Fluor Corporation and Align Technology have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – December 26, 2023 – Zacks Equity Research shares Fluor Corporation FLR as the Bull of the Day and Align Technology ALGN as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Sarepta Therapeutics SRPT, Denali Therapeutics DNLI and Verona Pharma VRNA.
Here is a synopsis of all five stocks:
Bull of the Day:
When it comes to companies that may be in store for a boost from President Biden's $1.2 trillion infrastructure bill, Fluor Corporation will be one to watch with its stock landing a Zacks Rank #1 (Strong Buy) and the Bull of the Day.
Through several subsidiaries, Fluor is a provider of engineering, procurement, construction, and maintenance services (EPCM) with FLR shares looking very attractive as the Zacks Engineering-R and D Services Industry is currently in the top 21% of over 250 Zacks industries.
Steady Growth
Fluor's total sales are now projected to rise 12% in fiscal 2023 and jump another 9% in FY24 to $16.88 billion. More impressive, Fluor's annual earnings are forecasted to soar 188% this year to $2.35 per share versus $0.82 a share in 2022. Plus, FY24 EPS is expected to expand another 12%.
Furthermore, over the last quarter, FY23 earnings estimate revisions have now soared 18% while FY24 EPS estimates are up 4%.
Valuation Discounts
Making Fluor's stock a very sound investment is that the company's valuation is reasonable considering its growth prospects. At 16.6X forward earnings, Fluor's stock trades at a 31% discount to the Zacks Engineering-R and D Services industry average of 24.1X with some of the other notable players in the space being AECOM ACM, Altair Engineering ALTR, and Sterling Infrastructure (STRL).
Fluor's stock also trades nicely beneath the S&P 500's 22.2X. More enticing is that Fluor shares trade well below their decade-long high of 41.8X forward earnings and at a slight discount to the median of 17.4X.
Notably, Fluor's price-to-sales ratio of 0.43X is comfortably below the optimum level of less than 2X with its industry average at 1.4X and the S&P 500 currently at 3.9X.
Recent Performance & Momentum
Fluor's stock has risen +7% in the last two months seeing strong momentum after third quarter earnings of $1.02 per share most recently crushed the Zacks Consensus of $0.52 a share by 85% in early November.
This led to Fluor raising its full-year EBITDA and adjusted EPS guidance with shares now up +13% in 2023. Even better, over the last three years, Fluor's stock has now soared +136% to largely outperform the broader indexes and even top its Zacks Subindustry's +87%.
Bottom Line
Fluor's stellar price performance over the last few years looks likely to continue into 2024 with its stock starting to check the boxes in many fundamental areas. In addition to its strong buy rating, Fluor's stock currently has an overall "A" Zacks VGM Style Scores grade for the combination of Value, Growth and Momentum.
Investors who haven't taken notice may want to do so as Fluor's stock hit 52-week highs of $40 a share last week and looks poised to reach higher highs.
Bear of the Day:
Although many stocks have started to participate in the broader end-of-the-year rally, Align Technology looks like one to avoid right now.
Mostly attributed to a weakening outlook, it's noteworthy that Align Technology's Zacks Medical-Dental Supplies Industry is currently in the bottom 7% of over 250 Zacks industries.
Despite the company's favorable long-term prospects as a provider of Invisalign clear aligners for the treatment of malocclusions or the misalignment of teeth, Align Technology's stock currently lands a Zacks Rank #5 (Strong Sell) and the Bear of the Day.
Time for a Cooldown Amid Declining Earnings Estimates
Considering most of Align Technology's +28% year-to-date gains came over the last month its stock certainly looks do for a correction or pullback as earnings estimate revisions are still noticeably lower in the last 60 days.
Fiscal 2023 earnings estimates are down -3% over the last two months from $8.77 per share to $8.42 a share. More concerning, FY24 EPS estimates have dropped -9% from $10.33 per share to $9.40 a share.
Unsupportive Valuation
With a current stock price of $270, Align Technology's valuation doesn't support its extensive rally over the last month trading at a 32.5X forward earnings multiple which is now noticeably above its industry average of 20.3X and the S&P 500's 22.2X.
Furthermore, Align Technology's price-to-sales ratio of 5.4X is uncomfortably above the optimum level of less than 2X and a very stretched premium to its industry average of 0.4X and even the S&P 500's 3.9X.
Takeaway
Undoubtedly, investors are hoping the end-of-the-year rally can continue for the broader stock market but the recent spike in Align Technology shares appears to be overdone. It may be wise to fade the rally in Align Technology's stock or stay on the sidelines until better opportunities present themselves.
Additional content:
3 Beaten-Down Biotechs to Buy for a 2024 Turnaround
The biotech sector took a beating in 2023. Rising interest rates and inflation, global supply chain constraints, recent bank failures and ongoing conflicts due to Russia-Ukraine and the Israel-Hamas wars increased broader economic uncertainty.
New drug approvals, pipeline progress and an increase in M&A activity were some of the positives in the sector in 2023. While companies engaged in making or developing COVID-19-related treatments continue to lose steam, the sector has started to discover its charm in obesity drugs, the demand and competition for which are expected to increase in 2024. The sector is also focused on bringing novel and innovative treatment opportunities for different diseases.
Here we discuss three drug/biotech stocks, which took a beating in 2023 but are likely to bounce back in 2024 based on anticipated regulatory approvals and/or positive pipeline updates. These are Sarepta Therapeutics, Denali Therapeutics and Verona Pharma.
Sarepta Therapeutics
It has been a bumpy ride for Sarepta in 2023 despite obtaining accelerated approval from the FDA for Elevidys — the first-ever gene therapy in Duchenne muscular dystrophy (DMD) indication. In October, Sarepta reported topline data from the phase III EMBARK study, the proposed confirmatory study for full approval of Elevidys in DMD indication. The study failed to achieve its primary endpoint. Sarepta's stock is down 30% year to date due to this negative update.
Despite the setback, the EMBARK study achieved statistical significance on all pre-specified key secondary endpoints, indicating that treatment with Elevidys modifies the course of DMD indication. Management claims to have shared these results with the FDA, who have confirmed that they are open to granting full approval to Elevidys across all age groups if supported by the data. At the time of granting accelerated approval, the FDA approved the therapy for use in patients aged 4 through 5 years. Sarepta intends to submit a regulatory filing with the FDA soon.
Sarepta commercially launched Elevidys in third-quarter 2023. Despite the setback in the EMBARK study, the company recorded $69.1 million in sales, which is encouraging for a newly-launched treatment.
Apart from Elevidys, Sarepta is working to introduce new gene therapy treatments in its portfolio. In this regard, it started two separate early-stage studies on novel gene therapy treatments targeting different muscular dystrophies, namely Limb-girdle muscular dystrophy (LGMD) type 2E/R4 and LGMD2B/R2 (dysferlinopathy).
sSarepta currently carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Estimates for 2024 earnings have improved from a loss of 98 cents to earnings of $1.79 per share in the past 60 days.
Denali Therapeutics
Denali Therapeutics makes therapies targeting neurodegenerative diseases. In spite of collaborations with big-wig pharma giants for multiple pipeline candidates, the small biotech still remains vulnerable to pipeline setbacks. In the past few months, Takeda and Sanofi have stopped developing their respective Denali-partnered candidates in Alzheimer's disease and cutaneous lupus erythematosus (CLE) indications.
Year to date, shares of Denali have lost 22.5%.
However, the company's partnerships with Biogen and Sanofi remain intact for other indications.
Currently, Denali has two wholly-owned candidates in late-stage development programs — DNL310 (for MPS II (Hunter syndrome)) and DNL343 (for amyotrophic lateral sclerosis or ALS). The company is progressing well with the development of its partnered pipeline. In this regard, Denali is also advancing mid/late-stage programs on BIIB-122/DNL151 in Parkinson's disease (partnered with Biogen) and SAR443820/DNL788 in ALS and multiple sclerosis (MS) indications (partnered with Sanofi).
Denali currently carries a Zacks Rank #2. Loss estimates for 2024 have narrowed down from a loss of $3.04 per share to $2.92 in the past 60 days.
Verona Pharma
Verona engages in developing therapies for treating chronic respiratory diseases. The company's lead candidate is ensifentrine, which has the potential to become the first non-steroidal therapy for treating respiratory diseases that combines bronchodilator and anti-inflammatory activities in one molecule.
The FDA is currently reviewing Verona's new drug application (NDA) filing, which seeks approval for ensifentrine for the maintenance treatment of patients with chronic obstructive pulmonary disease (COPD). This NDA is supported by data from late-stage studies, which have shown the potential of ensifentrine to improve lung function and disease symptoms. Treatment with the drug also exhibited a substantial reduction in the rate and risk of COPD exacerbations.
A final decision on the NDA is expected by Jun 26, 2024. If the NDA is approved, management expects ensifentrine to be the first novel mechanism available as COPD maintenance treatment in over 10 years and the company's first marketed product. Per Verona, the FDA does not plan to hold an advisory committee meeting to discuss the NDA.
Verona's shares have lost 37.4% in 2023.
The stock currently carries a Zacks Rank #2. In the past 60 days, loss estimates for 2024 have improved from $1.09 to 78 cents per share.
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Fluor Corporation (FLR) : Free Stock Analysis Report
Align Technology, Inc. (ALGN) : Free Stock Analysis Report
Sarepta Therapeutics, Inc. (SRPT) : Free Stock Analysis Report
Verona Pharma PLC American Depositary Share (VRNA) : Free Stock Analysis Report
Denali Therapeutics Inc. (DNLI) : Free Stock Analysis Report
