Tecnoglass and Cable One have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – June 28, 2023 – Zacks Equity Research shares Tecnoglass TGLS as the Bull of the Day and Cable One CABO as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Sociedad Quimica Y Minera SQM, Horizon Technology Finance HRZN and Capital Southwest CSWC.
Here is a synopsis of all five stocks.
Bull of the Day:
Tecnoglass, a Zacks Rank #1 (Strong Buy), has benefitted from strength this year in the building materials industry. The stock has broken out to the upside and is hitting all-time highs. Only stocks that are in extremely powerful uptrends are able to make new highs amid an uncertain economic environment. Shares continue to display relative strength as buying pressure accumulates in this market leader.
A secondary offering of ordinary shares temporarily pushed the stock lower in May, but TGLS has come roaring back and has now exceeded the highs of the year. Tecnoglass is part of the Zacks Building Products – Retail industry group, which is currently ranked in the top 7% of all Zacks Ranked Industries. 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.
Quantitative research studies have shown that roughly half of a stock's price movement can be attributed to its industry group. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
Company Description
Tecnoglass produces, markets, and installs architectural systems for commercial and residential construction industries. The company offers low emissivity, laminated, tempered, and digital print glass products. It also provides aluminum products including bars, plates, rods, and tubes that are used in the manufacture of architectural glass settings such as windows, doors, and spatial separators.
In addition, TGLS offers curtain wall facades, commercial display and hurricane-proof windows, awnings, and other components of architectural systems. Tecnoglass markets and sells its products under the Tecnoglass, ESWindows, and Alutions brand names through internal and independent sales representatives, as well as directly to distributors.
Earnings Trends and Future Estimates
TGLS has built up an impressive earnings history, surpassing earnings estimates in each of the last four quarters. Back in May, the company reported first-quarter earnings of $1.08/share, a 17.39% surprise over the $0.92/share consensus estimate. TGLS has delivered a 22.7% average earnings surprise over the past four quarters.
Analysts covering the building materials company are in agreement and have raised their earnings estimates across the board. The full-year EPS estimate has been raised by +8.36% in the past 60 days. The 2023 Zacks Consensus EPS Estimate now stands at $4.15/share, reflecting potential growth of 25% relative to last year. Sales are anticipated to climb 18.2% to $846.97 million.
Let’s Get Technical
TGLS shares bottomed out in June of last year, well before the major indices. The stock has surged over 177% in the past year. Only stocks that are in extremely resilient uptrends are able to make this type of price move. The stock is up nearly 60% this year alone, widely outperforming the major averages. This is the kind of stock we want to include in our portfolio – one that is trending well and receiving positive earnings estimate revisions.
Notice how the 50-day (blue line) and 200-day (red line) moving averages are sloping up. The stock has been making a series of higher highs and recently eclipsed its all-time high. With both strong fundamentals and technicals, TGLS is poised to continue its outperformance.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, Tecnoglass has recently witnessed positive revisions. As long as this trend remains intact (and TGLS continues to deliver earnings beats), the stock will likely continue its bullish run this year.
Bottom Line
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. A stock making new all-time highs should be viewed as a sign of strength.
A durable technical trend along with relative undervaluation (11.7 forward P/E) certainly justify adding shares to the mix. Recent positive earnings estimate revisions should also serve to create a ‘floor’ regarding any sudden or unexpected downside moves. If you haven’t already done so, make sure to put TGLS on your shortlist.
Bear of the Day:
Cable One provides data, video, and voice services in the United States. The company offers residential data services including Wi-Fi signal enhancements, digital video services with access to hundreds of channels, and a cloud-based DVR feature. Sparklight TV, its IPTV video service that enables customers to stream video from the cloud, is supported through devices such as Amazon Firestick, Apple TV, and Android-based smart televisions.
The Phoenix, Arizona-based company also provides its services to business customers including small to mid-markets, enterprises, and wholesale and carrier customers. Cable One serves over one million residential and business customers combined.
The Zacks Rundown
CABO, a Zacks Rank #5 (Strong Sell), is a component of the Zacks Cable Television industry group, which ranks in the bottom 11% 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.
Candidates in the bottom tiers of industries can often be solid short candidates. While individual stocks have the ability to outperform even when included in a poorly performing industry group, the industry association serves as a headwind for any potential rallies and the journey forward is that much more difficult.
CABO has hit a series of 52-week lows this year and has failed to produce any meaningful rally, all while markets have recovered nicely. When a stock fails to rally while the general market is bullish, it’s telling us that buying pressure remains weak. The share price remains in a downtrend, and a recent uptick presents a compelling short opportunity.
Recent Earnings Misses & Deteriorating Outlook
CABO has fallen short of earnings estimates in each of the past four quarters. Back in May, the company reported first-quarter earnings of $9.62/share, missing the $14.40/share consensus EPS estimate by -33.19%.
CABO has posted a trailing four-quarter average earnings miss of -20.03%. Consistently falling short of earnings estimates is a recipe for underperformance, and Cable One is no exception.
The Zacks Rank #5 (Strong Sell) stock has been on the receiving end of negative earnings estimate revisions as of late. For the current year, analysts have decreased estimates by -13.92% in the past 60 days. The 2023 Zacks Consensus EPS Estimate is now $50.51/share, reflecting negative growth of -15.09% relative to last year.
Falling 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
ABO is in a sustained downtrend. Notice how the stock is trading below both the 50-day (blue line) and 200-day (red line) moving averages. The stock is making a series of lower lows, with no respite from the selling in sight – another good sign for the bears.
While not the most accurate indicator, CABO 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. CABO 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. Shares remain in negative territory this year while the general market is showing strength.
Final Thoughts
A deteriorating fundamental and technical backdrop show that this stock is not set to produce new highs anytime soon. The fact that CABO 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. 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 CABO until the situation shows major signs of improvement.
Additional content:
3 Top Stocks Currently Yielding More Than 10%
When selecting dividend-paying stocks, one of the first things that investors look at is, of course, the annual yield.
It’s common for companies to increase their payouts when business is fruitful, making them enticing investments for income-focused investors from a shorter-term perspective.
Three high-yield stocks – Sociedad Quimica Y Minera, Horizon Technology Finance and Capital Southwest – could all be considerations for those with an appetite for income. Let’s take a closer look at each.
Sociedad Quimica Y Minera
Sociedad Quimica Y Minera, a current Zacks Rank #2 (Buy), is one of the world's largest lithium producers, with one of the industry's least impactful water, carbon, and energy footprints.
The company’s annual dividend presently yields a sizable 11.5%, crushing the Zacks Basic Materials sector average. SQM has grown its dividend payout by nearly 60% over the last five years, undeniably a major positive.
SQM shares have recently seen buyers step up near the 50-day moving average, a level they previously failed to hurdle.
Horizon Technology Finance
Horizon Technology Finance makes secured loans to development-stage companies in the technology, life science, healthcare information and services, and cleantech industries. The stock sports the highly-coveted Zacks Rank #1 (Strong Buy), with the revisions trend particularly noteworthy for its current fiscal year.
Horizon Technology shares currently yield 11.1% annually, with the payout growing modestly over the last five years.
In addition, the company has been a consistent earnings performer, exceeding earnings and revenue expectations in each of its last four quarters. Just in its latest release, the company delivered an 18% EPS beat and a 12.5% revenue surprise.
Capital Southwest
Capital Southwest is focused on early-stage financings, expansion financings, management buyouts, and recapitalizations in a broad range of industry segments. The stock is a Zacks Rank #1 (Strong Buy), with earnings expectations increasing across the board.
Similar to the stocks above, CSWC shares currently yield a sizable 11.4% annually paired with a 10% five-year annualized dividend growth rate. Still, the company’s 93% payout ratio does raise concerns, residing on the high end of the spectrum.
Keep an eye out for the company’s upcoming quarterly release expected on August 7th; the Zacks Consensus EPS estimate of $0.64 suggests a 30% improvement from the year-ago quarter.
Bottom Line
While high-yielding stocks can allow investors to build up a cash pile quickly, the sustainability of the increased yield, thanks to flourishing business conditions, can be vulnerable when things aren’t going so smoothly.
Instead, for those who seek reliability, targeting companies that are considered Dividend Aristocrats provides precisely that.
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Sociedad Quimica y Minera S.A. (SQM) : Free Stock Analysis Report
Horizon Technology Finance Corporation (HRZN) : Free Stock Analysis Report
Tecnoglass Inc. (TGLS) : Free Stock Analysis Report
Cable One, Inc. (CABO) : Free Stock Analysis Report
Capital Southwest Corporation (CSWC) : Free Stock Analysis Report
