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Sleep Number, Marcus, Australia and New Zealand Banking Group, Commonwealth Bank of Australia and National Australia Bank highlighted as Zacks Bull and Bear of the Day

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For Immediate Release

Chicago, IL – November 5, 2020 – Zacks Equity Research Shares of Sleep Number Corporation (SNBR - Free Report) as the Bull of the Day, The Marcus Corporation (MCS - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Australia and New Zealand Banking Group Ltd. (ANZBY - Free Report) , Commonwealth Bank of Australia (CMWAY - Free Report) and National Australia Bank Ltd. (NABZY - Free Report) .

Here is a synopsis of all five stocks:

Bull of the Day:

What comes to mind when you think about the hottest stocks out there? Usually something in tech, biotech, or some other high-growth industry. Sometimes, by looking for stocks with products that think outside the box, we can miss the hot stocks which are perfectly inside the box. These stocks are often found in your more traditional, dare I say “boring” industries.

Today’s Bull of the Day is a stock within one of these more boring industries. In fact, the company is in the Furniture industry which ranks in the Top 46% of our Zacks Industry Rank. I’m talking about Sleep Number. Sleep Number Corporation, together with its subsidiaries, provides sleep solutions and services in the United States. The company designs, manufactures, markets, retails, and services beds, pillows, sheets, and other bedding product under the Sleep Number name. The company sells its products directly to consumers through retail, online, and phone, as well as through wholesale. As of February 19, 2020, it operated approximately 610 stores in 50 states. 

Currently, the stock is a Zacks Rank #1 (Strong Buy). In addition to the favorable Zacks Rank, the stock features a Zacks Value Style Score of B, Growth of A, Momentum of D, to help it round out with a VGM Composite Score of A. The reason for the favorable rank is five analysts have increased their earnings estimates for the current year and next year. That bullish sentiment has pushed up our Zacks Consensus Estimate for the current year from $2.73 to $4.06 while next year’s number is up from $3.26 to $4.17.

The company has beat earnings for eight consecutive quarters. The last four quarters, the company has beat by an average of 55.89%. Last quarter’s 77.23% beat impressed investors, helping the stock rally sharply after the print.

Bear of the Day:

If you were making a list of industries to avoid investing in during a worldwide pandemic, movie theaters and hotels would top that list. Unfortunately, the companies in these industries have nowhere to hide. All they can really do is try to weather the storm, and hope they have enough cash on hand to come out on the other side.

Today’s Bear of the Day is a stock with exposure to both these industries. It’s Marcus. The Marcus Corporation, together with its subsidiaries, owns and operates movie theatres, and hotels and resorts in the United States. As of March 17, 2020, it owned or operated 1,110 screens at 91 locations in 17 states under the Marcus Theatres, Movie Tavern by Marcus, and BistroPlex brands; and owned and managed 20 hotels, resorts, and other properties in eight states. The company also operates a family entertainment center under the Funset Boulevard name in Appleton, Wisconsin, as well as owns and operates a retail outlet under the name of Ronnie's Plaza. In addition, it provides hospitality management services, including check-in, housekeeping, and maintenance for a vacation ownership development.

Marcus is currently a Zacks Rank #5 (Strong Sell). It also features a Zacks Growth Style Score of F, Momentum of D, and VGM Composite Score of D. Further, the Leisure and Recreational Services industry is in the Bottom 1% of our Zacks Industry Rank. The reason for the unfavorable rank is the series of negative earnings estimate revisions over the last thirty days. Two analysts have cut earnings for the current year and next year. These bearish revisions have cut down the current year Zacks Consensus Estimate from a $2.82 loss to a $4.01 loss. Next year’s number is off from a 4-cent loss to a $1.09 loss.

Additional content:

Australian Banks in Peril? RBA Cuts Interest Rates

In a bid to lift the economy from a recession mainly due to the coronavirus pandemic and support growth, the Reserve Bank of Australia (RBA) has announced a reduction in its yield-curve target and bank lending facility rate to 0.1% from 0.25%, the lowest in history. Additionally, the RBA chief, Philip Lowe, announced a “quantitative easing” policy, under which it has pledged to purchase longer-term debt.

The central bank has planned to buy A$100 billion ($70.4 billion) of Federal and State debt with a 5-10-year maturity period over the next six months.

Lowe stated, “The combination of the RBA’s bond purchases and lower interest rates across the yield curve will assist the recovery by: lowering financing costs for borrowers; contributing to a lower exchange rate than otherwise; and supporting asset prices and balance sheets.”

Notably, following the announcement, the Australian dollar eased and yields on sovereign bonds fell to historic lows yesterday.

In fact, the main motive behind the longer-term bond-purchase program is to facilitate a significant increase in the demand for those bonds, which will result in a decline in interest rates. When interest rates on bonds decline, governments are able to borrow at cheaper rates over longer periods. And, when interest rates across the economy are low, the overall cost of borrowing declines.

Most importantly, with lower cost of finance, the economic recovery becomes swift, which is the ultimate aim, given the coronavirus-induced economic slowdown.

Notably, given Australia’s progress in containing the spread of the novel coronavirus, the RBA has slightly upgraded its outlook for economic growth. Lowe stated, “it now appears probable that GDP increased solidly in the September quarter despite the lockdown in Victoria.”

How Will Lower Interest Rates Impact Australian Banks?

While lower interest rates mean reduced cost of borrowing, which is good news for businesses and households, for banks it is bad news.

This is because interest rate declines negatively impact banks’ interest income. Moreover, lower rates mean lower net interest margins for banks (which is the main indicator of their profitability). Overall, with a decline in interest rates, banks’ top lines get hampered to an extent.

Currently, banks across the globe have already been witnessing pressure on their top lines because of the prevailing low-interest rate environment. Several developed and developing economies resorted to similar actions as the RBA amid the pandemic and the resulting slowdown.

Banks in the United States are grappling with the near-zero rate environment, which is expected to continue at least until 2023, as signaled by the Federal Reserve. Notably, the Bank of England is contemplating the use of negative interest rates, thus taking the borrowing costs below zero.

Similarly, with interest rates declining further in Australia, banks within the region will see their top lines getting hurt. A few of the many Australian banks that are expected to witness revenue growth pressures due to this recent move by the central bank are Australia and New Zealand BankingCommonwealth Bank of Australia and National Australia Bank.

Of these, Australia and New Zealand Banking Group and Commonwealth Bank of Australia currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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