OI Glass and Kforce have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – September 6, 2023 – Zacks Equity Research shares OI Glass OI as the Bull of the Day and Kforce KFRC as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Atmos Energy ATO, TopBuild BLD and NVIDIA NVDA.
Here is a synopsis of all five stocks:
Bull of the Day:
OI Glass is shaping up to be a sound investment in terms of growth and value landing a Zacks Rank #1 (Strong Buy) and the Bull of the Day.
Formally known as Owens-Illinois, OI Glass stock may be a strong option for investors' portfolios as the largest manufacturer of glass containers in the world.
Furthermore, the Zacks Glass Products Industry is currently in the top 7% of over 250 Zacks industries indicating now may be an ideal time to buy OI Glass stock as a leader in the space.
Undervalued Growth
The broader glass industry is starting to experience new heights in its post-pandemic recovery. The operating environment for many glass products companies has stabilized despite what is still challenging macro conditions.
However, OI Glass's main initiative is focused on margin expansion to help offset the impact of softer demand and it's starting to show. Fiscal 2023 earnings are now forecasted to soar 39% to $3.21 per share versus EPS of $2.30 last year.
Plus, FY24 earnings are expected to be up another 1% and it's noteworthy that OI Glass has now surpassed EPS estimates for 12 consecutive quarters. Annual earnings estimates for both FY23 and FY24 have continued to trend higher over the last 60 days with OI Glass most recently beating Q2 EPS estimates by 6% in early August.
Attractive Valuation & Lofty Price Target
Making OI Glass's growth and bottom line expansion look undervalued is the fact that its stock trades at $19 and just 6.3X forward earnings.
Although OI Glass stock is up a respectable +18% YTD, rising earnings estimates support the notion that OI shares are still cheap, offering a 46% discount to its industry average of 11.7X and trading well below the S&P 500's 21.1X.
More reassuring is that analysts are starting to take notice as well. To that point, the Average Zacks Price Target of $27.86 a share represents 37% upside for OI Glass stock. Plus, five of the seven brokers surveyed by Zacks.com that cover OI Glass stock have strong buy ratings.
Bottom Line
It's often wise for investors to own stock in a company that has dominance or an edge in its market. Even better is when investors can get this exposure at an attractive discount and OI Glass stock seems to fit the bill.
Bear of the Day:
Investors may want to start monitoring the premium they are paying for Kforce stock as earnings estimate revisions have remained lower over the last two 60 days.
The professional staffing services company is coming off of a weaker-than-expected second quarter and there could be more downside risk ahead.
Subpar Q2 Results
It has been over a month since Kforce reported underwhelming Q2 results in late July but the trend in earnings estimates remains bleak.
Kforce stated its second quarter reflected the continuation of an uncertain economic environment with the company needing to adjust its structural costs to align with lower levels of revenue. Notably, Q2 sales of $389.19 million missed estimates by roughly -2% and dropped -11% from the prior-year quarter.
More concerning, Q2 earnings of $0.95 per share came up -3% short of expectations and dropped -27% from a year ago. This also marked the second straight quarter of missing top and bottom line expectations.
Following Kforce's Q2 report, annual earnings estimates have remained -8% lower for fiscal 2023 and -11% lower for FY24. Although Kforce's stock is still up a modest +12% YTD, shares of KFRC are down -6% since the company's Q2 report and lower EPS estimates are a sign the decline could continue.
Less Attractive Valuation
Declining earnings estimates have made Kforce's P/E valuation less attractive relative to its peers. Trading at $61 a share and 19.3X forward earnings, Kforce stock trades slightly beneath the S&P 500's 21.1X but 22% above the Zacks Staffing Firms Industry average of 15.7X.
This industry includes companies like GEE Group JOB and Heidrick & Struggles International HSII which have seen their annual earnings estimates go up despite a challenging operating environment and may be better options at the moment.
Furthermore, GEE Group and Heidrick & Struggles stock both trade under 10X forward earnings which is a more specific example of why investors might want to monitor the premium they are paying for Kforce stock.
Bottom Line
Kforce should still have the potential to be a meaningful investment as it relates to the business services sector but now doesn't look like a good time to buy.
Right now It may be best to stay on the sidelines in regard to Kforce's stock as there are better options in the Zacks Staffing Firms Industry with GEE Group's stock currently boasting a Zacks Rank #1 (Strong Buy) and Heidrick & Struggles stock sporting a Zacks Rank #2 (Buy).
Additional content:
3 Winners as Cooling Jobs Market Lifts Rate Hike Pause Hopes
Stock investors, lately, have been focusing on the latest economic reports to ascertain the Federal Reserve's near-term monetary policy pronouncements.
Fed Chair Jerome Powell, at the conference in Jackson Hole held in late August, said that price pressures may have lessened, but it is not yet at a satisfactory level. After all, the Fed's preferred gauge of inflation remains higher than its desired target of 2%.
However, it seems the Fed is largely done with hiking interest rates as the labor market cools down in August. The jobless rate edged up to 3.8% in August, more than analysts' forecast that it will remain at a multi-decade low at 3.5%, added the Bureau of Labor Statistics. Additionally, the real unemployment rate, which includes discouraged and part-time workers, jumped to 7.1%, the highest since May 2022.
Job additions, by the way, have continued to slow down since the beginning of the year. The U.S. economy added 187,000 new jobs in August, but that's below the coveted 200,000 mark for the third successive month. Increases in nonfarm payrolls, in reality, were revised substantially lower for June and July.
Average hourly earnings may have increased 0.2% month over month in August and 4.3% from a year ago, but remain less than analysts' estimate of 0.3% and 4.4%, respectively, a tell-tale sign that inflationary pressures are certainly poised to diminish further.
Softening labor market data coupled with ebbing inflation, thus, signifies that the Fed has successfully orchestrated a soft landing. Around 93% of market participants expect the central bank to keep interest rates unchanged in the September meeting. Similarly, 62% expect rates to remain unaltered in November, per the CME FedWatch Tool.
Hence, from an investment perspective, utility companies like Atmos Energy are well-positioned to gain from a rate hike pause. Being capital-intensive, utility companies need funding from external sources, leading to higher levels of debt. So, a lower interest rate environment reduces their debt levels. This, in turn, helps them pay off liabilities and register profits.
Encouraging regulatory outcomes and steady customer additions, in the interim, are helping Atmos Energy's performance. The natural gas distributor presently has a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for its current-year earnings has moved up 0.3% over the past 60 days. ATO's expected earnings growth rate for the current year is 8%. You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here.
The borrowing costs of real estate projects increase along with higher interest rates. Therefore, a rate hike pause bodes well for real estate activities and benefits stocks such as TopBuild.
TopBuild, known for providing various building products to the construction industry in the United States, currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has moved up 11% over the past 60 days. BLD's expected earnings growth rate for the current year is 6.1%.
Lastly, tech companies like NVIDIA gain from rate hike pauses since their future cash inflows get disrupted if interest rates edge up. Recently, the chipmaker posted blowout quarterly earnings banking on the stupendous growth in the artificial intelligence field (read more: Nvidia & 2 Other AI Stocks You'll Regret Not Buying Soon).
NVIDIA, at present, has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has moved up 36.6% over the past 60 days. NVDA's expected earnings growth rate for the current year is 213.2%.
Shares of Atmos Energy, TopBuild and NVIDIA have gained 3%, 89.5%, and 231.9%, respectively, so far this year.
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O-I Glass, Inc. (OI) : Free Stock Analysis Report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
Atmos Energy Corporation (ATO) : Free Stock Analysis Report
Kforce, Inc. (KFRC) : Free Stock Analysis Report
TopBuild Corp. (BLD) : Free Stock Analysis Report
