For Immediate Release
Chicago, IL – August 15, 2022 – Zacks Equity Research shares Playa Hotels & Resorts N.V. PLYA as the Bull of the Day and Trex Company, Inc. TREX as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Titan International TWI, Taiwan Semiconductor Manufacturing TSM and The Chefs' Warehouse CHEF.
Here is a synopsis of all five stocks:
Bull of the Day:
Playa Hotels & Resorts N.V. finally has some good news to celebrate as travelers rush to Mexico and the Caribbean this year on the reopening. This Zacks Rank #1 (Strong Buy) is expected to see triple digit earnings growth, which will be positive for the first time since the pandemic hit.
Playa Hotels & Resorts owns and/or manages 22 all-inclusive resorts in popular vacation destinations in Mexico, Jamaica and the Dominican Republic. These include brands such as Hyatt, Wyndham, Hilton, and Jewel resorts.
Another Beat in the Second Quarter of 2022
On Aug 4, Playa Hotels & Resorts reported its second quarter results and beat for the second straight quarter. Earnings were $0.15 versus the Zacks Consensus Estimate of $0.08.
Net income was $30.5 million compared to a net loss of $7.8 million in the second quarter of 2021.
Net Package RevPar rose 79.8% to $271.40 from $150.98 driven by a surge in occupancy which was 75.1% in the quarter, up 25.2% from last year which was 49.9%.
Jamaica has been the laggard in reopening to outside tourist guests but it removed COVID-19 travel related restrictions in April which helped sure both leisure and MICE demand in the country.
Jamaica reported the highest occupancy rate of any segment during the second quarter as travelers surged back into the country. Flight capacity and international passenger arrivals into Montego Bay spiked in the quarter.
Jamaica has led the way in bookings for 2023 in recent months.
Playa Hotel & Resorts said that Jamaica was their best performing segment before the pandemic and they expect it to continue to improve.
Bookings pace remains strong across all three of its markets, which bodes well for the upcoming winter beach season in 2023.
Analysts Raise Full Year 2022 and 2023 Estimates
Business has improved in Playa's three key markets as COVID travel restrictions, including testing requirements, have been lifted. People want to travel and have experiences in 2022 and 2023. They are already booking for next year.
2 earnings estimates have been raised in the last week both for 2022 and 2023.
The 2022 Zacks Consensus Estimate has jumped to $0.46 from $0.37 in the last week. That's earnings growth of 195.8% compared to 2021 where the company lost $0.48.
Similarly, the 2023 Zacks Consensus Estimate has also surged higher, up to $0.63 from $0.51 in the last 7 days. This is another 37.7% earnings growth.
Shares Fall From Recent Highs
Shares of Playa Hotel & Resorts were big pandemic winners, up 91% over the last 2 years. But year-to-date, the shares are down 8% and they've fallen 14% in the last 3 months despite the rebound in earnings.
Shares are cheap with a forward P/E of 15.8 and a price-to-book ratio of 1.7. A P/B ratio under 3.0 usually indicates a company is undervalued.
For investors looking for a play on the boom in travel, Playa Hotel & Resorts should be on your short list.
Bear of the Day:
Trex Company, Inc. had a great second quarter but warned on the rest of the year as the pro-channel prepares for an economic slowdown. This Zacks Rank #5 (Strong Sell) is now expected to see earnings decline in 2022.
Trex is the largest manufacturer of high-performance, low-maintenance wood alternative decking and railing. It's stocked in more than 6,700 retail locations worldwide.
In addition, Trex is also the leading national provider of custom-engineered railing systems for the commercial and multi-family market, including performing arts venues and sports stadiums.
Another Big Beat in the Second Quarter
On Aug 8, Trex reported its second quarter earnings and beat the Zacks Consensus Estimate by $0.11. Earnings were $0.79 versus the consensus of $0.68.
It was the 13th earnings beat in a row, going back to 2019. The company never missed during the pandemic years. That's impressive.
Sales rose 24% to $386 million, boosted by favorable pricing as well as mid-single digit growth in volume at Trex Residential, reflecting both consumer demand and continued distributor inventory build, especially in the pro channel.
In the second quarter it expanded the premium Transcend decking portfolio line by launching Trex Transcend Lineage decking. It features trend-forward colors with heat mitigating technology features and is, like all Trex decking, made from 95% recycled and reclaimed content.
It's the company's first major product launch since 2019.
Slowing Expected in the Second Half of 2022
Business sounds great, so what's the problem?
"Although we believe consumer demand for Trex decking and railing products remains healthy, in late June, we experienced a sudden reduction in pro-channel demand, as our partners began to adjust their inventory levels to align with expectations for an economic slowdown," said Bryan Fairbanks, CEO.
"Accordingly, we anticipate a significant reduction in revenues in the second half of 2022 as consumer demand is filled by existing channel inventories," he added.
Third quarter revenue is expected to range from $185 million to $195 million, which is down dramatically from the third quarter of 2021 when it was $336 million.
Fourth quarter revenue is now forecast to plunge as well, to a range of $180 million to $190 million from $304 million last year.
Analysts Cut 2022 and 2023 Full Year Earnings Estimates
With revenue set to decline, it's not surprising that the analysts cut earnings estimates.
7 were cut for 2022 in the last week, pushing the Zacks Consensus Estimate down to $1.94 from $2.47 in that time. That's an earnings decline of 7.6% because it made $2.10 last year.
7 were also cut for 2023, with the Zacks Consensus Estimate falling to $2.13 from $2.73 in the last 90 days.
Shares Fall in 2022
Trex shares were already weak before this warning on the second half of the year.
They're down 42.9% over the last year, while the S&P 500 is down just 3.8%.
But with estimates being cut, they aren't cheap on a forward P/E basis with a P/E of 29.5.
Trex is shareholder friendly and has a big share buyback program, however. It repurchased 2.8 million shares in the second quarter at an average price of $60.39.
It has 4.3 million shares remaining under the program.
But given the gloomy outlook, the shares may have further to fall. Investors might want to wait on the sidelines until the inventory is worked through and the outlook improves.
3 Highly Ranked Stocks with Stellar Growth Prospects
The market's performance has been stellar as of late. After a rough start in the first half, investors have undoubtedly welcomed the rally with open arms. The ongoing war in Ukraine, rising costs, and a hawkish Fed have all been components of the dark fiscal cloud hovering above us.
With buyers reappearing, a few highly-ranked stocks with excellent growth prospects that could take off include Titan International, Taiwan Semiconductor Manufacturing and The Chefs' Warehouse.
All three companies sport the highly-coveted Zacks Rank #1 (Strong Buy). Let's take a closer look at each company's growth prospects and a few other aspects a little closer.
Taiwan Semiconductor Manufacturing
Taiwan Semiconductor Manufacturing, the world's largest circuit foundry, is responsible for supplying microchips globally to an elite list of companies, including Nvidia and Advanced Micro Devices.
The company has stellar growth prospects, and analysts have been bullish across all timeframes over the last 60 days.
TSM is forecasted to generate a mighty $78 billion in revenue in FY22, penciling in a rock-solid 37% year-over-year uptick. And in FY23, the top-line looks to add an additional 15%.
Bottom-line projections are also rock-solid; the Zacks Consensus EPS Estimate of $6.30 for FY22 reflects a massive 53% year-over-year increase in earnings. Furthermore, the bottom-line looks to tack on a respectable 3.5% in FY23.
TSM's valuation levels sit enticingly as well. Its 14.2X forward earnings multiple is nowhere near its five-year median of 19.9X and represents a steep 42% discount relative to its Zacks Sector.
Titan International globally produces a broad range of products to meet original equipment manufacturers' specifications (OEMs) and aftermarket customers in the agricultural, earthmoving/construction, and consumer markets.
Analysts have substantially raised their earnings outlook across all timeframes.
Top-line growth projections are remarkable – Titan's annual revenue is forecasted to climb to $2.2 billion in FY22, reflecting a substantial 24% year-over-year increase. In FY23, the company's top-line looks to add an extra 4% of growth.
For the current fiscal year, the company's bottom-line is projected to skyrocket – the Zacks Consensus EPS Estimate of $2.19 pencils in a staggering 157% triple-digit year-over-year uptick. And in FY23, the bottom-line is forecasted to expand an additional 5.3%.
In addition to inspiring growth prospects, the company also rocks solid valuation levels. Titan's 0.4X forward P/S ratio resides on the low side and represents a deep 81% discount relative to its Zacks Sector.
The Chefs' Warehouse
The Chefs' Warehouse is a distributor of specialty food products in the United States, focused on serving the specific needs of chefs who own and/or operate restaurants, fine dining establishments, country clubs, hotels, caterers, culinary schools, and specialty food stores.
Like TSM and TWI, analysts have substantially raised their earnings outlook across all timeframes.
Look out, as the Zacks Consensus EPS Estimate for FY22 of $1.36 reflects a mind-boggling 2,820% year-over-year bottom-line expansion. The next fiscal year's earnings are forecasted to climb an additional double-digit 16%.
Of course, the growth doesn't stop there – CHEF is forecasted to generate a strong $2.5 billion in revenue throughout FY22, good enough for a rock-solid 40% year-over-year uptick. And in FY23, the revenue projection of $2.7 billion pencils in an additional 10% uptick.
CHEF's forward price-to-sales ratio resides at 0.5X, just below its five-year median value of 0.6X. Still, the value represents a deep 93% discount relative to its Zacks Sector. In addition, the company sports a Style Score of a B for Value.
The market's rebound as of late has been remarkable. After a brutal start to the year, we're finally seeing some consistent green, and investors are ecstatic.
Of course, in times when the market is roaring, investors want to have strong stocks in their portfolios. All three companies above sport a Zacks Rank #1 (Strong Buy) and have rock-solid growth prospects, making them perfect for investors who target growth.
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