For Immediate Release
Chicago, IL – May 3, 2022 – Zacks Equity Research shares Ryder System Inc.
R
as the Bull of the Day and Carvana Co.
CVNA
asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Advanced Micro Devices
AMD
, ON Semiconductor
ON
, and Nvidia Corporation
NVDA
.
Here is a synopsis of all five stocks:
Bull of the Day
:
Ryder System Inc.
isn’t seeing a slowdown in logistics. This Zacks Rank #1 (Strong Buy) recently reported a record first quarter.
Ryder is a nearly $10 billion global logistics and transportation company. It provides supply chain, dedicated transportation and fleet management solutions to some of the top consumer brands, including the top 10 Fortune 500 food and beverage companies in the United States.
Big Beat in the First Quarter
On Apr 27, Ryder reported its first quarter 2022 results and blew by the Zacks Consensus by $1.21. Earnings were $3.59 versus the Zacks Consensus of just $2.38. It was the 5th consecutive earnings beat in a row.
It saw record first quarter results with all three of its business segments seeing double digit revenue growth.
Fleet Management Systems (“FMS”) was up 22% to $2.2 billion versus $1.8 billion last year. Supply Chain Solutions (“SCS”) jumped 10% to $1.28 billion from $1.16 billion in 2021.
Dedicated Transportation Solutions (“DTS”) saw better-than-expected results gaining 25% to $296 million from $237 million.
Results exceeded expectations due to used vehicle sales and rental. Ryder generated record REO of 25% due to truck capacity constraints in the market, which benefited Fleet Management Systems, and from its continued ongoing initiatives to increase returns.
It’s strategy to accelerate growth in SCS and DTS is paying off as they now represent approximately 50% of the company’s revenue, up from 40% three years ago. Ryder anticipates the growth to continue in these two segments.
Previously announced SCS acquisitions are also performing well and are providing Ryder with enhanced capabilities in the fast-growing e-commerce fulfillment and multi-client warehousing.
Price increases were used to address “unusually high” labor cost increases. However, Ryder still expects SCS and DTS to achieve their high single-digit earnings targets in the second half.
Raised Full Year Earnings Guidance
Given the big beat in the first quarter, and continued bullish outlook in the logistics industry, it’s not surprising that Ryder raised its full year earnings estimates.
It now expects 2022 earnings between $13.00 and $14.00 per share, up from prior guidance of $11.00 to $12.00.
4 estimates have been revised higher over the last week pushing the Zacks Consensus up to $13.49 from $11.70. That’s earnings growth of 40.8% as Ryder made just $9.58 last year.
Shares Are Dirt Cheap
Like many stocks in 2022, Ryder shares are weak. They’ve fallen 13.8% year-to-date, which is similar to the decline of the S&P 500.
This has created a buying opportunity, however, as it’s now dirt cheap.
Ryder trades with a forward P/E of just 5.2.
It also pays a dividend currently yielding a juicy 3.3%.
For investors looking for a value stock with rising earning estimates, Ryder should be on your short list.
Bear of the Day
:
Carvana Co.
shocks the Street after reporting a wider-than-expected loss in the first quarter. The earnings estimates on this Zacks Rank #5 (Strong Sell) have been slashed in the last 30 days.
Carvana operates a website, Carvana.com, which provides a platform for people to buy, sell and finance cars. The car can be delivered to the customer or picked up at one of the automated Car Vending Machines. It provides as-soon-as-next-day delivery to customers in over 300 markets.
Big Miss in Q1
On Apr 20, Carvana reported its first quarter results and missed on the Zacks Consensus Estimate by 68%. Earnings were a loss of $2.89 versus the Zacks Consensus of a loss of $1.72.
It was Carvana’s third miss in a row.
While revenue rose 56% to $3.5 billion, total gross profit was just $298 million, a decrease of 12%.
The company’s net loss also widened to $506 million, an increase from $82 million a year ago.
Carvana called this quarter “challenging” and said it was due to events impacting the used vehicle industry as a whole, such as Omicron, used vehicle prices, interest rates, but also to events specific to Carvana, including reconditioning and logistics network disruptions.
It said that it considers these macro factors to be transitory.
No Longer Providing Guidance for the Full Year
But what really hit the stock was the decision to no longer provide specific numeric near-term guidance for the remainder of the year.
Carvana blamed its decision on the current industry trends impacting customer affordability including high used vehicle prices, rapid movements in interest rates, rapid increases in fuel prices and other macroeconomic uncertainty impacting the used vehicle market.
Analysts Slash Full Year Earnings Estimates
8 estimates were cut for the full year in the last 30 days. That has pushed the Zacks Consensus Estimate down to a loss of $6.27 from a loss of $2.12 just 60 days ago.
That’s a decline of 284% as Carvana lost just $1.63 last year.
Shares Plunge
Carvana shares were already falling heading into the first quarter earnings report. But they’re now down 72% year-to-date and are near their 52-week low.
Are shares a deal?
Wall Street isn’t looking favorably on companies that don’t have positive earnings and who are no longer providing guidance this year.
For those investors interested in auto retailers, perhaps look at the old-fashioned brick and mortar auto retailers, some of which reported record first quarter reports this year.
Additional content:
Can AMD Shares Return to Their Former Glory?
Stocks tumbled again last Friday to close out a tough week in the market. To put it simply, it was a pretty brutal April month all around. Perhaps, the old saying “April showers bring May flowers” can be valid for the investing world and bring us a prosperous month.
It’s a fresh week. Investors will be pivoting their focus to the Federal Open Market Committee’s (FOMC) announcement on Wednesday; the consensus is that the Fed will be raising rates by 50 basis points. While this rate hike is critical, the real focus will be on what the Fed plans moving forward in the summer meetings.
In the meantime, earnings season rolls on. We’ve witnessed adverse market reactions to quarterly releases, which is usually not the case. Economic concerns and geopolitical issues have undoubtedly weighed heavily on investor sentiment.
On deck to report quarterly results tomorrow after the market closes is the big semiconductor player
Advanced Micro Devices
.
It’s been a tough stretch in the semiconductor space. AMD has had the worst 2022 performance, followed closely by NVDA. In fact, none of the companies have managed to even come close to the S&P 500’s performance. The semiconductor shortage has added fuel to this fire sale.
Stretching out the time frame over the past year, we can see that nearly all three companies’ shares took a downwards trajectory around December 2021. Though 2022 hasn’t been kind, all three companies have managed to outpace the S&P 500 thanks to their nearly year-long run in 2022.
Previous Share Reactions
AMD has exceeded EPS estimates over its last six quarterly reports. However, the share price has only moved upwards twice over this timeframe; shares rose 7.5% following its latest earnings release and 6.6% in its July 2021 earnings release. The company’s four-quarter trailing average EPS surprise sits at a respectable 17%.
When share price rallied following the quarterly reports, AMD exceeded EPS expectations by at least 20% in both instances. To me, it seems an extensive EPS beat may be needed to fuel another rally for shares. Additionally, with the weakness in the semiconductor space throughout 2022, investors will most likely react adversely to any EPS or revenue miss.
Q4 2021 Earnings
AMD reported quarterly record revenue of $4.8 billion in its latest earnings report, up 49% year-over-year and 12% quarter-over-quarter. It also had robust quarterly profitability; gross margin was 50%, and operating income tallied $1.2 billion.
In its computing and graphics segment, revenue was up 32% year-over-year, driven by its Ryzen
TM
and Radeon
TM
processor sales. Within the company’s enterprise, embedded, and semi-custom segment, revenue tallied $2.2 billion, boosted by higher EPYC
TM
and semi-custom processor sales.
AMD witnessed strong demand for premium desktop and notebook PCs built with their impressive Ryzen 5000 processors and announced new Ryzen processors with AMD 3D V-Cache technology to power an unparalleled gaming experience. Additionally, AMD had a higher average selling price for its products throughout the quarter, driven by a richer mix of Ryzen processor and Radeon product sales.
Moving forward, AMD expects robust demand across both segments due to its cutting-edge technology and its established stance in the booming gaming industry. Furthermore, the company is benefitting majorly from the digital shift we’ve undergone since COVID-19 took the world by storm.
EPS & Revenue Estimates
The Zacks Consensus Estimate for Q1 earnings sits at $0.91 per share, reflecting stellar earnings growth in the double-digits at 75% from the year-ago quarter. Additionally, the Consensus Estimate trend has remained unchanged over the last 60 days, though one analyst recently upgraded their quarterly estimate. Notably, zero analysts have downgraded their estimates in this timeframe.
Q1 sales estimates are looking strong as well; the $5 billion consensus revenue estimate represents a sizable top-line expansion of 45% from the year-ago quarter. Additionally, AMD provided uplifting revenue guidance for 2022, held down by robust growth across all businesses.
ON Semiconductor & Nvidia Comparison
ON Semiconductor
is a leading supplier of power and analog semiconductors and sensors. Before the market opened today, ON reported its quarterly results; the company reported EPS of $1.22 and quarterly revenue of $1.9 billion, fueling shares to gain nearly 4% in the pre-market session.
Nvidia Corporation
is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit (GPU). The Zacks Consensus Estimate Trend for NVDA’s upcoming quarter has retraced marginally over the last 60 days, now displaying quarterly earnings of $1.29 per share.
Nvidia’s quarterly EPS estimate displays a notable 43% year-over-year growth in earnings, and the $8.1 billion consensus revenue estimate easily beats out NVDA’s year-ago quarterly sales of $5.6 billion by close to 45%.
These semiconductor companies are still posting and forecasting strong year-over-year growth rates, which bodes well for AMD heading into tomorrow.
Bottom Line
A highly unanticipated level of demand for microchips during the pandemic caused the supply chain to fall completely out of equilibrium. Blending the chip shortage into a volatile market environment with rising borrowing rates and surging energy costs has undoubtedly fueled the poor 2022 share performance.
However, microchips are a staple in our everyday lives, whether we realize it or not. Nearly every piece of technology requires a microchip to function correctly, and this trend isn’t going anywhere anytime soon as we continuously become more dependent on them.
Quarterly estimates and year-over-year growth rates are looking solid. This, paired with AMD’s strong demand across nearly all products, gives me an optimistic view of the company heading into its quarterly release. It is important that investors are aware of current market sentiment, as a robust earnings does not guarantee anything as we’ve seen so far in 2022. Still, semiconductor companies will benefit massively in the long-term.
AMD is currently a Zacks Rank #3 (Hold) with an overall VGM Score of an A.
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