JD.com and FMC have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – March 20, 2024 – Zacks Equity Research shares JD.com JD as the Bull of the Day and FMC FMC as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Baker Hughes Company BKR, Diamondback Energy, Inc. FANG and Matador Resources Co. MTDR.
Here is a synopsis of all five stocks.
Bull of the Day:
JD.com, often referred to simply as JD, is a Chinese e-commerce giant headquartered in Beijing. Founded in 1998, it's a major competitor to Alibaba BABA in the Chinese online retail market. JD focuses on selling authentic products directly to consumers, with a strong emphasis on logistics and building trust with customers. It has also expanded into other sectors like cloud computing and artificial intelligence.
The reality of investing in Chinese equities is that there are additional risks and considerable uncertainties. However, JD appears to be one of the most appealing stocks in the market, with upward trending earnings revisions, a compelling technical setup, and a deeply discounted valuation.
For investors willing to take the additional risks of investing in a Chinese ADR, JD.com may offer an exceptionally asymmetric opportunity.
Earnings Revisions Pop
In the chart below, which shows the earnings revisions trend, we can see the earnings estimates have just begun to curl up for FY24 and FY25.
Analysts just started raising earnings estimates in the last 30 days, but because of the geographical disconnect, and generally bearish sentiment in Chinese stocks, the upgrades are likely going mostly unnoticed.
This means investors considering JD.com stock are fishing in a spot with very few fellow anglers.
These upgrades mean that JD.com has a Zacks Rank #1 (Strong Buy) rating.
Deep Value Opportunity
When I say deep value, I mean very deep value. JD.com is currently trading at a one year forward earnings multiple of 8.9x. This is well below the industry average, and just a fraction of its five-year median of 47.6x.
Making it even more compelling is that EPS are projected to climb at an incredible pace over the next 3-5 years. As of now EPS are forecast to grow at an annual rate of 43.8%. That means JD has a PEG Ratio of just 0.2.
Technical Setup
The technical picture in JD.com stock also offers investors a clean trading setup from which to measure risk. Over the last few days JD has been forming a bull flag just below a critical level of resistance. If the stock can break out from the bull flag, and clear resistance, it may see much higher prices soon.
Additionally, in the chart we can see that a double bottom formed earlier this year, potentially marking a major low of the stock and playing favorably for the bulls.
Bottom Line
At this point in time, JD.com has the trifecta – a top Zacks Rank, discounted valuation, and an A+ technical setup. Furthermore, the deeply bearish sentiment only adds to the bullish catalysts.
As noted, Chinese stocks are going come with some additional uncertainty, but for investors who can manage the risk JD.com may be the ideal setup.
Bear of the Day:
FMC is a global agricultural sciences company that provides solutions to enhance crop health and productivity. With a focus on innovation and sustainability, FMC develops and markets a wide range of crop protection products, including herbicides, insecticides, and fungicides. Additionally, the company offers agricultural solutions such as seed treatments and precision agriculture technologies to support farmers worldwide.
FMC stock has struggled in recent years, with its stock trading unchanged since 2019. Furthermore, its near-term prospects are not ideal, as analysts have lowered earnings estimates, and price action sets up another move lower.
Based on this setup, investors should look for opportunities elsewhere.
Earnings Revisions Plummet
Current quarter earnings estimates have been slammed lower by -50% in the last two months and are expected to come in -72% lower than the same quarter last year.
Analysts have unanimously lowered earnings estimates across timeframes, and the earnings revision trend has been moving precipitously lower since July of 2023. This gives FMC a Zacks Rank #5 (Strong Sell) rating.
The industry broadly seems to be dealing with falling herbicide and fertilizer costs weighing on profits and pushing the sector near the bottom of the Zacks Industry Rank. FMC currently sits in the bottom 16% (212 out of 251) of the Zacks Industry Rank and bottom 6% (15 out of 16) of the Zacks Sector Rank.
Technical Setup
Although at the beginning of month it appeared that FMC may have found a bottom, as the stock pushed 20% higher in just two weeks, this is quickly reversing. The price action has quickly retreated from a significant level of resistance and is now breaking down from a small bear flag.
I would not be surprised to see FMC share price re-test the lower bound of the range, and possibly break below over the next few weeks or months.
Bottom Line
While I have little doubt that FMC will at some point be a stock worth owning in the future, there are too many industry specific headwinds currently weighing on profits. Fertilizer prices in particular are still correcting from the exuberant prices following the 2022 bout of inflation, and until it resolves will remain an obstacle.
For context, fertilizer prices nearly quadrupled between 2021 and mid-2022, and since corrected -65% from the highs. Even in just the last month prices fell -24%.
Until prices settle, and analyst begin to upgrade earnings estimates, investors should avoid FMC.
Additional content:
Permian Oil Rig Count Rises 3rd Time in 5 Weeks
In its weekly release, Baker Hughes Company stated that the U.S. rig count was higher than the prior week’s figure. The rotary rig count, issued by BKR, is usually published in major newspapers and trade publications.
Baker Hughes’ data, issued at the end of every week since 1944, helps energy service providers gauge the overall business environment of the oil and gas industry. The number of active rigs and its comparison with the week-ago figure indicates the demand trajectory for the company’s oilfield services from exploration and production companies.
Rig Count Data in Detail
Total U.S. Rig Count Rises: The number of rigs engaged in the exploration and production of oil and natural gas in the United States was 629 in the week ended Mar 15. The figure is higher than theweek-ago count of 622. Although the figure increased in three of the prior five weeks, there has been a slowdown in drilling activities. Many analysts believe that shale producers are getting more efficient, requiring fewer rigs, while some doubt whether certain producers have enough prospective land to drill. The current national rig count is, however, lower than the year-ago level of 754.
Onshore rigs in the week that ended on Mar 15 totaled 605, increasing from the prior week's count of 601. In offshore resources, 24 rigs were operating, higher than the week-ago count of 21.
U.S. Oil Rig Count Rises: The oil rig count was 510 in the week ended Mar 15, increasing from the week-ago figure of 504. The current number of oil rigs — far from the peak of 1,609 attained in October 2014 — is, however, down from the year-ago figure of 589.
U.S. Natural Gas Rig Count Rises: The natural gas rig count of 116 was higher than the week-ago figure of 115. The count of rigs exploring the commodity was, however, below the year-ago week’s 162. Per the latest report, the number of natural gas-directed rigs is almost 93% lower than the all-time high of 1,606 recorded in 2008.
Rig Count by Type: The number of vertical drilling rigs totaled 13 units, in line with the week-ago count. The horizontal/directional rig count (encompassing new drilling technology with the ability to drill and extract gas from dense rock formations, also known as shale formations) of 616 increased from the prior-week level of 609.
Rig Count in the Most Prolific Basin
Permian — the most prolific basin in the United States — recorded a weekly oil rig count of 310, higher than the week-ago figure of 307. The number increased in three of the prior five weeks.
Outlook
The West Texas Intermediate crude price is trading at more than the $80-per-barrel mark. Although the commodity pricing scenario is favorable for exploration and production operations, there has been a slowdown in drilling activities, which may continue as upstream players are prioritizing stockholder returns rather than boosting output.
Amid the backdrop, investors seeking medium to long-term gains may keep an eye on energy stocks such as Diamondback Energy, Inc. and Matador Resources Co.
Diamondback Energy, a leading pure-play Permian operator, has reported ongoing enhancements in the average productivity per well in the Midland Basin. The exploration and production company is likely to continue witnessing increased production volumes. FANG, carrying a Zacks Rank #3 (Hold), also has an investment-grade balance sheet. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Matador Resources has a strong presence in the oil-rich core acres of the Wolfcamp and Bone Spring plays in the Delaware Basin. Promising oil prices are likely to aid it in increasing production volumes. Matador acquired Advance Energy Partners Holdings, LLC, which comprises several oil and natural gas-producing properties and undeveloped acreage. Zacks #3 Ranked MTDR expects the buyout to be accretive to important valuation and financial metrics.
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FMC Corporation (FMC) : Free Stock Analysis Report
Baker Hughes Company (BKR) : Free Stock Analysis Report
Diamondback Energy, Inc. (FANG) : Free Stock Analysis Report
Matador Resources Company (MTDR) : Free Stock Analysis Report
JD.com, Inc. (JD) : Free Stock Analysis Report
