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Myers Industries and Spectrum Brands have been highlighted as Zacks Bull and Bear of the Day

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·14 min read
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For Immediate Release

Chicago, IL – July 5, 2022 – Zacks Equity Research shares Myers Industries MYE as the Bull of the Day and Spectrum Brands SPB asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Crocs, Inc. CROX, Delta Apparel DLA, Oxford Industries OXM and GIII Apparel Group GIII.

Here is a synopsis of all six stocks:

Bull of the Day:

Myers Industries a Zacks Rank #1 (Strong Buy), has surged more than 250% since the March 2020 bottom after dropping to roughly $6/share during the pandemic-induced market plunge. A very low percentage of companies complete the journey from penny stock to mid-double digits. These companies all experience remarkable growth in terms of both revenue and earnings, and MYE is no exception. The stock is currently up over 15% this year even as the general market hovers in bear market territory.

In a sign of strength, MYE recently hit a 52-week high before experiencing a mild pullback during the last month. This has created a great buying opportunity for the stock as it continues to benefit from increased demand for its products. The company's longevity and continued stock price ascent speak to management's ability to adapt to the ever-changing market landscape.

One of the ways we can determine which stocks are outperforming the market is to identify leading sectors and industry groups. The Zacks Rubber – Plastics industry is currently ranked in the top 8% out of approximately 250 industries. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform the market over the next 3 to 6 months.

Quantitative research studies suggest approximately half of a stock's future price appreciation is due to its industry grouping. Investing in stocks within leading industry groups can provide a constant 'tailwind' to our investing success. This industry group is part of the Zacks Industrial Products sector, which ranks in the top 32% out of 16 Zacks Ranked Sectors.

Let's take a closer look at this company within a powerful industry and sector combination.

Company Description

Myers Industries is a global manufacturer of polymer products for the agricultural, automotive, and industrial commercial and consumer markets. MYE is also the largest wholesale distributor of tools and supplies for the tire service industry.

The manufacturing company offers tire repair materials and custom rubber products, along with providing equipment for under-vehicle service for heavy trucks and off-road vehicles. Myers Industries was founded in 1933 and is headquartered in Akron, OH.

Earnings Trends and Future Estimates

MYE has surpassed earnings estimates in 2 of the past 4 quarters. The company most recently reported Q1 EPS back in May of $0.50 per share, a 78.57% surprise over the $0.28/share consensus estimate. This compares favorably to the $0.22/share reported in the same quarter in the prior year. Net sales for the first quarter of $225.49 million also beat estimates by 10.42%.

Myers Industries has delivered a trailing four-quarter average earnings surprise of 20.11%. Analysts have raised their full-year EPS projections by 26.56% in the past 60 days. The Zacks Consensus Estimate now stands at $1.62, reflecting a 67% growth rate relative to last year. Sales are anticipated to rise 14.66% to $873.05 million.

Charting the Course

MYE has risen from $6.47/share back in March 2020 to $22.71 at the time of this writing. Only stocks that are in extremely powerful uptrends are able to make this type of price move. The stock has continued its winning ways this year while the market has been in correction mode. This is the kind of stock we want to include in our portfolio – one that is trending well and experiencing positive earnings estimate revisions.

The stock is making a series of higher highs and is showing relative strength versus the market. With both strong fundamentals and technicals, MYE has been one of the pandemic's biggest beneficiaries.

Other Factors to Consider

Despite the impressive performance, MYE's valuation remains attractive. In addition, MYE pays a $0.54 dividend, which translates to a 2.38% yield.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. And as we know, Myers Industries has seen a steady batch of positive revisions as of late. As long as this trend remains intact (and MYE continues to post earnings beats), the stock should continue its bullish run this year.

Bottom Line

Buoyed by an undervalued and leading industry group, it's not difficult to see why MYE is a compelling investment. A history of positive earnings surprises along with a strong technical trend certainly warrant a closer look at this top-rated stock.

Recent positive earnings estimate revisions should also serve to create a 'floor' in terms of any sudden or unexpected downside moves. If you haven't already done so, make sure to put MYE on your shortlist.

Bear of the Day:

Spectrum Brands a Zacks Rank #5 (Strong Sell) stock, is a branded consumer products company. SPB operates globally through three segments: Home and Personal Care; Global Pet Care; and Home and Garden. The company sells home appliances under recognized brands such as Black and Decker and George Foreman. Its pet care products include food, training, and health and grooming items under names such as Nature's Miracle and Wild Harvest. In addition, SPB offers outdoor insect and weed control solutions under brand names like Rid-A-Bug and The Ant Trap. Spectrum Brands Holdings was incorporated in 2009 and is headquartered in Middleton, WI.

The Zacks Rundown

Spectrum Brands is part of the Zacks Consumer Products – Discretionary industry, which currently ranks in the bottom 19% out of approximately 250 industries. Because this industry is ranked in the bottom half of all Zacks Ranked Industries, we expect it to underperform the market over the next 3 to 6 months. This industry is part of the Zacks Consumer Discretionary sector, which ranks in the bottom 32% out of all 16 Zacks Ranked Sectors.

As a general rule of thumb, we want to target stocks in the top-performing industries as historical research has shown that roughly half of a stock's future price appreciation is due to its industry grouping. We therefore want to avoid stocks in the bottom 50% of all Zacks Ranked Industries.

Candidates in the worst-performing industry groups and sectors can often represent good shorting opportunities, as their industry performance provides a headwind to any potential rally attempts. While individual stocks have the ability to outperform even when included in poor-performing industries, their industry association serves as a headwind for any potential rallies. SPB is swimming against the current and the stock is confirming this notion as it continues to make a series of lower lows.

Recent Earnings and Deteriorating Forecasts

The consumer products company has missed earnings estimates in three of the past four quarters. Earlier this year, SPB reported a fiscal Q1 loss of $-0.06 per share, a -220% miss versus the $0.05 consensus estimate. SPB's lone beat over the last year came in the company's fiscal second quarter, when it surpassed the $0.40/share estimate by just one cent.

Over the last four quarters, Spectrum Brands has posted an average earnings miss of -61.77%. The company is not only consistently missing EPS estimates, they are doing so by a wide margin. When you're missing consensus estimates by that amount over time, you're going to be fighting against the current when it comes to the stock price. Consistently falling short of earnings estimates is a recipe for underperformance, and SPB is no exception.

Future consensus earnings estimates are falling along with the stock. For the fiscal third quarter, analysts have slashed their EPS estimates by 34.43% in the past 60 days. The Zacks Consensus Estimate is now $0.40/share, which translates to a -74.52% earnings regression compared to the same quarter a year ago. Sales are expected to decline -17.7% to $957 million. Falling earnings estimates are always a concern, but a decline of this magnitude is a big red flag. If the company continues its recent streak of earnings misses, more pain will likely be ahead for the stock.

Technical Outlook

SPB stock plunged below both the 50-day (blue line) and 200-day (red line) moving averages and is making a series of lower lows. It's important to point out that both moving averages are sloping downward – a good sign for the bears.

The death cross, a technical pattern in which a stock's 50-day moving average crosses below the longer-term 200-day moving average, occurred earlier this year. The stock has fallen over 20% from its peak last year and is showing no signs of a bottom.

Even with the recent decline, Spectrum Brands is relatively overvalued, irrespective of the metric used.

Final Thoughts

Our Zacks Style Scores illustrate a deteriorating investment picture for SPB, as the company is rated a second-worst possible 'D' in our Value category and has an overall 'C' VGM score. Recent earnings misses signal more trouble on the horizon. Falling future earnings estimates are a big red flag and need to be respected. These will likely serve as a ceiling to any potential rallies, nurturing the stock's downtrend.

The fact that SPB is included in a bottom-performing industry group and as well as a bottom-tier sector simply adds to the growing list of concerns. Investors will want to steer clear of an overvalued SPB until the situation shows major signs of improvement.

Additional content:

Can Demand and Online Strength Aid Crocs (CROX) Amid Inflation?

Crocs, Inc. has been benefiting from solid consumer demand, as well as strength in the Crocs and HEYDUDE brands. This led to the top and bottom lines surpassing the Zacks Consensus Estimate for the eighth straight quarter in the first quarter of 2022. Also, sales and earnings improved year over year. The top line witnessed growth across all regions and channels.

The company has been making significant progress in expanding digital and omnichannel capabilities. We note that digital sales advanced 20.3% year over year and accounted for 32.8% of revenues in the first quarter. Increased focus on the Crocs mobile app and global social platforms aided digital sales. Within digital, India, South Korea and Australia regions witnessed double-digit increases from the year-ago period. Gains from strategic collaborations, influencer campaigns, and digital and social marketing efforts remained upsides.

Driven by these factors, management updated the guidance for 2022 and issued a second-quarter view. For 2022, revenues related to the HEYDUDE buyout are likely to be $750-$800 million on a reported basis, up from $620-$670 stated earlier. The company expects revenue growth (excluding HEYDUDE) of more than 20% for 2022. Consolidated revenues are projected to be $3.5 billion, suggesting year-over-year growth of 52-55%. Adjusted earnings are envisioned to be $10.05-$10.65 per share, up from the prior stated $9.7-$10.25. The adjusted operating margin is anticipated to be 26-27% compared with the aforementioned 26%.

For second-quarter 2022, revenues are projected to grow 43-49% to $918-$957 million. In the prior-year quarter, it reported revenues of $641 million. The adjusted operating margin is estimated at 26%, including air freight expenses of $50 million.

Additionally, an uptrend in the Zacks Consensus Estimate echoes the same sentiment. The Zacks Consensus Estimate for CROX's 2022 sales and EPS suggests growth of 52.6% and 26.9%, respectively, from the year-ago period's reported numbers. Earnings estimates for the current financial year have increased 4% to $10.56 over the past 60 days.

The company's latest buyout of HEYDUDE, which sells light-weight, casual shoes and sandals for men, women and children, is likely to add value to its fast-growing footwear business. This is the second high-growth, highly profitable brand added to the Crocs portfolio. Crocs believes that HEYDUDE's consumer-insight-driven casual, comfortable and light-weight products perfectly fit its existing portfolio. The acquisition is likely to diversify Crocs' brand portfolio and add to its digital penetration, as HEYDUDE already has a strong online presence.

The acquisition is expected to be immediately accretive to Crocs' revenues, operating margins and earnings. It expects HEYDUDE to deliver revenues of $620-$670 million on a reported basis, beginning Feb 17, 2022. Management expects the HEYDUDE brand to reach $1 billion in revenues by 2024.

Hurdles On the Path

Crocs is currently grappling with the ongoing inflation, supply-chain headwinds and adverse impacts of the war in Ukraine. The supply-chain disruptions have been challenging for manufacturers and have significantly hampered the mobility of products across the globe.

The company notes that global inflation, contributing to incremental freight costs, particularly air freight, will continue through the first half of 2022 and 2022. It expects air freight costs of $75 million to hurt the gross margin in the first half of 2022.

Consequently, shares of CROX have lost 35.6% in the past three months compared with the industry's decline of 27%.

Wrapping Up

Despite supply-chain headwinds and rising inflation, this Zacks Rank #3 (Hold) stock is likely to get back on track in the near term on the back of solid demand, brand strength and robust digital business. Also, a long-term earnings growth rate of 15% reflects its inherent strength.

Stocks to Consider

Some better-ranked stocks from the same industry are Delta Apparel, Oxford Industries and GIII Apparel Group.

Oxford Industries, which is an apparel company, designs, sources, markets and distributes products bearing the trademarks of its owned and licensed brands. It currently flaunts a Zacks Rank #1 (Strong Buy). OXM has a trailing four-quarter earnings surprise of 99.7%, on average. You can see the complete list of today's Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Oxford Industries' current financial year's sales and earnings suggests growth of 10.9% and 7.1%, respectively, from the year-ago period's reported numbers.

Delta Apparel, a manufacturer of knitwear products, currently sports a Zacks Rank #1. DLA has a trailing four-quarter earnings surprise of 95.5%, on average.

The Zacks Consensus Estimate for Delta Apparel's current financial year's sales and earnings per share suggests growth of 11.9% and 10.1%, respectively, from the year-ago period's reported numbers.

GIII Apparel, a manufacturer, designer and distributor of apparel and accessories, presently has a Zacks Rank #2 (Buy). GIII has a trailing four-quarter earnings surprise of 160.6%, on average.

The Zacks Consensus Estimate for GIII Apparel's current financial-year sales and earnings suggests growth of 8.7% and 5.2% from the year-ago period's reported numbers, respectively.

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Crocs, Inc. (CROX) : Free Stock Analysis Report
GIII Apparel Group, LTD. (GIII) : Free Stock Analysis Report
Spectrum Brands Holdings Inc. (SPB) : Free Stock Analysis Report
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Myers Industries, Inc. (MYE) : Free Stock Analysis Report
Delta Apparel, Inc. (DLA) : Free Stock Analysis Report
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