Oshkosh and EagleBank have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – July 24, 2023 – Zacks Equity Research shares Oshkosh OSK as the Bull of the Day and Eagle Bancorp EGBN as the Bear of the Day. In addition, Zacks Equity Research provides analysis on United Airlines UAL, Delta Air Lines DAL and American Airlines AAL.
Here is a synopsis of all five stocks.
Bull of the Day:
Finally, after a scorching hot July for most of the country as well as the stock market, things have cooled a bit. A two-day pullback on Wall Street has folks reaching for their shopping list. That means that plenty of the names which were pushing up through all-time highs in the middle of last week have come down off their highs. You may be tempted to jump in and buy everything with both hands. You have to make sure you look before you leap. Not every name out there is worth your hard-earned cash.
One way to mitigate your long-term risk is by buying stocks with strong earnings trends. Lucky for you, the Zacks Rank offers up a cheat sheet, a Cliff’s Notes of sorts to get right to the root of the issue. Stocks in the good graces of our Zacks Rank have the strongest earnings trends when compared to the rest of the broad market.
Oshkosh is currently in the good graces of our Zacks Rank, checking in with a Zacks Rank #1 (Strong Buy). Established in 1917, WI-based Oshkosh Corporation is a producer and seller of a varied range of vehicle bodies and specialty vehicles. It is also engaged in equipment financing and leasing solutions for its customers, primarily through third-party funding arrangements.
The reason for the favorable Zacks Rank is that over the last week alone, analysts have come out and increased their earnings estimates for the current quarter, next quarter, and current year. Look back over the last thirty days, and you’ll see analysts also increasing their estimates for next year. The bullish moves have pushed up our Zacks Consensus Estimates for the current year from $5.53 to $6.11 while next year’s number is up from $7.50 to $7.62.
That $6.11 current year Zacks Consensus Estimate is good for 76.59% growth, with next year coming in at 24.71%. That’s on sales growth of 5.5% this year and 5% next year.
Bear of the Day:
There’s no question that the stock market has been red hot. All year, tech stocks have been screaming off the lows. There was a big bump in the road though. That bump came in the way of some very high-profile negativity in the banking sector. Most notably, smaller regional banks took an absolute dive after the bankruptcy of Silicon Valley Bank.
For the astute investor, it was a great time to come in and scoop up some bank stocks off the lows. It was truly a “throwing the baby out with the bathwater” scenario, as so many great banks lost tons in market value. Now that the dust has settled, a lot of those banks have rallied back to pre-panic levels. It may feel tempting to run out and buy more bank shares.
Look for banks with the strongest earnings trends and try to avoid those with the weakest trends. It could mean that profits are at risk in the intermediate term. One such stock is today’s Bear of the Day, Eagle Bancorp. EAGLE BANCORP is the holding company for EagleBank. The Bank is headquartered in Bethesda, Maryland, and conducts full service commercial banking services through nine offices, located in Montgomery County, Maryland and Washington, D.C. The Company focuses on building relationships with businesses, professionals and individuals in its marketplace.
Eagle is a Zacks Rank #5 (Strong Sell) in the Banks – Northeast industry which ranks in the Bottom 4% of our Zacks Industry Rank. The reason for the unfavorable rank is that over the last thirty days, analysts have cut their earnings estimates for the current quarter, next quarter, current year and next year. The bearish sentiment has cut our Zacks Consensus Estimate for the current year down from $4.47 to $2.93 while next year’s number is off from $4.50 to $3.77.
Additional content:
What to Make of Airline Earnings So Far
Results from some of the leading airline companies are in, and we can identify some broad trends therein.
Trend number one is international travel has come roaring back. And it isn’t just the Pacific region, though that is benefiting from China and Japan opening up, as well as alliances with local operators. Although Europe is experiencing heat waves, that doesn’t seem to be deterring travelers. South America too is going strong.
The second trend is that the recovery seems to be broad-based, across leisure and business.
Pent-up demand for international travel is the strongest driver of leisure travel. The lifting of pandemic-related restrictions and testing is really pushing it, particularly on the international side. The trend is currently expected to continue for a while, as people usually make their travel plans in advance. The hybrid work environment is also a driver for leisure travel because of the flexibility it allows. The segment will also benefit as people divert funds from other discretionary activities to catch up on travel.
Business travel is also coming back, as pandemic-related measures are removed. The hybrid work environment is a slight negative for business travel because people are not as easily available to do physical meetings. But this situation continues to evolve and more people continue to come back. 2024 could be when things normalize to a great extent.
As far as profitability is concerned, the situation is positive because jet fuel prices have dropped substantially. Additionally, capacity adds have been slower of late as suppliers struggle with supply chain issues, labor costs, etc. Limited capacity and surging demand is the recipe for stronger pricing, and lower fuel cost offers flexibility to operators to lower prices without sacrificing margins, if the economy does take a turn for the worse. Airport capacity is also a sticking factor, and this is leading to increased demand for widebody aircraft that can carry more passengers per flight.
Here's a quick recap of three airlines:
United Airlines Holdings, Inc.
The Zacks Rank #3 (Hold) company beat the Zacks Consensus earnings estimate by 26.1%, which came on top of a revenue beat of 1.8%. The full-year guidance for per share earnings was raised by a dollar to $11-$12.
The strong results were attributed to ongoing strength in its international business, as it continues to expand its global network and increase connectivity at new locations. In order to make the most of the growing demand in the Pacific region, it announced new flights to Manila, Hong Kong, Taipei and Tokyo. The company has placed the largest ever order for widebody aircraft with Boeing in December last year. Additionally, it has implemented the United Next program to deploy technology and other measures to bring down cost.
UAL estimates for 2023 and 20242 are up a respective 5% and 3%.
Delta Air Lines, Inc.
#2 (Buy) ranked Delta beat the Zacks Consensus revenue estimate by 3.9% and earnings estimate by 10.7%. Management raised the 2023 outlook to $6-$7 and maintained free cash flow expectation of $3 billion.
Despite a 17% increase in capacity, total revenue per available seat mile (TRASM increased 1%, driven by international passenger revenue, which grew 61%. The greatest strength was in Southern European destinations, but both the Pacific region and South America/Caribbean were also up strongly. Delta is seeing declining non-fuel unit costs as we move through the year, driven by scale efficiencies and double-digit decline in fuel cost.
The 2023 estimate is up nearly 21% while the 2024 estimate is up 6% in the last 30 days.
American Airlines Group Inc.
American Airlines beat on revenue by 2.3% and on earnings by 21.5%. The Zacks Rank #3 company’s full-year earnings guidance was raised to between $3.00 and $3.75 a share.
Like the others, American is seeing significant declines in fuel cost. But unlike them, it expects labor costs to increase in the near term (pilots are going to be paid on par with United and flight attendants are looking for 35% pay hikes). The airline also expects a decline in the revenue per seat mile as it runs more flights during the current quarter. Therefore, the near-term outlook spoke to increased uncertainty and hit share prices.
AAL estimates are up 5% for 2023 and 3% for 2024 in the last 30 days.
Bottom Line
There are several positive factors driving airlines stocks right now, not the least of which is the economic growth we’ve had over the last few years that was not supported by normal business activity. Now that pandemic-era restrictions are lifted, the expansion in the economy should generate growth in travel. While these factors are positive for all airlines, those with international exposure and pricing power are no doubt the ones that will outshine others.
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Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report
United Airlines Holdings Inc (UAL) : Free Stock Analysis Report
American Airlines Group Inc. (AAL) : Free Stock Analysis Report
Eagle Bancorp, Inc. (EGBN) : Free Stock Analysis Report
Oshkosh Corporation (OSK) : Free Stock Analysis Report
