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Skyline Champion and TrueCar have been highlighted as Zacks Bull and Bear of the Day

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·12 min read
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For Immediate Release

Chicago, IL – March 31, 2022 – Zacks Equity Research shares Skyline Champion Corp. SKY as the Bull of the Day and TrueCar, Inc. TRUE as the Bear of the Day. In addition, Zacks Equity Research provides analysis on BP plc BP, Uber Technologies, Inc. UBER and DCP Midstream, LP DCP.

Here is a synopsis of all five stocks:

Bull of the Day:

Skyline Champion Corp. is a large North American homebuilder focused on manufactured, modular homes, and more. Skyline Champion is coming off some impressive quarters and its outlook continues to look strong amid rising rates and rising prices across the economy.

SKY stock also appears more enticing as it falls alongside many other homebuilders. Plus, the prefabricated housing and building sector could just be starting to gain steam in the U.S. and beyond.

The Skyline Champion Story

Skyline Champion Corporation is one of the largest factory-built homebuilders in North America. The currently-constructed company was formed by the merger between Skyline Corporation and Champion Enterprises in the summer of 2018.

Skyline Champion builds a range of manufactured and modular homes, as well as ADUs or additional dwelling units, which is a fancy way of saying some type of guest house. The company also operates a park-model RVs segment. SKY's offerings service modular buildings for both single-family and multi-family housing, alongside the hospitality, senior, and workforce sectors.

Skyline Champion operates roughly 40 manufacturing facilities throughout the U.S. and western Canada and sells its various factory-built housing under various brand names. SKY's portfolio caters to a somewhat different aspect of the homebuilder and home buying market that might be set to soar.

Manufactured Housing Potential

Skyline Champion's manufactured and modular houses, apartments, hotels, and more, like all prefabricated housing, are built inside plants and factories and then transported to the site in one or more sections to be completed. Manufactured and modular housing is becoming more indistinguishable from traditional on-site made housing.

Skyline Champion's manufactured and modular offerings gained steam during the pandemic housing boom because of both speed and affordability. Two of the main reasons manufactured and modular housing might just be starting to surge again are the faster turnaround times and the lower costs, even if buyers are looking for multimillion-dollar prefabs. Investors should know that there is now a growing luxury and high-end side of the prefab housing market.

Soaring demand and ultra-low inventory continues to push up home prices around the country. Home prices rose at a record pace in 2021 and reports suggest the U.S. housing market is still millions of homes short of demand. This trend could grow worse as millennials, who are now the largest generation, are driving the housing market. And millennials are projected to form 6.4 million new households by 2025.

The lower average prices and the speed could see manufactured and modular housing pick up the slack in 2022 and beyond. For example, a new single-family home built on-site sold for an average of about $309K excluding the cost of the underlying land in 2020, according to U.S. government data. That same year, new manufactured homes cost $87K not including land.

Growth and Outlook

Skyline Champion's 2021 revenue (period ended April 3, 2021) popped 4% to $1.42 billion. This came on top of 1% sales growth in FY20 and 28% expansion in fiscal 2019. Meanwhile, its adjusted earnings climb 33% last year.

Thankfully, Skyline Champion ended FY21 on a much higher note, with fourth quarter sales up 49% and its average selling price per U.S. home sold 12% higher at $67K. And it's ripped off three strong quarters in its fiscal 2022, including 42% revenue growth in Q3 and a 210% climb in adjusted earnings.

SKY has been forced to raise its prices to combat surging materials and labor costs, with its average selling price per U.S. home sold up 32% YoY to $83K in the third quarter. Skyline Champion's total backlog skyrocketed from $489 million at the end of 2020 to $1.5 billion on January 1, as order levels outpace production.

Looking ahead, Zacks estimates call for Skyline Champion's FY22 revenue to surge 50% to $2.13 billion, with FY23 projected to come in another 11% higher. Meanwhile, its adjusted EPS are expected to soar by 150% and 11%, respectively.

Other Fundamentals

Skyline Champion has topped our EPS estimates by an average of 50% in the trailing four quarters. Plus, its FY22 and FY23 consensus earnings estimates are up by 15% and 14%, respectively since its early February financial release. This bottom-line positivity helps Skyline Champion scoop up a Zacks Rank #1 (Strong Buy) right now. SKY also sports "A" grades for Growth and Momentum in our Style Scores system.

Skyline Champion boasts a relativity strong balance sheet, with total a total of $382 million in cash and equivalents and $1.1 billion in total assets vs. $335 million in liabilities. SKY's Building Products - Mobile Homes and RV Builders industry currently ranks #7 out of over 250 Zacks industries right now. This helps show that many of the companies in the larger homebuilder market remain strong despite rising interest rates and prices.

Mortgage rates reached 3.45% by the early weeks of 2022, up from their lows of around 2.65% last January. The 30-year fixed rate mortgage did surge nearly 1% since then to hover at 4.42%. But this is still below where it was in parts of 2018 and within the range over the last decade. Plus, mortgage rates are historically low when we expand our view to pre-financial crisis levels. And the demographic trends remain in the industry's favor.

Bottom Line

SKY stock has climbed 192% in the last three years to outpace its highly-ranked industry's 82% run, the Construction Sector's 60% and the S&P 500's 65%. Skyline Champion is also up 25% in the past 12 months to outclimb the benchmark's 17% pop and its industry's 15% downturn.

SKY shares have tumbled roughly 28% in 2022, including its 6% drop during regular hours Wednesday to put it at $56.44 a share, or around where it was in late July 2021. Skyline Champion stock now trades 44% below its current Zacks consensus price target of $81.50 a share.

The pullback, coupled with its strong earnings outlook, has SKY trading at its lowest levels in three years (outside of the covid lows) at 14.3X forward 12-month earnings. This also marks a 40% discount vs. Skyline Champion's own median during the last three years and over 60% below its highs.

All said, investors with long-term horizons might want to consider buying Skyline Champion stock.

Bear of the Day:

TrueCar, Inc. is a top automotive digital marketplace that's suffered amid vehicle inventory shortages and the broader economic environment driving up car prices over the last year.

TRUE Story

TrueCar is a leading automotive digital marketplace that lets car buyers connect to its nationwide network of Certified Dealers. Users can then browse and search for both new and used cars with the goal of "making car buying and selling easy, transparent, and efficient."

TrueCar's website and digital platforms are user-friendly and offer wide-ranging or very precise search parameters. The company also boasts that it "powers auto-buying programs for more than 250 leading brands, including Sam's Club, Navy Federal Credit Union and American Express."

The stock has struggled to find its footing for years and the last 12 months have been no different. TrueCar's revenue fell by 17% in 2020, only to slip by nearly the exact same percentage in 2021. TRUE's fourth quarter revenue dropped 28%.

TrueCar's management team cited "limited new vehicle inventories across dealers, a consequence of the macro environment, including the continuing automobile semiconductor chip shortage," as a reason for the rough showing. The company also provided a rather downbeat outlook when it released its fourth quarter results in late February.

Bottom Line

Zacks estimates call for TrueCar's revenue to fall another 15% in 2022 to help expand its adjusted loss from -$0.22 a share in 2021 to -$0.33 per share this year. TRUE's downward earnings revisions activity helps it land a Zacks Rank #5 (Strong Sell) right now.

The nearby chart also showcases how rough a time TrueCar shares have had over the last five years. TRUE stock fell another 4.6% on Wednesday. And its Internet – Services industry currently ranks in the bottom 20% of over 250 Zacks industries.

Additional content:

BP Partners with Uber to Boost Delivery Services

BP plc announced a global strategic convenience delivery partnership with Uber Technologies, Inc. which will extend their current local arrangements to reach more consumers worldwide.

BP aims to bring the delivery platform to more than 3,000 locations globally in the next three years. The partnership will cover retail sites in Australia, New Zealand, Poland, South Africa and the west coast of the United States. It will include its U.K. and eastern U.S. sites for the first time this year. The companies also plan to bring it to other Europe markets, beginning from 2023.

Since February 2021, the companies have been working on mobility services, wherein BP provides electric vehicle charging for Uber drivers. With the latest partnership, BP and Uber will provide an extensive range of quality convenience products. This includes fresh and prepared ranges from select retail locations. The companies will explore other opportunities for collaboration, including the scope for using low-carbon methods to deliver orders from BP sites.

BP is the first convenience retailer to form an alliance with Uber Eats on a global scale. As part of the deal, BP and Uber Eats will introduce delivery options on BP's app — BPme. This was initially expected to be available in the U.K., the United States and Australia by the end of 2023. The latest offer will enable BP to directly connect its customers to Uber Eats' delivery riders.

BP has 20,500 retail sites globally, with 550 million customers living within 20 minutes of one of those retail sites. The sites provide a range of products suitable for local markets, including hot and cold drinks, food-for-now options, staple groceries, fresh produce and ready meals, and wine, beer and flowers. Hence, the partners identify immense growth opportunities.

BP will gain from Uber's operational footprint, superior technology to ship orders, and more than 4.4 million drivers and couriers globally. Notably, the partnership backs BP's target to increase its access to customers and expand its delivery footprint amid the mounting demand for food, groceries and daily essentials fetched to the door.

Company Profile & Price Performance

Headquartered in London, the U.K., BP is a fully integrated energy company with a strong focus on renewable energy.

Shares of the company have underperformed the industry in the past three months. The stock has gained 12.3% compared with the industry's 29.5% growth.

Zacks Rank & Key Picks

BP currently has a Zack Rank #3 (Hold).

Investors interested in the energy sector might look at the following company that presently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

DCP Midstream, LP, based in Denver, CO, is a leading energy infrastructure firm. For the year ended Dec 31, 2021, DCP generated $122 million of excess free cash flow, which is about 44% higher than the 2020 level of $85 million.

DCP Midstream's earnings for 2022 are expected to surge 139% year over year. For 2022, DCP projects adjusted EBITDA of $1,350-$1,500 million, significantly higher than $330 million in 2021.

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