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Merck and Block have been highlighted as Zacks Bull and Bear of the Day
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For Immediate Release
Chicago, IL – July 18, 2022 – Zacks Equity Research shares Merck & Co. (MRK - Free Report) as the Bull of the Day and Block Inc. (SQ - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Lithia Motors (LAD - Free Report) , Driven Brand Holdings (DRVN - Free Report) and Allison Transmission (ALSN - Free Report) .
Few areas of the economy are considered recession-proof. The wider healthcare field is part of that select group of sectors prepared to stay above any larger pullback in consumer spending and thrive even during a slowing U.S. economy.
Merck & Co. is a $240 billion market cap pharmaceutical titan that's climbed over 20% in 2022. The firm is continuing to make acquisitions and many of Merck's fundamentals make it an attractive play for the second half of 2022 and for years to come.
Oncology, Vaccines & Beyond
Merck is a diversified pharmaceutical company with offerings in areas such as oncology, vaccines, infectious diseases, diabetes, and beyond. One of its oncology stars is cancer-fighting drug Keytruda. Its first quarter sales climbed 23% to account for around 30% of total Q1 revenue.
Keytruda is an immunotherapy prescription medicine used to treat melanoma, non–small cell lung cancer, classical Hodgkin lymphoma (cHL), and more. Meanwhile, its HPV vaccinations Gardasil and Gardasil 9 soared 59%. Merck's animal health segment climbed 4% overall.
Merck's Covid-19 antiviral pill known as Lagevrio (molnupiravir) continued to shine as it competes against a similar offering from Pfizer. Both drugs aim to help treat Covid-19 and prevent hospitalizations. Merck's offering has brought in tons of sales so far, with first quarter revenue coming at $3.25 billion, putting it behind only Keytruda in terms of total revenue.
Merck also bolstered its long-term portfolio last November when it bought Acceleron Pharma for roughly $11.5 billion. One of Acceleron's prized offerings is an experimental drug for pulmonary arterial hypertension, which is a progressive and life-threatening blood vessel disorder. And it doesn't appear that Merk will stop there, with the Wall Street Journal reporting recently that it's in advanced talks to buy cancer-focused biotech company Seagen.
Recent Growth and Outlook
Merck's revenue climbed 6% in 2020 and 17% in 2021. Current Zacks estimates call for its revenue to pop another 16% in FY22 to hit $58.10 billion. Meanwhile, its adjusted earnings surged 33% last year, with it projected to jump 21% in FY22 to come in at $7.31 per share.
Peeking ahead, both its top and bottom lines are projected to pullback slightly (dip -2% YoY) in 2023 as Merck comes up against difficult to compete against periods. On the positive side, Merck last quarter raised its 2022 revenue and earnings guidance, with its upward earnings revisions helping MRK land a Zacks Rank #1 (Strong Buy) right now.
Merck's history of quarterly earnings beats is solid, outside of a small stretch during 2021. It has topped our adjusted EPS estimates by an average of 18% in the trailing three quarters.
Other Fundamentals
As we mentioned at the outset, Merck shares have shined in 2022. The stock is up roughly 22% YTD to top its highly-ranked Large Cap Pharma industry's 15% run and blow away the S&P 500's -15% drop. In fact, Merck closed regular trading Friday right near its all-time highs.
MRK shares have climbed 52% in the last five years to lag just behind its industry, with Merck up 120% in the past 10 years. The stock has trailed its peers over the trailing 36 months, but its 2022 run could signal it's ready to outperform going forward.
Even though Merck is trading right around fresh highs, its valuation levels are enticing. MRK trades at 12.9X forward 12-month earnings at the moment, good enough for a 27% discount to its own five-year highs and 13% value compared to its industry's current average. Merck is even trading 8% beneath its five-year median.
Merck's strong 2022 and solid long-term performance helps make its 2.9% dividend yield all the more impressive. Its current yield tops its industry's 2.5% average, the S&P 500's 1.6%, and roughly matches the 30-year U.S. Treasury.
Wrapping Up
Merck is part of the Large Cap Pharmaceuticals space that's in the top 21% of over 250 Zacks industries at the moment. Being part of a highly-ranked area is normally advantageous for stocks and it's crucial during bear markets and wider economic uncertainty.
Alongside its Zacks Rank #1 (Strong Buy) standing, 10 of the 18 brokerage recommendations Zacks has are "Strong Buys," with the rest coming in at "Holds."
Block Inc., formally known as Square, has transformed from a small company that sold credit card readers for smart devices into a diversified financial tech standout.
Block's long-term outlook appears relatively intact in our digital money world. But SQ shares have tumbled alongside most other growth stocks. Block also faces tough-to-compete-against periods and the prospect of slowing consumer spending.
Block's Story
Block portfolio includes a range of point-of-sale offerings, broader payment software and infrastructure, business loans, peer-to-peer payments, bitcoin transactions, and much more. The company's goal is to be a futuristic digital-native banking and financial services powerhouse for both sellers and consumers.
Block's business-focused fintech offerings are catching on with larger sellers amid the continued e-commerce revolution and it's been able to successfully join together its in-person POS segment and its digital commerce features. Wall Street also grew to love its P2P platform the Cash App.
Block made a pretty big splash when it decided to acquire "buy now, pay later" standout Afterpay. The all-stock deal valued at $29 billion closed on January 31. The broader buy now, pay later segment has, however, come under pressure amid the market selloff and downbeat consumer sentimen
Block is coming off to an impressive run of top-line growth that included 86% sales expansion in 2021 and 102% in 2020 which saw it climb from $4.7 billion in total FY19 revenue to $17.7 billion in 2021. These are nearly impossible to compete against periods, boosted by the covid economy.
With this in mind, current Zacks estimates still call for Block's 2022 revenue to climb roughly 2% and then jump another 23% in 2023. Both would mark by far its slowest ever growth as a public firm. At the same time, its adjusted 2022 earnings are projected to drop 50% YoY to $0.85 a share. And its consensus FY22 and FY23 EPS estimates have fallen since its last release.
Bottom Line
Block's downward earnings revisions help it land a Zacks Rank #5 (Strong Sell) at the moment. Wall Street has also continued to hammer SQ alongside all things growth, with the stock down over 75% since last August and 60% in 2022. All of its covid gains are gone, with it trading within a range it hovered between in 2018, 2019, and 2020.
The downturn and SQ's current levels might attract some long-term investors. But it might be best to stay away from the stock at least until Wall Street shows some willingness to buy these beaten-down names.
Investors won't have to wait too long for company updates, with Block set to report its quarterly results on August 4.
Additional content:
Key Predictions as Lithia (LAD - Free Report) Gears Up for Q2 Earnings
Lithia Motors is slated to release second-quarter 2022 results on Jul 20, before the opening bell. The Zacks Consensus Estimate for the to-be-reported quarter's earnings and revenues is pegged at $11.85 per share and $7.49 billion, respectively.
The Zacks Consensus Estimate for second-quarter earnings per share has remained stable over the past 30 days. The metric indicates a significant year-over-year jump of 6.6%. Further, the Zacks Consensus Estimate for quarterly revenues suggests year-over-year growth of 24.7%.
The auto retailer came up with better-than-expected results in the last reported quarter on the back of higher-than-expected revenues from new vehicle, used vehicle (retail and wholesale), and fleet and others segments. In fact, Lithia surpassed earnings estimates in the last four quarters, with the average being 30.5%.
Our proven model doesn't conclusively predict an earnings beat for Lithia this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is the case here. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%.This is because the Most Accurate Estimate for earnings is in line with the Zacks Consensus Estimate.
A spree of acquisitions had brought Lithia's total expected annualized revenue acquired to $7 billion in 2021. Since the beginning of 2022 through June-end, the firm's total expected annualized revenues acquired reached over $2.1 billion. These strategic buyouts are likely to have enhanced Lithia's product portfolio, market share and revenues. Also, we expect Lithia's Driveway e-commerce program to have significantly buoyed the firm's second-quarter revenues.
The Zacks Consensus Estimate for Lithia's revenues in the used vehicle business is $2,945 million, indicating a significant increase from $2,022 million recorded in the year-ago period. The metric also implies sequential growth of 12.4%. The consensus mark for revenues from the new vehicle segment stands at $3,730 million, suggesting 18.5% and 21.8% year-over-year and sequential growth, respectively.
The Zacks Consensus Estimate for revenues from Finance & Insurance is pegged at $378 million, implying an increase from $313 million and $270 million recorded in the last reported quarter and the year-ago period, respectively.
Nonetheless, the projected decline in gross margins for used and new vehicle retail raises concerns about the upcoming results. The consensus mark for second-quarter 2022 gross margins in the used vehicle retail segment is pegged at 9.7%, signaling a drop from 10% and 13.4% recorded in the prior reported quarter and the corresponding period of 2021, respectively. The Zacks Consensus Estimate for gross margin in the used vehicle retail segment is 12.61%, implying a contraction from 13.10% recorded in the first quarter of 2022.
Stocks with the Favorable Combination
Here are a couple of players from the auto space, which, according to our model, have the right combination of elements to post an earnings beat for the quarter to be reported:
Driven Brand Holdings has an Earnings ESP of +14.45% and a Zacks Rank #3. The stock is expected to report second-quarter 2022 earnings on Jul 27.
The Zacks Consensus Estimate for Driven's to-be-reported quarter's earnings and revenues is pegged at 29 cents per share and $486 million, respectively. Encouragingly, DRVN surpassed earnings estimates in the last four quarters, with the average being 30.1%.
Allison Transmission has an Earnings ESP of +3.87% and a Zacks Rank #3. The stock is set to report second-quarter 2022 earnings on Aug 3.
The Zacks Consensus Estimate for Allison's to-be-reported quarter's earnings and revenues is pegged at $1.33 per share and $695 million, respectively. Encouragingly, ALSN surpassed earnings estimates in the last four quarters, with the average being 11.7%.
Our 5 best-performing strategies have blown away the S&P's impressive +28.8% gain in 2021. Amazingly, they soared +40.3%, +48.2%, +67.6%, +94.4%, and +95.3%. Today you can access their live picks without cost or obligation.
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/performance for information about the performance numbers displayed in this press release.
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Merck and Block have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – July 18, 2022 – Zacks Equity Research shares Merck & Co. (MRK - Free Report) as the Bull of the Day and Block Inc. (SQ - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Lithia Motors (LAD - Free Report) , Driven Brand Holdings (DRVN - Free Report) and Allison Transmission (ALSN - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Few areas of the economy are considered recession-proof. The wider healthcare field is part of that select group of sectors prepared to stay above any larger pullback in consumer spending and thrive even during a slowing U.S. economy.
Merck & Co. is a $240 billion market cap pharmaceutical titan that's climbed over 20% in 2022. The firm is continuing to make acquisitions and many of Merck's fundamentals make it an attractive play for the second half of 2022 and for years to come.
Oncology, Vaccines & Beyond
Merck is a diversified pharmaceutical company with offerings in areas such as oncology, vaccines, infectious diseases, diabetes, and beyond. One of its oncology stars is cancer-fighting drug Keytruda. Its first quarter sales climbed 23% to account for around 30% of total Q1 revenue.
Keytruda is an immunotherapy prescription medicine used to treat melanoma, non–small cell lung cancer, classical Hodgkin lymphoma (cHL), and more. Meanwhile, its HPV vaccinations Gardasil and Gardasil 9 soared 59%. Merck's animal health segment climbed 4% overall.
Merck's Covid-19 antiviral pill known as Lagevrio (molnupiravir) continued to shine as it competes against a similar offering from Pfizer. Both drugs aim to help treat Covid-19 and prevent hospitalizations. Merck's offering has brought in tons of sales so far, with first quarter revenue coming at $3.25 billion, putting it behind only Keytruda in terms of total revenue.
Merck also bolstered its long-term portfolio last November when it bought Acceleron Pharma for roughly $11.5 billion. One of Acceleron's prized offerings is an experimental drug for pulmonary arterial hypertension, which is a progressive and life-threatening blood vessel disorder. And it doesn't appear that Merk will stop there, with the Wall Street Journal reporting recently that it's in advanced talks to buy cancer-focused biotech company Seagen.
Recent Growth and Outlook
Merck's revenue climbed 6% in 2020 and 17% in 2021. Current Zacks estimates call for its revenue to pop another 16% in FY22 to hit $58.10 billion. Meanwhile, its adjusted earnings surged 33% last year, with it projected to jump 21% in FY22 to come in at $7.31 per share.
Peeking ahead, both its top and bottom lines are projected to pullback slightly (dip -2% YoY) in 2023 as Merck comes up against difficult to compete against periods. On the positive side, Merck last quarter raised its 2022 revenue and earnings guidance, with its upward earnings revisions helping MRK land a Zacks Rank #1 (Strong Buy) right now.
Merck's history of quarterly earnings beats is solid, outside of a small stretch during 2021. It has topped our adjusted EPS estimates by an average of 18% in the trailing three quarters.
Other Fundamentals
As we mentioned at the outset, Merck shares have shined in 2022. The stock is up roughly 22% YTD to top its highly-ranked Large Cap Pharma industry's 15% run and blow away the S&P 500's -15% drop. In fact, Merck closed regular trading Friday right near its all-time highs.
MRK shares have climbed 52% in the last five years to lag just behind its industry, with Merck up 120% in the past 10 years. The stock has trailed its peers over the trailing 36 months, but its 2022 run could signal it's ready to outperform going forward.
Even though Merck is trading right around fresh highs, its valuation levels are enticing. MRK trades at 12.9X forward 12-month earnings at the moment, good enough for a 27% discount to its own five-year highs and 13% value compared to its industry's current average. Merck is even trading 8% beneath its five-year median.
Merck's strong 2022 and solid long-term performance helps make its 2.9% dividend yield all the more impressive. Its current yield tops its industry's 2.5% average, the S&P 500's 1.6%, and roughly matches the 30-year U.S. Treasury.
Wrapping Up
Merck is part of the Large Cap Pharmaceuticals space that's in the top 21% of over 250 Zacks industries at the moment. Being part of a highly-ranked area is normally advantageous for stocks and it's crucial during bear markets and wider economic uncertainty.
Alongside its Zacks Rank #1 (Strong Buy) standing, 10 of the 18 brokerage recommendations Zacks has are "Strong Buys," with the rest coming in at "Holds."
Bear of the Day:
Block Inc., formally known as Square, has transformed from a small company that sold credit card readers for smart devices into a diversified financial tech standout.
Block's long-term outlook appears relatively intact in our digital money world. But SQ shares have tumbled alongside most other growth stocks. Block also faces tough-to-compete-against periods and the prospect of slowing consumer spending.
Block's Story
Block portfolio includes a range of point-of-sale offerings, broader payment software and infrastructure, business loans, peer-to-peer payments, bitcoin transactions, and much more. The company's goal is to be a futuristic digital-native banking and financial services powerhouse for both sellers and consumers.
Block's business-focused fintech offerings are catching on with larger sellers amid the continued e-commerce revolution and it's been able to successfully join together its in-person POS segment and its digital commerce features. Wall Street also grew to love its P2P platform the Cash App.
Block made a pretty big splash when it decided to acquire "buy now, pay later" standout Afterpay. The all-stock deal valued at $29 billion closed on January 31. The broader buy now, pay later segment has, however, come under pressure amid the market selloff and downbeat consumer sentimen
Block is coming off to an impressive run of top-line growth that included 86% sales expansion in 2021 and 102% in 2020 which saw it climb from $4.7 billion in total FY19 revenue to $17.7 billion in 2021. These are nearly impossible to compete against periods, boosted by the covid economy.
With this in mind, current Zacks estimates still call for Block's 2022 revenue to climb roughly 2% and then jump another 23% in 2023. Both would mark by far its slowest ever growth as a public firm. At the same time, its adjusted 2022 earnings are projected to drop 50% YoY to $0.85 a share. And its consensus FY22 and FY23 EPS estimates have fallen since its last release.
Bottom Line
Block's downward earnings revisions help it land a Zacks Rank #5 (Strong Sell) at the moment. Wall Street has also continued to hammer SQ alongside all things growth, with the stock down over 75% since last August and 60% in 2022. All of its covid gains are gone, with it trading within a range it hovered between in 2018, 2019, and 2020.
The downturn and SQ's current levels might attract some long-term investors. But it might be best to stay away from the stock at least until Wall Street shows some willingness to buy these beaten-down names.
Investors won't have to wait too long for company updates, with Block set to report its quarterly results on August 4.
Additional content:
Key Predictions as Lithia (LAD - Free Report) Gears Up for Q2 Earnings
Lithia Motors is slated to release second-quarter 2022 results on Jul 20, before the opening bell. The Zacks Consensus Estimate for the to-be-reported quarter's earnings and revenues is pegged at $11.85 per share and $7.49 billion, respectively.
The Zacks Consensus Estimate for second-quarter earnings per share has remained stable over the past 30 days. The metric indicates a significant year-over-year jump of 6.6%. Further, the Zacks Consensus Estimate for quarterly revenues suggests year-over-year growth of 24.7%.
The auto retailer came up with better-than-expected results in the last reported quarter on the back of higher-than-expected revenues from new vehicle, used vehicle (retail and wholesale), and fleet and others segments. In fact, Lithia surpassed earnings estimates in the last four quarters, with the average being 30.5%.
Lithia Motors, Inc. price-eps-surprise | Lithia Motors, Inc. Quote
Earnings Whispers
Our proven model doesn't conclusively predict an earnings beat for Lithia this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is the case here. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%.This is because the Most Accurate Estimate for earnings is in line with the Zacks Consensus Estimate.
Zacks Rank: Lithia currently carries a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here.
Things to Note
A spree of acquisitions had brought Lithia's total expected annualized revenue acquired to $7 billion in 2021. Since the beginning of 2022 through June-end, the firm's total expected annualized revenues acquired reached over $2.1 billion. These strategic buyouts are likely to have enhanced Lithia's product portfolio, market share and revenues. Also, we expect Lithia's Driveway e-commerce program to have significantly buoyed the firm's second-quarter revenues.
The Zacks Consensus Estimate for Lithia's revenues in the used vehicle business is $2,945 million, indicating a significant increase from $2,022 million recorded in the year-ago period. The metric also implies sequential growth of 12.4%. The consensus mark for revenues from the new vehicle segment stands at $3,730 million, suggesting 18.5% and 21.8% year-over-year and sequential growth, respectively.
The Zacks Consensus Estimate for revenues from Finance & Insurance is pegged at $378 million, implying an increase from $313 million and $270 million recorded in the last reported quarter and the year-ago period, respectively.
Nonetheless, the projected decline in gross margins for used and new vehicle retail raises concerns about the upcoming results. The consensus mark for second-quarter 2022 gross margins in the used vehicle retail segment is pegged at 9.7%, signaling a drop from 10% and 13.4% recorded in the prior reported quarter and the corresponding period of 2021, respectively. The Zacks Consensus Estimate for gross margin in the used vehicle retail segment is 12.61%, implying a contraction from 13.10% recorded in the first quarter of 2022.
Stocks with the Favorable Combination
Here are a couple of players from the auto space, which, according to our model, have the right combination of elements to post an earnings beat for the quarter to be reported:
Driven Brand Holdings has an Earnings ESP of +14.45% and a Zacks Rank #3. The stock is expected to report second-quarter 2022 earnings on Jul 27.
The Zacks Consensus Estimate for Driven's to-be-reported quarter's earnings and revenues is pegged at 29 cents per share and $486 million, respectively. Encouragingly, DRVN surpassed earnings estimates in the last four quarters, with the average being 30.1%.
Allison Transmission has an Earnings ESP of +3.87% and a Zacks Rank #3. The stock is set to report second-quarter 2022 earnings on Aug 3.
The Zacks Consensus Estimate for Allison's to-be-reported quarter's earnings and revenues is pegged at $1.33 per share and $695 million, respectively. Encouragingly, ALSN surpassed earnings estimates in the last four quarters, with the average being 11.7%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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Our 5 best-performing strategies have blown away the S&P's impressive +28.8% gain in 2021. Amazingly, they soared +40.3%, +48.2%, +67.6%, +94.4%, and +95.3%. Today you can access their live picks without cost or obligation.
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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/performance for information about the performance numbers displayed in this press release.