Build-A-Bear Workshop and Bally's have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – January 17, 2023 – Zacks Equity Research shares Build-A-Bear Workshop BBW as the Bull of the Day and Bally's Corp. BALY as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Charles Schwab SCHW, Hancock Whitney Corp. HWC and Truist Financial Corp. TFC.
Here is a synopsis of all five stocks:
Bull of the Day:
Build-A-Bear Workshop, a Zacks Rank #1 (Strong Buy), has broken out of a long base in a powerful move to the upside amid the recent equity rally. Simply put, not many stocks finished 2022 in positive territory, let alone witness a surge to multi-year highs. The bullish price action is a sign of strength as BBW looks to continue its momentum into the new year.
BBW sports the highest Zacks Value Style Score of 'A,' indicating an increased likelihood that the stock propels higher on favorable valuation metrics. The company is part of the Zacks Retail – Miscellaneous industry group, which ranks in the top 24% out of approximately 250 Zacks Ranked Industries. Because this industry is ranked in the top half of all Zacks Ranked Industries, we expect it to outperform the market over the next 3 to 6 months, just as it has over the preceding 3-month period.
Historical research studies suggest that approximately half of a stock's price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1. It's no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
Company Description
Build-A-Bear Workshop operates as a multi-channel retailer of plush animals and related products. The company offers various styles of plush products that are pre-stuffed or to-be-stuffed, along with sounds and scents that can be added to the stuffed animals. In addition, BBW provides a range of clothing, shoes, accessories, and other toy and novelty items.
BBW conducts its stores under the Build-A-Bear Workshop brand name and sells its products through several e-commerce sites. The company operates more than 300 stores in the United States and Canada; 41 stores in the United Kingdom and Ireland; and 72 franchised stores internationally.
Earnings Trends and Future Estimates
BBW has built up an impressive earnings history, surpassing earnings estimates three of the past four quarters. Back in November of last year, the company reported Q3 EPS of $0.51/share, a 34.21% surprise over the $0.38 consensus estimate. BBW has delivered a trailing four-quarter average earnings surprise of 14.73%.
Growth for the retailer is expected to remain hot in the coming quarters. For the current quarter, the Q1 Zacks Consensus Estimate stands at $1.02/share, reflecting growth of 14.61% relative to the same quarter last year.
Analysts covering BBW have increased their full-year EPS estimates by +10.31% in the past 60 days. The fiscal 2024 Zacks Consensus EPS Estimate now stands at $3.21/share, translating to potential growth of 11.46% relative to last year. Sales are anticipated to climb 5.47% to $485.6 million.
Let's Get Technical
Since bottoming out back in September of last year, BBW shares have advanced over 90% and are showing no signs of slowing down. Only stocks that are in extremely powerful uptrends are able to make this type of price move and widely outperform the major indices. This is the kind of stock we want to include in our portfolio – one that is trending well and receiving positive earnings estimate revisions.
The stock has been making a series of higher highs, and the recent pullback represents a solid buying opportunity. With both strong fundamentals and technicals, BBW is poised to continue its outperformance.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, Build-A-Bear Workshop has recently witnessed positive revisions. As long as this trend remains intact (and BBW continues to deliver earnings beats), the stock will likely continue its bullish run this year.
Bottom Line
At just an 8.45 forward P/E, BBW shares remain relatively undervalued and represent a phenomenal opportunity. Solid institutional buying should continue to provide a tailwind for the stock price. Robust fundamentals combined with a strong technical trend certainly justify adding shares to the mix.
Backed by a leading industry group and robust history of earnings beats, it's not difficult to see why this company is a compelling investment. This stock market winner continues to prove its doubters wrong, and investors would be wise to consider BBW as a portfolio candidate if they haven't already done so.
Bear of the Day:
Bally's Corp. is a gaming, hospitality, and entertainment company that engages in casinos, resorts, and online gaming in the United States. BALY offers interactive entertainment experiences through its traditional casino offerings as well as its online sportsbook, bingo, daily fantasy, and iCasino. The company owns and operates 14 casinos that comprise 14,900 slot machines, 500 table games, 3,900 hotel rooms, as well as a horse racetrack across ten states.
The Zacks Rundown
Bally's, a Zacks Rank #5 (Strong Sell), is a component of the Zacks Hotels and Motels industry group, which ranks in the bottom 38% out of approximately 250 Zacks Ranked Industries. As such, we expect this industry group as a whole to underperform the market over the next 3 to 6 months.
Candidates in the bottom tiers of industries can often be solid potential short candidates. While individual stocks have the ability to outperform even when included in a poor-performing industry group, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is much more difficult.
The odds are stacked against BALY, and the stock is agreeing with this notion. BALY experienced a climax top in March of 2021 and has been in a sustained price downtrend ever since. The company is ranked a worst-possible 'F' in our Zacks Momentum Style Score category, indicating further weakness ahead. The share price has been hitting a series of lower lows and represents a compelling short opportunity.
Recent Earnings Misses and Deteriorating Outlook
BALY has fallen short of estimates in two of the last four quarters. The entertainment company most recently reported Q3 earnings of just $0.01/share back in November of last year, missing the $0.28/share consensus EPS estimate by -96.43%. Bally's has fallen short of estimates by an average of -29.5% over the prior four quarters. Missing estimates by such a wide margin is a huge red flag.
Bally's has been on the receiving end of negative earnings estimate revisions as of late. For the current year, analysts have revised their EPS estimates downward by -113.33% in just the past 30 days. The 2023 Zacks Consensus EPS Estimate is now $-0.02/share, translating to negative growth of -101.87% versus last year. These falling earnings estimates need to be respected and point to a negative growth trend that bears like to see.
Technical Outlook
BALY is in a sustained downtrend. The stock is making a series of lower lows, with no respite from the selling in sight. Also, both moving averages have rolled over and are sloping down – another good sign for the bears.
While not the most accurate indicator, BALY has also experienced what is known as a "death cross," wherein the stock's 50-day moving average crosses below its 200-day moving average. BALY would have to make a serious move to the upside and show increasing earnings estimate revisions to warrant taking any long positions in the stock. The stock has fallen nearly 40% in the past year alone.
Final Thoughts
A deteriorating fundamental and technical backdrop show that this stock is not set to "hit it big" anytime soon. The fact that BALY is included in one of the worst-performing industry groups provides yet another headwind to a long list of concerns. A history of earnings misses and falling future earnings estimates will likely serve as a ceiling to any potential rallies, nurturing the stock's downtrend.
Potential investors may want to give this stock the cold shoulder, or perhaps include it as part of a short or hedge strategy. Bulls will want to steer clear of a down-trending BALY until the situation shows major signs of improvement.
Additional content:
Higher Rates, Robust Trading to Aid Schwab's (SCHW) Q4 Earnings
Charles Schwab is scheduled to report fourth-quarter and 2022 results on Jan 18, before market open. Its revenues and earnings in the quarter are expected to have improved on a year-over-year basis.
In third-quarter 2022, Schwab's earnings surpassed the Zacks Consensus Estimate. Results benefited from higher rates, which led to a rise in net interest income. Also, the absence of fee waivers and solid brokerage account numbers acted as tailwinds in the quarter. However, higher expenses hurt results to some extent.
The company does not have an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in two and lagged in two of the trailing four quarters.
Schwab's activities in the to-be-reported quarter encouraged analysts to revise earnings estimates upward. In the past 30 days, the Zacks Consensus Estimate for SCHW's fourth-quarter earnings has been revised 1.9% higher to $1.10. The estimate indicates an increase of 27.9% from the year-ago quarter's reported number. Our estimate for fourth-quarter earnings is $1.05.
The consensus estimate for sales is pegged at $5.57 billion, which suggests an increase of 18.4% from the year-ago quarter's reported figure. Our estimate for total revenues is $5.49 billion, indicating a year-over-year rise of 16.7%.
SCHW projects 2022 revenue growth of 11-13%, assuming the market's forward rate expectations as of early-October.
Before we take a look at what our quantitative model predicts, let's check the factors that are likely to have impacted Schwab's fourth-quarter performance.
Key Factors & Estimates for Q4
Similar to the first three quarters of 2022, market volatility and client activity were robust in the fourth quarter. Few developments, including Russia's invasion of Ukraine and continued supply-chain disruptions, led to ambiguity among investors.
Also, the ultra-aggressive stance of the central banks across the globe to control inflation and resultant fears of an economic downturn/recession drove client activity and trading volumes. These factors led to heightened volatility in the equity markets and other asset classes, including commodities, bonds and foreign exchange.
Investors seemed interested in entering the markets. In October, SCHW opened 298,000 new brokerage accounts. In November, brokerage accounts opened were 303,000.
While Schwab's trading performance is expected to have been robust in the quarter under review, supported by higher volatility and client activity, trading revenues are not expected to have improved much from the year-ago quarter.
The Zacks Consensus Estimate for fourth-quarter trading revenues is pegged at $905 million, which suggests a decline of 11% from the prior-year quarter's reported number. Our estimate for trading revenues is $1.05 billion.
Then, the consensus estimate for average interest-earning assets for the to-be-reported quarter is pegged at $540 billion, which suggests a decline of 8.2% from the prior-year quarter's reported level. Our estimate for average interest-earning assets is $617.2 billion, suggesting year-over-year growth of 4.9%.
In the fourth quarter, the Federal Reserve continued with its ultra-hawkish monetary policy stance, raising interest rates by another 125 basis points. The policy rate reached 4.25-4.50%, the highest in the past 15 years. Also, the overall lending scenario was decent.
Thus, supported by loan growth and higher interest rates, Schwab's net interest revenues are likely to have been positively impacted. The Zacks Consensus Estimate for net interest revenues is pegged at $3 billion, which suggests a year-over-year rise of 39.9%. Our estimate for the same is also $3 billion.
Management expects net interest revenues of $3 billion in the fourth quarter as well. Net interest margin is expected to be in the mid-210 bps zone.
The consensus estimate for asset management and administration fees of $1.07 billion suggests a decline of 3.3% from the prior-year quarter's reported number. Our estimate for the same is $1.02 billion, indicating a year-over-year fall of 8.3%.
Coming to expenses, Schwab's operating expenses have been elevated in the past few quarters. Due to the persistent regulatory spending and strategic buyouts to drive efficiency, overall expenses are expected to have been high in the to-be-reported quarter. We project total expenses to rise 12.7% year over year to $3.03 billion.
What the Zacks Model Unveils
According to our quantitative model, the chances of Schwab beating the Zacks Consensus Estimate for earnings this time are high. This is because it has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better.
You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for Schwab is +1.08%.
Zacks Rank: The company currently carries a Zacks Rank #3.
Other Stocks Worth a Look
A few other finance stocks, which you may want to consider, as these too have the right combination of elements to post an earnings beat in their upcoming releases per our model, are Hancock Whitney Corp. and Truist Financial Corp..
Hancock Whitney is scheduled to release fourth-quarter 2022 earnings on Jan 17. HWC, which carries a Zacks Rank #2 (Buy) at present, has an Earnings ESP of +0.10%. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
The Earnings ESP for Truist is +0.23% and it carries a Zacks Rank #3 at present. TFC is slated to report fourth-quarter 2022 results on Jan 19.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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The Charles Schwab Corporation (SCHW) : Free Stock Analysis Report
BuildABear Workshop, Inc. (BBW) : Free Stock Analysis Report
Hancock Whitney Corporation (HWC) : Free Stock Analysis Report
Truist Financial Corporation (TFC) : Free Stock Analysis Report
Bally's Corporation (BALY) : Free Stock Analysis Report
