Kaiser Aluminum and AMN Healthcare Services have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – March 14, 2024 – Zacks Equity Research shares Kaiser Aluminum KALU as the Bull of the Day and AMN Healthcare Services AMN as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Exxon Mobil Corp. XOM, Chevron Corp. CVX and Diamondback Energy, Inc. FANG.
Here is a synopsis of all five stocks:
Bull of the Day:
Having a cunning edge in the fabrication of specialty aluminum products, Kaiser Aluminum is one of the most intriguing industrial products stocks at the moment. To that point, Kaiser Aluminum's stock sports a Zacks Rank #1 (Strong Buy) and lands the Bull of the Day.
Increasing demand for Kaiser Aluminum's highly engineered products and solutions for the aerospace industry are very appealing at the moment with the company's reach extending to automotive extrusions, food and beverage packaging, and other industrial applications.
Q4 Profit Surprise: Foreshadowing the anticipation of a lofty rebound in Kaiser Aluminum's bottom line was much stronger-than-expected Q4 results in February.
Driving what turned out to be a surprise quarterly profit was record sales of $237 million in Kaiser Aluminum's Aerospace/High-Strength Applications segment. Net sales of $722 million beat Q4 estimates by 3% despite dipping from $766 million a year ago.
Impressively, Kaiser Aluminum posted Q4 adjusted net income of $10 million or $0.60 a share which blasted expectations that called for an adjusted loss of -$0.34 a share. Even better, Q4 earnings soared from an adjusted loss of -$1.66 a share in the comparative quarter.
Soaring FY24 EPS Estimates: Following the eye-catching Q4 earnings beat, EPS estimates have climbed 20% over the last 30 days for Kaiser Aluminum's current fiscal 2024. Plus, FY25 EPS estimates are up 1% in the last month.
EBITDA & EPS Rebound: Kaiser Aluminum ended FY23 with annual earnings at $2.74 per share compared to an adjusted loss of -$1.86 a share in 2022. Notably, earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 48% to $210 million.
More importantly, Kaiser Aluminum expects its adjusted EBITDA margins to improve another 70-170 basis points in FY24 which would put an end to the up-and-down cycle the company has faced in recent years due to higher operating costs.
According to Zacks estimates, Kaiser Aluminum's EPS is projected to leap another 32% this year to $3.59 per share. Better still, annual earnings are forecasted to almost double in FY25 to $6.55 per share.
Reasonable Valuation & Sizable Dividend: With EPS estimates on the rise KALU shares trade at a more reasonable 21.2X forward earnings multiple. This is slightly beneath the S&P 500's 21.7X and a discount to its Zacks Metal Products-Procurement and Fabrication industry average of 26X with some of the other notable names in the space including ESAB Corp. and Northwest Pipe Co.
Adding more value is that Kaiser Aluminum's stock trades at just 0.4X sales and offers a 4.04% annual dividend yield which impressively tops the industry average of 1.93% and the S&P 500's 1.3%.
Bottom Line
Following very pleasant Q4 results last month Kaiser Aluminum's stock is starting to check the boxes. In addition to the strong buy rating KALU shares also have an overall "A" Zacks Style Scores grade for the combination of Value, Growth, and Momentum.
Bear of the Day:
Labor shortages and staff burnout among nurses are reasons to be wary of AMN Healthcare Services stock despite the company's favorable long-term prospects.
Correlating with this cautious scenario, AMN's stock currently carries a Zacks Rank #5 (Strong Sell) and lands the Bear of the Day.
Declining Nurse and Allied Solutions Segment Sales
Providing total talent solutions and staffing networks for healthcare organizations, AMN's Nurse and Allied Solutions segment revenue fell -38% last quarter to $538 million with the company stating its travel nurse sales fell -40% specifically.
AMN was still able to beat Q4 top and bottom line expectations in February but this is concerning considering the Nurse and Allied Solutions segment makes up more than half of its total revenue.
Furthermore, the impact of challenging work conditions and high turnover particularly among "Nurse Leaders" is lingering with AMN forecasting its Nurse and Allied Solutions segment revenue to be down 36-38% for the first quarter. AMN projects its consolidated revenue for Q1 to be 26-28% lower with Zacks estimates of $814.46 million representing a -27% decline.
Bottom Line Effect
With the proponents of nurse staffing making up such a large chunk of AMN's core business, the company's bottom line is expected to be impacted as well. Notably, earnings estimate revisions have declined -20% for fiscal 2024 over the last 30 days from projections of $4.93 per share to $3.97 a share.
Plus, FY25 EPS estimates have fallen -14% in the last month which is starting to put a dent in the hopes of a sharp rebound in AMN's bottom line next year.
Takeaway
AMN's stock is already down -20% year to date and a rebound may not come until its Nurse and Allied Solutions segment sales begin to stabilize. This will need to be monitored by investors going forward and for now, AMN's stock is one to avoid.
Additional content:
3 Permian Stocks to Buy as Oil Prices Back in the Pink
The ongoing rise in oil prices is fueling a bullish trend, encouraging more exploration and production activities. Companies in the upstream sector are likely to expand their operations in lucrative shale reserves, leading to a higher number of drilling rigs. This increase in drilling activity is anticipated to boost production, providing advantages for businesses engaged in exploration and production.
Oil Price Still High
West Texas Intermediate crude price is trading at more than $75 per barrel, which is highly favorable for exploration and production activities. In its short-term energy outlook, the U.S. Energy Information Administration ("EIA") projected the average spot price of West Texas Intermediate crude at $82.15 per barrel this year, an extremely favorable price for upstream operations.
Permian Oil Production to Rise
In March, total oil production from shale resources in the United States will likely increase by 20,000 barrels per day to 9,716 thousand barrels per day (MBbl/D), per EIA. The shale resources comprise Anadarko, Appalachia, Bakken, Eagle Ford, Haynesville, Niobrara and Permian.
Of all the resources, Permian will witness the highest increase in daily oil production this month, according to the EIA's drilling productivity report. In the Permian, the EIA projects oil production to rise by 14,000 barrels per day to 6,085 MBbls/D this month.
Permian Explorers in the Spotlight
It has been apparent that a favorable crude pricing scenario is backing higher production volumes. Improving Permian production amid healthy oil prices raised the incentive to keep an eye on companies like Exxon Mobil Corp., Chevron Corp. and Diamondback Energy, Inc., operating in the most prolific basin. All the stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
3 Stocks to Gain
ExxonMobil and Chevron have solid upstream businesses. In the Permian Basin, ExxonMobil has a solid pipeline of profitable projects. Chevron, too, has a strong foothold in the Permian, where a significant portion of the energy major's acreage has minimum royalty payments.
To strengthen its presence in the Permian, ExxonMobil entered into a staggering $59.5 billion all-stock deal to buy Pioneer Natural Resources. This is because Pioneer Natural is one of the foremost oil producers operating in the Permian Basin. With the deal closure expected in the first half of 2024, Permian production of the integrated energy major will more than double to 1.3 million barrels of oil equivalent per day (MMBoE/D). Furthermore, ExxonMobil projected that this production figure will rise to an impressive 2 MMBoE/D by 2027.
Diamondback Energy, a leading pure-play Permian operator, has reported ongoing enhancements in the average productivity per well in the Midland Basin. Thus, the exploration and production company is likely to continue witnessing increased production volumes. FANG also has an investment-grade balance sheet.
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Chevron Corporation (CVX) : Free Stock Analysis Report
Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
AMN Healthcare Services Inc (AMN) : Free Stock Analysis Report
Kaiser Aluminum Corporation (KALU) : Free Stock Analysis Report
Diamondback Energy, Inc. (FANG) : Free Stock Analysis Report
