TravelCenters of America and Shopify have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – September 14, 2022 – Zacks Equity Research shares TravelCenters Of America TA as the Bull of the Day and Shopify SHOP asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on United Parcel Service, Inc. UPS and FedEx Corp. FDX.
Here is a synopsis of all four stocks.
Bull of the Day:
Substantial bottom-line beats thrill any investor, and for obvious reasons. One company that wowed investors in its latest report is TravelCenters Of America.
Another thrilling aspect of the company is that it carries a Zacks Rank #1 (Strong Buy), meaning that analysts have upped their earnings outlook significantly over the last several months.
TravelCenters of America is a full-service national travel center chain in the U.S.
In addition, TA has nationwide locations serving hundreds of thousands of professional drivers and other highway travelers each month, including virtually all major trucking fleets.
Let’s take a deeper dive into the company.
Share Performance & Quarterly Results
TravelCenters of America shares have been scorching hot over the last three months, gaining a jaw-dropping 65% in value and crushing its Zacks Sector.
The immense relative strength that TA shares have displayed over the recent term tells us one thing for sure, and it’s that buyers have been busy.
As we can see in the chart above, a substantial earnings beat undoubtedly fueled the massive move. In its latest quarter, TA reported earnings of $4.34 per share, crushing the Zacks Consensus EPS Estimate by a triple-digit 290%.
In fact, the company carries a four-quarter trailing average EPS surprise of a spectacular 1700%.
Top-line results have also been strong, with TA registering three revenue beats over its last four quarters.
Growth Estimates & Valuation
TA carries a favorable near-term growth outlook; the Zacks Consensus EPS Estimate of $1.69 for the upcoming quarterly report suggests Y/Y earnings growth of an impressive 11%.
Looking at the bigger picture, the Zacks Consensus EPS Estimate of $7.56 for FY22 pencils in a steep 84% year-over-year uptick in earnings.
Top-line growth is also impressive; the FY22 revenue estimate of $10.6 billion pencils in a double-digit 44% increase year-over-year.
Pivoting to valuation, TA shares trade at solid valuation levels, as displayed by its Style Score of an A for Value. The company’s 0.08X forward price-to-sales ratio is tiny, representing a steep 94% discount relative to its Zacks Sector.
Bottom Line
One of the best ways investors can find expected winners within the market is by utilizing the Zacks Rank – one of the most potent market tools out there.
A portfolio consisting of Zacks Rank #1 (Strong Buy) stocks has beaten the market in 26 of the last 31 years with an average annual return of 24%.
Additionally, the top 5% of all stocks receive the highly coveted Zacks Rank #1 (Strong Buy). These stocks should outperform the market more than any other rank.
TravelCenters of America would be an excellent stock for investors to keep on their watchlists, as displayed by its Zack Rank #1 (Strong Buy).
Bear of the Day:
Once an investor favorite during the pandemic, the tide has shifted significantly for Shopify in 2022 amid facing one of the most challenging macroeconomic backdrops in history.
Shopify has an incredible story, providing a multi-tenant, cloud-based, multi-channel e-commerce platform for small and medium-sized businesses. It’s easy to see why it was such a loved stock during the pandemic.
However, the Fed has become hawkish in 2022, creating an unfavorable environment for growth stocks that borrow capital at a higher rate.
Analysts have undoubtedly taken note of the challenging business environment, pulling back their earnings estimates over the last several months, pushing the stock into an unfavorable Zacks Rank #5 (Strong Sell).
Let’s take a deeper dive into Shopify’s current state.
Share Performance & Valuation
It’s been a fall from glory for Shopify shares in 2022, down nearly 80% and vastly underperforming the S&P 500.
Over the last month, Shopify shares have continued to see adverse price action, down close to 20% and underperforming the S&P 500 in this timeframe also.
Shares can’t catch a break, with sellers winning the battle all year.
In addition, SHOP’s valuation multiples appear a bit stretched, with the company carrying a Style Score of an F for Value. Its 8.1X forward price-to-sales ratio represents a 115% premium relative to its Zacks Sector.
However, the value is a fraction of its five-year median of 22.7X.
Quarterly Performance
The company’s earnings performance has left some to be desired as of late, with SHOP missing revenue and earnings estimates in three of its previous four quarters.
Just in its latest print, Shopify recorded a wide 200% bottom line miss and a 3% revenue miss.
Bottom Line
Steep valuation levels and worse-than-expected quarterly reports paint a grim picture for the company in the short term.
Shopify is a Zacks Rank #5 (Strong Sell), telling us it has a weak near-term earnings outlook.
Instead, investors should pivot to stocks that either carry a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy) – these stocks have a much stronger earnings outlook.
Additional content:
2 Dividend-Paying Air Freight & Cargo Stocks to Count On
The Zacks Transportation - Air Freight and Cargo industry stands to benefit from higher shipping rates. Even though economies are reopening, the demand for online shopping is high among consumers. The buoyant demand scenario is pushing up shipping rates, thus aiding industry participants. The buoyancy in the industry is further confirmed by its Zacks Industry Rank #33, which places it in the top 13% of more than 250 Zacks industries.
Despite the robust demand environment, industry players face quite a few challenges. Supply-chain disruptions and higher fuel costs are likely to keep the bottom line of the companies in this industrial cohort under pressure.
The industry has gained 7.5% over the past three months, compared with the S&P 500 Index’s 8.8% appreciation and 9% growth of the broader Zacks Transportation sector.
Among the Air Freight and Cargo players, United Parcel Service, Inc. and FedEx Corp. announced dividend hikes even during the coronavirus-induced uncertainty in 2021, 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. These include 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%. Moreover, 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 Parcel: Headquartered in Atlanta, GA, United Parcel provides letter and package delivery, transportation, logistics, and related services. Currently, it has a market capitalization of $172.60 billion.
UPS’ strong free cash flow-generating ability is encouraging. It supports UPS’ shareholder-friendly activities. In the first half of 2022, UPS generated a free cash flow of $6,895 million compared with $6,804 million in first-half 2021. Notably, UPS paid dividends worth $2,567 million in first-half 2022 compared with $1,718 million in first-half 2021. UPS aims to reward its shareholders to the tune of $8.2 billion in 2022 through dividends ($5.2 billion) and share buybacks ($3 billion).
UPS pays out a quarterly dividend of $1.52 ($6.08 annualized) per share, which gives it a 3.04% yield at the current stock price. This company’s payout ratio is 48% of its earnings at present. The five-year dividend growth rate is 8.81%. (Check United Parcel Services’ dividend history here).
United Parcel Service, Inc. dividend-yield-ttm | United Parcel Service, Inc. Quote
Fedex: Based in Memphis, TN, FedEx provides transportation, e-commerce, and business services in the United States and internationally. Currently, it has a market capitalization of $54.34 billion.
FedEx raised its dividend 53% to $1.15 per share in June 2022. During fiscal 2022, FedEx repurchased shares worth $2.2 billion. The company expects to repurchase shares worth $1.5 billion during the first half of fiscal 2023. Such shareholder friendly moves indicate the company’s commitment to create value for shareholders and underline its confidence in its business. These initiatives not only instill investors’ confidence but also positively impact earnings per share.
FDX pays out a quarterly dividend of $1.15 ($4.60 annualized) per share, which gives it a 2.15% yield at the current stock price. This company’s payout ratio is 15% of its earnings at present. The five-year dividend growth rate is 8.12%. (Check FedEx’s dividend history here).
FedEx Corporation dividend-yield-ttm | FedEx Corporation Quote
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United Parcel Service, Inc. (UPS) : Free Stock Analysis Report
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TravelCenters of America LLC (TA) : Free Stock Analysis Report
Shopify Inc. (SHOP) : Free Stock Analysis Report
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