PlayAGS and RH have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – April 5, 2023 – Zacks Equity Research shares PlayAGS AGS as the Bull of the Day and RH RH as the Bear of the Day. In addition, Zacks Equity Research provides analysis on United Parcel Service, Inc. UPS and Norfolk Southern Corp. NSC.
Here is a synopsis of all four stocks.
Bull of the Day:
PlayAGS is a Zacks Rank #2 (Buy) and it sports an A for Value and an A for Growth. Despite so many calls for a recession, this name and several others in the gaming industry have been holding up rather well. Let’s explore more about this company in this Bull of The Day article.
Description
PlayAGS, Inc. designs and supplies gaming products and services for the gaming industry in the United States and internationally. It operates through three segments: Electronic Gaming Machines (EGM), Table Products, and Interactive Games (Interactive). PlayAGS, Inc. was incorporated in 2005 and is headquartered in Las Vegas, Nevada.
Earnings History
When I look at a stock, the first thing I do is look to see if the company is beating the number. This tells me right away where the market’s expectations have been for the company and how management has communicated to the market. A stock that consistently beats has management communicating expectations to Wall Street that can be achieved. That is what you want to see.
For PlayAGS, I see three straight beats of the Zacks Consensus Estimate and that was all preceded by an earnings meet. That is not that great to see, but by itself that is not enough to make the company a Zacks Rank #1 (Strong Buy).
Earnings Estimates Revisions
The Zacks Rank tells us which stocks are seeing earnings estimates move higher.
Over the last 60 days, earning estimates have moved around for URBN.
This quarter has seen estimates improve from a loss of 11 cents to a loss of 8 cents.
Next quarter moved from breakeven to a gain of 2 cents.
The full fiscal year 2023 has increased from a loss of $0.13 to a gain of $0.01 over the last 30 days.
Next fiscal year sees estimates move from a loss of $0.02 to a gain of $0.19.
Positive movement in earnings helped move this stock to a Zacks Rank #1 (Strong Buy).
Valuation
The valuation for AGS is mixed at these levels. I see a forward earnings multiple of 1095x and that is super lofty, but a result of earnings being just barely positive. The price to book multiple of 5.6x is in line with other names in the industry. Growth is solid at 16% and margins have seen a dramatic improvement. If nothing else this stock is worth a deeper look.
Bear of the Day:
RH is a Zacks Rank #5 (Strong Sell) and has seen earnings estimates slide lower in a big way recently. This article will look at why this stock is a Zacks Rank #5 (Strong Sell) as it is the Bear of the Day.
Description
RH operates as a retailer in the home furnishings and operates under RH Galleries and RH brand names, as well as Waterworks showrooms throughout the United States and the United Kingdom. The company was formerly known as Restoration Hardware Holdings, Inc. and changed its name to RH in January 2017. RH was incorporated in 2011 and is headquartered in Corte Madera, California.
Earnings History
When I look at a stock, the first thing I do is look to see if the company is beating the number. This tells me right away where the market’s expectations have been for the company and how management has communicated to the market. A stock that consistently beats has management communicating expectations to Wall Street that can be achieved. That is what you want to see.
In the case of RH, I see three beats and of the Zacks Consensus Estimate and one earnings miss. This alone does not make the stock a Zacks Rank #1 (Strong Buy) and it doesn’t make it a Zacks Rank #5 (Strong Sell) either.
The Zacks Rank does care about the earnings history, but it is much more heavily influenced by the movement of earnings estimates.
Earnings Estimates
The Zacks Rank tells us which stocks are seeing earnings estimates move higher or in this case lower. For RH I see annual estimates moving lower of late.
The current fiscal year consensus number moved lower from $17.70 to $13.31 over the last 60 days.
The next year has moved from $20.36 to $17.51. That move lower is probably the biggest deciding factor for this stock to be a Zacks Rank #5 (Strong Sell).
Negative movement in earnings estimates like that is why this stock is a Zacks Rank #5 (Strong Sell).
It should be noted that a majority of stocks in the Zacks universe are seeing negative earnings estimate revisions. That means that the stocks that are seeing small but negative earnings estimate revisions are falling to a Zacks Rank #5 (Strong Sell).
Additional content:
These Railroad Stocks Look Attractive with Solid Dividend Yields
The Zacks Transportation - Rail industry continues to suffer from headwinds like raging inflation, higher interest rates, high fuel price and supply-chain disruptions. Even though oil price has declined (down 5.7% in the January-March period) due to recession fears, it remains high. Since fuel expenses represent a key input cost for any transportation player, an uptick in fuel costs is not a welcome development. Operating expenses are on the way up, given the rise in fuel cost.
Partly due to these headwinds, the industry has declined 1.9% over the past three months against the S&P 500 Index’s 8.4% appreciation and 5.6% rise of the broader Zacks Transportation sector.
Despite the challenges surrounding the industry,some railroad companies like United Parcel Service, Inc. and Norfolk Southern Corp. have consistently announced dividend hikes, thus highlighting their pro-shareholder stance.
Stocks that have a strong history of dividend growth belong to mature companies, which are less susceptible to large swings in the market, and act as a hedge against economic or political uncertainty as well as stock market volatility. At the same time, they offer downside protection with their consistent increase in payouts.
Additionally, these companies have superior fundamentals like a sustainable business model, a long track of profitability, rising cash flows, good liquidity, a strong balance sheet and some value characteristics.
How to Pick Stocks with Solid Dividend Payouts?
In order to choose some of the best dividend stocks from the aforementioned industry, we have run the Zacks Stock Screener to identify stocks with a dividend yield in excess of 2% and a sustainable dividend payout ratio of less than 60%. Each of the two stocks mentioned below carries a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
United Pacific: Headquartered in Omaha, NE, Union Pacific, through its subsidiary, Union Pacific Railroad Company, operates in the railroad business in the United States. Currently, it has a market capitalization of $123.15 billion.
UNP pays out a quarterly dividend of $1.30 ($5.20 annualized) per share, which gives it a 2.61% yield at the current stock price. This company’s payout ratio is 46% of its earnings at present. The five-year dividend growth rate is 12.02%. (Check United Pacific’s dividend history here).
We are impressed with Union Pacific’s consistent efforts to reward its shareholders through dividends and share repurchases. The company hiked its dividend twice in 2021. In May 2022, UNP’s board of directors increased its quarterly cash dividend by 10% to $1.30 per share. Notably, Union Pacific has been paying dividends on its common stock for 123 consecutive years. In 2022, UNP paid dividends worth $3,159 million and repurchased shares worth $6,282 million. For 2023, management anticipates a dividend payout of approximately 45% (of earnings).
Union Pacific Corporation dividend-yield-ttm | Union Pacific Corporation Quote
Norfolk Southern: Headquartered in Atlanta, GA, Norfolk Southern engages in the rail transportation of raw materials, intermediate products and finished goods in the United States. Currently, it has a market capitalization of $48.29 billion.
NSC pays out a quarterly dividend of $1.35 ($5.40 annualized) per share, which gives it a 2.59% yield at the current stock price. This company’s payout ratio is 36% of its earnings at present. The five-year dividend growth rate is 11.95%. (Check Norfolk Southern’s dividend history here).
Norfolk Southern Corporation dividend-yield-ttm | Norfolk Southern Corporation Quote
We are impressed with Norfolk Southern's efforts to reward its shareholders through dividends and share repurchases. In January 2023, the company's board announced a dividend hike of 9%, thereby raising its quarterly dividend payout from $1.24 per share to $1.35. During 2022, Norfolk Southern paid dividends worth $1,167 million and repurchased and retired common stock worth $3,110 million.
In 2021, Norfolk Southern paid dividends worth $1,028 million and repurchased and retired common stock worth $3,390 million. Norfolk Southern's strong free cash flow generating ability supports its shareholder-friendly activities. In 2022, the free cash flow was $2,274 million.
Such shareholder-friendly moves indicate the company’s commitment to creating value for shareholders and underline its confidence in its business. These initiatives not only instill investors’ confidence but also positively impact earnings per share.
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Norfolk Southern Corporation (NSC) : Free Stock Analysis Report
United Parcel Service, Inc. (UPS) : Free Stock Analysis Report
RH (RH) : Free Stock Analysis Report
PlayAGS, Inc. (AGS) : Free Stock Analysis Report
