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Walker & Dunlop (WD - Free Report) originates, sells, and services a range of multifamily and other commercial real estate financing products and services for owners and developers in the United States. The company offers first mortgage, second trust, supplemental, construction, mezzanine, preferred equity, and small-balance loans. WD also provides financing for manufactured housing, student housing, affordable housing, and senior housing.
The company also offers appraisal, market research, and valuation services, in addition to real estate-related investment banking and advisory services. WD originates loans through its principal lending and investing arm. Walker & Dunlop was founded in 1937 and is based in Bethesda, MD.
The Zacks Rundown
WD, a Zacks Rank #5 (Strong Sell), is a component of the Zacks Financial – Mortgage & Related Services industry group, which ranks in the bottom 15% out of approximately 250 Zacks Ranked Industries. As such, we expect this industry group as a whole to underperform the market over the next 3 to 6 months.
Candidates in the bottom tiers of industries can often be solid potential short candidates. While individual stocks have the ability to outperform even when included in a poor-performing industry group, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much more difficult.
Along with many other financial-related stocks, WD has been underperforming this year as recent banking failures have put a dent on the whole financial sector. The share price is hitting a series 52-week lows and represents a compelling short opportunity as the market remains volatile.
Recent Earnings Misses & Deteriorating Outlook
WD has fallen short of earnings estimates in three of the past four quarters. The company most recently reported a Q4 profit of $1.41/share back in February, missing the $1.55/share consensus EPS estimate by -9.03%. The stock has moved steadily lower since the announcement.
Over the past three quarters, WD has delivered an average earnings miss of -5.58%. Consistently falling short of earnings estimates is a recipe for underperformance, and Walker & Dunlop is no exception.
WD has been on the receiving end of negative earnings estimate revisions as of late. Looking into the current quarter, analysts have decreased Q2 estimates by -26.37% in the past 60 days. The Zacks Consensus EPS Estimate is now $1.34/share, reflecting a -16.77% regression relative to the same quarter in the prior year.
Image Source: Zacks Investment Research
Falling earnings estimates are a huge red flag and need to be respected. Negative growth year-over-year is the type of trend that bears like to see.
Technical Outlook
As illustrated below, WD in a sustained downtrend. WD has plunged below important technical levels in the 50-day and 200-day moving averages. The stock is making a series of lower lows, with no respite from the selling in sight.
Image Source: Zacks Investment Research
While not the most accurate indicator, WD has also experienced what is known as a ‘death cross’, wherein the stock’s 50-day moving average crosses below its 200-day moving average. WD would have to make a serious move to the upside and show increasing earnings estimate revisions to warrant taking any long positions in the stock. The stock has fallen more than 40% in the past year alone.
Final Thoughts
A deteriorating fundamental and technical backdrop show that this stock is not set to build upon its former highs anytime soon. The fact that WD is included in one of the worst-performing industry groups provides yet another headwind to a long list of concerns. A history of earnings misses and falling future earnings estimates will likely serve as a ceiling to any potential rallies, nurturing the stock’s downtrend.
A series of 52-week lows indicate the downtrend is likely far from over. Potential investors may want to give this stock the cold shoulder, or perhaps include it as part of a short or hedge strategy. Bulls will want to steer clear of WD until the situation shows major signs of improvement.
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Bear of the Day: Walker & Dunlop, Inc. (WD)
Walker & Dunlop (WD - Free Report) originates, sells, and services a range of multifamily and other commercial real estate financing products and services for owners and developers in the United States. The company offers first mortgage, second trust, supplemental, construction, mezzanine, preferred equity, and small-balance loans. WD also provides financing for manufactured housing, student housing, affordable housing, and senior housing.
The company also offers appraisal, market research, and valuation services, in addition to real estate-related investment banking and advisory services. WD originates loans through its principal lending and investing arm. Walker & Dunlop was founded in 1937 and is based in Bethesda, MD.
The Zacks Rundown
WD, a Zacks Rank #5 (Strong Sell), is a component of the Zacks Financial – Mortgage & Related Services industry group, which ranks in the bottom 15% out of approximately 250 Zacks Ranked Industries. As such, we expect this industry group as a whole to underperform the market over the next 3 to 6 months.
Candidates in the bottom tiers of industries can often be solid potential short candidates. While individual stocks have the ability to outperform even when included in a poor-performing industry group, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much more difficult.
Along with many other financial-related stocks, WD has been underperforming this year as recent banking failures have put a dent on the whole financial sector. The share price is hitting a series 52-week lows and represents a compelling short opportunity as the market remains volatile.
Recent Earnings Misses & Deteriorating Outlook
WD has fallen short of earnings estimates in three of the past four quarters. The company most recently reported a Q4 profit of $1.41/share back in February, missing the $1.55/share consensus EPS estimate by -9.03%. The stock has moved steadily lower since the announcement.
Over the past three quarters, WD has delivered an average earnings miss of -5.58%. Consistently falling short of earnings estimates is a recipe for underperformance, and Walker & Dunlop is no exception.
WD has been on the receiving end of negative earnings estimate revisions as of late. Looking into the current quarter, analysts have decreased Q2 estimates by -26.37% in the past 60 days. The Zacks Consensus EPS Estimate is now $1.34/share, reflecting a -16.77% regression relative to the same quarter in the prior year.
Image Source: Zacks Investment Research
Falling earnings estimates are a huge red flag and need to be respected. Negative growth year-over-year is the type of trend that bears like to see.
Technical Outlook
As illustrated below, WD in a sustained downtrend. WD has plunged below important technical levels in the 50-day and 200-day moving averages. The stock is making a series of lower lows, with no respite from the selling in sight.
Image Source: Zacks Investment Research
While not the most accurate indicator, WD has also experienced what is known as a ‘death cross’, wherein the stock’s 50-day moving average crosses below its 200-day moving average. WD would have to make a serious move to the upside and show increasing earnings estimate revisions to warrant taking any long positions in the stock. The stock has fallen more than 40% in the past year alone.
Final Thoughts
A deteriorating fundamental and technical backdrop show that this stock is not set to build upon its former highs anytime soon. The fact that WD is included in one of the worst-performing industry groups provides yet another headwind to a long list of concerns. A history of earnings misses and falling future earnings estimates will likely serve as a ceiling to any potential rallies, nurturing the stock’s downtrend.
A series of 52-week lows indicate the downtrend is likely far from over. Potential investors may want to give this stock the cold shoulder, or perhaps include it as part of a short or hedge strategy. Bulls will want to steer clear of WD until the situation shows major signs of improvement.