CrowdStrike and The Estee Lauder Companies have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – August 3, 2023 – Zacks Equity Research shares CrowdStrike CRWD as the Bull of the Day and The Estee Lauder Companies Inc. EL as the Bear of the Day. In addition, Zacks Equity Research provides analysis on CarGurus CARG, Rivian Automotive RIVN and Honda HMC.
Here is a synopsis of all five stocks:
Bull of the Day:
Company Overview
Founded in 2011, Sunnyvale, CA-based Zacks Rank #1 (Strong Buy) stock CrowdStrike is a leader in next-generation endpoint protection, threat intelligence and cyberattack services. The company was formed when co-founders George Kurtz and Dmitri Alperovitch were inspired by the shortcomings in the previous-generation security software technologies. The company gains a leg up on the competition through its use of crowdsourced data from its customer base applied to modern technologies, including AI, cloud computing, and graph databases to detect threats and stop breaches.
CrowdStrike specializes in endpoint protection and threat intelligence. Endpoints include devices such as laptops, desktop computers, smartphones, tablets, servers and other internet of things (IoT) devices. Endpoint protection aims to safeguard these devices from a wide range of threats including malware, ransomware, viruses, spyware, phishing attacks and other advanced cyber threats. Threat intelligence focuses on understanding the broader cybersecurity landscape including the motivations and capabilities of different threat actors as well as tactical threat intelligence which involves more specific and detailed information about current threats.
A Growth Story
It's difficult to find a company with higher and more consistent growth than CrowdStrike. Last quarter, earnings grew 84% year-over-year on revenue growth of 42%. Since going public in 2019, the company has grown annual revenue and earnings annually.
Not only has CRWD grown earnings each year, the company has beat analyst expectations for every quarter as a public company thus far.
Future Outlook
In recent quarters earnings growth has increased even more, spurred on by rising demand for security and networking products amid the growing hybrid working trend. Overall growth in cybersecurity demand is another significant catalyst. As hackers get more sophisticated, demand should rise. Pet Statista, the worldwide cybersecurity market is projected to reach $173.50 billion in 2023 and $262.40 billion by 2027. Analysts expect a similar, yet more robust trajectory for CRWD. Over the next 3 quarters, analysts expect CRWD to grow earnings at a healthy 50% clip.
Consistency
CrowdStrike is able to be consistent for three reasons: it has a subscription-based model (recurring sales), makes strategic acquisitions, and is using the latest in technology (AI) to stay ahead of the competition.
Technical View
CRWD's 50-day moving average crossed above its 200-day moving average recently, to trigger a bullish golden cross (signals a major trend change).
Takeaway
CrowdStrike is a leader in the cybersecurity industry because of its focus on new technology to thwart threats, strategic acquisitions, and subscription-based offering. Growing demand for cybersecurity solutions should only increase demand for CRWD's suite of products moving forward.
Bear of the Day:
Company Overview
New York-based Zacks Rank #5 (Strong Sell) stock The Estee Lauder Companies Inc. is one of the world's leading manufacturers and marketers of skincare, makeup, fragrance, and hair care products. The company's products are sold through department stores, mass retailers, company-owned retail stores, hair salons, and travel-related establishments. Though the company is headquartered in the US, its manufacturing and research facilities are spread across Canada, Belgium, Switzerland, Japan, South Africa, and the UK.
Inflation and Currency Headwinds
Because of Estee Lauder's wide-ranging international presence, the company is exposed to unfavorable currency fluctuations. A strong US dollar will lead the company to increase prices or suffer from contracting profit margins. For now, the dollar is up roughly 4% over the past three weeks (a strong move for the dollar) and is on the brink of breaking out.
Regardless of the fluctuations in the dollar, Estee Lauder has a much lower profit margin (9.41) versus the cosmetics industry (19.99).
The Death of the Department Store
One headwind that Estee Lauder has little control over is the death of the department store. The COVID-19 pandemic drove consumers away from department stores and to e-commerce platforms such as Amazon (a trend already in motion). Consumer preferences are also changing. Consumers are more drawn to specialty stores, boutiques, and direct-to-consumer brands than ever before.
Increased Competition
"Fast-fashion" retailers have gained popularity for their ability to quickly respond to changing fashion trends. While EL earnings dropped 75% last quarter while competitor e.l.f. Beauty saw EPS launch by 182%, year-over-year. Consumers are clearly searching for inexpensive, high-quality cosmetics brands like ELF versus legacy, more expensive brands like EL. The trend is showing up in EL's estimates moving forward.
Negative Earnings ESP Score
EL is expected to report earnings on August 18th. Last quarter, EL missed earnings expectations by 4.08%. Investors should expect earnings to miss this quarter again because of its negative Earnings ESP Score. A negative Zacks Earnings ESP (Expected Surprise Prediction) combined with a poor rank of strong sell suggests that the company will likely miss earnings expectations.
Price is the Ultimate Arbiter
Beyond the faltering fundamentals and business headwinds, EL shares exhibit relative weakness versus the general market and its industry group. Over the past year, EL shares are down 35%, while the Soap-Cosmetic Industry is flat.
Takeaway
Currency headwinds, growing competition, and slowing growth point to a bleak outlook for Estee Lauder.
Additional content:
3 Auto Stocks Set to Outpace Estimates This Earnings Season
The Auto-Tires-Trucks sector is almost halfway through the Q2 earnings season. The picture thus far is one of continued resilience and strength. So far, eight S&P 500 sector components — Tesla, Ford, General Motors, PACCAR, O'Reilly Automotive, Genuine Parts, BorgWarner and LKQ Corp — have reported quarterly numbers. All these companies managed to pull off an earnings beat.
Per the Earnings Trend report dated Jul 26, the auto sector's earnings for the second quarter are expected to grow 14.6% on a year-over-year basis. As for revenues, they are estimated to rise 19.9% year over year.
With a host of companies still left to release second-quarter 2023 results, we have identified —with the help of the Zacks Stock Screener — a few auto players, which are positioned to outshine the Zacks Consensus Estimate in second-quarter earnings. These include CarGurus, Rivian Automotive and Honda. Before we discuss the companies, let's take a look at the factors shaping the quarterly performance of automotive companies.
Factors at Play
Most automakers experienced year-over-year sales growth in the second quarter of 2023, thanks to improving inventory levels. The demand for automobiles remained strong, indicating that the rise in interest rates did not significantly affect purchasing decisions. At the outset of 2023, industry experts anticipated a potential deceleration in the U.S. car market amid inflationary pressure and increased borrowing expenses. However, consumer demand demonstrated greater resilience than anticipated. Quoting Cox Automotive's chief economist Jonathan Smoke, "Consumers have found a way to buy new wheels."
The seasonally adjusted annualized sales rate for June 2023 was 15.7-15.8 million vehicles, up from 15.1 million vehicles in May 2023 and 12.9 million units in June 2022. Per Cox Automotive, new vehicle sales in the second quarter of 2023 topped 4 million units, up 15% year over year and 13% sequentially.
Supply constraints have been considerably alleviated. Limited new vehicle inventory over the past two years that had handcuffed sales is no longer a pressing concern. According to Cox Automotive, new vehicle inventory levels in the United States saw a significant increase of more than 70% in June compared to the same period last year.
The rising popularity of new energy vehicles (including all-electric, hybrids and fuel-cell) is also expected to have fueled the revenues of automakers. Despite concerns over high borrowing costs, Americans' unwavering love for cars and pent-up demand are likely to have aided auto sales in the second quarter of 2023.
Picking Potential Winners
While it is not possible to be sure about which companies are well positioned to beat earnings estimates, our proprietary methodology — Earnings ESP — makes it relatively simple. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. Earnings ESP shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.
You can see the complete list of today's Zacks #1 Rank stocks here.
Our research shows that for stocks with the abovementioned combination, the chances of an earnings beat are as high as 70%.
Our Choices
CarGurus: The company is an online automotive marketplace connecting buyers and sellers of new and used cars. CarGurus is the #1 listing platform, with the largest selection of vehicles in the United States. The acquisition of the CarOffer platform added wholesale vehicle acquisition and selling capabilities to CarGurus' portfolio of dealer offerings. The acquisition allows the firm to offer Instant Max Cash Offer to customers who wish to sell their car while purchasing a new one. This is likely to have benefited the firm.
During the quarter to be reported, CarGurus enhanced automotive search and shopping by introducing the ChatGPT plugin, utilizing generative AI to provide shoppers with greater personalization and ease in exploring vehicle options without being restricted by specific search fields.
CarGurus has an Earnings ESP of +7.14% and a Zacks Rank #1. The company is scheduled to release second-quarter results tomorrow. The Zacks Consensus Estimate for CarGurus' to-be-reported quarter's earnings and revenues is pegged at 23 cents per share and $230 million, respectively. CARG surpassed earnings estimates in three of the trailing four quarters and missed in the other, with the average surprise being 49.5%.
Rivian: The company delivered 12,640 vehicles in the second quarter of 2023. It produced 13,992 vehicles at its manufacturing facility in Normal, IL, during the three months, ended Jun 30, 2023. The production and delivery numbers witnessed an uptick from the second-quarter 2022 level. In the second quarter of 2022, the company had produced 4,401 vehicles and delivered 4,467 vehicles. Higher deliveries are likely to have boosted revenues in the quarter under review. Increasing cost efficiency is also likely to have aided its performance and narrowed loss from the year-ago levels.
Rivian has an Earnings ESP of +0.75% and a Zacks Rank #2. The electric vehicle startup is scheduled to release second-quarter results on Aug 8. The Zacks Consensus Estimate for Rivian's to-be-reported quarter's bottom line is pegged at a loss of $1.41 a share, indicating an improvement of 25.4% year over year. The consensus mark for revenues is pegged at $979 million. RIVN surpassed earnings estimates in three of the trailing four quarters and missed in one, with the average surprise being 6.08%.
Honda: Higher year-over-year deliveries in America during the April-June period are likely to boost Honda's to-be-reported quarter results. In the second quarter of the year, Honda achieved remarkable sales growth in the American market. In June alone, the company experienced a substantial 56.9% year-over-year increase in U.S. sales, reaching a total of 111,498 units sold. Throughout the entire quarter, Honda continued to thrive, with a notable 44.7% year-over-year growth, culminating in the sale of 347,025 units.
Honda brand sales in the second quarter surged 42.6% year over year to 306,848 units, while Acura brand sales soared 63.2% to 40,177 units. One of the driving forces behind Honda's success was the surge in electrified vehicle sales.
Honda has an Earnings ESP of +9.65% and a Zacks Rank #3. Japan's auto giant is scheduled to release fiscal first quarter 2024 results on Aug 9. The Zacks Consensus Estimate for Honda's to-be-reported quarter's earnings and revenues is pegged at 99 cents per share and $33.6 billion, respectively. HMC missed earnings estimates in three of the trailing four quarters and beat in one, with the average negative surprise being 9.08%.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
See Stocks Free >>
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
https://www.zacks.com
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Honda Motor Co., Ltd. (HMC) : Free Stock Analysis Report
The Estee Lauder Companies Inc. (EL) : Free Stock Analysis Report
CarGurus, Inc. (CARG) : Free Stock Analysis Report
CrowdStrike (CRWD) : Free Stock Analysis Report
Rivian Automotive, Inc. (RIVN) : Free Stock Analysis Report
