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Casey's, America's Car-Mart, FedEx, Stitch Fix and Adobe highlighted as Zacks Bull and Bear of the Day

·10 min read
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For Immediate Release

Chicago, IL – September 22, 2021 – Zacks Equity Research Shares of Casey's General Stores, Inc. CASY as the Bull of the Day, America's Car-Mart, Inc. CRMT as the Bear of the Day. In addition, Zacks Equity Research provides analysis on FedEx Corporation FDX, Stitch Fix, Inc. SFIX and Adobe Inc. ADBE.

Here is a synopsis of all five stocks:

Bull of the Day:

Casey’s General Stores is a Zacks Rank #1 (Strong Buy) that operates convenience stores under the Casey's and Casey's General Store names.

The stock had a nice run higher earlier in the year, but after a recent earnings beat, almost all the 2021 gains have been erased. Investors are now looking at why the stock has sold off and eyeing levels to buy the dip.

About the Company

Casey’s stores offer a selection of food, nicotine products, automotive products, and many more items you would typically find in convenient stores. Loyal customers are a fan of their pizza, but if you have traveled in the Midwest, you might be familiar with the company as a gas station. Casey provides gasoline and diesel fuel in over 2000 stores in 16 states.

The company has almost 18,000 full time employees and is headquartered in Ankeny, Iowa. Casey’s has a market cap of $7 Billion and has Zacks Style Scores of “B” in Growth and Value. The stock has a Forward PE of 22 and pays a 0.75% dividend.

Q1 Earnings

Earlier this month the company reported earnings, seeing a 13% EPS beat. The company also beat on revenue and raised its dividend by a penny. Adjusted EBITDA came in above expectations and inside SSS were up 8%.

Casey’s also affirmed FY22 fuel and inside SSS, which indicates growth of mid-single digit percentages.

CEO Darren Rebelez had the following comments on the quarter:

“Total revenue was up across the board as guest traffic returned throughout the quarter. Inside gross profit was up almost 17% due in part to the merchandise resets and strategic sourcing initiatives the Company implemented earlier this calendar year.”

While the numbers looked good, the stock sold off to prices not seen since February.

Pullback Unjustified

Jefferies was out with a note shortly after earnings making the case that the post-earnings sell-off was not justified. The firm believes the year over year opex growth created some fear, but there are many positives that were overshadowed by the headline.

Jefferies points out that elevated fuel margins, longer-term growth due to M&A, and positioning relative to peers are reasons as to why they have a Buy rating. The firm has a $237 price target, about 25% higher from current levels.

Estimates

Jefferies isn’t the only analyst that likes the stock, as estimates are going up across the board.

Over the last month, estimates for the current quarter have been raised by 8%, from $2.57 to $2.78. For the current year, we have seen a jump of 11% in that same time frame.

Since earnings, both Deutsche Bank and Northcoast Research raised price targets to $256 and $247 respectively.

The Technicals

CASY was up almost 30% on the year when it hit an all-time high of $229 back in May. However, the stock is now trading under $190, or 17% lower.

The stock is below all moving averages, with the 50-day at $197 and the 200-day at $202. Eventually, the bulls will need to recapture those levels for technical analysts to get bullish again.

In the meantime, investors should look at $180 as a long-term support area to accumulate. If the market does see a sell off, CASY could fall in sympathy to the 61.8% Fibonacci retracement at $160. This area between $160-$180 should be a buy zone for anyone interested in the stock.

Bottom Line

Those that have driven though the Midwest are familiar with Casey’s. Their gas stations and convenience stores are a staple on any road trip in the middle of the country.

The stock has had a rough summer, but the recent sell off isn’t justified. Estimates are going up and the company has a lot of growth potential as it expands through M&A. Additionally, with gas prices elevated, margins will continue to help the bottom line.

With the recent sell off, the stock might need time to digest. Investors should be eyeballing current prices as an opportunity for long-term entry.

Bear of the Day:

America’s Car-Mart is a Zacks Rank #5 (Strong Sell) that operates automotive dealerships and is one of the largest auto retailers in the United States.

The stock has benefitted all year as the used car market was hot due to higher prices on short supply. However, that dynamic might be hurting the industry now. After the company reported earnings, the stock has pulled back significantly and is now off 33% from 2021 highs.

More About CRMT

America’s Car-Mart was founded in 1981 and is headquartered in Rogers, Arkansas. As of April 30, 2021, it operated 151 dealerships in the South-Central United States. CRMT employs 2000 people and has a market cap of $800 million.  

The Company operates its dealerships primarily in small cities and rural locations throughout the South-Central United States. They focus on customers that may not qualify for traditional used car financing because of bad credit history.

The stock has a Zacks Style Score of “B” in Value. However, the stock is rated “F” in both Growth and Momentum.

Q1 Earnings

In August, the company reported a Q1 EPS beat of half a percent. Revenue came in above expectations and same store revenue growth was up 46.7% v 5.5% last year.

At first glance the numbers look fine, but while the market was expecting the number that was reported, investors were used to the company blowing out numbers. For the quarter reported in May, the company saw a 130% EPS beat, so when EPS came in as expected, investors were a bit disappointed.  

Additionally, the company saw margins compressed more than expected. This is due to the tight used car market as inventory’s remain low.

Stock Crashes

While the sales numbers aren’t bad, investors are worried about the used car market. What used to be a tailwind in rising prices is now a headwind in low supply. The stock dropped from $160, to $130 in one day, a drop of almost 20%. 

Estimates

Over the last 60 days, analysts have consistently taken down their numbers. For the current quarter, estimates have fallen 7%, from $3.68 to $3.41. For the current year, numbers have fallen by 6%.

The Technicals

Before earnings, CRMT had a great looking chart. However, the stock saw no support at the 200-day moving average. While the stock is down only slightly from the post-earnings lows, there seems to be no life. Investors likely have to wait for the next catalyst to get some movement either way.

For those that might want to buy the dip, the $90 level is the 61.8% Fib retracement drawn from the COVID lows to all-time highs.

In Summary

CRMT has had a major setback with investors, causing the stock to fall in similar fashion to the COVID crash. Until the supply/demand dynamic of the used car market normalizes, investors are best looking somewhere else.

Additional content:

FedEx Posts Mixed Q1; Adobe, StitchFix Beat

Market indexes fought valiantly to climb back from the hole they dug Monday, but only the Nasdaq and Russell 2000 were able to close in the green Tuesday: +0.22% and +0.18%, respectively. The Dow subtracted another -48 points from the -614 it lost Monday, -0.14% on the day. The S&P 500 dipped into the red right at the close, -0.08%. Off the trading highs for the day, the indexes still demonstrated a level of stability.

Trading activity may have been a tad subdued as the Fed’s next take on monetary policy comes out Wednesday; though most analysts do not think an asset purchase taper gets put into place in the FOMC report, it’s a close enough call not to rule it out completely. Fed Chair Jay Powell has been staunch in his keeping markets liquid as employment numbers (slowly) reach their potential, and with economic concerns in China this week, it would seem there’s a lot on the plate for the Fed to digest first.

FedEx shares were down -3.5% in late trading Tuesday, following the company’s mixed fiscal Q1 earnings report after the closing bell. Earnings of $4.37 per share missed the $4.95 Zacks consensus, as well as the $4.87 per share in the year-ago quarter, on $22.0 billion in sales, topping the $21.8 billion expected. Higher employment costs — to the tune of $450 million in the quarter — and other supply constraints weighed on results. Shares of FDX are now down year to date.

However, online personal style service Stitch Fix shares jumped +18% on its fiscal Q4 earnings, which swung from a -14 cents expected to +19 cents reported. Revenues also topped estimates — $571 million versus $547.8 million in the Zacks consensus. Even though fiscal Q1 and full-year revenue guidance is lower than analysts had been predicting, which may result in a lowering of the Zacks Rank, the big swing to a profit seems to be grabbing most of the attention. Shares are still down -36.7% year to date.

Computer software staple Adobe beat estimates on both top and bottom lines yesterday afternoon, $3.11 per share versus $3.00 expected, on $3.94 billion in revenues, outpacing the consensus $3.88 billion. This was a record quarter in revenue gains for the company, led by its Digital Media segment, +23% year over year. Shares are up +33% year to date, but sold off on this Q3 earnings news.

Wednesday morning, we’ll see seasonally adjusted Existing Home Sales data for August, following Tuesday morning’s better-than-expected Housing Starts and Building Permits reports. Estimates are for the headline to come in beneath July’s 5.99 million units, but perhaps we’ll be pleasantly surprised in this aspect of the housing market, as well. Also, Fed Chair Jay Powell speaks after the FOMC’s report comes out. Careful attention will be paid to any semblance of a timeline on tapering.

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Adobe Inc. (ADBE) : Free Stock Analysis Report

FedEx Corporation (FDX) : Free Stock Analysis Report

Caseys General Stores, Inc. (CASY) : Free Stock Analysis Report

Americas CarMart, Inc. (CRMT) : Free Stock Analysis Report

Stitch Fix, Inc. (SFIX) : Free Stock Analysis Report

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