For Immediate Release
Chicago, IL – June 30, 2022 – Zacks Equity Research shares The Chef’s Warehouse
CHEF
as the Bull of the Day and AZEK
AZEK
asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Pfizer
PFE
, BioNTech
BNTX
and Moderna
MRNA
.
Here is a synopsis of all five stocks:
Bull of the Day
:
The Chef’s Warehouse
is a Zacks Rank #1 (Strong Buy) that is a distributor of specialty food products in the United States. The company is a go to for chefs who operate restaurants, hotels, caterers, bakeries, cruise lines, country clubs, culinary schools and fine dining establishments.
The stock is one of the only names you’ll find that is up for 2022. After trading sideways for the first half of the year, the stock fought off market negativity and held the $30-32 area whenever markets sold off.
After a big EPS beat, the stock shot to all-time highs. With CHEF up almost 20% on the year, investors are now wondering if this momentum can continue or if the stock has made its move.
More About CHEF
The company was founded in 1985 and is headquartered in Ridgefield, Connecticut. It employs 2,700 people and has a market cap of $1.5 billion.
The company’s product portfolio includes approximately 50,000 stock-keeping units, such as specialty food products, such as artisan charcuterie, specialty cheeses, unique oils and vinegars, truffles, caviar, chocolate, and pastry products.
The stock has Zacks Style Scores of “A” in Momentum, “B” in Growth, but “D” in Value. The value issue lies with a Forward PE of 33. The stock pays no dividend.
Q4 Earnings Beat and Guide
In late April, Chef’s Warehouse reported earnings, seeing a 233% EPS beat. Q4 came in at $0.26 v the -$0.52 expected. Revenues were up significantly year over year, with the company reporting $558.3M v the $282M last year.
The company affirmed FY revenues at $2.1-2.2B v the $2.15B expected.
CEO Chris Pappas had the following comments on the quarter:
“Revenue trends were strong in the fourth quarter as we saw continued growth in consumer confidence in dining out across our markets…December sales and business activity grew steadily as holiday customer traffic drove sequential volume increases commensurate with pre-COVID periods, even with a reduction in larger corporate parties and events.”
On June 22nd, the company came out with some positive guidance, citing strong demand. Fiscal year 2022 revenues were taken higher, from the expected $2.26B, to now $2.33-2.43B. They also raised their gross profit outlook from $500-524M to $542-565M.
Management said that strength in customer demand and the team’s ability to merchandize their product drove financial performance.
Estimates Rising
The earnings and guidance have helped analysts take price targets and estimates higher. After EPS, BMO capital markets reiterated their outperform rating, but lifted their price target from $40 to $44.
Over the last 7 days, estimates have shot higher across all time frames. For the current quarter, we have seen estimates jump from $0.23 to $0.35, or 52%. For the current year, we have seen a 56% move higher, with estimates going from $0.78 to $1.22.
The Technical Take
The stock crashed during COVID, moving from the $40 level to under $5 a share. With COVID mostly past us and restaurants back open, the stock has made a full recovery.
After printing all-time highs, CHEF has pulled back a little bit. Investors should eye some moving averages below to get a good entry into the stock. If we get a larger pullback, the $33 level is the 200-day moving average.
For those looking to jump in early, the $35.50 area is where the 50-day MA resides. Additionally, if you draw a Fibonacci retracement from June lows to all-time highs, you get a 61.8% retracement at the $35.00 level. So that $35-35.50 spot might be the buy zone for more aggressive traders.
In Summary
The current market environment is not giving investors a lot of winners. However, Chef’s Warehouse has been a solid exception. With the stock up almost 20% on the year, the market is trying to tell us something.
If the stock can perform under a period of severe stress, then it should really get going when the atmosphere improves. Investors should be buying pullbacks when support shows itself and then look to be rewarded when the broad market improves.
Bear of the Day
:
AZEK
is a Zacks Rank #5 (Strong Sell) that engages in designing, manufacturing, and selling building products for residential, commercial, and industrial markets in the United States. AZEK’s main focus is outdoor living products, like decking, railing and trim.
As the housing market heated up after COVID, so did the stock. However, with the equity markets moving lower and mortgage rates moving higher, it means less cash for those outdoor projects at home.
The stock is well off its highs, but with earnings estimates still heading lower, investors might want to stay away until we see a turn around in earnings.
About the Company
AZEK is headquartered in Chicago, Illinois. The company was incorporated in 2013 and employs over 2,000 people.
In addition to decks for residential houses, AZEK has a commercial segment. This part of the business manufactures engineered polymer materials that is used in various industries, which includes outdoor, graphic displays and signage, educational, and recreational markets, as well as the food processing and chemical industries.
AZEK is valued at $2.7 billion and has a Forward PE of 16. The stock holds a Zacks Style Score of “D in Value, “D” in Growth and “F” in Momentum. The stock pays out no dividend.
Q1 Earnings
The company reported EPS back in early May, seeing a 6% beat on EPS. Revenues came in above expectations at $396.3M v the $369M expected. The company also raised their FY22 revenue guidance and EBITDA.
This was its eight straight beat; the company has never missed since becoming public. While having a history of beating expectations is great, the market is clearly worried this won’t continue. Analysts have been lowering estimates for the company all year.
Estimates
After earnings, analysts were positive on demand, but negative on margins and cost headwinds. Inflationary pressures will eat into the bottom line and for that reason, earnings estimates are going lower.
For the current quarter, estimates have fallen from $0.32 to 0.27, or 10% over the last 60 days. For the current year, the numbers have dropped 8%, from $1.18 to $1.08.
Technical Take
The stock debuted right after the COVID bottoms and almost doubled from the IPO price. However, since the beginning of 2022, the stock has dropped like a rock, down over 60%.
With such little chart history, it’s hard to tell where the bottom is. Until there is relief in the earnings estimates, the stock will likely continue to bleed lower.
If there is a positive catalyst, investors should watch the 50-day moving average. If price got over the area, which is currently at $20, there could finally be a move higher in the name.
If the stock did happen to bounce, it would likely be a selling opportunity unless inflationary pressure abates.
In Summary
With mortgage rates going higher and equity markets going lower, there is less money for AZEK’s services. While demand is still healthy, this trend might not continue if the economy worsens. Additionally, cost pressures will eat into margins, putting a squeeze on the bottom line.
These are two factors that are giving the bears fuel to sell the stock lower.
Additional content:
FDA Panel Recommends Modifying Jabs to Target Omicron
The FDA’s Vaccines and Related Biological Products Advisory Committee (VRBPAC), on Tuesday, voted 19-2 to recommend modifying the current strain composition of available COVID-19 vaccines to target the Omicron variant and its subvariants. The committee members recommended incorporating genetic material from the Omicron variant in the modified boosters.
If the FDA follows the VRBPAC’s recommendation, which it usually does, vaccine makers like
Pfizer,
BioNTech
and
Moderna
will need to roll out modified boosters of their COVID vaccines to provide better protection from the virus, which has been mutating rapidly.
However, the vote did not specify if the modified boosters should target the Omicron variant or both the Omicron as well as the older ancestral strains of the virus. It was also not clear whether the modified boosters will target the more recent Omicron subvariants, BA.4 and BA.5. which represent more than half of all U.S. COVID-19 cases now.
Not only do these variants outcompete the BA.1 Omicron subvariant but have also shown the potential to evade immune protection. This creates a need for adapted vaccine boosters with improved vaccine effectiveness. The FDA will now take the decision of what strain of Omicron the modified booster vaccines should target.
The currently authorized vaccines of Pfizer and BioNTech, and Moderna and their currently available boosters are designed to target the ancestral coronavirus strain that emerged in late 2019. However, Pfizer/BioNTech and Moderna are developing Omicron-based COVID-19 vaccine boosters to address the rise of new and evolving Omicron subvariants. These Omicron-targeted vaccines have shown promise in clinical studies.
Earlier this month, Moderna announced data from an ongoing phase II/III study on its bivalent COVID-19 vaccine booster candidate mRNA-1273.214, targeting the Omicron variant.
The clinical data showed that following one month of administration of a 50 µg dose of mRNA-1273.214, a 5.4-fold
increase in neutralizing antibodies
against the Omicron subvariants BA.4 and BA.5 was seen in all study participants, regardless of prior infection. In a subset of seronegative participants, the candidate generated a 6.3-fold increase in neutralizing titers against both the Omicron subvariants. Based on these results, Moderna intends to complete the regulatory filing for mRNA-1273.214 in the coming weeks.
Pfizer and BioNTech are also working on new Omicron-based vaccine candidates, both monovalent and bivalent. The bivalent vaccine is a combination of the ancestral strain and the Omicron BA.1 subvariant.
Earlier this week, Pfizer announced data from a phase II/III study on the vaccine candidates. Data from the phase II/III study showed that participants, given the booster dose of both the vaccine candidates, generated a substantially higher immune response against the Omicron subvariant BA.1compared to Comirnaty, Pfizer/BioNTech’s currently authorized vaccine. Pfizer and BioNTech intend to share the above results with the regulatory authorities for approval of the booster vaccines.
Pfizer and BioNTech are also evaluating both the vaccine candidates against the recent Omicron subvariants, BA.4 and BA.5.
The Biden government expects to start a booster campaign in October to prepare for an expected surge in infections in autumn. The Omicron-based vaccine boosters of Pfizer and BioNTech and Moderna should be ready before the campaign begins.
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