Shift4 and Pool have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – August 11, 2023 – Zacks Equity Research shares Shift4 Payments FOUR as the Bull of the Day and Pool Corp POOL as the Bear of the Day. In addition, Zacks Equity Research provides analysis on DLocal Ltd. DLO and Gambling.com Group Ltd. GAMB.
Here is a synopsis of all four stocks.
Bull of the Day:
Shift4 Payments is a Zacks Rank #1 (Strong Buy) that is a provider of integrated payment processing and technology solutions. The company provides omni-channel card acceptance and processing solutions, including credit, debit, contactless card, Europay, Mastercard and Visa, QR Pay, and mobile wallets, as well as alternative payment methods.
FOUR has been underperforming most tech companies, up only 12% on the year. For the most part, the stock has been sideways since making its initial 2023 gains back in January.
The company recently posted a positive earnings report and analysts are taking estimates higher. Investors should be watching the stock for potential technical support, followed by a move higher into the end of the year.
About the Company
The company was founded in 1999 and is headquartered in Allentown, Pennsylvania.
The stock has a Zacks Style Score of “A” in Growth and Momentum, but “C” in Value. The Forward PE is 24 and the stock has a market cap of $5 billion.
FOUR employs 2,300 employees and operates in Europe, Japan, and North America.
Q2 Earnings Beat
In early August, FOUR beat earnings expectations by 51%. This was the sixth straight EPS beat that stretches back to early 2022. Since the start of this earnings streak, the stock is up 40%.
Looking at the quarter, Q2 came in at $0.74 v the $0.51 expected. Adjusted EBITDA was $110M v the $66M last year.
Shift4 Payments raised its FY23 guidance, now seeing End-to-End payment volume at $108-114B v the $104-110B prior. This is an increase of 45-54% year over year.
Gross revenues, adjusted EBITDA, and FCF for FY23 were also taken higher.
Analyst Estimates
Analysts reacted to EPS and the guidance raise by lifting estimates across the board.
Since earnings, estimates for the current quarter have gone from $0.66 to $0.69 or 5%. Next quarter is where it gets impressive, with estimates going from $0.65 to $0.78 over the last 7 days. This is a 20% jump, which is almost matched by a 15% jump in the current year.
Looking at the numbers for next year, estimates have gone from $3.02 to $3.34 over the last 7 days or 11%.
Since earnings, multiple analysts have taken price targets higher for FOUR:
UBS reiterated the stock with a Buy and took its price target to $100, up from $93.
Credit Suisse reiterated FOUR with an Outperform and raised their price target to $80 from $75.
Morgan Stanley maintained its Underweight but lifted its price target to $52 from $50.
The Technicals
The stock started the year out around the $50 level and then marched to $75, good for about a 50% move. Since April, the stock has traded in a sideways range between $60 and $70.
As FOUR drifts lower on market weakness, investors should be watching support levels for potential buys. The 200-day MA resides at $61 and would likely be a big spot for bulls. This would front-run the $60 level which has been support four times since the April lows.
If a larger market sell-off hits the stock, the $52.50 area is the 61.8% retracement drawn from November lows to April highs.
For the bulls to take charge, the price needs to get over the $67 level. This would be a move above both the 50-day and 21-day MA. That scenario would not only bring more attention to the stock, but it would also signal a potential break of the $70 resistance.
Bottom Line
While FOUR has been trading sideways during market strength, there are reasons to believe that an eventual up move could come as we close out the year.
Estimates are headed higher and if that earnings momentum continues, we should see the bulls eventually take out that resistance that has held the stock down since April.
Bear of the Day:
Pool Corp is a Zacks Rank #5 (Strong Sell) that distributes swimming pool supplies, equipment, and related leisure products in the United States and internationally.
The stock had a big year in 2021 when it rallied over 60%, but now investors see the price back at levels seen before the breakout. With POOL 25% below those 2021 all-time highs, investors are now asking whether it is time to dip their toes in.
Unfortunately, the pool business has dried up since the hot 2021. Both Pool Corp and Leslie’s recently reported disappointing earnings and now have investors on edge.
About the Company
Pool Corp was founded in 1993 and is headquartered in Covington, Louisiana.
The company is the world's largest wholesale distributor of swimming pool supplies, equipment, and related products. In addition, the company is a leading regional wholesale distributor of irrigation and landscape products.
The company reports operations under two segments — the Base Business segment (95.3% of total 2022 revenues) and the Excluded segment, i.e., sale centers excluded from Base Business (4.7%).
POOL is valued at $15 billion and has a Forward PE of 17. The stock holds Zacks Style Scores of “A” in Growth, but “F” in both Momentum and Value. The stock pays a dividend of 1.15% and had a Forward PE of 29.
Q2 Earnings
Pool Corp last reported earnings in late July, missing expectations by 2%. This was the third straight miss by the company, which had previously beaten earnings in 14 straight quarters.
The company cut its guidance, seeing FY23 at $13.14-14.14 v the $14.99 expected. Operating margins came in at 17.6% v 20.4% last year and gross margins were 30.6% v 32.4% last year.
Management commented that they expect current macro trends to remain a challenge over the short term. However, they added that they remain confident that the industry will benefit from longer-term demographic and socioeconomic trends.
Estimates
Earnings estimates have been trending lower after the Q2 report as analysts were forced to lower numbers due to guidance.
Over the last 30 days, numbers for the current quarter plunged from $4.40 to $3.40 or 23%.
For the current year, analysts have lowered estimates 11% over that same time frame.
Looking at the longer term, numbers are going lower as well. For next year, estimates have fallen from $16.82 to $14.94 over the last 30 days or almost 11%.
Technical Take
The stock is up almost 30% on the year but off about 9% from its 2023 highs. The stock still looks good on the chart, with it trading above the 21-day MA at $376.
POOL saw some sympathy selling after disappointing earnings from Leslie's. The 50-day MA tested at $352 and then the stock bounced after the company’s earnings release was not as bad as Leslie's.
While the chart looks ok for now, there looks to be a resistance level at $390. If selling comes in and breaks the 21-day MA, we likely see a retest of that 50-day at $362 and a possible test of the $345 level, which is the 200-day MA.
In Summary
Pool Corp is losing momentum when it comes to earnings, but the stock is holding up for now. Investors should be cautious here and watch for support breaks and possibly join in the selling if those levels fail.
Additional content:
2 Service Firms Poised to Beat Estimates This Earnings Season
The Zacks Business Services sector had a strong second quarter of 2023, driven by an improving global macroeconomic environment, strong demand for services, improving supply chains, a less-hawkish stance from the U.S. Federal Reserve, and strong digital adoption. However, labor market constraints and higher operational expenses remained headwinds.
Per the latest Earnings Trend report, earnings of S&P 500 members of the business services sector that have reported results this season grew 6.1% year over year on 5.6% revenue growth, with 70.4% of the companies beating EPS estimates and 66.7% topping sales projections.
Total quarterly earnings of the S&P 500 members of the sector are currently anticipated to display 6.1% year-on-year growth. Revenues are likely to indicate a 5.6% rise.
A handful of companies from the sector, like DLocal Ltd. and Gambling.com Group Ltd., are expected to beat estimates in the ongoing reporting cycle.
Let us discuss the factors that are likely to have played a key role in shaping the performance of business services companies in the quarter.
Factors Influencing Q2 Results
The sector is a major beneficiary of the broader economy and service activities. According to the "advance" estimate released by the Bureau of Economic Analysis, GDP grew at an annual rate of 2.4% in the second quarter of 2023 compared with 2% growth in the first quarter. Fed’s decision to pause interest rate hike in June after ten straight increases also offered relief to the global economy.
Economic activities in the non-manufacturing sector were in good shape in the quarter. The Services PMI measured by the Institute for Supply Management has stayed above the 50% mark for the past seven months, indicating continued expansion.
Sector-specific factors that acted as tailwinds in the quarter are the essentiality of certain services like waste management, the rise in demand for risk mitigation and consulting services, increased expertise in improving operational efficiency and lower costs, successful work-from-home models and digital transformation.
Services pertaining to transportation & warehousing; accommodation & food; utilities; construction; rental & leasing; health care & social assistance; education; information; professional, scientific & technical stayed healthy in the quarter.
Stocks Poised to Beat This Season
With the existence of several players in the sector, finding the right business services stocks that have the potential to beat on earnings can be daunting. Our proprietary methodology, however, makes it fairly simple.
You could narrow down the list of choices by looking at stocks that have the combination of a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), and a positive Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings ESP is our proprietary methodology for determining stocks that have the best chances to surprise in their next earnings announcement. It is the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.
Our research shows that for stocks with this combination, the chance of an earnings surprise is as high as 70%.
Here are our picks.
DLocal Limited: The company operates a payment processing platform globally.
DLocal is set to report its second-quarter 2023 results on Aug 15. It has an Earnings ESP of +12.50% and currently carries a Zacks Rank #3. The Zacks Consensus Estimate for the to-be-reported quarter has remained unchanged in the past 60 days.
The consensus mark for the top line in the to-be-reported quarter is pegged at $151.2 million, indicating year-over-year growth of 49.4%. The consensus mark for the bottom line is pegged at 13 cents, indicating an increase of 30% on a year-over-year basis.
DLocal Limited price-eps-surprise | DLocal Limited Quote
Gambling.com: The company is a leading provider of player acquisition services for the regulated global online gambling industry.
Gambling.comis scheduled to report its second-quarter 2023 results on Aug 17. It has an Earnings ESP of +3.45% and currently carries a Zacks Rank #3. The Zacks Consensus Estimate for the to-be-reported quarter has moved 9.1% north in the past 60 days.
The consensus mark for revenues in the to-be-reported quarter is pegged at $21.9 million, indicating year-over-year growth of 37.4%. The consensus mark for the bottom line is pegged at 12 cents, indicating an increase of 33.3% on a year-over-year basis.
Gambling.com Group Limited price-eps-surprise | Gambling.com Group Limited Quote
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. 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
Pool Corporation (POOL) : Free Stock Analysis Report
Shift4 Payments, Inc. (FOUR) : Free Stock Analysis Report
DLocal Limited (DLO) : Free Stock Analysis Report
Gambling.com Group Limited (GAMB) : Free Stock Analysis Report
