Woodward and Levi Strauss have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – February 2, 2024 – Zacks Equity Research shares Woodward WWD as the Bull of the Day and Levi Strauss LEVI as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Manulife Financial Corp MFC, First Horizon FHN and Canadian Imperial Bank of Commerce CM.
Here is a synopsis of all five stocks:
Bull of the Day:
Woodward is a Zacks Rank #1 (Strong Buy) that designs, manufactures, and services control solutions for the aerospace and industrial markets worldwide.
The stock has had a big run since reporting earnings last May, up over 50%. Woodward has since reported three more earnings beats, with the recent quarter taking the stock to all-time highs.
Unfortunately for investors, the quarter was a sell-the-news event. After gapping higher by 5%, the stock reversed lower and is trading below the pre-earnings level.
The pullback will likely offer a long-term opportunity as earnings estimates continue to track in the right direction.
About the Company
Woodward was founded in 1870 and is headquartered in Fort Collins, CO. The company has 8,800 full-time employees and has a market cap of $8 billion.
The company operates in two segments, Aerospace and Industrial.
The Aerospace segment's products include metering units, actuators, air valves, fuel pumps, fuel nozzles, specialty valves, thrust reverser actuation systems for turbine engines and nacelles, flight deck controls, actuators, motors, and sensors for aircraft.
The Industrial segment offers actuators, valves, pumps, fuel injection systems, solenoids, ignition systems, speed controls, electronics and software, and sensors.
The stock has a Zacks Style Score of "B" in Growth and "A" in Momentum. It also posts a Style Score of "D in Value, with a Forward PE of 26. The company also pays a small dividend of 0.6%.
Q1 Earnings Beat
Earlier this week, Woodward reported Q1 EPS at $1.45 v $1.10 expected, or a 32% surprise to the upside. Revenues came in at $787M v the $739M and the company raised FY guidance citing broad-based strength across Industrial, with significant expansion in transportation.
FY24 is now seen at a range of $5.00-$5.40 v the $4.95 expected. Revenues are expected in a range of $3.15-3.30B versus the $3.19B expected. Free Cash Flow is seen at $300-350M v the $275-325M prior.
Management cited significant sales growth and margin expansion as the reason for the beat. They added that it has been a strong start to the year, reflecting continued positive momentum, including robust end-market demand, and improved operational performance.
The stock had a positive reaction at first but has since reversed lower.
Analyst Estimates
Since earnings just came out, investors should be looking at what analysts have been doing with estimates over the last 7 days.
For the current quarter, analysts have lifted estimates from $1.22 to $1.25, or 2%. This continues the momentum seen over the last 90 days, which has seen estimates go higher by 16%.
Looking at the current year, we see a similar move, with estimates going higher by 5% over the last 7 days and up 13% over the last 90 days.
Analysts expect the momentum next year to continue. Over the last 7 days, estimates have been raised by 1.5%, and 17% over the last 90 days.
The Technicals
The stock just traded all-time highs and reversed lower. This signals that buyers can have patience with their entries, so let us go over some buyable levels.
The 50-day moving average is $135.40 and the 200-day moving average is $124. If for some reason those levels were to break on a market selloff, the 61.8% Fib retracement from the 2023 spring lows to recent highs is $112.
WWD is up over 50% off the 2023 lows, so some backing and filling might be warranted. However, when you look at the longer term, the chart looks great and a move back above the recent highs would signal continued momentum.
Bottom Line
Woodward is not a company everyone knows, but this stock is trending up better than most names. Inventors should be looking to buy any pullbacks for a long-term resumption of that trend.
Moving averages and Fibonacci levels are great signals to alert for an entry, just make sure support is confirmed before jumping in.
Bear of the Day:
Levi Strauss is a Zacks Rank #5 (Strong Sell) that designs, markets, and sells apparel and related accessories for men, women, and children worldwide. Levi's products are sold through chain retailers, department stores, online sites, brand-dedicated retail stores, and shop-in-shops.
The company recently reported an earnings beat, which has helped the stock rally about 6% since. However, since earnings analysts have been taking their estimates lower, spelling trouble for the company in the year ahead.
About the Company
Levi Strauss is a popular brand name that was founded way back in 1853. The company is headquartered in San Francisco, CA, and employs over 19,000.
LEVI is valued at $6.5 billion and has a Forward PE of 13. The stock holds Zacks Style Scores of "A" in Growth, but "F" in Momentum. The company pays a dividend of 3%.
Q4 Earnings
LEVI reported a 5% EPS beat but missed on revenues. The company always beats the number as they have not seen a miss since the IPO back in 2019.
The bad news was the guide of FY24 was below consensus, coming in at a range of $1.15-1.25 versus the $1.31 expected. The company sees net revenues up 1-3% v the 5.3% expected.
The good news came in higher margins, lower inventories, and a reduction to the corporate workforce of 10-15%.
The stock went lower on the guide down but turned higher on the company's attempt to control costs. Additionally, new CEO Michelle Gass will take over the leadership role.
Some investors have hopes that new leadership and cost control will help the bottom line, but for now, estimates do not look favorable for a higher stock price.
Earnings Estimates
Over the last 7 days, analysts have been lowering estimates across the board. For the current quarter, numbers have dropped from $0.41 to $0.23, or 44%. For the next quarter, estimates have fallen 26%, going from $0.15 to $0.11 over that same time frame.
Looking at next year, estimates have the same trend lower. Over the last 7 days, numbers have fallen to $1.42 from $1.53, a move lower of 7%.
As these estimates have been trending down, the stock has as well, off almost 50% from the 2021 highs.
Technical Take
In 2019 the LEVI IPO was sold quickly. The stock went from $23 to $16 and when COVID hit, the stock fell to $10. But from there, the stock tripled, reaching post-IPO highs above $30.
Since that high, the stock has been in a slow bleed motion down, falling to $12.50, not too far from those post-COVID lows.
The earnings move higher helps the look of the chart. It is over both the 50-day and 200-day moving averages. The $17-18 range seems to be a strong area of resistance and if the 50-day were to break at $16, the stock would like to fall to that 200-day MA area at $14.50.
Value and dividend investors likely look to support the stock, but another disappointing quarter in April might bring more selling pressure.
Investors might want to take some profits and reconsider at lower levels.
In Summary
While management is shaking things up with new leadership and cost-saving measures, investors might want to take some profits and reconsider at lower levels. With earnings estimates on a clear downward trend, the stock could be dead money in the short term.
Additional content:
3 Top Dividend Stocks to Buy for a Tricky February
After registering significant gains in 2023, major bourses climbed northward in January, with the Dow breezing past the 38,000 mark and the S&P 500 entering a bull market. For January, the Dow and the S&P 500 gained 2.1% and 3.3%, respectively. The tech-laden Nasdaq also posted a healthy gain of 3.3%, per FactSet data.
Last month, stocks gained momentum as fears of a looming recession were squashed by strong economic growth in the final quarter of 2023. The U.S. economy expanded at an annualized rate of 3.3% in the fourth quarter of 2023, banking on an uptick in consumer outlays and business investments.
At the same time, signs of inflationary pressure cooling down helped the stock market scale upward. The personal consumption expenditures (PCE) price index increased by 1.7% in the fourth quarter, less than the third quarter's increase of 2.6%, and is now hovering near the Federal Reserve's target of 2%.
However, the last trading session of January was disappointing, and the same is expected to continue all through February as well. This is because Fed Chairman Jerome Powell categorically said there won't be any interest rate cut in March.
Fed officials are looking for further encouraging economic data to decide on rate cuts. They said it won't be fitting to lower the federal funds rate until and unless inflation moves justifiably toward the 2% goal.
Rate cuts tend to boost consumer outlays, decrease the cost of borrowing and help the economy grow along with the stock market. But with the Fed throwing cold water on the prospects for a March rate cut, stocks are well-poised to wobble this month.
February, anyhow, is a dicey month for stocks, particularly in an election year. Per Dow Jones Market Data, the S&P 500 has posted an average negative return of 0.1% in February since 1928. And in an election year, the broader index has delivered an average drop of 0.3% in February.
Similarly, back in 1897, the Dow, on average, gave a negative return of 0.2% in February. The blue-chip index, on average, declined 1.1% in February during an election year, added the Dow Jones Market Data.
So, with things not looking hunky-dory for the stock market in the near term, investors should place their bets on dividend-paying stocks such as Manulife Financial Corp, First Horizon and Canadian Imperial Bank of Commerce for a steady income since their solid business model helps them to remain tranquil toward market volatility. The stocks boast a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today's Zacks Rank #1 stocks here.
Manulife Financial is one of the dominant life insurers in Canada and is rapidly growing its operations in the United States. Manulife Financial has a dividend yield of 4.7%.
In the past 5-year period, MFC has increased its dividend 13 times, and its payout has advanced nearly 9.2%. Check Manulife Financial's dividend history here.
The Zacks Consensus Estimate for its next-year earnings has moved up 1.1% over the past 60 days. MFC's expected earnings growth rate for the current year is 3.8%. Manulife Financial currently has a Zacks Rank #2.
First Horizon is a financial services company. First Horizon has a dividend yield of 4.1%.
In the past 5-year period, FHN has increased its dividend two times, and its payout has advanced 1.3%. Check First Horizon's dividend history here.
The Zacks Consensus Estimate for its current-year earnings has moved up almost 6% over the past 60 days. FHN's expected earnings growth rate for the next year is 7.8%. First Horizon currently has a Zacks Rank #2.
Canadian Imperial Bank of Commerce is a leading North American financial institution that has branches and offices across Canada, the United States, and around the world. Canadian Imperial Bank of Commerce has a dividend yield of 5.6%.
In the past 5-year period, CM has increased its dividend 14 times, and its payout has advanced 5.5%. Check Canadian Imperial Bank of Commerce's dividend history here.
The Zacks Consensus Estimate for its current-year earnings has moved up 7.8% over the past 60 days. CM's expected earnings growth rate for the current year is 5.2%. Canadian Imperial Bank of Commerce currently has a Zacks Rank #1.
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Manulife Financial Corp (MFC) : Free Stock Analysis Report
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Canadian Imperial Bank of Commerce (CM) : Free Stock Analysis Report
Woodward, Inc. (WWD) : Free Stock Analysis Report
Levi Strauss & Co. (LEVI) : Free Stock Analysis Report
