For Immediate Release
Chicago, IL – January 31, 2022 – Zacks Equity Research Shares AutoZone
AZO
as the Bull of the Day, National Beverage Corp.
FIZZ
asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on CVS Health Corporation
CVS
, Hologic Inc.
HOLX
and Cerner Corp.
CERN
.
Here is a synopsis of all five stocks:
Bull of the Day
:
AutoZone
, a Zacks Rank #1 (Strong Buy), is one of the great stock market stories over the past few decades. The company’s longevity and continued stock price ascent speak to management’s ability to adapt to the ever-changing market landscape.
AutoZone stock hit an all-time high just last month before retreating slightly along with the market. Part of the Zacks Retail and Wholesale sector (ranked in the top 32% of all 16 Zacks sectors), AZO sports a Zacks Growth Style Score of ‘A’. This top score indicates AZO’s growth prospects are still enticing and its financial strength is sound.
Company Description
AutoZone is a leading retailer and distributor of automotive replacement parts and accessories. The company provides various components for cars, utility vehicles, vans, and light trucks. Its products include familiar vehicle parts such as batteries, A/C compressors, belts and hoses, fuel pumps, fuses, starters and alternators, and thermostats.
AZO maintains stores in the U.S., Puerto Rico, Mexico and Brazil, operating approximately 6,800 locations. In addition to storefronts, AutoZone also sells its products and accessories through several websites including AutoZone.com. AZO was founded in 1979 and is headquartered in Memphis, TN.
Sales and Earnings Trends
In fiscal 2021, AZO reported a year-over-year increase in net revenues to $14.63 billion, with domestic same store sales rising 13.6%. The company’s sustained revenue growth is striking as it has generated record sales for 23 consecutive years. For the most recent quarter ending this past November (fiscal Q1 2022), net sales grew 16.3% to $3.67 billion which exceeded the Zacks Consensus Estimate of $3.36 billion. The replacement part company reported EPS of $25.69, a 23.33% positive surprise over the $20.83 Zacks Consensus Estimate.
The AZO growth engine is expected to remain hot this year as analysts have increased their fiscal 2022 EPS estimates by 9.73% in the past 60 days. The Zacks Consensus Estimate now stands at $107.24, representing growth of 12.66% relative to fiscal ’21. Sales are seen climbing by 6.2% to $15.53 billion.
AZO has established a healthy track record of earnings surprises as the firm has surpassed estimates in each quarter for the past four years running. AutoZone has delivered a trailing four-quarter average earnings surprise of 23.17%.
Let’s Get Technical
Since the bottom of the pandemic-induced market plunge in March 2020, AZO has more than doubled the return of the S&P 500, with shares appreciating 167.15%. This is the kind of stock you want to include in your portfolio – one with both strong fundamentals as well as technicals. The stock trended very well over the last 12 months, and the 100-day moving average served as support throughout the majority of the last year.
The moving average lines are all sloping up and the stock continues to make a series of new 52-week (and all-time) highs. While AZO has pulled back slightly in recent weeks along with the market, the stock is looking to find support at a familiar trendline and new highs may be just around the corner. Cautious investors may feel hesitant about investing in a stock that has come this far over decades, but the fact is this elite company is still outperforming.
Near-Term Outlook
During the fiscal first quarter, AutoZone opened 15 stores in the U.S., two in Mexico and one in Brazil. In total, the company expects to open 20 domestic mega hubs and 200 new stores across America over the next 12 months. This key expansion is set to boost company prospects and elevate the sustained sales and earnings trends.
In fiscal 2021, AZO repurchased $3.4 billion worth of company stock. Even more noteworthy, the company has bought back almost 90% of its outstanding shares since 1998. During the most recent quarter, AZO repurchased 515,000 shares for $900 million at an average price of $1,749 per share. And on December 15
th
, AutoZone’s Board of Directors authorized the buyback of an additional $1.5 billion of common stock related to the company’s ongoing share-repurchase program. Further share buybacks will continue to assist the performance of the stock going forward.
Bottom Line
AZO is part of the Zacks Automotive – Retail and Wholesale – Parts industry group, which ranks in the top 9% out of all 254 industry groups. In case readers needed another reason to consider this stock, quantitative studies suggest that about half of a stock’s price appreciation is due to its industry grouping. By investing in stocks in the top-performing industry groups, investors can add a ‘tailwind’ to their trading success.
Robust sales and earnings growth combined with a strong technical trend certainly justify adding shares to the mix. This long-term stock market winner continues to prove its doubters wrong, and investors would be wise to consider it as a candidate if they haven’t already done so.
Bear of the Day
:
National Beverage Corp.
operates as a holding company and develops, produces, markets and sells a portfolio of juices, energy drinks, soft drinks and sparkling waters primarily in the U.S. and Canada. The company serves retailers as well as smaller accounts via the food-service and convenience distribution channels. FIZZ’s well-known brands include names such as Shasta, Faygo, LaCroix, and Mr. Pure. National Beverage Corp. was incorporated in 1985 and is headquartered in Fort Lauderdale, FL.
Fizzling Out – Known Headwinds
FIZZ, a Zacks #5 Rank (Strong Sell), is a component of the Zacks Beverages – Soft Drinks industry group which ranks in the bottom 10% out of all 254 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 tougher. The odds are stacked against FIZZ, and the stock is agreeing with this notion after making a series of lower lows.
Recent Earnings and Future Estimates
The company reported its fiscal second quarter results in December. FIZZ posted quarterly EPS of $0.42, missing the Zacks Consensus Estimate of $0.50 by -16%. The stock has moved steadily lower since the announcement. For the current quarter, Zacks is anticipating a regression in EPS of $0.38, reflecting negative growth of -2.56% year-over-year.
Analysts covering FIZZ have decreased their annual earnings estimates recently. For fiscal 2022, the current Zacks Consensus Estimate sits at $1.85, down -5.61% from just 60 days ago. This would represent a negative growth rate of -0.54% relative to fiscal 2021.
Analysts have also reduced their EPS estimates for fiscal 2023 by -3.81%; the estimate is now $2.02. Declining earnings estimates are a red flag and need to be respected.
Technical Outlook
FIZZ is in a sustained downtrend. The stock has plunged below all of the moving averages and is making a series of lower lows. It’s also important to point out that all of the moving averages have rolled over and are sloping downward, the opposite of what bulls would like to see.
While not the most accurate indicator, FIZZ has also recently experienced what is known as a ‘death cross’, wherein the stock’s 50-day moving average crosses below its 200-day moving average. FIZZ 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.
Bottom Line
A deteriorating fundamental and technical backdrop show that this stock is fizzling out. The fact that FIZZ is included in one of the worst-performing industry groups provides yet another headwind to a long list of concerns. The company is also relatively overvalued. Potential investors should only think about including this stock in their portfolio as part of a hedge or short strategy.
Additional content:
CVS Health Hits 52-Week High: What’s Driving It?
CVS Health Corporation
reached a new 52-week high of $107.61 on Jan 27, before closing the session marginally lower at $106.79.
The company’s shares have charted a solid trajectory in recent times, appreciating 49.1% over the past year, ahead of the 28.7% rise of the
industry
it belongs to and 17.5% surge of the S&P 500 composite.
Over the past five years, the company registered earnings growth of 8.1%, ahead of the industry’s 6.1% rise and the S&P 500’s 2.8% increase. The company’s long-term expected growth rate of 7.8% compares with the industry’s growth projection of 6.1% and the S&P 500’s estimated 11.7% increase.
CVS Health has been registering robust growth across three of its operating segments. The company’s retail/long term care (LTC) business witnessed a substantial recovery in front store sales, raising investors’ confidence. Strong potential in the specialty pharmacy space also instills optimism. A good solvency position is another plus.
Let’s delve deeper.
Key Drivers
Segmental Growth:
The market is upbeat about enhanced third-quarter revenues across three of CVS Health’s operating segments. Within pharmacy services, growth outperformed the company’s expectations, delivering 9.3% revenue growth and strong operating income growth. The retail/LTC segment reported above-market growth and exceeded the company’s expectations with 10% revenue growth. Meanwhile, in the health care benefits arm, CVS Health registered 9.5% revenue growth, strongly driven by growth in the government business.
Retail on a Growth Track:
Over the last few quarters, CVS Health’s retail/LTC business has been registering revenue growth after several quarters of a drag. In the third quarter, the segment’s pharmacy sales and prescriptions filled increased 8% year over year, largely driven by COVID-19 vaccine administration and core pharmacy services.
The company also witnessed a solid rebound in front store sales on strength across all categories, with health and wellness products driving nearly two-thirds of growth. The company’s patient satisfaction scores remained high, with nearly 90% satisfied with their experience in CVS Health locations.
Specialty Pharmacy – A High-Growth Avenue:
The soaring demand for specialty pharmacy, especially in the ongoing decade, is likely to accelerate growth for CVS Health. In the third quarter, specialty pharmacy revenues increased 8.7%, reflecting integrated offering with in-store, mail order and specialty services growth.
The company also saw continued growth within specialty pharmacy capabilities. Furthermore, CVS Health’s investments in high-growth areas of specialty pharmacy, adding businesses such as Coram and Novologix, raise our optimism.
Strong Solvency:
CVS Health ended the third quarter with cash and cash equivalents of $9.8 billion compared with $10.13 billion at the end of the second quarter. Total debt came up to $58.39 billion, much higher than the corresponding cash and cash equivalent level.
Yet, the near-term payable debt of $1.5 million is significantly lower than the short-term cash level, indicating good news in terms of the company’s solvency level. The company is holding sufficient cash for debt repayment, at least for the year of economic downturn.
Downsides
A host of factors have been deterring CVS Health’s rally of late.
The ongoing difficult pharmaceutical reimbursement scenario in the pharmacy services and retail/LTC segments, and escalating drug prices are hampering the demand for CVS Health’s offerings. Further, the company is faced with stiff competition, especially in the pharmacy segment, as other retail businesses continue to add pharmacy departments and low-cost pharmacy options become available.
Zacks Rank and Key Picks
Currently, CVS Health carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the broader medical space are
Hologic, Inc.
and
Cerner Corp
.
You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Hologic, carrying a Zacks Rank #2 at present, has a long-term earnings growth rate of 7.4%. HOLX surpassed earnings estimates in three of the trailing four quarters and missed in another occasion, delivering an average surprise of 29.2%.
Hologic has declined 10.1% compared with the industry’s 13% drop over the past year.
Cerner, carrying a Zacks Rank #2 at present, has a long-term earnings growth rate of 12.8%. CERN’s earnings surpassed estimates in three of the trailing four quarters and met estimates on another occasion, delivering an average surprise of 3.2%.
Cerner has gained 13.3% against the industry’s 57.6% slump over the past year.
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