For Immediate Release
Chicago, IL – April 1, 2021 – Zacks Equity Research Shares of Dow Inc.
DOW
as the Bull of the Day, Gibraltar Industries, Inc.
ROCK
as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Pfizer Inc.
PFE
, BioNTech SE
BNTX
and Micron Technology, Inc.
MU
.
Here is a synopsis of all five stocks:
Bull of the Day
:
Dow
is a Zacks #1 (Strong Buy) that is a material science company. Dow provides a portfolio of advanced, sustainable and leading-edge products for consumer care, infrastructure and packaging markets.
The stock has grinded higher over the last year and now sits just below 52-week highs. A recent earnings report helped the stock move higher and analysts are hiking estimates for the upcoming year.
About the Company
Dow is headquartered in Midland, Michigan and was incorporated in 2018. The company has a long history under the DowDuPont name and is currently a component of the Dow Jones Industrial Average.
Dow has a market cap of $48 Billion and has Zacks Style Scores of “B” in Value, but “F” in Momentum. The Forward PE is 15 and the company pays a dividend of 4.3%.
Q4 Earnings and Guidance
Dow reported Q4 earnings in late January seeing a top line beat and a 17% earnings surprise to the upside. The company also guided Q1 revenue above expectations. Their outlook for 2021 was that the company was entering the year with sequential momentum and will be well-positioned for continued profitable growth. Dow expects that as the recovery widens, they will see an increase in margins and improving demand.
That bullish idea in late January came to fruition as the company guided Q1 EBITDA above expectations on March 16
th
. At a JPMorgan Conference, Dow said it now sees EBITDA $50-100M higher despite the bad weather conditions. Moreover, Q2 EBITDA will come in at least $300-400M above consensus as market demand will strengthen. The company added they expect the global economic recovery to drive tailwinds into the end of the year.
Estimates
The bullish tone from the guidance has forced analysts to hike their estimates.
Over the last 30 days, earnings estimates have jumped higher across most time frames. For the next quarter, we have seen estimates raised by 28%, from $0.98 to $1.25. For the current year, we have seen a 17% move higher in that same time frame.
Analysts are commenting that the acceleration of the vaccine rollout, combined with the stimulus package should lead to strong demand. More specifically to the petrochemicals sector, strong demand, elevated margins and tight supply/demand dynamics will help Dow benefit.
The Technicals
The march panic gave investors a rare opportunity as the stock fell to the low $20s. Since then, DOW has slowly rallied to 52-week highs above the $67 level. The stock has pretty much held the 50-day moving average, which is currently at the $60 level, the whole way up. If the stock were to break this technical level, bargain hunters should watch the 200-day, which is all the way down at $51.50.
Unless we see a large market pullback, that drop in price seems unlikely. For those looking to buy now, they can look to the Fibs for a price target. A Fibonacci retracement drawn from 2020 highs to lows, gives us an 161.8% extension target at $75. This target comes just shy of Wells Fargo’s recent reiteration of their $80 price target.
Bottom Line
Dow doesn’t have a lot of eyeballs on it, which makes it a sneaky play the rest of the year. It won’t move like a tech stock, but it’s up 25% off 2020 lows and 25% away from Wells Fargo’s targets. This sets up for an acceptable risk reward with a company that pays a dividend over 4%.
Bear of the Day
:
Gibraltar Industries
is a Zacks Rank #5 (Strong Sell) that manufactures and distributes products for renewable energy, conservation, residential, and infrastructure markets in North America and Asia. Their products range from ventilation and expanded metal to mail storage solutions and raid dispersion products and solutions.
After a run of over 200% from the March lows, the stock sits about 10% below all-time highs. After a recent earnings miss, investors have to decide whether it’s time to take profits as earnings estimates start to fall.
More about ROCK
Gibraltar is headquartered in Buffalo, New York and employs over 2300.The company is valued around $3 billion and has a Forward PE of 26. ROCK has Zacks Style Scores of “F” in Value but “A” in Momentum. The company does not pay a dividend.
The company had been on a nice streak of beating earnings, surprising to the upside for five straight quarters. However, when the company reported in late February investors were surprised with a rare miss, which sent the stock down about 15% in a week.
Q4 Earnings
Q4 earnings came in above last year’s numbers, but ROCK reported a 6.35% earnings miss. The company guided FY21 below expectations, seeing $3.30-47 v the $3.80 expected. Revenues were also guided below expectations.
There were some short-term setbacks as project delays in the renewable segment were delayed, which led to lower margins. While residentials rose on strong demand, infrastructure sales were down.
Investors will be watching for a bounce back in these numbers next quarter, but if there is no turn around, the stock will see pressure.
Estimates
While estimates don’t look bad across the board, the next quarter and the current year are seeing some pressure. Over the last 60 days, we have seen a drop of 15% for the next quarter. For the current year, estimates have fallen 10% over that same time frame.
The Technicals
The stock has had quite the run over the last year, so you can’t blame investors for taking profits when earnings missed. Looking at the charts, the bulls might have more reasons to be cautious.
After earnings, the stock broke the 50-day moving average for the first time since late November. While the stock quickly bounced back above that level, the stock once again lost traction and has become fairly volatile.
For now, the stock is chopping around the 50-day MA at $92 as if there is a big wall that can’t be passed. If the bulls can get a solid move on high volume above this level, perhaps new highs can come.
However, if the up move fails, investors should watch for a drop back to the post earnings lows around $80. If there is overall market weakness, the 200-day moving average is at $71 and would make a better long-term entry point.
In Summary
Gibraltar has been tough as a rock all year, but there are some signs of weakness after this last quarter. Investors should take caution over the next few months and look for a lower entry point as a possible infrastructure rally helps the stock in the back half of the year.
Additional content:
Dow Dips, Other Markets Up; Micron (MU) Beats
On the final trading day of calendar Q1, the S&P 500 reached another new all-time closing high, +0.37%. The Dow dipped going into the close, though it was higher for most of the session: -0.25%. The Nasdaq posted the highest daily gains, +1.54%, and concluded its fifth straight monthly gain, albeit a more challenging one. The Russell 2000 brought in +1.13% on the day; it too is bouncing off some more difficult trading days in the recent past.
Yesterday’s
Chicago PMI
for March came in well ahead of expectations, depicting yet another metric tracking economic strength of late: 66.3 beat the 60.3 consensus estimate, and performed even better than the 59.5 reported for February.
Pending Home Sales
for February, which also came out during the day Wednesday, reported more than 3x worse than expectations: -10.6% versus -3.1% consensus. It was also well below the -2.8% number that came in for January, illustrating some jammed gears in the housing market.
Pfizer-BioNTech
reported 100% effectiveness in treating children aged 12-15 in a new study on its Covid-19 vaccine. In a pool of 2200 patients of teen and pre-teen age, the well-tolerated vaccine saw zero Covid cases. while those receiving placebo had 18 cases. Last week, Pfizer also began a study for younger children, aged 5-11, and will then move onto kids aged 2-5 after that. Should all go well, we may expect to see a vast majority of Americans vaccinated, hopefully before the next school year.
Micron
, a Zacks Rank #1 (Strong Buy) memory and data storage giant, posted a modest beat on both top and bottom lines in its fiscal Q2 earnings release after yesterday’s closing bell: 98 cents per share outperformed expectations on earnings, while $6.24 billion in sales eked ahead of $6.23 billion estimated, +30% year over year. Guidance for next quarter was raised to $1.62 per share, plus or minus 7 cents, while $7.1 billion in expected Q3 revenue is notably better than the $6.7 billion in the Zacks consensus.
Shares rose 3% initially on the news, following gains of 20% year to date and +110% in the past year, from the March 2020 lows. The company has not missed an earnings expectation in two years. Its four-quarter trailing positive surprise average is more than 10%. And with raised guidance for the quarter to come, it’s likely Micron will retain its Strong Buy or Buy rating into the future.
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