manufacturers and auto financial services providers.
Ford has a Zacks Rank #2 (Buy) and Growth Style Score of ‘B’. Current year growth estimate of 46.2% is significantly higher than the industry growth rate of 25.9%. The Zacks Consensus Estimate for the current year EPS has been revised up by 7% in the last two months.
Transportation – JetBlue Airways Corporation (JBLU)
JetBlue is a passenger airline that focuses on providing high-quality customer service. The low-fare, low-cost carrier operates primarily on point-to-point routes.
This Zacks Rank #2 (Buy) company has a Growth Style Score of ‘A’. JetBlue has a current year growth estimate of more than 100%, compared to the industry growth rate of 17.7%. The Zacks Consensus Estimate for the current year EPS has been revised up by nearly 4% over the last two months.
Consumer Staples – Cal-Maine Foods, Inc. (CALM)
This Zacks Rank # 1 (Strong Buy) company is engaged in the production, cleaning, grading, and packaging of fresh shell eggs for sale to shell egg retailers.
Cal-Maine has a Growth Style Score of ‘A’. Current year growth estimate of more than 100% is well above the industry growth rate of 2.3%. The Zacks Consensus Estimate for the current year EPS has been revised 175% upward over the last two months.
Consumer Discretionary – GoPro, Inc. (GPRO)
California-based GoPro is one of the leading manufacturers of the world's most handy camera and enabler of some of today's most immersive and engaging content.
This Zacks Rank #1 (Strong Buy) has a Growth Style Score of ‘B’. It has a current year growth estimate of 31.7%, compared to industry growth rate of 21.3%. The Zacks Consensus Estimate for the current year EPS has been revised 20% upward over the last two months.
Retail/Wholesale – Shoe Carnival Inc. (SCVL)
Shoe Carnival is a high volume, value-oriented retailer of family footwear.
Apart from a Zacks Rank #2 (Buy), SCVL also has a Growth Style Score of ‘A’. Current year growth estimate of 16.1% is significantly higher than the industry growth rate of 5.7%. The Zacks Consensus Estimate for the current year EPS has been revised nearly 0.7% upward over the last two months.
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FORD MOTOR CO (F): Free Stock Analysis Report
JETBLUE AIRWAYS (JBLU): Free Stock Analysis Report
CAL-MAINE FOODS (CALM): Free Stock Analysis Report
GOPRO INC-A (GPRO): Free Stock Analysis Report
SHOE CARNIVAL (SCVL): Free Stock Analysis Report
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