For Immediate Release
Chicago, IL – September 13, 2022 – Zacks Equity Research shares JD.com JD as the Bull of the Day and Dave & Buster’s Entertainment PLAY asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Ryder System, Inc. R, Triton International Ltd. TRTN and GATX Corp. GATX.
Here is a synopsis of all five stocks.
Bull of the Day:
JD.com is a Zacks Rank #1 (Strong Buy) that operates as an online direct sales company in China. The company offers a diverse range of products, from electronics to food.
Unlike many Chinese related stocks, JD has held up well in 2022 and is down just slightly year to date. One reason for the relative strength is a stretch of earnings beats that stretches back to 2019.
With the market recently gaining some traction, investors are looking at stocks like JD that have held up well. Let’s take a look at the bullish case for JD as we head into the back half of the year.
About the Company
JD was incorporated in 2006 and is headquartered in Beijing, China. It employs 385,000 people and has a market cap of $80 Billion.
Through its website and mobile applications, JD offers a selection of products including home appliances, clothing, luxury goods, jewelry, household products, personal care items, food, books, media products, toys, fitness equipment and virtual goods.
The stock has Zacks Style Scores of “A” in Growth as well as Momentum, and sports a “B” in Value. JD has a Forward PE of 28 and pays no dividend.
Q2 Earnings Beat
In late August, JD reported a 32% EPS beat for Q2. The company also beat on the top line and saw its EBITDA margin go from 1.5% last year to 2.7%.
Management commented that they are pleased with the topline growth considering the challenging period. They added that the premium membership program of JD.com has exceeded the milestone of 30 million registered members in July 2022, setting a new record in scale.
The stock reacted very well to the earnings report, moving from the $55 area to an August high of $67.87 in just four days. The stock has pulled back since that up move, but rising estimates should keep any future selling at bay.
Over the last 30 days, estimates have been trending higher across all time frames. For the current quarter, we have seen numbers taken from $0.55 to $0.62 or 13%. For next quarter, they have ticked 13% higher over that same time frame.
Looking down the road, analysts see the momentum continuing. Over the last 60 days, the current year has seen estimates go from $1.86 to $2.15, or 11%. For next year, analysts have taken numbers 3% higher.
Analysts are also taking price targets above current trading levels. Susquehanna reiterated JD with a Neutral after earnings, lifting their targets to $62 from $55. Benchmark reiterated JD with their Buy rating and price target of $109.
The stock made highs early in 2021 at $107. After that high, the stock dropped 62% to bottom around the $40 level. JD has bounced 50% from that low made back in March and has traded sideways around the $60 area.
Now down 10% on the year, investors are looking for those post-earnings highs above $67 to get green on the year.
Looking at the moving averages, the stock is above the 50-day at $60.50, but below the 200-day at $63.25. If the bulls want some momentum higher in price, that 200-day must be taken back.
If the bulls get a breakout above that area, they should watch for the $73-75 spot for profit taking. This was the resistance back in February, which likely brings in some sellers.
The bulls can lean on the $54 level, which was the pre-earnings lows and the 61.8% retracement drawn from May lows to June highs.
The bulls have seen some relative strength in JD.com, something that has been rare for a Chinese stock in 2022.
Investors should be watching this name for a potential breakout over the 200-day moving average. Traders have a nice setup above the 50-day MA at $60.50 and with the 61.8% support area at $54.
If the overall market can gain traction, the bulls should expect the stock to get 2022 highs before the year is over.
Bear of the Day:
Dave & Buster’s Entertainment is a Zacks Rank #5 (Strong Sell) that owns and operates entertainment and dining venues for adults and families in North America. Its venues offer dining and an assortment of entertainment attractions centered on playing games and watching live sports.
The stock was trading at four-month highs before an earnings report last week. Unfortunately for investors, the quarter disappointed and the stock fell over 10%.
Buying the dip did work earlier in the year, but poor earnings and falling estimates should be a signal to avoid the stock for now.
About the Company
PLAY is headquartered in Coppell, TX. The company was founded in 1982 and employs over 13,000 people.
Dave & Busters operates under a core concept called “Eat Drink Play and Watch.” The company wants families to come for food and drinks, bring their kids to play games, while the adults watch the game.
The company operates under two segments, Food and Beverage (33.5% of total revenues in fiscal 2021) and Amusement and Other revenues (66.5%).
PLAY is valued at $2 billion and has a Forward PE of 14. The company holds Zacks Style Scores of “B” in Value and “A” in Growth. The stock pays no dividend.
The company reported EPS on September 7th, missing expectations by 39%. EPS came in at $0.59 v the $1.01 expected. Revenues beat, coming it at $468M v the $432M expected. Same Store Sales were up 9.6% v 2019, which means the company is above pre-pandemic levels.
While there are positives like having customers back and record-breaking revenues, the bottom line was hampered by wage and commodity inflation. This is eating into profits and until they mitigate the issue, investors will shy away from the stock.
Because of the poor performance in Q2, analysts are lowering estimates.
For the current quarter, estimates have dropped from $0.23 to $0.08 over the last 7 days, or 65%. This is a fairly large drop, which shows us near term the stock may have trouble lifting.
Things are expected to improve, but we still see a drop next quarter. Estimates over the last 7 days for the next quarter have fallen from $0.79 to $0.73, or 7.5%
Before earnings, the stock was looking healthy for the first time since April. It had bounced almost 50% off the July lows and was trading under the $45 level.
When earnings hit, the stock erased all the August gains and fell below the 200-day MA at $39 and to the 50-day moving average. This 50-day area held up and the bulls and bears seem to be fighting at the 200-day. A move below that recent low and we could see further downside.
Dave & Busters is a place to have a good time, but investors in the stock are not having fun at all. The recent quarter is making bulls nervous and the stock could break some important technical levels soon.
3 Transport Equipment Leasing Stocks with Solid Dividend Yields
The Zacks Transportation - Equipment and Leasing industry is gaining from healthy equipment and lease demand on the back of impressive consumer spending, despite the current uncertain scenario. Businesses keen on making capital investments to ramp up operations are also adding stimulus to lease demand. The buoyancy in the industry is further confirmed by its Zacks Industry Rank #51, which places it in the top 20% of more than 250 Zacks industries.
Driven by the tailwinds, the industry has gained 31.3% over the past three months, outperforming the S&P 500 Index’s 8.5% appreciation and 8.4% growth of the broader Zacks Transportation sector.
Given this encouraging backdrop, it would be a wise decision to invest in some dividend-paying stocks like Ryder System, Inc., Triton International Ltd. and GATX Corp. from the Transportation - Equipment and Leasing industry.
Why Dividend Growth Stocks?
Stocks that have a strong history of dividend growth belong to mature companies, which are less susceptible to large swings in the market, and act as a hedge against economic or political uncertainty as well as stock market volatility. At the same time, these offer downside protection with their consistent increase in payouts.
Additionally, these stocks have superior fundamentals that make dividend growth a quality and promising investment for the long term. These include a sustainable business model, a long track of profitability, rising cash flows, good liquidity, a strong balance sheet and some value characteristics.
In view of the tailwinds mentioned, it can be safely said that dividend-paying stocks appear as a preferred option compared to non-dividend-paying stocks in periods of high degree of market volatility like the present situation.
3 Transport Equipment & Leasing Stocks to Embrace Now
In order to choose some of the best dividend stocks from the aforementioned industry, we have run the Zacks Stock Screener to identify stocks with a dividend yield in excess of 2% and a sustainable dividend payout ratio of less than 60%. Moreover, each of the three stocks mentioned below carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Ryder: Headquartered in Miami, FL, Ryder operates as a logistics and transportation company worldwide. Ryder pays out a quarterly dividend of 62 cents ($2.48 annualized) per share, which gives it a 3.19% yield at the current stock price. This company’s payout ratio is 16% of its earnings at present. The five-year dividend growth rate of 3.85%. (Check Ryder’s dividend history here).
In July 2022, Ryder announced a 7% hike in its quarterly dividend, taking the total to 62 cents per share (annualized $2.48). The first installment of the increased dividend will be paid out on Sep 16, 2022, to shareholders of record as of Aug 22.
Ryder System, Inc. dividend-yield-ttm | Ryder System, Inc. Quote
Ryder is benefiting from improving economic and freight market conditions in the United States. R’s raised outlook for 2022 is also encouraging. It expects total revenues and operating revenues to increase approximately 22% and 16%, respectively, in 2022 (previous view: both were expected to rise 17% and 14%, respectively). Adjusted EPS for the whole year is now estimated in the range of $14.30 - $14.80 compared with the $13.00-$14.00 range forecast while releasing second-quarter 2022 results in July.
Triton International: Headquartered in Hamilton, Bermuda, Triton International engages in the acquisition, leasing, re-leasing, and sale of various types of intermodal containers and chassis to shipping lines and freight forwarding companies and manufacturers.
Triton pays out a quarterly dividend of 65 cents ($2.60 annualized) per share, which gives it a 4.18% yield at the current stock price. This company’s payout ratio is 24%, with a five-year dividend growth rate of 6.98%. (Check Triton’s dividend history here).
Triton International Limited dividend-yield-ttm | Triton International Limited Quote
GATX: Headquartered in Chicago, IL, GATX operates as a railcar leasing company in the United States and internationally. GATX pays out a quarterly dividend of 52 cents ($2.08 annualized) per share, which gives it a 2.17% yield at the current stock price. This company’s payout ratio is 34%, with a five-year dividend growth rate of 4.46%. (Check GATX’s dividend history here).
GATX has been paying regular dividends since 1919 and holds an impressive record with respect to dividends and buybacks. In January 2022, the company raised its quarterly dividend by 4% to 52 cents per share, marking the 104th consecutive year of dividend payment by the company. The gradual improvement in the North American railcar leasing market is aiding GATX’s top line.
GATX Corporation dividend-yield-ttm | GATX Corporation Quote
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