For Immediate Release
Chicago, IL – October 4, 2021 – Zacks Equity Research Shares of Thor Industries, Inc.
THO
as the Bull of the Day, First Solar, Inc.
FSLR
as the Bear of the Day. In addition, Zacks Equity Research provides analysis on The Gap, Inc.
GPS
, The Mosaic Company
MOS
and Best Buy Co., Inc.
BBY
.
Here is a synopsis of all five stocks:
Bull of the Day
:
Thor Industries
is a Zacks Rank #1 (Strong Buy) that makes a wide range of recreational vehicles (RVs). The company manufactures in Indiana and Ohio and sells its products through independent dealers in the U.S. and Canada.
After doubling from the COVID lows in 2020, the stock traded sideways over the summer after pulling back from highs. However, a recent earnings report helped bring investors back into the stock. Now, the bulls are looking for all-time highs once again.
About the Company
Thor is headquartered in Elkhart, Indiana and employs over 22,000 people. The company was founded in 1980 and sells travel trailers, motorhomes, caravans, urban vehicles and more.
THO is valued at $6.8 billion and has a Forward PE of 9. The company holds a Zacks Style Score of “A” in Momentum and “B” Value. The stock also pays a 1.3% dividend.
Travel Has Changed
The COVID-19 shutdowns started a movement for consumers to look at different ways to vacation and travel. With hotels closed and airport travel inconvenient, people looked to the old-fashioned camper as an alternative.
Demand for RVs went through the roof, which caused a massive backlog for companies like Thor and Winnebago.
When the vaccines came out, there was the thought that America would be opening up and travel would return to normal. However, the demand for campers, motorhomes and other recreational vehicles never subsided. Earnings and order backlogs from the manufacturers of these products shows us that domestic travel has changed for good.
Earnings Beat
Thor investors are used to beating on EPS, with the recent quarter marking sixth straight earnings surprise to the upside. The company posted a 42% beat on the bottom line, and saw revenues of $3.59B v $3.33B expected.
The order backlog is still huge, up 190% year over year. Gross profit margin was also up big from last year and the company said that demand for their RV products remains robust.
Management was very positive on the call, making the following comments:
“THOR is carrying great momentum into fiscal year 2022, supported by a number of positive factors. Interest from new RV buyers and order activity continues to be robust across each of our business segments. We have record backlogs supported by North American dealer inventory levels that are 9% lower than the already historically low levels from a year ago and 44% lower than they were two years ago. Dealers remain confident in the long-term outlook for the RV industry and continue to invest in growing their businesses as the industry sees continued buying interest from both the first-time and repeat RV buyers.”
Thor added that that despite the challenging operating environment, the team has overcome the supply chain constraints. They look to grow the dividend, fund strategic opportunities and repurchase shares.
Estimates Rising
The quarter has opened eyes among analysts, which have started to lift estimates drastically. For the current year, analysts have raised estimates from $11.36 to $13.69, a hike of 20%. For the next year, we see a 13% jump, from $12.07 to $13.65.
Analysts are talking price targets higher. Wedbush raised their price target to $140 from $126 and BMO has their target at $166.
The Technical Take
The move lower over the summer broke some moving averages and threatened the $100 level. However, a 61.8% Fibonacci support level just above that $100 mark held up well. With the stock back above moving averages, the chart looks technically bullish.
The next resistance level will be the $140 market, an area where the bears took over back in May. If the bulls can push over $132, we would have $178 Fibonacci targets (161.8%).
In Summary
The RVs are still seeing a lot of demand and the backlog for campers is massive. The company has overcome challenges and proved that the supply chain issues have not gotten in the way of exceeding their numbers.
Look for the momentum to continue into the next year and for things to improve as supply chains get back to normal.
Bear of the Day
:
First Solar
is a Zacks Rank #5 (Strong Sell) that is a provider of solar energy solutions. The company specializes in designing, manufacturing, and selling solar electric power modules using a proprietary thin-film semiconductor technology.
First Solar reported a real nice quarter back in July that rallied the stock 30%. However, the supply chain issues are hampering the solar industry and could impact future growth. So, investors should take caution as we head into the next few quarters.
About the Company
First Solar is headquartered in Tempe, AZ and employs over 5,000 people. The company was founded in 1999 and operates in the U.S, Japan, France and other locations internationally.
FSLR is valued at $10 billion and investors should be concerned with the valuation. The company holds a Zacks Style Score of “D” in Value with a PE of 22. At the same time, growth investors applaud the “B” Style Score in Growth.
Q1 Earnings
Big earnings out in July, with the company seeing Q2 at $0.77 v the $.60 expected. Revenues missed and FY21 guidance was lowered, but revenue guidance was lifted.
The guidance cut was due to freight costs, which continue to move higher. However, we are also seeing supply chain issues in the industry that could be an issue for further growth. Analysts are noticing and dropping numbers.
Estimates
Over the sixty days, estimates fell lower. For the next quarter, analysts have dropped their numbers to $0.72 from $0.65 For the next year, numbers have fallen from $3.10 to $2.69, or 20%.
Despite the guidance cut and analyst’s dropping expectations, the stock surged, moving from $80 to almost $107.
Supply Chain Issues
The bottlenecks in the supply chain are causing issues for a lot of companies. In the solar industry, the combination of getting materials and rising costs is a recipe for a couple quarters of trouble.
Steel and aluminum costs are key for solar panels and rising costs are a headwind. Despite good demand, these costs will trickle to the bottom line.
Technical Take
First Solar was one of the hottest stocks of 2007-08, with the stock shooting from under $50 to over $300 in just a year. However, during the financial crisis, the stock collapsed and never fully recovered.
After years of hanging on around the $50 mark, the stock has finally come back to life, moving over $100 a share. The stock is on the verge of breaking out, the fundamental issues discussed above are bringing in sellers on every move over $100.
The stock fell about 20% on the recent market sell off. Investors defended the 200-day moving average just under the $90 level and they will need to keep that area or the stock will likely fall back to summer support at $80.
In Summary
First Solar has some fundamental issues that will be a risk as they head into the next couple earnings reports. Investors should be on the defense until the supply chain issues can be overcome.
Additional content:
Zacks #1s with Growth AND Value
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The Gap Inc.
The name of the company may be The Gap, but the real powerhouse these days is Old Navy. And active women’s apparel brand Athleta is also starting to gain some traction. These two brands led to a strong fiscal second quarter performance in late August, which included a raised full-year outlook.
GPS is a premier international specialty retailer with more than 3,800 stores worldwide. It’s four segments are Gap Global, Old Navy Global, Banana Republic Global and Other (which includes the aforementioned Athleta brand). As part of the retail – apparel & shoes space, the company is in the Top 16% of the Zacks Industry Rank. Shares have climbed approximately 14% so far in 2021.
Earnings per share in its fiscal second quarter came to 70 cents, which trounced the Zacks Consensus Estimate by nearly 50%. Net sales of $4.2 billion inched past our expectation of $4.17 billion and jumped 29% year over year. Most impressively though, the result improved 5% over the same time in 2019, which was pre-covid.
Same-store sales were up 3% year over year and a solid 12% from two years ago.
Those annoying Old Navy commercials must really work, because net sales at that segment jumped 21% in the quarter with comps up 18% against 2019. Moving forward, Old Navy has big hopes for its inclusive shopping experience BODEQUALITY, which is part of its Power Plan 2023 for long-term sustainable growth.
Net sales at Athleta soared 35% with comps up 27% from 2019. GPS is also working to transform Banana Republic through various factors including product assortment. Sales were still down in the quarter, but improved from the first quarter 2021.
GPS has worked hard to better its marketing efforts, improve its brand management and enhance its technology. These factors paid off so much that the company raised its full-year outlook. It now expects adjusted EPS of between $2.10 and $2.25 with net sales growing about 30% versus 2020.
The Zacks Consensus Estimate for this fiscal year (ending January 2022) is now $2.21, which marks a 24.2% improvement over the past 60 days. Next fiscal year (ending January 2023) is now seen at $2.65, an advance of 20.5% over the same amount of time and suggests a year-over-year improvement of 20%.
The Mosaic Company
At a time of artificial intelligence, 5G, the Internet of Things, blockchain and dozens of other technologies; it seems weird that something like fertilizers could be considered “hot”. And yet, this space is in the top 6% of the Zacks Industry Rank, as agriculture trends are expected to be strong moving forward.
One of the biggest names in the space is The Mosaic Company, a leading producer and marketer of concentrated phosphate and potash crop nutrients. Shares are up over 60% so far this year, and the company expects the second half of 2021 to be one of its best periods in over a decade.
In the second quarter, MOS reported earnings per share of $1.17, which beat the Zacks Consensus Estimate by more than 15%. It was the fifth straight quarter with a positive surprise. The average beat over the past four quarters is just under 43%, but that’s skewed a bit by a triple digit surprise in the fourth quarter.
Net sales of $2.8 billion actually fell a little short of our expectations, but still jumped 37% year over year as stronger pricing offset the lower volumes. Net sales in Phosphates rose 54%, while sales in Potash advanced 19%. Volumes in both segments declined.
Looking forward, MOS sees a $90-$100 per ton improvement in average realized price in the Phosphates segment sequentially in the third quarter, while the Potash segment should have a $25-$35 per ton improvement.
The Zacks Consensus Estimate for this year is up to $4.86, which has surged 47.7% over the past two months. Expectations for next year are at $4.68, which suggests a year-over-year decline. However, analysts have raised their expectations by approximately 43% in 60 days, so there’s a lot of room for improvement before December 2022 rolls around.
Best Buy
It’s scary to think where this country would’ve been in this pandemic without technology. It allowed millions of people to work from home and students to learn from home during an unprecedented shutdown. We were able to stay in close contact with loved ones in quarantine. And technology provided gaming and streaming options to keep the family occupied so you can have just a few sweet moments of solitude before resuming your government-mandated house arrest with those lovely people.
Throughout all these circumstances, Best Buy was there with the consumer electronics necessary to keep things going when Covid locked things up. The dependence on technology led to 14 straight quarters of positive surprises for the company, including a more than 56% beat in its recently reported fiscal second quarter.
BBY is part of the Retail – Consumer Electronics space, which means it’s in the top 13% of the Zacks Industry Rank. The company has been focused on developing its omni-channel capabilities, improving the supply chain and cost-containment efforts. It’s really been paying off!
Earnings per share reached $2.98 in its fiscal second quarter, which trounced the Zacks Consensus Estimate by more than $1.
Enterprise revenues jumped nearly 20% to $11.85 billion, compared to our expectation of $11.6 billion. Enterprise comp sales increased by the same percentage. Key drivers in the quarter were computing, mobile phones, home theater, appliances and services.
Best of all though, BBY expects continued customer demand and solid momentum. In fact, it now sees enterprise comparable sales increasing between 9% and 11% for fiscal 2022, compared to the previous outlook of 3% to 6%.
The Zacks Consensus Estimate for this fiscal year (ending January 2022) is up to $9.95, which has advanced 16.9% in just two months. The expectation for next year (ending January 2023) is only at $9.54, which is up 9.3% in two months but down year over year. However, there’s plenty of time for that to improve as consumers are unlikely to throw their computers, TVs and gaming systems away in the future.
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