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3 Highly-Ranked Undervalued Stocks

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This doesn’t seem like a time for value because... well, it’s not a time for value. But that could change. Stocks remain at or very near all-time highs, despite rising inflation, the delta variant and a taper that’s on the horizon. We could be seeing a lot of bargains in the weeks ahead.

If you don’t mind a little growth getting mixed in with the value, then Zacks’ proven metrics can help you find stocks that are going to really capitalize on whatever comes next in this recovering economy.

Our Highly-Ranked Undervalued Stocks screen will pick out some of those names. This tool seeks Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy) stocks with Zacks Value Scores of A or B. It also wants stocks in the top 50% of the Zacks Industry Rank.

Below are three names that recently passed the test. Make sure to click above to see all the stocks that made the list today.

Knight-Swift Transportation Holdings KNX

This economy is ready to shift gears and get back to some sort of normal, so it was good to see Knight-Swift Transportation Holdings (KNX) raise its EPS outlook for the full year (which is still rare).

And it was even better that this truck company rewarded its shareholders in the first half with more than $53 million in share repurchases and over $30 million in dividends. After a strong second-quarter performance , this name looks set to roll on down the highway for the rest of 2021 and beyond.

Knight-Swift is the largest truckload carrier in North America. Its three segments include Trucking (81% of the top line in 2020), Logistics (8%) and Intermodal (8.4%). As part of the transportation – truck space, the company is in the top 14% of the Zacks Industry Rank. Shares are up approximately 22% so far in 2021.

You’d have to throw things in reverse and go all the way back to November 2017 to find a negative earnings surprise, which was around the same time that Knight Transportation merged with Swift Transportation. The past seven straight quarters have all been beats, including its second quarter report from July.

Earnings per share of 98 cents topped the Zacks Consensus by 12.6%, which brought the four-quarter average to 15%. Total revenues of $1.32 billion advanced 24% from last year and inched past our expectation of $1.3 billion.

Each of its segments enjoyed increased revenues. The trucking segment was up 8.2%, while logistics soared more than 100% and intermodal rose 39.4%. Cash equivalents of $179.03 million (compared to $156.70 million) made the previously mentioned repurchases and dividends possible. Of course, the best piece of news was probably the raised guidance for 2021.

KNX now expects earnings per share between $3.90 and $4.05, compared to the previous forecast of $3.45 to $3.60. This upgrade is based on benefits from recent acquisitions of UTXL and AAA Cooper Transportation.

The Zacks Consensus Estimate for this year has advanced 11.8% in the past two months to $3.97, while the following year is up 14.7% in that time to $4.21. That makes year-over-year profit growth of 6%.

Zacks Investment Research
Zacks Investment Research


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Arrow Electronics ARW

With IT spending expected to rebound strongly in 2021 and demand for semiconductors going through the roof amid the shortage, it makes sense for the electronics – parts distribution to be in the Top 2% of the Zacks Industry Rank. And if you want some exposure to this highly-ranked space, then all signs point to Arrow Electronics (ARW).

The company is one of the world’s largest distributors of electronic components and enterprise computing products. It serves over 150,000 customers, including original equipment manufacturers (OEMs), contract manufacturers (CMs), value-added resellers (VARs) and other commercial users. Its offerings are divided into two categories: Global Components (72% of 2020 revenues) and Global Enterprise Computing Solutions (28%).

Shares are up more than 56% over the past year, including approximately 23% so far this year. ARW has topped the Zacks Consensus Estimate for five straight quarters now and just recently reported its highest quarter for sales and EPS in its history.

For the second quarter, the company earned $3.34 per share, which beat the Zacks Consensus Estimate by 14.8% and brought the four-quarter average surprise to over 21%. Revenues of $8.56 billion jumped 30% year over year while topping our expectations by a little more than 1%.

ARW has been enjoying strong demand for complex software and cloud-based solutions as we pull out of the pandemic. Plus, a good amount of its revenue comes from sale of semiconductors, which are expected to grow this year despite the shortage and should be a further boon for the company. It’s best-in-class services and easy-to-acquire technologies are also strong points for the future.

The past 60 days have seen double-digit earnings estimate improvement for both this year and next. The Zacks Consensus Estimate for this year is up 13.6% in that time to $13.51, while next year has climbed 12.8% to $14.26. For the moment, that comes to year-over-year growth of more than 5%.

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Zacks Investment Research


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Carter’s, Inc. CRI

Nothing says ‘new normal’ like new threads, which is true if your 73 years old, 43 years old, 23 years old… or just 3 years old. That’s why Carter’s, Inc. (CRI) had such a strong second-quarter performance, because if mommy or daddy gets a new outfit then baby certainly deserves a flashy new onesie.

CRI is the largest marketer of branded apparel and related products for babies and young children with brands that include Carter’s, OshKoshB’gosh, and several others. It operates 1000 stores in North America and also sells products though leading department stores, such as Target, Walmart and Amazon. And of course, it has bulked up the online presence, which includes a new mobile app.

The company reported a strong second quarter about a month ago with earnings per share of $1.67 that topped the Zacks Consensus Estimate by more than 130%. Furthermore, net sales of $746.4 million jumped 45% year over year and topped our expectation by more than 5%.

The company received a big boost from store reopenings, which were made possible by the eased restrictions from the vaccine rollout. More specific to the company, CRI has worked to improve marketing, enhance pricing and offer a more robust product portfolio.

It now expects earnings per share for 2021 to soar 75% year over year, which nearly doubled the earlier forecast of 40%. And sales should increase 15% rather than just 10%. Due to the enhanced outlook, analysts have been boosting their expectations as well.

The Zacks Consensus Estimate for this year is up to $7.29, marking an advance of 21% over the past 30 days. Next year is at $7.95, which has increased nearly 20% in that time and suggests a year-over-year rise of 9%.

Zacks Investment Research
Zacks Investment Research


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Arrow Electronics, Inc. (ARW) : Free Stock Analysis Report

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