JP Morgan and Cracker Barrel have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – October 20, 2023 – Zacks Equity Research shares JP Morgan JPM as the Bull of the Day and Cracker Barrel CBRL as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Carrols Restaurant Group TAST, Casey’s General Stores CASY and Carvana CVNA.
Here is a synopsis of all five stocks.
Bull of the Day:
Company Overview
Newly ranked Zacks #1 (Strong Buy) stock JP Morgan Chase & Co., commonly known as JP Morgan, is one of the world’s largest and most influential institutions. The banking juggernaut operates as a multinational investment bank and financial services company, offering various services to individuals, businesses, and governments. JP Morgan provides services such as investment banking, asset management, commercial banking, private banking, securities trading, and treasury services.
The company plays a significant role in global finance by facilitating capital raising, mergers and acquisitions (M&A), and trading in several unique markets. Additionally, the company offers retail banking services, including mortgages, credit cards, and personal loans, serving millions of consumers worldwide. With iconic CEO Jamie Dimon at the helm, the company is best known for its expertise in navigating complex financial environments like the one we’re experiencing now.
Tough Times Never Last. But Strong Banks Do
This March, three mid-size US banks failed in less than a week. Outside of the pandemic crash of 2020, banks are on pace for their worst year since the Global Financial Crisis of 2008. The SPDR S&P Bank ETF is down nearly 20%, while the SPDR Regional Banking ETF is down a staggering 29% year-to-date.
Deposits Are the Lifeblood of Banks
JP Morgan grew through acquisitions, both domestic and foreign. Most notably, the company acquired the failed First Republic Bank with generous assistance from the FDIC. Internationally, the company has grown through investments like the one in Brazil’s C6 Bank (JPM owns 46% now). All these acquisitions, combined with JPM’s reputation as a stable bank, have led to soaring deposits, while competitors experience deposit droughts. In fact, JPM added $85 billion in deposits year-over-year and is ranked #1 in deposit growth.
Deposits are the lifeblood of banks because they enable lending, generate income, and maintain liquidity. The ongoing banking crisis is only helping JPM further.
Benefiting from the Most Popular Credit Card Franchise
Though a potential economic slowdown and high rates will hamper wholesale loan demand, demand for consumer loans (specifically credit cards) will likely remain strong in the near term. Analysts tracked by Zacks are taking note – six analysts have revised estimates higher, while only one has revised estimates lower.
Strong Cash Position & Return on Equity
JPM has a solid balance sheet. Most of the company’s debt is long-term, and the company has ample money coming in to cover any obligations (even if the economy turns sour). JPM’s trailing return on equity (ROE) reflects its growth potential. The company’s trailing ROE of 17.97% compares favorably with the banking industry’s 12.56% ROE.
Bottom Line
Despite a challenging banking landscape, with many banks facing significant declines, JP Morgan remains resilient. The company’s success is attributed to strategic acquisitions and substantial deposit growth, in contrast to competitors experiencing deposit shortages.
Bear of the Day:
Company Overview
Zacks Rank #5 (Strong Sell) stock Cracker Barrel Old Country Store, also known as Cracker Barrel is an American restaurant and retail chain known for its Southern-inspired cuisine and nostalgic, country-themed atmosphere. Established in 1969, CBRL is often found alongside major highways and offers homestyle cooking, including dishes like grits and fried chicken and biscuits, served in a cozy, rustic setting.
Attached to each restaurant, Cracker Barrel operates a gift shop that sells a wide range of products such as Southern-inspired home décor and vintage items. Cracker Barrel is a popular choice for families and travelers seeking American comfort food.
Restaurant Industry: Notoriously Cutthroat
Intense competition, razor-thin profit margins, and sky-high operating costs are among the reasons why most restaurants fail. With countless establishments vying for customers, eateries must consistently deliver exceptional food, services, and ambiance to attract and retain patrons. However, running a customer-friendly restaurant is just one piece of the puzzle that makes up profitability in this cutthroat industry. Economic factors have a huge impact on restaurant success.
Wage inflation and supply chain challenges are major headwinds for restaurants in the current economic climate. Cracker Barrel is suffering from both. The company’s profit margins are being squeezed because it is forced to pay higher wages while simultaneously paying more for the inputs needed to run the business.
Traffic Woes
While the American consumer benefits from the wage growth described above, stubborn inflation continues to be a concern. Because gas prices continue to trend higher off already bloated levels, Americans are only driving when necessary. In the fourth quarter of fiscal 2023, the company witnessed softer-than-expected traffic, leading to slower revenue growth.
Spotty Earnings Surprise History
Cracker Barrel fell short of Zacks Consensus EPS expectations in 6 of the past 13 quarters. To make matters worse, CBRL has a negative Zacks Earnings ESP (Expected Surprise Prediction) score, which means the company is likely to fall short of expectations when it announces earnings on November 16th.
Relative Weakness & Bearish Chart Pattern
CBRL shares exhibit relative weakness and are down 24% year-to-date. Currently the stock is carving out a weak rally to the overhead 50-day moving average (bear flag).
Bottom Line
Intense competition, rising operating costs, and economic factors such as wage inflation and supply chain disruptions are squeezing the company’s margins.
Additional content:
3 Stocks to Gain from Pick Up in Retail Sales
Sales at U.S. retailers came in well above estimates in September, indicating strength among consumers despite higher interest rates and elevated inflation. This calls for investing in retailers such as Carrols Restaurant Group, Casey’s General Stores and Carvana, which are poised to gain even more.
Retail Sales Increase in September, Beat Expectations
Sales at U.S. retailers rose 0.7% in September, well above analysts’ expectation of a rise of 0.3%, added the Commerce Department. The retail sales figure for August was also revised higher from an increase of 0.6% to 0.8%.
Last month, retail sales rose 3.8% year over year. Sales at retail outlets increased as consumers splurged on discretionary and staple items despite the Federal Reserve’s aggressive monetary policies to tame stubbornly high inflation (read more: 3 Top Stocks to Gain as Inflation is Still Running Hot).
Sales at internet retailers advanced 1.1% last month and are estimated to rise even further in October, banking on another Prime Day promotion by Amazon. Sales at eateries increased 0.9% in September. Similarly, sales increased at personal health care and general merchandise stores.
Receipts at gas stations jumped 0.9% last month, indicating higher pump prices. In reality, core retail sales, which mostly determine the consumer spending component of the GDP, increased by 0.6% in September.
So, what drove retail sales higher? Consumer spending at retail outlets primarily picked up due to strength in the labor market. Job growth was robust in September and average hourly wages improved significantly, which gave consumers the wherewithal to spend.
The Big Gainers
Given the positives, it’s sensible for astute investors to invest in retailers that directly benefit from this promising economic backdrop and an uptick in retail sales.
These stocks carry a Zacks Rank #1 (Strong Buy) or 2 (Buy). Such stocks also have a VGM Score of A or B. Here V stands for Value, G for Growth, and M for Momentum; the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners. You can see the complete list of today’s Zacks #1 Rank stocks here.
Carrols Restaurant Group is the largest BURGER KING franchisee in the U.S. TAST currently has a Zacks Rank #1 and a VGM Score of A. The Zacks Consensus Estimate for its current-year earnings has increased 117.6% over the past 60 days. The company’s expected earnings growth for the current year is 152.9%.
Casey's General Stores operates convenience stores under the Casey's and Casey's General Store names. CASY currently has a Zacks Rank #2 and a VGM Score of A. The Zacks Consensus Estimate for its current-year earnings has increased 6.5% over the past 60 days. The company’s expected earnings growth for the next year is 11.6%.
Carvana is a leading e-commerce platform for buying and selling used cars. CVNA currently has a Zacks Rank #2 and a VGM Score of B. The Zacks Consensus Estimate for its current-year earnings has increased 30.8% over the past 60 days. The company’s expected earnings growth for the current year is 57.2%.
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JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report
Cracker Barrel Old Country Store, Inc. (CBRL) : Free Stock Analysis Report
Carrols Restaurant Group, Inc. (TAST) : Free Stock Analysis Report
Casey's General Stores, Inc. (CASY) : Free Stock Analysis Report
Carvana Co. (CVNA) : Free Stock Analysis Report
