UBS and Alico have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – March 9, 2023 – Zacks Equity Research shares UBS Group AG UBS as the Bull of the Day and Alico ALCO as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Microsoft MSFT, Alphabet GOOGL and Oracle Corp ORCL.
Here is a synopsis of all five stocks.
Bull of the Day:
UBS Group AG, a Zacks Rank #1 (Strong Buy), has surged off the bear market bottom from last year, widely outperforming its industry in the process. The stock has been hitting a series of 52-week highs this year on increasing volume. Shares continue to display relative strength as buying pressure accumulates in this market leader.
UBS is ranked favorably by our Zacks Style Scores, with a ‘B’ for Value and overall ‘B’ VGM score, indicating further upside is likely. The company is part of the Zacks Banks-Foreign industry group, which ranks in the top 7% out of more than 250 Zacks Ranked Industries.
This group has widely outperformed the market to kick off the new year. Despite the impressive performance, this industry group remains relatively undervalued.
Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1. 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. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
UBS Group AG provides financial advice and solutions to institutional, corporate, and private clients globally. The company offers a host of financial-related services such as personal banking, investment advice and solutions, lending, wealth planning, asset allocation, and investment banking. UBS was founded in 1862 and is headquartered in Zurich, Switzerland.
UBS remains focused on opportunistic expansion strategies in various areas by entering into partnerships with a host of other firms. These inorganic growth moves are expected to benefit the company’s long-term trajectory. UBS maintains a strong capital position and its efficiency initiatives will likely continue to aid profitability.
Earnings Trends and Future Estimates
UBS has surpassed earnings estimates in three of the past four quarters, with an average earnings surprise of 16.6%. The financial firm most recently reported fourth-quarter earnings back in January of $0.50/share, beating the Zacks Consensus Estimate of $0.37 by 35.14%.
UBS Group AG has witnessed improving earnings estimate revisions. Looking into the current year, analysts have raised their 2023 EPS estimates by 4.33% in the past 60 days. The Zacks Consensus Estimate now stands at $2.17/share.
Let’s Get Technical
UBS shares have advanced more than 50% off the bottom from last year. Only stocks that are in extremely powerful uptrends are able to make this type of price move while the general market remains volatile. 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 both 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. With both strong fundamentals and technicals, UBS 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, UBS Group AG has recently witnessed positive revisions. As long as this trend remains intact (and UBS continues to deliver earnings beats), the stock will likely continue its bullish run this year.
Solid institutional buying should continue to provide a tailwind for the stock price. UBS has vastly outperformed its financial peers, and increasing volume at recent breakout levels adds to the bullish sentiment.
Robust fundamentals combined with a strong technical trend certainly justify adding shares to the mix. 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. Investors would be wise to consider UBS as a portfolio candidate if they haven’t already done so.
Bear of the Day:
Alico operates as an agribusiness and land management company in the United States. Alico cultivates citrus trees to produce citrus for delivery to the processed and fresh citrus markets. In addition, ALCO is involved in cattle ranching, sugarcane and sod production, and forestry. The company also owns and manages land for leasing, grazing, conservation, and mining activities. Based out of Fort Myers, ALCO owns over 74,000 acres of land in Florida.
The Zacks Rundown
ALCO, a Zacks Rank #5 (Strong Sell), is a component of the Zacks Agriculture – Operations industry group, which ranks in the bottom 35% 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 potential short candidates. While individual stocks have the ability to outperform even when included in a poor-performing industry group, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much more difficult.
Along with many other agricultural stocks, ALCO experienced a climax top in April of last year and has been in a price downtrend ever since. The share price is hitting a series of lower lows and represents a compelling short opportunity as the market remains volatile.
Recent Earnings Misses & Deteriorating Outlook
ALCO has fallen short of earnings estimates in two of the past three quarters. The company most recently reported a Q1 loss of -$0.84/share in February, missing the -$0.31/share consensus EPS estimate by -170.97%. The stock has moved steadily lower since the announcement.
Over the past three quarters, ALCO has delivered an average earnings miss of -150.67%. Consistently falling short of earnings estimates is a recipe for underperformance, and Alico is no exception.
ALCO has been on the receiving end of negative earnings estimate revisions as of late. For the current fiscal year, analysts have decreased estimates by -141.03% in the past 60 days. The 2023 Zacks Consensus EPS Estimate is now -$0.94/share, reflecting a -347.62% regression relative to fiscal 2022.
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.
As illustrated below, ALCO is in a sustained downtrend. Notice how the stock has plunged below the 200-day moving average (signaled by the blue line). The stock is making a series of lower lows, with no respite from the selling in sight. Also note how the 200-day moving average is sloping down – another good sign for the bears.
While not the most accurate indicator, ALCO has also experienced what is known as a ‘death cross’, wherein the stock’s 50-day moving average (red line) crosses below its 200-day moving average. ALCO 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. The stock has fallen nearly 19% in the past year alone.
A deteriorating fundamental and technical backdrop show that this stock is not set to print fresh highs anytime soon. The fact that ALCO 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.
Our Zacks Style Scores depict a weakening outlook for this stock, as ALCO is rated a worst-possible ‘F’ in our Value category and ‘F’ for our overall VGM score. 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 ALCO until the situation shows major signs of improvement.
Microsoft's (MSFT) A.I. Offerings Target Enterprise Applications
Microsoft recently launched Microsoft Dynamics 365 Copilot. This is a copilot in CRM and ERP that helps in bringing next generation Artificial Intelligence (AI) to every business line.
Dynamics 365 Copilot helps in empowering workers with AI tools built for marketing, sales, operations, services and supply chain roles. It also uses generative AI to automate monotonous task and encourage creativity of the workforce.
Microsoft earlier launched AI in its search engine to compete with Alphabet’s Google and now with its latest AI technology targeting corporate applications, MSFT is competing with rivals like Oracle Corp.
Copilot in Viva Sales and Microsoft Dynamics 365 Sales not only help sellers curate mail responses to customers but also can create an email summary of a Teams meeting in Outlook.
Copilot in Dynamics 365 Marketing and Dynamics 365 Customer Insights helps marketers smoothen the process of data exploration, audience segmentation and content creation. They can also create fresh email campaign content.
Management believes that this AI will proactively identify external issues like weather, geography and financials that may impact the supply chain process.
Microsoft is set to announce the next set of AI related to workplace productivity on Mar 16.
Microsoft Corporation price-consensus-chart | Microsoft Corporation Quote
Microsoft’s Recent Advancements in Artificial Intelligence
This Zacks Rank #3 (Hold) company is actively investing in developing AI, which management believes will reap profits in the long term.
Shares of Microsoft have decreased 7.9% in the past year compared with the Zacks Computer and Technology sector’s decline of 10.2% in the same period.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In February, Microsoft announced a premium teams messaging offering powered by ChatGPT. The company has already received a great response from the Silicon Valley for the same.
This service will be priced at $7 per month in June and the price will be increased to $10 per month from July. This AI chatbot will simplify meetings by recommending tasks, generating automatic meeting notes and help create meeting templates.
Last month, Microsoft announced a multi-million investment in Open AI. The company aims to integrate ChatGPT’s technology into all its products.
In November, Microsoft announced the Microsoft Supply Chain platform. This platform helps organizations maximise their supply chain data estate investment. This is made possible by collaborating Microsoft AI, low-code, security and SaaS applications in one platform.
Microsoft also announced the preview of a Microsoft Supply Chain Center. It is a ready-made supply chain center for supply chain visibility and transformation.
The Supply Chain Center has customizable as well as pre-built modules. Some of the pre-built modules are supply and demand insights module, order management module, partner modules and many more. This is a huge step toward redesigning supply chain by increasing efficiency and agility for the customers.
As of Dec 31, 2022, Microsoft had total cash, cash equivalents and short-term investments balance of $99.5 billion. The long-term debt was $44 billion. The strong cash balance provides Microsoft with the chance to invest in growth opportunities like AI.
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