PBF Energy and Southern Copper have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – July 29, 2022 – Zacks Equity Research shares PBF Energy PBF as the Bull of the Day and Southern Copper SCCO as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Apple AAPL, Amazon AMZN and Intel INTC.
Here is a synopsis of all five stocks:
Bull of the Day:
PBF Energy, a Zacks Rank #1 (Strong Buy), has been a substantial beneficiary of higher commodity prices over the past year. PBF had been steadily outperforming the market before pulling back along with the energy sector over the past month. With oil looking to stabilize in the short-term, along with hints from the Fed regarding the potential for slower rate hikes in the future, energy stocks such as PBF are looking to begin the next leg up. The retreat in price over the past few weeks presents investors with a solid buying opportunity.
PBF sports the highest Zacks Growth and Value Style Scores of ‘A’. The company is part of the Zacks Oil and Gas – Refining and Marketing industry group, which ranks in the top 2% out of more than 250 Zacks Ranked Industries. This group has widely outperformed the market this year, advancing more than 26% while the S&P 500 is in a deep correction.
Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1. It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
Company Description
PBF Energy is a leading refiner that produces gasoline, diesel, heating oil, jet fuel, and petrochemicals. The company sells its products in the United States, Canada, and Mexico. PBF also provides rail, truck, and marine transportation services. PBF Energy was founded in 2008 and is headquartered in Parsippany, NJ.
Earnings Trends and Future Estimates
PBF has surpassed earnings estimates in each of the past four quarters. The refiner reported Q2 EPS just yesterday of $10.58/share, a 43.75% surprise over the $7.36 consensus estimate. PBF has delivered a trailing four-quarter average earnings surprise of 77.97%.
Analysts are in agreement in terms of earnings revisions and have increased their estimates across the board. For the third quarter, analysts covering PBF have increased their estimates by 123.03% in the past 60 days. The Q3 Zacks Consensus EPS estimate now stands at $3.68, translating to a staggering potential growth rate of 2,966.67% relative to the same quarter last year.
For the full year, analysts have bumped up their earnings projections by 164.11% in the past 60 days. The 2022 Zacks Consensus EPS Estimate is now $12.73, reflecting anticipated growth of 609.2% relative to last year. Revenues are expected to climb 39.36% to $37.98 billion. Clearly, the growth is there for PBF investors.
Stock Performance & Valuation
PBF shares have advanced over 230% in the past year. Only stocks that are in extremely powerful uptrends are able to make this type of price move while the major indices are in a correction. This is the kind of stock we want to include in our portfolio – one that is trending well and receiving positive earnings estimate revisions. Shares have advanced over 140% this year alone.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. And as we know, PBF Energy has recently witnessed positive revisions. As long as this trend remains intact (and PBF continues to deliver earnings beats), the stock will likely continue its bullish run this year. Cautious investors may feel hesitant about investing in a stock that has come this far, but the fact is this elite company is still outperforming.
Despite the impressive performance, PBF remains relatively undervalued, irrespective of the metric used:
Bottom Line
Solid institutional buying should continue to provide a tailwind for the stock price. PBF is ranked favorably by our Style Score Categories with an ‘A’ for Value and ‘A’ for Growth, paving the way for an overall ‘A’ VGM score. This indicates that there’s a strong likelihood that PBF’s outperformance will continue on the heels of strong sales and earnings growth.
Robust fundamentals combined with a strong technical trend certainly justify adding shares to the mix. Backed by a leading industry group and robust history of earnings beats, it’s not difficult to see why this company is a compelling investment. This market winner continues to prove its doubters wrong, and investors would be wise to consider PBF as a portfolio candidate if they haven’t already done so.
Bear of the Day:
Southern Copper is engaged in the mining, smelting, and refining processes of copper and other minerals. The company operates internationally in Peru, Mexico, Argentina, Ecuador, and Chile. SCCO is also involved in the production of refined gold, silver, and other materials. In addition, the company operates a host of underground mines that produce zinc and lead. SCCO was incorporated in 1952. Based in Phoenix, AZ, Southern Copper operates as a subsidiary of Americas Mining Corporation.
The Zacks Rundown
SCCO, a Zacks Rank #5 (Strong Sell), is a component of the Zacks Mining – Non Ferrous industry group, which ranks in the bottom 8% out of more than 250 Zacks Ranked Industries. As such, we expect this industry group as a whole to underperform the market over the next 3 to 6 months. This group has fallen over 25% year-to-date, widely underperforming the -15% decline from the S&P 500.
Candidates in the bottom tiers of industries can often be solid potential short candidates. While individual stocks have the ability to outperform even when included in a poor-performing industry group, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much tougher.
The odds are stacked against SCCO, and the stock is agreeing with this notion. SCCO experienced a climax top back in April and has been in a price downtrend ever since. The share price is hitting a series of 52-week lows and represents a compelling short opportunity as the market continues its volatile start to the year.
Southern Copper is also relatively overvalued, irrespective of the valuation metric used.
Recent Earnings Misses and Deteriorating Forecasts
SCCO has fallen short of earnings estimates in two of the last three quarters. The mining company most recently reported Q2 earnings earlier this week of $0.56/share, missing the $0.95/share consensus estimate by -41.05%. The stock has moved steadily lower since the announcement, even as the market has rallied.
The company has posted a trailing four-quarter average earnings miss of -10.91%. Consistently falling short of earnings estimates is a recipe for underperformance, and SCCO is no exception.
Analysts are in agreement in terms of earnings revisions, and have slashed estimates across the board. For the full year, EPS projections have declined 10.39% to $3.71/share, reflecting negative growth of -15.49% relative to last year.
Declining earnings estimates are a huge red flag and need to be respected. Negative growth year-over-year is the type of trend that bears like to see.
Technical Outlook
SCCO is in a sustained downtrend. The stock has plunged below both the 50-day and 200-day moving averages. The stock is making a series of lower lows, with no respite from the selling in sight. Also, both moving averages have rolled over and are sloping down – another good sign for the bears.
While not the most accurate indicator, SCCO has also experienced what is known as a 'death cross,' wherein the stock's 50-day moving average crosses below its 200-day moving average. SCCO would have to make a serious move to the upside and show increasing earnings estimate revisions to warrant taking any long positions in the stock. The stock has fallen nearly 20% this year alone.
Final Thoughts
A deteriorating fundamental and technical backdrop show that this stock is not set to print new highs anytime soon. The fact that SCCO is included in one of the worst-performing industry groups provides yet another headwind to a long list of concerns. A history of earnings misses and falling future earnings estimates will likely serve as a ceiling to any potential rallies, nurturing the stock's downtrend.
Our Zacks Style Scores depict a weakening outlook for this stock, as SCCO is rated a 'C' in our Growth category. Potential investors may want to give this stock the cold shoulder, or perhaps include it as part of a short or hedge strategy. Bulls will want to steer clear of an overvalued SCCO until the situation shows major signs of improvement.
Additional content:
Amazon, Apple Up on Earnings, Intel Takes a Bath
Market indices rallied off yesterday morning's lineup of economic data that in more unforgiving times (say, a month or two ago) might have met the buzzsaw; nowadays, we see grow across the board: the Dow was +332 points on the day, +1.03%, while the Nasdaq grew +130 points, +1.08%. Further, the S&P 500 at +1.21% and the small-cap Russell 200 +1.34% rounded out a positive trading day.
Renowned investor Leon Cooperman recently described a market "bottom" as having occurred when trading is impervious to bad news. Well, bad news is what we got ahead of Thursday's open, where Q2 GDP posted a negative headline for the second-straight quarter while jobless claims' 4-week moving average keeps climbing. It's been a rough quarter but a "so far, so good" Q2 earnings season — at least ahead of yesterday afternoon's marquee reports:
Apple notched its third-straight earnings beat in its fiscal Q3 results, reaching $1.20 per share for a 6-cent beat (though still below the year-ago's $1.30 per share). Revenues posted a slight beat to $82.96 billion from $81.99 billion in the Zacks consensus. Shares of the world's largest gadget maker were up +3% in after-market trading.
iPhone sales are still the bread and butter of Apple, and these came in better than expected to 40.67 billion units sold in the past three months. Its Services revenue was a tad below expectations at $19.6 billion, while Mac sales dropped -10% on supply constraints and foreign exchange headwinds. But considering its China business only came in -1% in a very challenging quarter, we'd have to see this quarter from Apple as not only being better than expected, but as strong as reasonably expected.
Shares of Amazon bloomed +10% in late trading, even though the company posted a -20 cent loss per share in Q2, as opposed to a 15-cent gain. Revenues came in better than expected, however: $121.23 billion versus $119.67 billion expected. The company took a $6 billion charge in the quarter to adjust for extra labor and capacity, which may explain the bottom-line big miss.
Amazon Web Services (AWS), the company's cloud-based profit engine outpaced expectations in the quarter: $19.74 billion surpassed the anticipated $19.54 billion, while Advertising revenue grew +21% year over year to $8.76 billion, above the expected $8.65 billion. Online Stores and Subscribers came in a little short of estimates, but overall results were, just like Apple, better than expected.
Intel, however, is a different story: in an absolute nightmare quarter, the chip-making giant posted earnings of 29 cents per share, less than half the 69 cents expected and more than 4x lower than the $1.28 per share in the year-ago quarter. CEO Pat Gelsinger said the quarter was "below standard" and that they "can and must do better." It's the company's first miss in more than eight years.
Guidance for Q3 was abysmal, as well: 30 cents per share is expected on the bottom line, less than half the 90 cents in the Zacks consensus, while revenues next quarter, which had previously been expected to reach $18.91 billion, are now guiding to a range of $15-16 billion. The company also posted its worst Data Center revenue, perhaps ever, -16%. Shares were down -10% in late-session trading.
In other news, the Chips Act passed Congress Thursday, which will allot more than $50 billion to semiconductor companies to begin generating chips in the U.S. This is widely seen as not only good for supply-chain initiatives that rely on advanced technology, like automobile dashboards, but a win for national security. It's also seen as a hedge against possible aggression in Taiwan by China.
Questions or comments about this article and/or its author? Click here>>
Why Haven't You Looked at Zacks' Top Stocks?
Our 5 best-performing strategies have blown away the S&P's impressive +28.8% gain in 2021. Amazingly, they soared +40.3%, +48.2%, +67.6%, +94.4%, and +95.3%. Today you can access their live picks without cost or obligation.
See Stocks Free >>
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
https://www.zacks.com
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
Intel Corporation (INTC) : Free Stock Analysis Report
Apple Inc. (AAPL) : Free Stock Analysis Report
Southern Copper Corporation (SCCO) : Free Stock Analysis Report
PBF Energy Inc. (PBF) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
