Martin Marietta Materials and Signet Jewelers have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – July 12, 2023 – Zacks Equity Research shares Martin Marietta Materials (MLM) as the Bull of the Day and Signet Jewelers SIG as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Discover Financial Services DFS, Builders FirstSource BLDR and Jabil JBL.
Here is a synopsis of all five stocks:
Bull of the Day:
Martin Marietta Materials is a Zacks Rank #1 (Strong Buy) that produces and supplies construction aggregates and other heavy building materials, mainly cement, in the United States.
The stock is trading just below all-time highs as investors see strong demand helping earnings for the next few years. While it is hard to chase a stock like this higher, investors should be watching for opportunistic pullbacks.
About the Company
Martin Marietta was founded in 1939 and is headquartered in Raleigh, NC. The company offers crushed stone, sand, and gravel products; ready mixed concrete and asphalt; paving products and services; and Portland and specialty cement for use in infrastructure projects, and nonresidential and residential construction markets, as well as in the railroad, agricultural, utility, and environmental industries.
The stock has a Zacks Style Score of "D" in Value and Momentum. It has a Forward PE of 28 and pays a small dividend of about half a percent. MLM currently employs 9,400 and has a market cap of $27 billion.
Q1 Earnings Beat
In early May, the company reported a 118% EPS beat. Q1 earnings came in at $2.16 v the $0.99 expected and revenues were $1.35B v the $1.19B expected. Management cited solid near-term product demand as a reason for the big quarter.
The company adjusted its FY23 outlook, seeing EBITDA at the higher end of the expected range. They also lifted their revenue outlook to $6.6-6.82B v the $6.27 expected.
Management saw healthy customer backlogs across their footprint which was led by infrastructure and heavy nonresidential project of scale. They expect recent legislation and public investment to support demand for several years.
The CEO commented, "We are confident in our ability to continue to expand margins throughout the year and expect to deliver compelling full-year financial results more directionally in line with the high end of our previously announced 2023 guidance range, which we will revisit at mid-year."
The earnings beat was the second quarter in a row after the company reported multiple misses over the last couple years.
Analyst Estimates
Looking at analyst estimates since earnings, we see longer-term numbers shooting higher, while short-term looks mixed.
Looking at the current quarter, have estimates moving 1% higher over the last 90 days. However, for the next quarter, they are going down by almost 2%. While the magnitude of these moves is low, it tells us that analysts might be conservative in their expectations.
This idea is backed up when you look at the bigger picture and see longer-term estimates are going higher over the last 90 days.
For the current year, analysts have taken numbers from $14.84 to $15.89, or 7%. For next year, we see estimates jump from $17.04 to $18.14, or 6.5%.
The Technicals
The stock is trading near 52-week highs, which happen to be all-time highs. Understanding that many investors do not like to chase, let us go over possible areas of support.
The stock topped at $462 in late June before pulling back to the $440 area where the 21-day MA has shown some support. Below that level, $417 looks to be the 50-day MA support area, and then $380 is the earnings gap fill.
If we get a market sell-off, investors can hope for the 200-day MA at $364, but this is unlikely unless aggressive market selling comes in.
For those that look for Fibonacci retracements, the $405 level is the halfway back spot, found drawing from the pre-earnings breakout area to recent highs. The 61.8% retracement is $390.
Bottom Line
While Martine Marietta has had quite the run, there are both technical and fundamental reasons for this.
When a stock trades at all-time highs, there is price discovery above, which is what MLM is going through now.
On the fundamental side, strong demand led by public investment will be a tailwind for revenues for years. This will keep investors interested and willing buyers to come in on any sell-off.
Those interested in the name should watch support levels for buying opportunities and look for MLM to finish off the year strong.
Bear of the Day:
Signet Jewelers is a Zacks Rank #5 (Strong Sell) that is a retailer of diamond jewelry, watches as well as other products.
The stock has rallied nicely with the overall market, but investors might be getting ahead of themselves. A recent earnings report showed the company struggled when compared to last year and Same Store Sales (SSS) were off by double digits. Moreover, the company cut the guidance and estimates are falling.
About the Company
Signet is headquartered in Hamilton, Bermuda.The company operates through three segments: North America, International, and Other.
Many familiar brands known in the U.S. are Kay Jewelers, Kay Jewelers Outlet, Jared The Galleria Of Jewelry, Jared Vault, Zales Jewelers, Zales Outlet, Diamonds Direct, James Allen, Banter by Piercing Pagoda, and Peoples Jewellers names, as well as operates online through its digital banners, James Allen and Blue Nile.
The company is valued at $3.3B and employs 30,000. The stock has a Forward PE of 7 and pays a dividend of 1.3%. The stock holds Zacks Style Scores of "A" in Value, but "F" in Growth and "D" in Momentum.
Q1 Earnings
In early June, Signet reported an earnings beat of 24%. Beating on the bottom line is what the company does, and it has not missed since 2017. But looking closer, the y/y revenue was down to $1.69B from $1.84B last year.
The company cut its FY24 outlook and guided for a weak Q2 citing a deceleration of trends and a softer-than-expected Mother's Day.
Q2 revenues are expected to come in at a range of $1.53-1.58B v the expected $1.73B. FY24 is now seen at a range of $9.49-$10.09 v the $11.18 expected. SSS were down 13.9% year over year.
The stock's immediate reaction was to go lower, but it bounced above some technical resistance levels. After a more than 10% rally, investors might be getting ahead of themselves as estimates continue to march lower.
Estimates
Over the last 60 days, analysts have cut estimates for all time-frames.
For the current quarter, analysts have dropped their numbers from $2.65 to $1.34, or 49%.
For the next quarter, analysts lowered estimates from $1.02 to $0.75, or 26%.
Longer term, numbers are falling as well. Next year's estimates have gone from $12.03 to 10.46 or 13%.
Technical Take
The stock market rally has really helped SIG lift higher. However, investors might be getting ahead of themselves as the stock approaches the upper end of its 52-week range. $75 will be a tough nut to crack and the bears will likely step in.
The 200-day MA is around the $69 level and will be watched by both sides. A move back under that level and the recent rally could be considered a failure. Signet investors are familiar with that "failure" word as the stock has traded from $150 to $6 back to $110 and down to $50 before the 2023 up move.
Expect volatile action that will be amplified with any news on earnings.
In Summary
Looking back to the last miss in 2017, the stock was at $60. This was right where it was trading before the recent rally. Meaning that while the stock has seen some big volatile moves, there has been no real appreciation in the name despite all the earnings outperformance.
Additional content:
3 Red-Hot Stocks Suited for Momentum Investors
By targeting stocks breaking out to or near new highs, investors can insert themselves in favorable trends where buyers are in control.
And as many have learned, stocks breaking out to new highs tend to make even higher highs, especially when they boast favorable near-term earnings outlooks.
Three large-cap stocks –Discover Financial Services, Builders FirstSource and Jabil – are all breaking out to or near 52-week highs and sport a favorable Zacks Rank.
In addition, all three carry sound valuation levels, with all carrying a Style Score of "A" for Value. For value-conscious investors interested in momentum, let's take a closer look at each.
Discover Financial Services
Discover Financial Services is a digital banking and payment services company in the United States, offering deposit products, credit cards, and personal, student, and home loans. The stock is a Zack Rank #2 (Buy), with the revisions trend particularly notable for its upcoming quarterly release on July 19th.
DFS shares presently trade at an 8.8X forward earnings multiple, in line with the five-year median and nicely beneath 2022 highs of 9.6X. The stock carries a Style Score of "A" for Value.
Further, DFS shares could also attract income-focused investors, with the company's dividend yielding a solid 2.4% annually. Dividend growth is also apparent, with the payout growing by a double-digit 11% over the last five years.
Builders FirstSource
Builders FirstSource, a current Zacks Rank #1 (Strong Buy), supplies building materials, manufactured components, and construction services to professional homebuilders, sub-contractors, remodelers, and consumers. Analysts have raised their expectations across the board and have been in full agreement.
The company has consistently surprised in a big way as of late, exceeding the Zacks Consensus EPS estimate by an average of an impressive 70% over its last four quarters. Market participants have been impressed with the results, with shares seeing bullish activity post-earnings in back-to-back releases.
Jabil
Jabil provides electronic manufacturing services and solutions to its customers, currently boasting a Zacks Rank #2 (Buy). The revisions trend for its current fiscal year is hard to ignore, with the $8.50 EPS estimate being revised nearly 8% higher since July of last year.
JBL shares currently trade at a 13.1X forward earnings multiple, above the five-year median by a few ticks but nicely below the Zacks Computer and Technology sector average. The company also boasts a solid growth profile, with earnings forecasted to climb 11% in its current fiscal year (FY23) and a further 9% in FY24.
Further, Jabil's 45.2% trailing twelve-month return on equity (ROE) is certainly worth highlighting, reflecting a higher level of efficiency in generating profits from existing assets.
Bottom Line
Momentum investing is centered around targeting stocks displaying outperformance. And when you add in the Zacks Rank, the strategy can become even more powerful.
And that's precisely what all three stocks above have displayed, breaking out to new 52-week highs on the back of improved earnings outlooks.
In addition, all three sport a Style Score of "A" for Value.
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Discover Financial Services (DFS) : Free Stock Analysis Report
Signet Jewelers Limited (SIG) : Free Stock Analysis Report
Jabil, Inc. (JBL) : Free Stock Analysis Report
Builders FirstSource, Inc. (BLDR) : Free Stock Analysis Report
Martin Marietta Materials, Inc. (MLM) : Free Stock Analysis Report
