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United Natural Foods, AMC, Ampco-Pittsburgh, ExlService and Copart as Zacks Bull and Bear of the Day

Zacks Equity Research
·12 min read

For Immediate Release             

Chicago, IL – October 19, 2020 – Zacks Equity Research highlights United Natural Foods UNFI as the Bull of the Day and AMC Entertainment AMC as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Ampco-Pittsburgh Corp. AP, ExlService Holdings, Inc. EXLS and Copart, Inc. CPRT.

Here is a synopsis of all five stocks:

Bull of the Day:                                                 

United Natural Foods is a Zacks Rank #1 (Strong Buy) that is a leading distributor of natural, organic, and specialty food. It has been an interesting year for the company, as strong demand from the response to COVID-19 has been a tailwind for sales. Earlier in the year, more people were in the stores and more products were being moved, which was a big plus for a distributor like United Natural Foods.

Now the question is if the company’s latest success was purely because of the pandemic or and start of a larger trend. The stock has meandered back and forth over the last few months so investors are undecided for now.

However, recent earnings and rising estimates, along with some debt restructuring have the bulls ready to shop.

More on UNFI

United Natural Foods is headquartered in Providence, Rhode Island and distributes products to over 30,000 customers. The company has a market cap of $1 billion and a Forward PE of 5.5. The stock has Zacks Style Scores of “B” in Value and “A” in momentum.

Q 4 Earnings

On September 28th, the company reported a large earnings beat, surprising to the upside by 49%. Additionally, the company beat on revenue and raised FY21 guidance to $3.05-$3.55.

EBITDA rose 19.3% on strong sales and cost leverage. The segment that stood out the most was their retail channel, where net sales increased 12.9%.

Despite the beat, the stock slid after the CEO Steve Spinner announced retirement. However, he offered some words of confidence in the team left in charge:

“In close collaboration with the Board, I decided now is the right time for the Company to transition to its next leader. As we enter the next chapter, I have great confidence in the strength of our team and the opportunities ahead and look forward to my continued service as Executive Chairman.”

The earnings beat was the fourth since the beginning of 2019 and the largest since the first quarter of that year.

Estimates Rising

The guidance higher has forced analysts to hike their estimates higher. For next quarter, estimates have jumped 70% over the last 30 days, moving from $0.46 to $0.78. For next year, estimates have gone 39% higher over that same time frame, rising to $3.06 from $2.20.

Improving Debt

Recently, the company issued $500 million of senior notes, which was upsized from the $400 million the company was originally looking for. The purpose of the move was to repay some of its outstanding amounts under its term loan facility. This move to restructure its debt should help with finance costs down the road and improve the bottom line.

The Technical Take

The stock has a lot of good technical signals triggering as of late. Looking back to March, UNFI bottomed at $5. When investors realized the stock benefited from the pandemic the stock shot to $23 and from there has been stuck under $20.

After earnings and the announced CEO retirement, the stock fell under $15, coming up shy of the 200-day MA test. Since then the stock has bounced aggressively, all the way back to $20. The move helped surpass the 21 and 50-day MA and now threatens a short squeeze if the stock can gain momentum over $20.

Speaking of shorts, they could help drive the stock higher. Over 11.3 million shares or almost 32% of the float is short. If there is another positive catalyst, the stock could see a very quick move higher, fueled by short covering.

In Summary

United Natural Foods has had a rough couple years since its SuperValu acquisition. However, the fundamentals have improved and the stock is responding. The improving debt situation, valuation and short position makes the stock very attractive at current levels.

Bear of the Day:

AMC Entertainment is a Zacks Rank #5 (Strong Sell) that operates movie theaters and screens across the United States and internationally. As of March, of this year, the company owned 1000 theaters and 11,000 screens. Recent rumors of bankruptcy have been unfounded, but investors must be aware the COVID-19 might eventually wipe out the equity.

More About AMC

The company was founded in 1920 and is headquartered in Leawood, Kansas.  AMC is valued at $300 million and has Zacks Style Scores of “B” in Value, but “D” in Growth. Recently the company was reported to file for chapter 11 bankruptcy, but the CEO denied that they were seeking bankruptcy.

Q4 Earnings

In early August, the company reported earnings, posting a 36% surprise to the downside. Admissions revenue came in at $0.9M vs. $895.5M last year. Obviously, the lockdowns had a lot to do with the loss of revenue and the company is reeling from the inability to attract movie goers in a pandemic.

While the company might get a pass due to COVID-19, the trend lower had already started. The company missed on EPS six of the last eight quarters. The stock reflected this poor performance, going from $35 in early 2017, to $8 to start $2020.

Estimates

The estimates are falling across the board. Over the last 90 days, next quarter has seen a drop from -$2.84 to -$4.11. For next year, we have seen a fall from -$2.60 to -$4.00 over the same time frame.

Fighting to survive.

The company is trying to survive and do the best they can to wait out the virus. Movie goers likely have a pent-up demand, so whenever a vaccine comes AMC could bounce back. However, it’s a risk most investors don’t want to take.

As venues slowly reopen, they anticipate that existing cash resources would be largely depleted by the end of 2020 or early 2021. If this happens, they will require additional sources of liquidity or perhaps bankruptcy.

The Technicals

There isn’t much to analyze on the chart as it has gone straight down since early September. Perhaps the company can get a relief bounce on some news, but the $5 level will have a lot of supply. The 200-day MA resides at that level and would be a spot to exit any longs.

In Summary

AMC is what investors call dead money. There simply is no reason to put money to work here, while there are plenty of other companies that are thriving in this environment. Those interested in a turnaround story should wait for the virus to subside and price action to improve.

Additional content:

3 Top Stocks That Made the Most of a Predictable Q3 Rebound

The Bureau of Economic Analysis is set to release the third-quarter GDP numbers on Oct 29, 2020, five days ahead of the U.S. presidential elections. Analysts have predicted a sharp rebound from the historic lows of the second quarter. Economists are largely predicting an annualized growth rate of about 30% for the third quarter, which would be the highest since the 16.7% increase witnessed in the first quarter of 1950 under Harry Truman’s presidentship, as quoted in a CNBC article.

Moreover, per the latest estimate based on the GDPNow model, the Federal Reserve Bank of Atlanta predicted third-quarter GDP to come in at a healthy 35.2%. Analysts at Goldman Sachs have also upgraded their GDP forecast to 35%, while Bloomberg economists predicted GDP of 21% for the third quarter, as quoted in a Business Insider article. The University of California Los Angeles (“UCLA”) Anderson Forecast too suggests an annualized growth rate of 28.3%, as mentioned in a Staffing Industry Analysts article.

Notably, the third-quarter growth estimates come against the backdrop of a record fall which had occurred in the second-quarter when GDP had plunged 31.4%, a revised estimate from the initial figure of 32.9%, the largest decline since the Great Depression. The Bureau of Economic Analysis had cited a decline in state and local government expenditure, personal consumption expenditure (PCE), exports and private inventory investment as the reason behind the plunge.

Nevertheless, the economy is widely predicted to have seen double-digit growth in the third quarter as it reopened, businesses resumed and people got back to work despite a surge in COVID-19 cases. Reflective of this, the unemployment rate fell and consumers increased their outlays. The Fed’s accommodative monetary policy and the government’s economic relief package provided the necessary boost to business houses and consumers.

The expectation of this sharp rebound in the July-September quarter can also be corroborated by the pick-up in both manufacturing and service side activity that constitutes the bulk of broader economic activity. Both ISM manufacturing purchasing manager’s index (PMI) and services PMI have reported a reading of above 50 for all the three months of the quarter, indicating growth.

The manufacturing PMI registered a reading of 54.2%, 56% and 55.4% for the months of July, August and September, respectively. The services PMI came in at 58.1%, 56.9% and 57.8% in July, August and September, respectively. Particularly, September’s services PMI reading surpassed the pre-COVID-19 reading of 57.3% in February.

3 Big Gainers to Invest In

With the U.S. economy pretty much on track to register a bounce back in the third-quarter GDP report, it will be prudent to invest in manufacturing and services stocks that have made the most of the rebound. It’s worth pointing out that these stocks are also fundamentally sound to grow in the near future. Notably, they have a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ampco-Pittsburgh Corp. manufactures and sells custom-designed engineering products to commercial and industrial users in the United States. The Zacks Consensus Estimate for its current-year earnings increased more than 100% over the past 60 days. The company's expected earnings growth rate for the current year is 35.1%. Its shares gained 15.9% in the July-September quarter.

ExlService Holdings, Inc. provides operations management and analytics services in the United States. The Zacks Consensus Estimate for its current-year earnings increased 16.2% over the past 60 days. The company's expected earnings growth rate for the next quarter is 26.7%. Its shares gained 4.2% in the July-September quarter.

Copart, Inc.provides a range of services for processing and selling vehicles on the Internet to vehicle sellers, insurance companies and banks among others in the United States. The Zacks Consensus Estimate for its current-year earnings increased 10.3% over the past 60 days. The company’s expected earnings growth for the current year is 12.1%. Its shares added 26.3% in the July-September quarter.

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United Natural Foods, Inc. (UNFI) : Free Stock Analysis Report
 
Copart, Inc. (CPRT) : Free Stock Analysis Report
 
ExlService Holdings, Inc. (EXLS) : Free Stock Analysis Report
 
AmpcoPittsburgh Corporation (AP) : Free Stock Analysis Report
 
AMC Entertainment Holdings, Inc. (AMC) : Free Stock Analysis Report
 
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