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Tempur Sealy, Blue Bird, Valero Energy, PBF Energy and Phillips 66 highlighted as Zacks Bull and Bear of the Day

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·11 min read
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For Immediate Release

Chicago, IL – September 24, 2021 – Zacks Equity Research Shares of Tempur Sealy International, Inc. TPX as the Bull of the Day, Blue Bird Corporation BLBD as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Valero Energy Corporation VLO, PBF Energy Inc. PBF and Phillips 66 PSX.

Here is a synopsis of all five stocks:

Bull of the Day:

Home prices have started to cool down a bit, but the housing market remains strong as people continue to relocate and reevaluate where and how they live. The pandemic spurred millions to crave more space and update their homes and apartments, which boosted furniture sellers and other home-focused retailers.

Mattress maker Tempur Sealy International benefited from these trends. More importantly, the firm's sales surged before the current housing boom and sleep is never going out of style.

Stable Business

Tempur Sealy is one of the largest mattress and bedding companies in the world, operating under Tempur-Pedic, Sealy, and Stearns & Foster brands. TPX also offers value-focused private label and OEM products. The Lexington, Kentucky-based company sells mattresses, pillows, and more, and many of its offerings are what many consumers would consider high-end—outside of the super luxury side.

TPX ranked No. 1 in JD Power's U.S. Mattress Satisfaction Report for the second year in a row in 2020. The firm's various brands, models, and sizes range in price and much more. The company sells adjustable beds and mattresses that provide cooling and other high-tech capabilities to help provide better sleep. Some of its new offerings even aim to reduce snoring, which can be detrimental to sleep patterns.

TPX, like all retailers, has invested in its digital and direct-to-consumer business in the Amazon age to help fight back against any encroachment from digital-focused newcomers and bed-in-a-box firms like Casper. Of course, Tempur Sealy also owns its own stores and works with third-party retailers such as Mattress Firm.

Tempur Sealy in early August completed its acquisition of a leading specialty bed and mattress retailer in the U.K. TPX's purchase of Dreams is expected to "nearly double" sales through its international segment and significantly boost its DTC revenue. Wall Street has shown love for the deal and its blowout second quarter financial results that it reported at the end of July.

Recent Growth & Outlook

As we quickly mentioned up top, the mattress giant posted strong pre-pandemic growth, with fiscal 2019 revenue up 15% and its first quarter FY21 revenue climbed 19%. Last year's ideal conditions, driven by home buying and increased home-focused spending, helped its revenue jump 18.5% to reach $3.68 billion

Most recently, TPX's adjusted Q2 earnings skyrocketed nearly 300% from $0.20 a share in the year-ago period to $0.79 to crush our estimate by 32%. Meanwhile, its revenue soared 76% and its gross margin climbed from 40% to 44.3%. These YoY results were boosted slightly by an easier to compare period in Q2 FY20, but that hardly accounts for the stellar quarter, with revenue up 62% against the pre-covid period.

Executives also boosted its guidance on the back of improved industry conditions and its Dreams deal. Zacks estimates call for TPX's FY21 revenue to surge 36% in 2021 to reach $5 billion, which is expected to boost its adjusted EPS by 69% to $3.23 a share. Tempur Sealy is projected to follow its 2021 showing with 10% higher revenue in FY22 and 13% stronger earnings.

Analysts quickly and sharply raised their FY21 and 2022 adjusted earnings outlooks, with its consensus estimates up 15% and 14%. The post-second quarter release revisions are part of a continued trend over the last year-plus.

Other Fundamentals

Along with its growth, TPX executives rolled out initiatives aimed at returning value to shareholders. Last November, the company completed a four-for-one stock split to help make its share price more accessible to a broader swath of investors.

Management also at the time announced plans to initiate a quarterly dividend in 2021 and increase its stock buybacks, both of which it's done. It paid a $0.07 a share dividend in the first two quarters of 2021 and then boosted its payout by nearly 30% to $0.09 a share for a 0.70% yield.

Given this backdrop, it might not be shocking that TPX stock has skyrocketed 135% in the last year to crush the S&P 500's 40% and its Retail-Home Furnishings Market's—includes RH, Ethan Allen and others—80% run. Tempur Sealy's impressive streak continued over the past three months, up 30%, while its peers have cooled off to climb 7%.

TPX stock touched new highs of over $50 a share on Thursday and it could experience a near-term pullback since it climbed above overbought RSI territory (70 or higher) at 78. Even though it might be a bit overheated at the moment, the stock still trades at a nearly 20% discount to its industry at 14.0X forward 12-month earnings, which comes in not too far above its own year-long median and 15% under its highs.

Bottom Line

Tempur Sealy's positive EPS revisions help it land a Zacks Rank #1 (Strong Buy) right now and Wall Street is rather high on the stock with six of the nine brokerage recommendations Zacks has at "Strong Buys," with none below a "Hold." Plus, its furniture space sits in the top 14% of over 250 Zacks industries.

Bear of the Day:

Blue Bird Corp. is a historic maker of school buses and it's expanded its offerings to include alternative fuel and EV buses. The stock went on a huge run after the vaccine announcement last fall as Wall Street cheered the likelihood schools would reopen soon.  

Most U.S. schools are back in person and the company could rebound in the next few years. However, its near-term outlook is hardly strong and its stock is down 25% in the last three months.

Blue Bird Basics

Blue Bird is a leading independent designer and manufacturer of school buses, with roughly 180,000 buses in operation today. The company is rather stable and has remained a staple in American school districts for decades.

BLBD's sales had grown over the last several years before they slipped marginally in FY19 and then dropped 14% in fiscal 2020 (period ended Oct. 3, 2020), as the entire education world was turned upside down.

Zacks estimates call for its fiscal 2021 revenue to fall another 17% to $730 million, with its adjusted earnings projected to sink 51% to $0.40 a share. Luckily, the company is projected to bounce back in 2022, with its EPS expected to surge 75% above our current year projection on 11% higher sales.

Bottom Line

Despite the expected progress, Blue Bird's earnings revisions have trended in the wrong direction to help it land a Zacks Rank #5 (Strong Sell) at the moment, alongside its "D" grades for Value and Momentum and an "F" for Growth in our Style Score system.

On top of that, its Automotive – Domestic industry is near the bottom quarter of over 250 Zacks industries. And the nearby chart showcases that Blue Bird stock has significantly underperformed its industry in the past three years, while falling 19%.

The Macon, Georgia company is set to bounce back as life and schools return to normal. The firm could also benefit as it sells more electric school buses and more districts slowly revamp their fleets as part of a broader green push.

All that said, investors might want to stay away from BLBD stock for now, or at least until it shows signs of a more prolonged comeback.

Additional content:

3 Oil Refineries to Gain as EPA Considers a Blending Requirement Cut

The overall business environment for energy companies is improving at a healthy pace from the coronavirus onslaught. It's thus time to keep a close eye on oil refiners since the biofuel blending requirements could possibly get lowered to a great extent.

EPA Considers to Lower US Biofuel Blending Requirement

The Biden administration is proposing to drastically lower the requirement for the nation's biofuel blending, per Reuters. This comes across as a favor for the oil industry after the coronavirus pandemic dented worldwide demand for gasoline.

The biofuel policy of the country is being administered by President Biden's Environmental Protection Agency (EPA). The blending mandates for 2020 and 2021 will likely be lowered to about 17.1 billion gallons and 18.6 billion gallons, respectively, per the document cited by Reuters. Thus, as compared to the 20.1 billion gallons level, that was confirmed for last year before the pandemic wreaked havoc on the energy market, the proposed levels are considerably lower.

The report cited that oil refining companies will possibly blend 20.8 billion gallons of renewable fuel into the nation's fuel mix for the 2022 compliance year. It has been cautioned by administrative officials that they have not finalized the numbers, which are awaiting further revisions. No comment on this event has still been made by the EPA.

Stocks to Gain

If the proposals are adopted, it would be a big win for oil refiners. This is because with lower renewable fuel been blended, biofuel blending costs will likely reduce. We are presenting three refining stocks that should be on investors' radar as these could probably gain following the adoption of the proposal. Each of the stocks carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Valero Energy Corp., having operating interests in 15 petroleum refineries in the United States, Canada and the United Kingdom, gained 3.2% yesterday on the news. The company is also likely to generate strong cashflows on the back of rising gasoline demand since coronavirus vaccines are being rolled out at a massive scale. Over the past seven days, the stock has seen upward earnings estimate revisions for 2021.

PBF Energy gained 10.8% yesterday on the news. In the United States, the company is among the largest independent petroleum refiners. Improving fuel demand is also aiding the stock. In 2021, the company is likely to see bottom-line growth of 54.9%.

Phillips 66 is among the largest refiners in the world and gained 4.2% on the news. It is also being aided by improving fuel demand. In the past seven days, the stock has seen upward earnings estimate revisions for 2021. 

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