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The Zacks Analyst Blog Highlights: RH, Foot Locker, Quanta, Celgene and CBRE

Zacks Equity Research
The Zacks Analyst Blog Highlights: Under Armour, G-III, Ralph Lauren and Columbia Sportswear

For Immediate Release

Chicago, IL –March 26, 2019 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: RH RH, Foot Locker Inc. FL, Quanta Services Inc. PWR, Celgene Corp. CELG and CBRE Group Inc. CBRE.

Here are highlights from Monday’s Analyst Blog:

5 Value Picks to Counter Yield Curve Inversion

On Mar 22, the U.S. stock market retreated owing to a yield curve inversion between the 3-month US Treasury Note and 10-year US Treasury Note. The Dow, S&P 500 and Nasdaq Composite plunged 1.8%, 1.9% and 2.5%, respectively, on the day. The yield inversion was mainly caused by the Fed’s extra dovish monetary stance, which triggered investors’ concerns about a global economic slowdown.

However, according to Fed, the fundamentals of the U.S. economy remain strong. Meanwhile, the global economy will get a boost if the trade tussle between the United States and China is settled. Thus, the recent stock market meltdown could be a good buying opportunity. At this stage, it would be prudent to pick value stocks with a favorable Zacks Rank to cushion the portfolio as well as to make some gains from the upside potential.

Inverted Yield Curve Does Not Hint at Immediate Recession

On Mar 22, yield on 3-month US Treasury Note surged ahead of 2-year, 5-year ad 10-year US Treasury Notes. Yield curve inversion generally implies market’s diminishing expectations about future economic growth. Specifically, inversion between the 3-month and 10-year bond yields is recognized by several financial experts as a clear indication of an imminent recession. The yield on the 10-year Treasury note fell below the yield on the 3-month Treasury bill for the first time since 2007.

However, an inverted yield curve does not indicate immediate recession. It may happen after a year or two or even later. A survey by research firm Credit Suisse shows that historically, U.S. stocks rose 15% on average in the 18 months following yield inversions. The study also revealed that it took nearly 24 months for the stock market to enter recession after yield curve inversion.

Despite the yield inversion between 3-month and 10-year US Treasury Notes, the yield curve between 2-year Treasury Note and 10-year Treasury Note is still upward sloping. Several financial experts consider this yield curve as a more powerful indicator of an impending recession.

Positive Development on Trade Front  

Second, the 11-month long trade dispute between the United States and China is headed toward a possible settlement. If this happens, a major concern for the global economy will be eliminated. On Mar 20, Trump mentioned that negotiations with China for a trade deal "is coming along nicely."  

This week, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will travel to Beijing for another round of discussions with Chinese authorities. The International Monetary Fund has identified ongoing the tariff tussle between the countries as the primary factor behind a perceived global economic slowdown in 2019.

Our Top Picks

At this stage, it will be prudent to buy value stocks on the dip that could prove profitable once the rally resumes. We have selected four stocks with a Value Score of A or B and a Zacks Rank #1 (Strong Buy). You can seethe complete list of today’s Zacks #1 Rank stocks here.

Our research shows that stocks with a Value Style Score of A or B when combined with a Zacks Rank #1 or 2 (Buy) offer the best opportunities in the Value-investing space.

RHoperates as a retailer in the home furnishings. The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 13.2, lower than the industry average of 16. It has a PEG ratio of 0.76, below the industry average of 0.83. The company has expected earnings growth of 18.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 60 days. It has a Value Score of A.

Foot Locker Inc. operates as an athletic shoes and apparel retailer. The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 11, lower than the industry average of 12.4. It has a PEG ratio of 1.2, lower than the industry average of 1.25. The company has expected earnings growth of 10% for the current year. The Zacks Consensus Estimate for current-year earnings has risen 5.7% over the last 60 days. It has a Value Score of A.

Quanta Services Inc.provides specialty contracting services in the United States, Canada, Australia, Latin America, and internationally. The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 10.4, lower than the industry average of 14.4. It has a PEG ratio of 1.30, below the industry average of 1.33. The company has expected earnings growth of 25.3% for the current year. The Zacks Consensus Estimate for current-year earnings has moved 7.3% north over the last 60 days. It has a Value Score of A.

Celgene Corp.provides specialty contracting services in the United States, Canada, Australia, Latin America, and internationally. The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 8.2, lower than the industry average of 21.6. It has a PEG ratio of 0.37, below the industry average of 1.85. The company has expected earnings growth of 21% for the current year. The Zacks Consensus Estimate for current-year earnings climbed 3.5% over the last 60 days. It has a Value Score of B.

CBRE Group Inc.operates as a commercial real estate services and investment company worldwide. The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 13.5, below the industry average of 13.8. It has a PEG ratio of 1.23, lower than the industry average of 1.81. The company has expected earnings growth of 8.8% for the current year. The Zacks Consensus Estimate for current-year earnings moved 5.6% up over the last 60 days. It has a Value Score of B.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.


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Quanta Services, Inc. (PWR) : Free Stock Analysis Report
 
Celgene Corporation (CELG) : Free Stock Analysis Report
 
Foot Locker, Inc. (FL) : Free Stock Analysis Report
 
Restoration Hardware Holdings Inc. (RH) : Free Stock Analysis Report
 
CBRE Group, Inc. (CBRE) : Free Stock Analysis Report
 
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