For Immediate Release
Chicago, IL – September 8, 2022 – Zacks Equity Research shares East West Bancorp EWBC as the Bull of the Day and Cincinnati Financial CINF asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on General Electric Co. GE, Carlisle Companies CSL and Griffon Corp. GFF.
Here is a synopsis of all five stocks:
Bull of the Day:
East West Bancorp is a Zacks Rank #1 (Strong Buy) that provides a range of personal and commercial banking services to businesses and individuals.The company accepts various deposit products, such as personal and business checking and savings accounts, money market, and time deposits.
While the company provides traditional banking services, it has a niche as an ethnic-Chinese commercial bank that allows clients a financial bridge to facilitate business transactions between the U.S. and China.
The stock shot higher in August after earnings beat. However, like the overall market, EWBC ran into resistance and sold off. Now 10% lower, investors should start looking at the name to see if its right for their portfolio.
About the Company
East West Bancorp was founded in 1998 and is headquartered in Pasadena, CA. It employs 3,000 people and has a market cap of almost $10 Billion.
The company operates approximately 120 locations in the United States and China; full-service branches in Hong Kong, Shanghai, Shantou, and Shenzhen; and representative offices in Beijing, Chongqing, Guangzhou, Taipei, and Xiamen.
East West operates through three segments: Consumer and Business Banking, Commercial Banking, and Other. The company offers all the traditional services a normal bank would, but also provides various wealth management, treasury management, foreign exchange, and interest rate and commodity risk hedging services.
EWBC has Zacks Style Scores of "B" in Momentum, "C" in Value and "D" in Growth. The stock sports a Forward PE of only 9 and pays 2.3% dividend.
Q2 Earnings Beat
In late July the company posted an 8% EPS beat, driven by record assets and record loans. This was their second straight beat, which comes two quarters after their first earnings miss since 2020.
Q2 came in at $1.81 v the $1.68 expected. Revenues were at $551M, above the $522M expected. Net Interest Margin (NIM) came in at 3.23% v the 2.87% last quarter. East West saw growth across all major loan categories and noninterest-bearing demand deposits increased 8%.
Management commented that the balance sheet is positioned for higher interest rates, but also very diversified.
The company guided FY net interest income growth at 30-35% and loans +16-18%.
Over the last 60 days, estimates have been trending higher. For the current quarter, we have seen numbers taken from $1.81 to $2.08 or 15%. For next quarter, they have ticked 13% higher.
Looking down the road, analysts see the momentum continuing. Over the last 90days, the current year has seen estimates go from $7.01 to $7.79, or 11%. For next year, analysts have taken numbers 8% higher.
All-time highs were trading earlier this year above the $93 level. But the equity market sell-off and tensions between the United States and China brought the stock lower by 35%.
The stock rallied over 25% from lows and is currently coming back to some support levels.
The 50-day moving average is just above $70 and buyers seem interested. However, the 61.8% Fibonacci retracement drawn from June lows to August highs is $68. This area already brought in buyers and if it continues to hold, the stock could see a rally back to that 200-day moving average and beyond.
East West Bancorp has a niche not many banks have, with the opportunity to get a share in the finance industry in China. While there is current risk with this idea, the company is well diversified to weather the current storm.
The stock is currently discounted because of the current atmosphere and if global geopolitical risk were to subsided, investors will be rewarded.
Short-term investors have a nice trade setup at current levels as they look for a move back to the 200-day moving average above, with a stop at recent lows. Long-term investors have an even greater opportunity to add a non-traditional bank to their portfolio, while getting exposure to the Chinese market.
Bear of the Day:
Cincinnati Financial is a Zacks Rank #5 (Strong Sell) that provides property casualty insurance products in the United States. The company also offers commercial leasing and financing services; and insurance brokerage services.
The stock was trading at all-time highs back in April, but a bad quarter has shaken investors confidence. Now trading over 30% from those highs, the bulls are still not ready to jump in as falling estimates are concerning and the technicals do not look bullish.
About the Company
Cincinnati Financial is headquartered in Fairfield, OH. The company was founded in 1950 and employs over 5,000 people.
The company operates through five segments: Commercial Lines Insurance, Personal Lines Insurance, Excess and Surplus Lines Insurance, Life Insurance, and Investments.
CINF is valued at $15 billion and has a Forward PE of 19. The company holds Zacks Style Scores of "B" in Value, but "D" in Momentum. The stock pays out a dividend of 2.8%.
The company reported EPS in late July, missing expectations by 38%. EPS came in at $0.65, far below the $1.79 a year ago. Revenues were $820M vs the $2.3B last year.
The big miss was due to large catastrophe losses and a higher commercial accident year loss ratio related to its commercial casualty business.
Over the last 90 days, numbers have been taken down across all time frames.
For both the current quarter, estimates have dropped from $1.27 to $1.03, or 18%. For the current year, we see a 12% drop, over that same time frame.
While insurers can take temporary losses for unseen events, it looks like analysts see the trouble in the future. Estimates for next year have also dropped aggressively. Over the last 60 days, numbers have fallen from $5.99 to $5.34, or 10%.
After the results, RBC cut its price target from $133 to $108.
Not much to like when you look at the chart, as the stock is steadily moving from the upper left quadrant to the lower right.
The stock is trading below all moving averages, with the 50-day at $106 and the 200-day at $119. The bulls will likely run into resistance at these levels as long as the fundamentals are under question.
The stock hit 2022 lows in early August at $93.41, but rallied with the market back above the $105 level. However, the stock is bleeding again and falling very close to those recent lows. If that area is taken out, the bears likely press into the mid-$80s.
For those looking to buy the stock, they should wait for the 61.8% Fibonacci support area at $84. This can be found by drawing from the COVID lows to the 2022 highs.
Cincinnati Financial might take a while to find footing. Until then, the stock should be avoided and investors should allocate capital to elsewhere.
GE Arm Clinches Wind Turbine Deal in Japan
General Electric Co. unit GE Renewable Energy recently announced that it secured an onshore wind turbine contract from Green Power Investment (GPI) for the Fukaura Wind Farm in Fukaura Town, Nishi Tsugaru District, Aomori Prefecture, Japan.
Per the latest deal, GE Renewable Energy will be responsible for supplying 19 units of its 4.2-117 onshore wind turbines. The onshore wind turbines have a rotor diameter of 117m, and a hub height of 110m and will be operated at 4.2MW. These turbines at the wind farm will have an instilled capacity of 79.8MW. The installation process of the onshore wind turbines is expected to start in the second quarter of 2023. The turbines will likely come online in 2024. The deal includes a 10-year full-service contract, which could be extended later.
Fukaura Wind Farm is located close to Japan's northwestern sea border. Given the complex location, the GE 4.2-117 onshore wind turbines are designed to minimize unfavorable impacts on the environment, and efficiently deal with the adverse weather conditions and the unique wind environment of Japan.
This marks GE's third such project with GPI in Japan. GPI's projects in the Tohoku region are supported by Tohoku Electric Power Co., Inc., its strategic partner.
Zacks Rank & Stocks to Consider
GE currently carries a Zacks Rank #3 (Hold). Some better-ranked companies from the conglomerates sector are discussed below.
Carlisle Companies sports a Zacks Rank #1 (Strong Buy), currently. CSL pulled off a trailing four-quarter earnings surprise of 28%, on average. You can see the complete list of today's Zacks #1 Rank stocks.
In the past 60 days, Carlisle's earnings estimates have increased 14.7% for 2022. The stock has rallied 32.4% in the past six months.
Griffon Corp. has a Zacks Rank #2 (Buy) at present. GFF delivered a trailing four-quarter earnings surprise of 104.6%, on average.
In the past 60 days, Griffon's earnings estimates have increased 3% for fiscal 2022 (ending September 2022). The stock has surged 36% in the past six months.
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General Electric Company (GE) : Free Stock Analysis Report
Cincinnati Financial Corporation (CINF) : Free Stock Analysis Report
Carlisle Companies Incorporated (CSL) : Free Stock Analysis Report
East West Bancorp, Inc. (EWBC) : Free Stock Analysis Report
Griffon Corporation (GFF) : Free Stock Analysis Report
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