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Cleveland-Cliffs and Cal-Maine Foods have been highlighted as Zacks Bull and Bear of the Day
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For Immediate Release
Chicago, IL – January 5, 2022 – Zacks Equity Research shares Cleveland-Cliffs (CLF - Free Report) as the Bull of the Day, and Cal-Maine Foods (CALM - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Photronics (PLAB - Free Report) , Tokyo Electron (TOELY - Free Report) , and Alpha and Omega Semiconductor (AOSL - Free Report) .
Cleveland-Cliffs is a Zacks Rank #1 (Strong Buy) that is the largest flat-rolled steel producer in North America. The Company is vertically integrated, from mined raw materials, direct reduced iron, and ferrous scrap to primary steelmaking and downstream finishing, stamping, tooling, and tubing.
The stock had a fantastic 2020, moving from a COVID crash low of $2.63 to $15. The stock then continued higher in 2021, moving to $26.51 before pulling back to close up about 45% on the year.
The stock broke some technical support in December, but has recently reclaimed those levels. So investors are now wondering if the stock can continue its run and make it three straight years of outperformance.
About the Company
Cleveland-Cliffs serves a range of markets where they offer flat-rolled carbon steel, stainless, electrical, plate, tinplate, long steel products, carbon and stainless-steel tubing, and hot and cold stamping and tooling.The company was founded in 1847, has about 26,000 employees and is headquartered in Cleveland, Ohio.
CLF has a market cap of almost $11 Billion and has Zacks Style Scores of “A” in Growth and Value. The stock has a Forward PE of 4 and does not pay a dividend.
A New Company
In recent years, the company has acquired ArcelorMittal USA and AK Steel, These moves have transformed the focus from mining iron ore to being a vertically integrated steel producer.
With that, Cleveland-Cliffs completed its Toledo Direct Reduction plant last year. This natural-gas-based plant supplies high-quality hot-briquetted iron (HBI), an environmentally friendly alternative to scrap and imported pig iron. The plant is expected to generate significant value due to the scarcity of domestic prime scrap, all while meeting the company’s greenhouse gas initiative.
Q3 Earnings
In late October, Cleveland-Cliffs reported a 4% EPS beat. Revenues also came in above expectations and the company said they believe average sales price in 2022 should be higher than last year.
Steelmaking volume came in at 4.15M v 1.12M a year ago. And EBITDA was up to $1.93B from $126M a year ago.
Management commented that the company’s business model is based on contract sales and they have already renewed annual fixed price contracts for their most important customers. They add that because they aren’t exposed to steel spot prices, they see continued growth and are positioned for strong profitability.
Estimates
Estimates are actually coming down for the current quarter, which might be a reason the stock has fallen of late. However, looking over the next several quarters, things look very optimistic.
Over the last 90 days, estimates have jumped 125% higher for next quarter, moving from $1.13 to $2.54. For next year, we see a 60% jump over that same time frame.
The Technicals
Cleveland-Cliffs had some glory days back in 2007 and 2011, with the stock rising to $100 both years. However, both times the stock crashed under $20 and from 2013 on we didn’t see much life.
The stock had been dead money for almost a decade, and when COVID hit, CLF fell under $3.
The rally in the markets rewarded the CLF investors that stepped in during the panic. The stock rallied all the way to $26 last year and recently pulled back under $20.
So after all that, the stock is starting to trade in a sideways range, with resistance in the $25 area and support at the $20 level.
The moving averages are close together, with the 200-day at $21 and the 50-day at $22. I would expect sideways trading until the next quarter, but if the company can impress there is an opportunity for a large move upwards.
The halfway back from 2021 lows to highs has held well. This 50% Fibonacci retracement has given investors a place to rely on and buy. A break of that $25 resistance could bring the stock to $30 in a hurry. This would be an up move of over 30% from current levels.
Bottom Line
Investors in Cleveland-Cliffs get some value and growth in a company that has recently transformed itself. The company isn’t exposed to steel prices like most steel stocks, so if prices fall, the stock should still hold up.
While the stock might be stuck in a sideway pattern at the moment, look for it to start trending higher after earnings. Over $25 CLF should post its third straight winning year and outperform the market by a steady margin.
Cal-Maine Foods is a Zacks Rank #5 (Strong Sell) that is primarily engaged in the production, grading, packing and sale of fresh shell eggs, including conventional, cage-free, organic and nutritionally-enhanced eggs.
The stock has been trading sideways since Q1 of last year and investors are getting exhausted over the lack of upside the company has shown. After a recent earnings miss, it might be time to give up on the name and allocate capital elsewhere.
About the Company
The company is the largest producer and distributor of fresh shell eggs in the United States. Some popular brand names include Land O’Lakes, Farmhouse, Egg-Land’s Best and 4-Grain.
Cal-Maine is headquartered in Ridgeland, Mississippi and employs over 3,000 people. The company was founded in 1957 and sells the majority of its shell eggs in states across the southwestern, southeastern, mid-western and mid-Atlantic regions of the United States.
CALM is valued at $1.8 billion and has a Forward PE of 34. The company holds a Zacks Style Score of “A” in Momentum Growth, but “D” in Value. That valuation has been a drag and an earnings miss hasn’t helped.
Q4 Earnings
Cal-Maine reported earnings on December 29th, missing expectations by 93%. On the positive side, revenues came in at $390.9M v the $347.3M from last year. The net average selling price per dozen was $1.86 v the $1.85 last year.
The company is facing inflationary pressures and trying to manage its costs. Management is focused on running efficient operations, but for now costs are eating into that bottom line.
Estimates
Estimates for the company are flat the current year. For next year we see a 1% drop over the last 7 days, from $1.01 to $1.00. While this isn’t a big move, its in the wrong direction.
Investors should wait until these numbers start moving the right way before getting back in this stock. And with that, they should make sure the technical aspect is in their favor as well.
Technical Take
As mentioned above, the stock has been in a sideways pattern, trading from between $34 and $40 since the summer months. However, if you go back even further, we saw a sideways trade between $40-50 for six years.
Price is now below that long-term range, which isn’t a good sign.
After earnings, the stock dropped almost 10%, but then rallied back. It popped back over the declining 200-day moving average and is at highs not seen since August. While this is a positive sign, sellers likely step in at the top of this range, so investors should consider doing the same.
If the stock were to fall below that $34-35 support zone, we could see some further downside. But the takeaway from the technical side is that this stock remains dead money.
In Summary
Cal-Maine is continuing to frustrate investors by trading sideways and disappointing on earnings. Until this stock can get out of its trading range, it's best to stay away.
Additional content:
Buy These 3 Semiconductor Stocks to Start 2022 with a Bang
The last two years have been pretty fantastic for many tech players, especially those on the building-block side, and for obvious reasons. We had all those workloads moving to remote locations, necessitating a massive decentralization of compute resources. The big question for everyone is whether and to what extent that momentum will continue this year.
A number of experts have weighed on the possibilities already, and tech has been referred to as a defensive play during the pandemic. And that’s so true. Even if you look past the big five or six stocks that were more or less responsible for what happened with the S&P 500 and the Nasdaq, there really has been a big story out there, all to do with supporting the players bringing about changes in computing.
Remote working isn’t the only driver, of course. We are, on the whole, doing much more online and through automated processes, not just on an individual level but also organizational. And again, everyone who can is operating AI models, creating huge opportunities in data collection and processing. The EV revolution also continues to unfold, with exciting implications for semiconductor players.
So it was really refreshing to hear somebody like AMD CEO Lisa Su confirming my expectations with the statement that the ongoing strength in semiconductor demand is ‘the new normal.’ Of course, she also said that supply chain issues remain, particularly in the desktop space, which could lead to a flattish year for that segment. But that is something that the industry will iron out as we move through the year.
So I set about selecting some semiconductor stocks that look poised to outperform this year-
Photronics
Photronics is a leading provider of photomasks that are stencil-like plates allowing light to shine through in specific patterns, thus facilitating the imprinting of designs onto a semiconductor or FPD substrate and other types of electrical and optical components. They are manufactured on the basis of customer product designs at facilities in Asia, Europe and North America.
Given the nature of its offering, Photronics stands to gain from new chip designs, expansion of capacity by semiconductor manufacturers including foundries and others, as well as the retooling of existing capacity to build new designs. So the current strength in the semiconductor market that is driving so many players to retool and expand capacity is extremely positive for Photronics’ prospects.
The company is also seeing very strong growth in China, which is racing to become self-sufficient in chips. China contributes more than a third of its sales at the moment, strength that should continue for the next few quarters at least.
In the last quarter, Photronics beat the Zacks Consensus Estimate by 32.0% on revenue that beat by 3.6%. The estimate for the current year ending in October jumped 27 cents (26.2%) in the last 30 days.
Photonics is currently expected to grow revenue and earnings both in 2022 and 2023.
The Zacks Rank #1 (Strong Buy) stock belongs to the Semiconductor Equipment – Photomasks industry, which is in the top 2% of Zacks-classified industries, indicating strong upside potential.
Photronics shares are up 43.0% in the last three months.
Tokyo Electron
Tokyo Electron Ltd. is the largest manufacturer of production equipment for ICs (coaters and developers for wafer processing, plasma etching equipment, thermal processing systems, etc.) and FPDs (coaters and developers for FPD manufacturing, plasma etching/ashing apparatus, etc.) in Japan and the third largest in the world.
Analysts currently expect Tokyo Electron’s revenue and earnings to grow a respective 33.2% and 65.5% in the year ending Mar 2022. They expect double-digit revenue and earnings growth the following year.
The Zacks Rank #1 stock belongs to the Semiconductor – Discretes industry, which is in the top 7% of Zacks-classified industries, a strong indication of upside potential.
Tokyo Electron shares are up 41.0% in the last three months.
Alpha and Omega Semiconductor
Alpha and Omega Semiconductor Ltd. is engaged in designing, developing and supplying a broad range of power semiconductors globally, including a portfolio of Power MOSFET and Power IC products. These are used in high-volume end-market applications, such as notebooks, netbooks, flat panel displays, mobile phone battery packs, set-top boxes, portable media players and power supplies.
Alpha and Omega did see a slight hiccup in 2020 as a result of the pandemic, but it recovered strongly thereafter. It has topped estimates by strong double-digits in each of the last four quarters. The estimate revisions history looks good: the 2022 (ending June) earnings estimate jumped 67 cents (19.6%) in the last 60 days while the 2023 estimate jumped 47 cents (12.9%).
Analysts currently expect Alpha and Omega to generate revenue and earnings growth of 17.8% and 39.3% this year. Growth is expected to continue in 2023.
Alpha and Omega shares are up 103.0% in the last three months.
Zacks Top 10 Stocks for 2022
In addition to the investment ideas discussed above, would you like to know about our 10 top picks for the entirety of 2022?
From inception in 2012 through November, the Zacks Top 10 Stocks gained an impressive +962.5% versus the S&P 500’s +329.4%. Now our Director of Research is combing through 4,000 companies covered by the Zacks Rank to handpick the best 10 tickers to buy and hold. Don’t miss your chance to get in on these stocks when they’re released on January 3.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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Cleveland-Cliffs and Cal-Maine Foods have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – January 5, 2022 – Zacks Equity Research shares Cleveland-Cliffs (CLF - Free Report) as the Bull of the Day, and Cal-Maine Foods (CALM - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Photronics (PLAB - Free Report) , Tokyo Electron (TOELY - Free Report) , and Alpha and Omega Semiconductor (AOSL - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Cleveland-Cliffs is a Zacks Rank #1 (Strong Buy) that is the largest flat-rolled steel producer in North America. The Company is vertically integrated, from mined raw materials, direct reduced iron, and ferrous scrap to primary steelmaking and downstream finishing, stamping, tooling, and tubing.
The stock had a fantastic 2020, moving from a COVID crash low of $2.63 to $15. The stock then continued higher in 2021, moving to $26.51 before pulling back to close up about 45% on the year.
The stock broke some technical support in December, but has recently reclaimed those levels. So investors are now wondering if the stock can continue its run and make it three straight years of outperformance.
About the Company
Cleveland-Cliffs serves a range of markets where they offer flat-rolled carbon steel, stainless, electrical, plate, tinplate, long steel products, carbon and stainless-steel tubing, and hot and cold stamping and tooling.The company was founded in 1847, has about 26,000 employees and is headquartered in Cleveland, Ohio.
CLF has a market cap of almost $11 Billion and has Zacks Style Scores of “A” in Growth and Value. The stock has a Forward PE of 4 and does not pay a dividend.
A New Company
In recent years, the company has acquired ArcelorMittal USA and AK Steel, These moves have transformed the focus from mining iron ore to being a vertically integrated steel producer.
With that, Cleveland-Cliffs completed its Toledo Direct Reduction plant last year. This natural-gas-based plant supplies high-quality hot-briquetted iron (HBI), an environmentally friendly alternative to scrap and imported pig iron. The plant is expected to generate significant value due to the scarcity of domestic prime scrap, all while meeting the company’s greenhouse gas initiative.
Q3 Earnings
In late October, Cleveland-Cliffs reported a 4% EPS beat. Revenues also came in above expectations and the company said they believe average sales price in 2022 should be higher than last year.
Steelmaking volume came in at 4.15M v 1.12M a year ago. And EBITDA was up to $1.93B from $126M a year ago.
Management commented that the company’s business model is based on contract sales and they have already renewed annual fixed price contracts for their most important customers. They add that because they aren’t exposed to steel spot prices, they see continued growth and are positioned for strong profitability.
Estimates
Estimates are actually coming down for the current quarter, which might be a reason the stock has fallen of late. However, looking over the next several quarters, things look very optimistic.
Over the last 90 days, estimates have jumped 125% higher for next quarter, moving from $1.13 to $2.54. For next year, we see a 60% jump over that same time frame.
The Technicals
Cleveland-Cliffs had some glory days back in 2007 and 2011, with the stock rising to $100 both years. However, both times the stock crashed under $20 and from 2013 on we didn’t see much life.
The stock had been dead money for almost a decade, and when COVID hit, CLF fell under $3.
The rally in the markets rewarded the CLF investors that stepped in during the panic. The stock rallied all the way to $26 last year and recently pulled back under $20.
So after all that, the stock is starting to trade in a sideways range, with resistance in the $25 area and support at the $20 level.
The moving averages are close together, with the 200-day at $21 and the 50-day at $22. I would expect sideways trading until the next quarter, but if the company can impress there is an opportunity for a large move upwards.
The halfway back from 2021 lows to highs has held well. This 50% Fibonacci retracement has given investors a place to rely on and buy. A break of that $25 resistance could bring the stock to $30 in a hurry. This would be an up move of over 30% from current levels.
Bottom Line
Investors in Cleveland-Cliffs get some value and growth in a company that has recently transformed itself. The company isn’t exposed to steel prices like most steel stocks, so if prices fall, the stock should still hold up.
While the stock might be stuck in a sideway pattern at the moment, look for it to start trending higher after earnings. Over $25 CLF should post its third straight winning year and outperform the market by a steady margin.
Bear of the Day:
Cal-Maine Foods is a Zacks Rank #5 (Strong Sell) that is primarily engaged in the production, grading, packing and sale of fresh shell eggs, including conventional, cage-free, organic and nutritionally-enhanced eggs.
The stock has been trading sideways since Q1 of last year and investors are getting exhausted over the lack of upside the company has shown. After a recent earnings miss, it might be time to give up on the name and allocate capital elsewhere.
About the Company
The company is the largest producer and distributor of fresh shell eggs in the United States. Some popular brand names include Land O’Lakes, Farmhouse, Egg-Land’s Best and 4-Grain.
Cal-Maine is headquartered in Ridgeland, Mississippi and employs over 3,000 people. The company was founded in 1957 and sells the majority of its shell eggs in states across the southwestern, southeastern, mid-western and mid-Atlantic regions of the United States.
CALM is valued at $1.8 billion and has a Forward PE of 34. The company holds a Zacks Style Score of “A” in Momentum Growth, but “D” in Value. That valuation has been a drag and an earnings miss hasn’t helped.
Q4 Earnings
Cal-Maine reported earnings on December 29th, missing expectations by 93%. On the positive side, revenues came in at $390.9M v the $347.3M from last year. The net average selling price per dozen was $1.86 v the $1.85 last year.
The company is facing inflationary pressures and trying to manage its costs. Management is focused on running efficient operations, but for now costs are eating into that bottom line.
Estimates
Estimates for the company are flat the current year. For next year we see a 1% drop over the last 7 days, from $1.01 to $1.00. While this isn’t a big move, its in the wrong direction.
Investors should wait until these numbers start moving the right way before getting back in this stock. And with that, they should make sure the technical aspect is in their favor as well.
Technical Take
As mentioned above, the stock has been in a sideways pattern, trading from between $34 and $40 since the summer months. However, if you go back even further, we saw a sideways trade between $40-50 for six years.
Price is now below that long-term range, which isn’t a good sign.
After earnings, the stock dropped almost 10%, but then rallied back. It popped back over the declining 200-day moving average and is at highs not seen since August. While this is a positive sign, sellers likely step in at the top of this range, so investors should consider doing the same.
If the stock were to fall below that $34-35 support zone, we could see some further downside. But the takeaway from the technical side is that this stock remains dead money.
In Summary
Cal-Maine is continuing to frustrate investors by trading sideways and disappointing on earnings. Until this stock can get out of its trading range, it's best to stay away.
Additional content:
Buy These 3 Semiconductor Stocks to Start 2022 with a Bang
The last two years have been pretty fantastic for many tech players, especially those on the building-block side, and for obvious reasons. We had all those workloads moving to remote locations, necessitating a massive decentralization of compute resources. The big question for everyone is whether and to what extent that momentum will continue this year.
A number of experts have weighed on the possibilities already, and tech has been referred to as a defensive play during the pandemic. And that’s so true. Even if you look past the big five or six stocks that were more or less responsible for what happened with the S&P 500 and the Nasdaq, there really has been a big story out there, all to do with supporting the players bringing about changes in computing.
Remote working isn’t the only driver, of course. We are, on the whole, doing much more online and through automated processes, not just on an individual level but also organizational. And again, everyone who can is operating AI models, creating huge opportunities in data collection and processing. The EV revolution also continues to unfold, with exciting implications for semiconductor players.
So it was really refreshing to hear somebody like AMD CEO Lisa Su confirming my expectations with the statement that the ongoing strength in semiconductor demand is ‘the new normal.’ Of course, she also said that supply chain issues remain, particularly in the desktop space, which could lead to a flattish year for that segment. But that is something that the industry will iron out as we move through the year.
So I set about selecting some semiconductor stocks that look poised to outperform this year-
Photronics
Photronics is a leading provider of photomasks that are stencil-like plates allowing light to shine through in specific patterns, thus facilitating the imprinting of designs onto a semiconductor or FPD substrate and other types of electrical and optical components. They are manufactured on the basis of customer product designs at facilities in Asia, Europe and North America.
Given the nature of its offering, Photronics stands to gain from new chip designs, expansion of capacity by semiconductor manufacturers including foundries and others, as well as the retooling of existing capacity to build new designs. So the current strength in the semiconductor market that is driving so many players to retool and expand capacity is extremely positive for Photronics’ prospects.
The company is also seeing very strong growth in China, which is racing to become self-sufficient in chips. China contributes more than a third of its sales at the moment, strength that should continue for the next few quarters at least.
In the last quarter, Photronics beat the Zacks Consensus Estimate by 32.0% on revenue that beat by 3.6%. The estimate for the current year ending in October jumped 27 cents (26.2%) in the last 30 days.
Photonics is currently expected to grow revenue and earnings both in 2022 and 2023.
The Zacks Rank #1 (Strong Buy) stock belongs to the Semiconductor Equipment – Photomasks industry, which is in the top 2% of Zacks-classified industries, indicating strong upside potential.
Photronics shares are up 43.0% in the last three months.
Tokyo Electron
Tokyo Electron Ltd. is the largest manufacturer of production equipment for ICs (coaters and developers for wafer processing, plasma etching equipment, thermal processing systems, etc.) and FPDs (coaters and developers for FPD manufacturing, plasma etching/ashing apparatus, etc.) in Japan and the third largest in the world.
Analysts currently expect Tokyo Electron’s revenue and earnings to grow a respective 33.2% and 65.5% in the year ending Mar 2022. They expect double-digit revenue and earnings growth the following year.
The Zacks Rank #1 stock belongs to the Semiconductor – Discretes industry, which is in the top 7% of Zacks-classified industries, a strong indication of upside potential.
Tokyo Electron shares are up 41.0% in the last three months.
Alpha and Omega Semiconductor
Alpha and Omega Semiconductor Ltd. is engaged in designing, developing and supplying a broad range of power semiconductors globally, including a portfolio of Power MOSFET and Power IC products. These are used in high-volume end-market applications, such as notebooks, netbooks, flat panel displays, mobile phone battery packs, set-top boxes, portable media players and power supplies.
Alpha and Omega did see a slight hiccup in 2020 as a result of the pandemic, but it recovered strongly thereafter. It has topped estimates by strong double-digits in each of the last four quarters. The estimate revisions history looks good: the 2022 (ending June) earnings estimate jumped 67 cents (19.6%) in the last 60 days while the 2023 estimate jumped 47 cents (12.9%).
Analysts currently expect Alpha and Omega to generate revenue and earnings growth of 17.8% and 39.3% this year. Growth is expected to continue in 2023.
Alpha and Omega shares are up 103.0% in the last three months.
Zacks Top 10 Stocks for 2022
In addition to the investment ideas discussed above, would you like to know about our 10 top picks for the entirety of 2022?
From inception in 2012 through November, the Zacks Top 10 Stocks gained an impressive +962.5% versus the S&P 500’s +329.4%. Now our Director of Research is combing through 4,000 companies covered by the Zacks Rank to handpick the best 10 tickers to buy and hold. Don’t miss your chance to get in on these stocks when they’re released on January 3.
Be First to New Top 10 Stocks >>
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.