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July trading has started slowly with a large chunk of Wall Street on vacation. The S&P 500 gained 0.1% during a shortened session on Monday, while the Nasdaq edged 0.2% higher. Both indexes were slightly lower through early afternoon trading Wednesday as investors waited for inflation and interest rate updates via the Fed’s June minutes.
Wall Street isn’t likely to learn too much more, since Jay Powell and the Fed already said they plan to raise rates again in 2023 and leave them higher for longer than many hoped several months ago. Traders currently place a roughly 90% chance on the Fed raising rates by 0.25% at its late-July FOMC meeting to take its benchmark rate to between 5.25% and 5.50%, based on the CME Fed Watch Tool. Peeking further down the road, Wall Street sees rates staying (70% chance) at those new levels or 25 basis points higher into January 2024.
Investors appear to be growing comfortable with the new higher-rate environment. And the economy is showcasing impressive resilience that has more on Wall Street calling for a soft-landing as the labor market, supply chains, and more continue to normalize following the truly unprecedented Covid shocks. Plus, if history is a useful guide, the market could be headed for a strong back half of 2023 even after its bullish start.
Plus, other areas outside of big tech are finally starting to participate in the rally. All 11 S&P 500 sectors climbed in June. And the overall S&P 500 earnings picture is stabilizing and even starting to trend higher for some areas of the market.
The first-half rally also showcases why it is vital to stay exposed to the stock market as much as possible because few were calling for a bullish first six months of 2023 back at the end of 2022.
Today we use a Zacks screen that helps find stocks that offer a combination of value and improving earnings outlooks for investors looking to buy stocks in July and beyond.
Screen Basics
The screen we are digging into today comes loaded with the Research Wizard and aims to sort through highly-ranked Zacks stocks to find some of the top value names.
This value-focused screen searches only for stocks that boast Zacks Rank #1 (Strong Buys) or #2 (Buys). It also focuses on stocks with price-to-earnings (P/E) ratios under the median for its industry. The screen also looks for stocks with price-to-sales (P/S) ratios under the median for its industry to help lock in relative value compared to its peers, since basing it off the wider market is not always the most useful tool.
The screen then digs into quarterly earnings rates above the median for its industry. This particular Zacks screen also uses a special blend of upgrades and estimates revisions to select the best seven stocks in this list.
The screen basics are listed below…
· Only Zacks Rank #1 (Strong Buy) or #2 (Buy) Stocks
· P/E (using 12-month EPS) - Under the Median for its Industry
· P/S - Under the Median for its Industry
· Percentage Change Act. EPS Q(0)/Q(-1)
· Rating Change and Revisions Factors (to help narrow the list to the 7 best stocks in this list)
This strategy comes loaded with the Research Wizard and it is called bt_sow_value_method1. It can be found in the SoW (Screen of the Week) folder.
The screen is pretty simple, yet powerful. Here are two of the seven stocks that made it through this week's screen…
KB Home is one of the largest homebuilders in the U.S., operating in nearly 50 markets across Colorado, Arizona, Texas, California, Nevada, Washington, and beyond. KBH allows buyers to customize many aspects of their homes and it is committed to energy-efficient offerings. KB Home’s revenue soared 37% in 2021 and another 21% in 2022 amid the Covid housing boom
The housing market has cooled from its blistering pace. Thankfully, demographic trends and the overall housing shortage remain long-term tailwinds for KB Home and the broader homebuilder segment. The housing market is also showing signs of life as buyers realize rates are likely stabilizing at higher levels. And the economy remains on very sturdy footing, with the unemployment rate continuing to hover near historic lows.
Image Source: Zacks Investment Research
KBH’s revenue climbed 3% YoY in Q2 FY23, with homes delivered up 6% and the average selling price down 3%. Zacks estimates still call for KB Home’s adjusted fiscal 2023 earnings and revenue to slide as it faces a very difficult to compete against stretch. But KBH’s adjusted earnings outlook has soared since its Q2 report, with its consensus estimate up 19% for FY23 and 16% for FY24 to help it land a Zacks Rank #1 (Strong Buy). Plus, KBH is projected to return to strong top and bottom-line growth in FY24.
KB Home shares have surged 70% over the last year and 60% YTD. This is part of a 95% run over the past five years to outpace the S&P 500’s 64%. Despite the climb, KBH trades right around its own five-year median at 8.1X forward 12-month earnings and at a 35% discount to its own high during this stretch. KB Home also trades at a 20% discount to its Building Products - Home Builders industry, which currently ranks in the top 4% of over 250 Zacks industries.
Patterson Companies aims to provide top-of-the-line products, technology, and services to both the dental market and the animal health segment in North America and the U.K. The company’s dental segment includes roughly 130K offerings across products, equipment, software, technology, and services, from dental care essentials to its Patterson Revolve Software Suite. Patterson’s Animal Health segment aims to service everything your local veterinary might need, alongside all the essentials to keep livestock and farm animals healthy.
Patterson’s fiscal 2023 revenue (period ended on April 29) came in essentially flat from FY22 and its adjusted earnings popped 7%. PDCO’s solid showing last year came up against a big two-year stretch of top and bottom-line growth. And Zacks estimates call for PDCO to post solid adjusted earnings and revenue growth both this year and next. Plus, its EPS outlook has popped since it reported its Q4 FY23 results on June 21 to help it grab a Zacks Rank #1 (Strong Buy) at the moment.
Image Source: Zacks Investment Research
PDCO shares have jumped 16% YTD, including a 14% post-earnings release surge. Patterson stock has now climbed 40% in the last five years to outpace its Medical - Dental Supplies industry’s (currently ranked No. 52 out of 252 Zacks industries) 27% run. PDCO currently trades at a 31% discount to its industry at 12.9X forward 12-month earnings. Patterson also trades roughly 10% below its own five-year median and offers 35% value vs. its own highs. Plus, PDCO’s dividend currently yields around 3.2%.
Want more articles from this author? Scroll up to the top of this article and click the FOLLOW AUTHOR button to get an email each time a new article is published.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Image: Bigstock
Finding Top-Ranked Value Stocks to Buy in July
July trading has started slowly with a large chunk of Wall Street on vacation. The S&P 500 gained 0.1% during a shortened session on Monday, while the Nasdaq edged 0.2% higher. Both indexes were slightly lower through early afternoon trading Wednesday as investors waited for inflation and interest rate updates via the Fed’s June minutes.
Wall Street isn’t likely to learn too much more, since Jay Powell and the Fed already said they plan to raise rates again in 2023 and leave them higher for longer than many hoped several months ago. Traders currently place a roughly 90% chance on the Fed raising rates by 0.25% at its late-July FOMC meeting to take its benchmark rate to between 5.25% and 5.50%, based on the CME Fed Watch Tool. Peeking further down the road, Wall Street sees rates staying (70% chance) at those new levels or 25 basis points higher into January 2024.
Investors appear to be growing comfortable with the new higher-rate environment. And the economy is showcasing impressive resilience that has more on Wall Street calling for a soft-landing as the labor market, supply chains, and more continue to normalize following the truly unprecedented Covid shocks. Plus, if history is a useful guide, the market could be headed for a strong back half of 2023 even after its bullish start.
Plus, other areas outside of big tech are finally starting to participate in the rally. All 11 S&P 500 sectors climbed in June. And the overall S&P 500 earnings picture is stabilizing and even starting to trend higher for some areas of the market.
The first-half rally also showcases why it is vital to stay exposed to the stock market as much as possible because few were calling for a bullish first six months of 2023 back at the end of 2022.
Today we use a Zacks screen that helps find stocks that offer a combination of value and improving earnings outlooks for investors looking to buy stocks in July and beyond.
Screen Basics
The screen we are digging into today comes loaded with the Research Wizard and aims to sort through highly-ranked Zacks stocks to find some of the top value names.
This value-focused screen searches only for stocks that boast Zacks Rank #1 (Strong Buys) or #2 (Buys). It also focuses on stocks with price-to-earnings (P/E) ratios under the median for its industry. The screen also looks for stocks with price-to-sales (P/S) ratios under the median for its industry to help lock in relative value compared to its peers, since basing it off the wider market is not always the most useful tool.
The screen then digs into quarterly earnings rates above the median for its industry. This particular Zacks screen also uses a special blend of upgrades and estimates revisions to select the best seven stocks in this list.
The screen basics are listed below…
· Only Zacks Rank #1 (Strong Buy) or #2 (Buy) Stocks
· P/E (using 12-month EPS) - Under the Median for its Industry
· P/S - Under the Median for its Industry
· Percentage Change Act. EPS Q(0)/Q(-1)
· Rating Change and Revisions Factors (to help narrow the list to the 7 best stocks in this list)
This strategy comes loaded with the Research Wizard and it is called bt_sow_value_method1. It can be found in the SoW (Screen of the Week) folder.
The screen is pretty simple, yet powerful. Here are two of the seven stocks that made it through this week's screen…
KB Home ((KBH - Free Report) )
KB Home is one of the largest homebuilders in the U.S., operating in nearly 50 markets across Colorado, Arizona, Texas, California, Nevada, Washington, and beyond. KBH allows buyers to customize many aspects of their homes and it is committed to energy-efficient offerings. KB Home’s revenue soared 37% in 2021 and another 21% in 2022 amid the Covid housing boom
The housing market has cooled from its blistering pace. Thankfully, demographic trends and the overall housing shortage remain long-term tailwinds for KB Home and the broader homebuilder segment. The housing market is also showing signs of life as buyers realize rates are likely stabilizing at higher levels. And the economy remains on very sturdy footing, with the unemployment rate continuing to hover near historic lows.
Image Source: Zacks Investment Research
KBH’s revenue climbed 3% YoY in Q2 FY23, with homes delivered up 6% and the average selling price down 3%. Zacks estimates still call for KB Home’s adjusted fiscal 2023 earnings and revenue to slide as it faces a very difficult to compete against stretch. But KBH’s adjusted earnings outlook has soared since its Q2 report, with its consensus estimate up 19% for FY23 and 16% for FY24 to help it land a Zacks Rank #1 (Strong Buy). Plus, KBH is projected to return to strong top and bottom-line growth in FY24.
KB Home shares have surged 70% over the last year and 60% YTD. This is part of a 95% run over the past five years to outpace the S&P 500’s 64%. Despite the climb, KBH trades right around its own five-year median at 8.1X forward 12-month earnings and at a 35% discount to its own high during this stretch. KB Home also trades at a 20% discount to its Building Products - Home Builders industry, which currently ranks in the top 4% of over 250 Zacks industries.
Patterson Companies, Inc. ((PDCO - Free Report) )
Patterson Companies aims to provide top-of-the-line products, technology, and services to both the dental market and the animal health segment in North America and the U.K. The company’s dental segment includes roughly 130K offerings across products, equipment, software, technology, and services, from dental care essentials to its Patterson Revolve Software Suite. Patterson’s Animal Health segment aims to service everything your local veterinary might need, alongside all the essentials to keep livestock and farm animals healthy.
Patterson’s fiscal 2023 revenue (period ended on April 29) came in essentially flat from FY22 and its adjusted earnings popped 7%. PDCO’s solid showing last year came up against a big two-year stretch of top and bottom-line growth. And Zacks estimates call for PDCO to post solid adjusted earnings and revenue growth both this year and next. Plus, its EPS outlook has popped since it reported its Q4 FY23 results on June 21 to help it grab a Zacks Rank #1 (Strong Buy) at the moment.
Image Source: Zacks Investment Research
PDCO shares have jumped 16% YTD, including a 14% post-earnings release surge. Patterson stock has now climbed 40% in the last five years to outpace its Medical - Dental Supplies industry’s (currently ranked No. 52 out of 252 Zacks industries) 27% run. PDCO currently trades at a 31% discount to its industry at 12.9X forward 12-month earnings. Patterson also trades roughly 10% below its own five-year median and offers 35% value vs. its own highs. Plus, PDCO’s dividend currently yields around 3.2%.
Click here to sign up for a free trial to the Research Wizard today.
Want more articles from this author? Scroll up to the top of this article and click the FOLLOW AUTHOR button to get an email each time a new article is published.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance/.