Lennar and Resideo Technologies' have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – July 05, 2023 – Zacks Equity Research shares Lennar Corporation LEN as the Bull of the Day and Resideo Technologies' REZI as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Nvidia NVDA, Apple AAPL and Tesla TSLA.
Here is a synopsis of all five stocks:
Bull of the Day:
The Building Products-Home Builders Industry is in the top 7% of over 250 Zacks industries, and Lennar Corporation is standing out amongst the space with a Zacks Rank #1 (Strong Buy).
Stronger housing data has correlated with Lennar's rising earnings estimates with the company coming off a record year for revenue at $33.67 billion and earnings at $17.55 per share.
Lingering demand for new homes following the pandemic and stabilizing mortgage rates continue to make Lennar stock very compelling as one of the largest homebuilders in the U.S.
Outpacing EPS Expectations
Earnings estimates are intriguingly higher and indicative of more upside in Lennar stock in correlation with strong housing data and the company's very impressive fiscal second quarter report on June 14.
Notably, Lennar blasted Q2 earnings expectations by 27% at $2.94 per share compared to EPS estimates of $2.32. Lennar beat quarterly top-line estimates by 10% with Q2 sales coming in at $8.04 billion.
This was very impressive as Lennar's top and bottom lines were expected to decline by a much larger magnitude following a very tough-to-compete-against prior year quarter that saw earnings at $4.69 per share and sales at $8.35 billion.
More impressively, Lennar has now beaten the Zacks EPS Consensus for 17 consecutive quarters dating back to June of 2019.
Lennar is having another strong year as earnings estimate revisions have soared since the company's Q2 report. Fiscal 2023 earnings estimates have skyrocketed 29% over the last 30 days to $12.65 per share compared to $9.76 a share a month ago.
Plus, FY24 EPS estimates are soaring as well and are now up 20% to $13.08 per share compared to estimates of $10.85 a share 30 days ago.
Attractive P/E Valuation
With earnings estimates on the rise and Lennar's bottom line remaining robust, shares of LEN look attractive trading at $125 and just 9.9X forward earnings. This is slightly beneath the industry average of 10.4X and attractively below the S&P 500's 20.8X.
Furthermore, Lennar stock trades 49% below its decade-long high of 19.5X while still offering a 10% discount to the median of 11X.
Bottom Line
Lennar stock is up +38% year to date and there should be even more upside with earnings estimates climbing since the company's second quarter report. Now appears to be a good time to buy as demand for new homes remains higher and mortgage rates stabilize.
Bear of the Day:
Taking a closer look at Resideo Technologies' stock reveals why its lands a Zacks Rank #5 (Strong Sell) and the Bear of the Day.
Resideo provides security solutions primarily in residential environments and is part of the top-rated Zacks Security and Safety Services Industry which is in the top 23% of over 250 Zacks industries.
However, Resideo appears to be losing its footing in the competitive industry which hosts a number of highly-ranked stocks at the moment including Axon Enterprise, Lakeland Industries and MSA Safety which all sport a Zacks Rank #1 (Strong Buy).
Declining Earnings Estimates
There are a number of stocks in the Zacks Security and Safety Services Industry that are seeing rising earnings estimates but Resideo's have started to decline.
Over the last 60 days Resideo's fiscal 2023 and FY24 EPS estimates are down -5% and -6% respectively.
Considering the broader business environment is strong, this is cause for concern and indicates there are better options to choose from such as Axon, Lakeland, and MSA Safety.
Stalling EPS Growth
With Resideo's stock trading at $17, earnings are now expected to be virtually flat this year but rise 13% in FY24 at $2.17 per share. Still, the trend in declining earnings estimate revisions is alarming and points to more downside risk ahead in Resideo stock.
Digging a little deeper, Resideo's bottom line has stalled in recent years since the company went public in October 2018.
Earnings of $2.47 per share in 2018 are still the highest since the company went public and this year's EPS projections of $1.91 a share would still represent a -30% decrease over the last six years.
Bottom Line
While Resideo stock is up +7% year to date it's still down -32% since going public in 2018 and investors may want to stay on the sidelines for now with earnings estimates declining.
There are better options in the top-rated Zacks Security and Safety Services Industry at the moment and should be better opportunities to potentially invest in Resideo stock in the future.
Additional content:
Here's What to Expect for the Second Half of 2023
Declining inflation. A Fed that has pumped the brakes. Artificial intelligence.
These bullish tailwinds helped to manifest one of the best first halves for stocks in recent memory. In fact, the Nasdaq generated an incredible 31.73% run over the last six months, the tech-heavy index's best first half to a year dating back to 1983. The S&P 500 finished the first half with an impressive 15.91% gain, while the Dow lagged but is currently eyeing a bullish breakout.
This past Friday morning's release of May's personal consumption expenditures (PCE) data, the Fed's preferred inflation gauge, showed prices rose 3.8% on a year-over-year basis. This was down from 4.4% in April and marked the lowest rate since April 2021. For the month, prices ticked up just 0.1%, below the 0.2% projection.
While the market is currently pricing in a roughly 88% chance of another 25-basis point hike later this month, our analysis points to a higher likelihood of another pause. Inflation measures are projected to have declined further in June, which would increase the odds of more market strength in July given the lagging data. But there's other reasons for the bulls to cheer during this hot summer month.
Reasons to Expect More Strength Ahead
Stocks have risen in 9 out of the last 10 years in July, climbing an average of 3.3%. In fact, no month sports a better average over the last decade than July. The positive seasonality along with the start of the Q2 earnings season have the potential to extend this year's rally even further.
As we move past July and into the remainder of the year, the picture remains bright. Since 1950, the S&P 500 has followed up a positive first half with an average gain of 6.0%. Even better, when first half gains were 10% or higher (like this year), the index delivered average gains of 7.7% in the second half and was positive in 82% of the occurrences with these characteristics.
These gains won't be achieved without their fair share of volatility. The average drawdown during second halves given a positive first half has been -9%. First halves that have exceeded 10% (like this year) have historically led to slightly shallower second half drawdowns. As shown below, the average second half drawdown after a greater than (or equal to) 10% first half performance is -8.8%.
It's important to point out that historical statistics are just a guide. Markets never repeat themselves exactly, but they often rhyme. Even during strong bull markets, it's never a straight line up. There's always volatility along the way, and even if the second half goes well, it's reasonable to expect a correction somewhere in the neighborhood of 8-10%.
Confirmation of a New Bull Market
The S&P 500 re-entered bull market territory in early June, as the blue-chip index took 165 trading days to advance 20% off the October '22 bear market low. What can we expect moving forward?
Forward returns after a bull market has been confirmed have also been historically appealing. Twelve months after a bull market has officially started (based on the 20% threshold), the S&P 500 has delivered an average gain of 18%.
Zooming out further, bull markets have averaged 39.4 months dating back to 1929, and have produced an average gain of 130.1%. The truth is that bull markets are built on the shoulders of bears, and bear markets should be viewed as great buying opportunities. Instead, normally panic ensues, and investors tend to sell at major turning points. Rather, the larger drawdowns should be used for new entries or additional buying points.
Stocks to Watch
Nvidia rebounded 3.6% on Friday and edged higher Monday morning. Nvidia stock shrugged off reports from earlier in the week that the Biden administration will expand its chip export curbs to China. Other semiconductor stocks followed suit. NVDA is a Zacks Rank #1 (Strong Buy) and remains in a robust uptrend.
Apple finished the week as the first U.S. company valued at $3 trillion. It's been an incredible run for Apple stock, with shares climbing nearly 50% on the year. AAPL is currently a Zacks Rank #3 (Hold) and is trading at all-time highs.
Tesla jumped over 6% Monday morning after second-quarter deliveries surged to 466,140, surpassing the Q1 record of 422,875. The figure easily beat the Q2 estimate of 445,000. Tesla has received criticism for recent price cuts, but the strategy appears to be working well. TSLA is a Zacks Rank #3 (Hold) and has witnessed its shares rise over 128% so far this year.
This market is clearly surprising to the upside. Positive seasonality in July along with the start of the second-quarter earnings season are likely to provide the bulls with more reasons to cheer. From all of us here at Zacks, we wish you a safe and happy July 4th.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
See Stocks Free >>
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
https://www.zacks.com
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Apple Inc. (AAPL) : Free Stock Analysis Report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
Lennar Corporation (LEN) : Free Stock Analysis Report
Tesla, Inc. (TSLA) : Free Stock Analysis Report
Resideo Technologies, Inc. (REZI) : Free Stock Analysis Report
