For Immediate Release
Chicago, IL – August 1, 2019 – Zacks Equity Research Shares of Twitter TWTR as the Bull of the Day, Bank OZK OZK as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Chevron Corporation CVX, Marathon Oil Corp. MRO and Cheniere Energy, Inc. LNG.
Here is a synopsis of all five stocks:
Bull of the Day:
If you forgive yesterday’s downside action in the NASDAQ, tech stocks have been on fire. Pushing up near all-time highs every session, it’s been easy to make money on the four-letter tickers. Today’s Bull of the Day is a stock that managed to buck the downtrend yesterday and still come out on top. I’m talking about Zacks Rank #1 (Strong Buy) Twitter.
Twitter, Inc. operates as a platform for public self-expression and conversation in real time. The company offers various products and services, including Twitter, a platform that allows users to consume, create, distribute, and discover content; and Periscope, a mobile application that enables user to broadcast and watch video live with others. It also provides promoted products and services, such as promoted tweets, promoted accounts, and promoted trends, which enable its advertisers to promote their brands, products, and services. In addition, the company offers a set of tools, public APIs, and embeddable widgets for developers to contribute their content to its platform, syndicate and distribute Twitter content across their properties, and enhance their Websites and applications with Twitter content.
The reason for the favorable Zacks Rank comes from a spate of recent earnings estimate revisions to the upside. In the last week alone, three analysts have increased their EPS estimates for the current year. The bullish moves have pushed up our Zacks Consensus Estimates for the current year from $1.05 to $1.36. That would represent year-over-year EPS growth of 58.14%. Over the same period, revenues are estimated to grow by 17.06% to $3.56 billion.
It’s no wonder why the stock has been surging. Since bottoming out in the mid-teens during late 2017, shares have tripled. You can see the consistent move upwards, following the earnings trend, by taking a look at the Price, Consensus and EPS Surprise Chart here on Zacks.com. From this single chart you can glean a host of information. The multi-colored lines on the chart represent the evolution of our Zacks Consensus Estimates over time. Note the consistent move from the bottom-left to the top-right of the chart in each year from 2018 all the way through 2021.
Bear of the Day:
The Fed acted as expected today with the central bank cutting rates by 25-bps. What worried the market, and what should worry the banks out there, is the Fed stopped short of offering up the beginning of an easing cycle. It set the stage for rate hikes to come in the future, as early as the September meeting if needed. That unrest led to a tightening of interest rate spreads, ultimately putting more pressure on banks. One of those smaller banks is today’s Bear of the Day, Bank OZK.
Formerly known as Bank of the Ozarks, Bank OZK provides retail and commercial banking services to businesses, individuals, and non-profit and governmental entities. The company accepts non-interest bearing checking, interest bearing transaction, business sweep, savings, money market, individual retirement, and other accounts, as well as time deposits. Its loan products include loans secured by residential 1-4 family, non-farm/non-residential, agricultural, construction/land development, multifamily residential properties, and other land loans; small business and consumer loans; indirect consumer marine and RV loans; small business administration, farm service agency, and USDA guaranteed loans; commercial and industrial loans; and loans to businesses or individuals engages in the production of timber, poultry, livestock, or crops.
Currently, the bank is a Zacks Rank #5 (Strong Sell). The reason for the unfavorable rating comes from a series of negative earnings estimate revisions coming from analysts. Over the last thirty days, six analysts have cut their estimates for the current year and next year. The bearish moves have dropped the Zacks Consensus Estimates for the current year from $3.49 to $3.37 and next year down from $3.61 to $3.31. EPS is expected to contract by 7% year-over-year for next quarter. Next year’s contraction is just under 2%. Now that the Fed has cut rates, net interest margin is likely to contract even further, putting more pressure on earnings from smaller regional banks like Bank OZK.
Factors Setting the Tone for Chevron’s (CVX) Q2 Earnings
Chevron Corporation is scheduled to release second-quarter 2019 results before the opening bell on Aug 2. The current Zacks Consensus Estimate for the to-be-reported quarter’s earnings per share is $1.74 on revenues of $42.5 billion.
In the last reported quarter, the integrated oil and gas company beat the consensus mark for earnings by 10.32% on the back of output gains. However, the bottom line fell from the year-ago quarter amid lower y/y oil prices. As far as earnings surprises are concerned, the San Ramon, CA-based U.S. oil major surpassed the Zacks Consensus Estimate thrice in the last four quarters, with average positive surprise of 2.33%.
Chevron Corporation Price and EPS Surprise
Investors are keeping their fingers crossed and anticipating that Chevron will surpass earnings estimates this time around. Let’s see which way the company’s top and bottom-line estimates are trending.
The Zacks Consensus Estimate for revenues is pegged at $42.5 billion. It generated revenues of $42.2 billion in the prior-year quarter. The Zacks Consensus Estimate for second-quarter earnings per share of $1.80 indicates a marginal improvement from $1.78 recorded in the corresponding quarter of the prior year. The earnings estimates for the to-be-reported quarter have been revised downward by six cents in the past seven days.
Let’s delve deeper into the factors that are likely to influence Chevron’s second-quarter earnings.
Factors at Play
The company’s upcoming results are set to benefit from increasing output. The Zacks Consensus Estimate for second-quarter production volumes is pegged at 3,095 thousand oil-equivalent barrels per day (MBOE/d), suggesting an improvement from 2,826 MBOE/d in the year-ago period. Chevron is likely to record higher year-over-year output from top-tier assets in Permian and Gulf of Mexico, as well as the Wheatstone LNG plant in Australia. While higher output may buoy the company’s upstream results, we remain concerned of oil and gas prices that declined y/y amid rising fuel inventories, slowdown of global economy and trade tensions. Consequently, the Zacks Consensus Estimate for the upstream segment’s operating income is pegged at $2,863 million, implying a decline from the year-ago reported figure of $3,295 million.
The Zacks Consensus Estimate for the to-be-reported quarter’s refinery input is pegged at 1,590 thousand barrels per day (mbpd), pointing to a decline from the year-ago level of 1,595 mbpd. Nonetheless, year-over-year widening of crack spreads in the to-be-reported quarter is likely to fuel the downstream segment’s margins. Consequently, the Zacks Consensus Estimate for segmental income stands at $890 million, higher than $838 million recorded in the year-ago quarter.
Our proven model does not show that Chevron will beat estimates in the to-be-reported quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat the consensus estimate. That is not the case here as you will see below. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%.
Zacks Rank: It currently has a Zacks Rank of 3, which increases the predictive power of ESP. But we also need to have a positive Earnings ESP to be confident of a positive surprise.
Note that we caution against stocks with a Zacks Ranks #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is seeing a negative estimate revision.
Stocks to Consider
While earnings beat looks uncertain for Chevron, here are some firms from the energy space that you may want to consider on the basis of our model, which shows that these have the right combination of elements to post an earnings beat in the upcoming quarterly reports:
Marathon Oil Corp. has an Earnings ESP of +0.48% and is a #3 Ranked player. The company is slated to release second-quarter 2019 earnings on Aug 7. You can see the complete list of today’s Zacks #1 Rank stocks here.
Cheniere Energy, Inc. is set to report second-quarter 2019 earnings on Aug 8. The stock has an Earnings ESP of +88.46% and a Zacks Rank #2.
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