For Immediate Release
Chicago, IL – November 28, 2023 – Zacks Equity Research shares Matador Resources Co. MTDR as the Bull of the Day and Hilton Grand Vacations Inc. HGV as the Bear of the Day. In addition, Zacks Equity Research provides analysis on JinkoSolar Holdings JKS, Nextracker NXT and Shoals Technologies Group SHLS.
Here is a synopsis of all five stocks.
Bull of the Day:
Matador Resources Co. is an independent oil and natural gas producer. This Zacks Rank #1 (Strong Buy) is expected to grow earnings by 33.3% next year.
Matador explores, develops, produces and acquires oil and natural gas resources in the United States. Its operations are focused on the Wolfcamp and Bone Spring plays in the Delaware Basin in Southeast New Mexico and West Texas. Matador also operates in the Eagle Ford shale play in South Texas and the Haynesville shale and the Cotton Valley plays in Northwest Louisiana.
It also has midstream operations and provides natural gas processing, oil transportation services, natural gas, oil and produced water gathering services and produced water disposal services to third parties.
Perfect 5-Year Earnings Surprise Track Record
On Oct 24, 2023, Matador Resources reported its third quarter earnings and beat on the Zacks Consensus Estimate by 17%. Earnings were $1.86 versus the Zacks Consensus of $1.59. That's a $0.27 beat.
Matador Resources has an amazing earnings surprise track record. It is an earnings all-star with 5 years of beats. That includes the years of the pandemic.
This is impressive, especially for a commodities company as commodities can be volatile.
It saw record results for the third quarter of 2023 and was the best quarter of total production in Matador's history. It averaged more than 135,000 barrels of oil and natural gas equivalent (BOE) per day. It was 3% higher than the prior record, in Q2, of 130,683 BOE per day.
There was record oil production during the third quarter of 77,529 barrels per day, up 2% than the previous record in the second quarter of 2023.
Natural gas production was also a record, up 6% sequentially, to 345.4 million cubic feet per day.
"We achieved these record production results despite the challenges of bringing on the largest batch of wells in Matador’s history as well as challenges associated with maintenance, weather and potential midstream takeaway constraints," said Joseph Wm. Foran, CEO.
Earnings Estimates Moving Higher for 2024
Earnings have been challenged for the energy companies in 2023 as 2022 saw high earnings on strong oil and natural gas prices due to the Ukraine War.
But analysts now expect higher earnings for Matador in 2024 after they are forecast to decline 33.1% this year to $7.04 from $10.53 last year.
But 2 estimates are higher in the last 30 days and 1 is lower in the last week for 2024. The 2024 Zacks Consensus Estimate is now $9.38 up from $8.56 over the last 60 days. That's earnings growth of 33.3%.
The Stock is Cheap
Shares of Matador Resources are down 13.4% over the last year and are up just 0.7% year-to-date. But with the earnings expected to rebound, it's a cheap stock.
Matador trades with a forward P/E of just 8.3.
In the third quarter adjusted free cash flow was $144.6 million. It paid down debt and did various brick-by-brick acquisitions. But it's also shareholder friendly. On Oct 24, 2023, Matador's board raised the fixed quarterly cash dividend to $0.20 per share, or $0.80 on an annual basis, up from $0.60 per share annually.
It's the fourth increase to the fixed dividend since the board initiated the dividend in the first quarter of 2021. The dividend currently yields 1.4%.
For investors looking for an energy producer where the earnings are on the rebound, Matador is one to keep on your short list.
[In full disclosure, Tracey manages Zacks Insider Trader portfolio, which currently owns MTDR.]
Bear of the Day:
Hilton Grand Vacations Inc. is a timeshare company exclusive to Hilton. This Zacks Rank #5 (Strong Sell) saw growth decelerate in the third quarter as the economy slowed.
Hilton Grand Vacations develops and operates a system of vacation ownership resorts in select vacation destinations. It has more than 525,000 Club members around the world.
Another Earnings Beat in Q3
On Nov 6, 2023, Hilton Grand Vacations reported its third quarter results. It beat on the Zacks Consensus Estimate, reporting $0.98 versus the consensus of $0.91.
It was the fifth earnings surprise in a row.
Total revenue declined to $1.018 billion from $1.116 billion in the third quarter of 2022.
Contract sales for the quarter, ending Sep 30, 2023, fell $18 million to $603 million compared to the year ago period. Tours increased by 14.8% and VPG decreased by 13.5% year-over-year.
Hilton Grand Vacations was also impacted by the Maui wildfires in the quarter.
Hilton Grand Vacations Updates Full Year Outlook
It started the quarter with a strong July, but growth decelerated as the quarter went along, particularly in August.
With a "modestly softer" consumer macroeconomic environment, the company updated its full-year outlook to reflect a more moderate improvement in contract sales for the remainder of the year.
As a result, the analysts cut earnings estimates for both 2023 and 2024.
3 estimates were cut for 2023 in the last 30 days, pushing the Zacks Consensus down to $3.47 from $4.04 in the last 60 days. That's an earnings decline of 10.6% as Hilton Grand Vacations earned $3.88 last year.
4 estimates were also cut for 2024 with the Zacks Consensus falling to $3.71 from $4.38. However, that's earnings growth of 6.9%.
Shares Sink in the Last Year
The timeshare business is difficult in slowdowns and recessions. The Street appears to be getting a little nervous as shares of Hilton Grand Vacations are down 17.6% over the last year and are testing a key level of resistance.
It's cheap, with a forward P/E of just 10.3.
It also is shareholder friendly. In the third quarter, it repurchased 1.5 million shares for $64 million. Hilton Grand Vacations still has $432 million remaining under the 2023 Share Repurchase Plan. It doesn't pay a dividend.
Investors interested in the timeshare industry might want to wait on the sidelines until the earnings estimates start trending up, instead of down.
U.S. Solar Electricity Generation to Beat Hydro: Stocks to Buy
Per the latest short-term energy outlook published by the U.S. Energy Information Administration (“EIA”), annual electricity generation from solar energy in the United States will be 14% more than electricity generation from hydroelectric facilities in 2024. In addition to surpassing hydropower generation for the first time, the solar capacity increase is also projected to reduce generation from fossil fuel-fired power plants in the nation.
Such solid projections naturally bring the spotlight on solar stocks like JinkoSolar Holdings, Nextracker and Shoals Technologies Group, which you may add to your portfolio.
Factors Driving Solar Growth in America
A key catalyst driving growth in the U.S. solar industry is solid installation activities. As reported by the Solar Energy Industries Association (“SEIA”), the U.S. solar industry installed 5.6 gigawatts-direct current (GWdc) of capacity in the second quarter of 2023, indicating a 20% increase from that reported in the second quarter of 2022.
Such solid solar installation activities are backed by the falling cost of installation and favorable policies undertaken by individual states as well as the U.S. government. The cost to install solar has dropped by more than 40% over the last decade, per SEIA.
Policy-wise, renewable portfolio standards (RPS) set by states across the nation play an integral role in reducing emissions and boosting the individual state’s clean energy portfolio. Moreover, in October 2023, the U.S. government announced $3.5 billion funding for 58 projects across the country to strengthen electric grid resilience, with a particular focus on spurring solar and other renewable energy.
Another factor driving customers toward solar electricity generation is the steadily increasing household electricity bill from conventional energy sources. Per EIA, in the first three months of 2023, the average U.S. residential monthly electricity bill was 5% higher year over year.
Stocks to Buy
To summarize, the prospects of solar stocks seem bright, while unfavorable weather patterns have been leading to reduced electricity generation from hydropower. This has prompted EIA to reduce its forecast of U.S. hydropower generation by 6% in 2023 compared with last year.
Considering the above discussion, we would encourage investors to invest in the following solar stocks:
JinkoSolar: It is a manufacturer of solar products like silicon wafers, solar cells and solar modules, with a global network spanning Europe, North America and Asia. In October 2023, JinkoSolar announced its third-quarter 2023 results. Its total solar module, cell and wafer shipments were 22,597 megawatts (MW) in the third quarter, up 108.2% from that recorded in the last reported quarter.
The Zacks Consensus Estimate for JinkoSolar’s 2023 sales indicates an improvement of 34.9% from the prior-year reported figure. The bottom-line estimate for the year implies an improvement of 108.6% from the 2022 reported figure. The company currently sports a Zacks Rank #1 (Strong Buy).
Nextracker: It is a provider of intelligent, integrated solar tracker and software solutions used in utility-scale and distributed generation solar power plants. In October 2023, Nextracker reported second-quarter fiscal 2024 results. Its quarterly revenues worth $573 million improved a solid 23% year over year.
The Zacks Consensus Estimate for NXT’s fiscal 2024 sales indicates an improvement of 23% from the prior-year reported figure. The bottom-line estimate for fiscal 2024 implies growth of 812.5% from the 2022 reported figure. The company currently carries a Zacks Rank #2 (Buy). You can seethe complete list of today’s Zacks #1 Rank stocks here.
Shoals Technologies: It is a leading provider of electrical balance of system (EBOS) solutions for solar energy projects in the United States. In November, Shoals reported its third-quarter results. Its revenues improved 48% year over year in the third quarter, backed by the increased domestic demand for solar EBOS.
The Zacks Consensus Estimate for SHLS’ 2023 sales indicates an improvement of 49.9% from the prior-year reported figure. The consensus estimate for 2023 earnings implies growth of 78.4% from the 2022 reported figure. The company currently carries a Zacks Rank #2.
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