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With just around 10 days to go before the earnings season kicks in, I thought it would be a good idea to take a look at some stocks that have started showing signs of pulling ahead of the others.
As always, I reply on the Zacks Ranks for stocks, which go from #1 for Strong Buys to #5 for Strong Sells. The historical success of the Zacks Rank is just too great to ignore.
I also like to stick to industries that have things going for them. It seems crazy to do otherwise given that half the price appreciation on any stock is related to the industry that it’s in.
While I like growth stories, sometimes we tend to overpay for growth. So we think we are headed for a 20% increase and it actually goes up with 5%. We don’t make a loss in absolute terms, but that certainly wasn’t what you signed up for.
And these low-growth selections can add up, especially when you do make a loss on some names as well. Older people with less working years ahead may prefer safe returns, even if they are low. But if you’re new to investing, or are willing and able to take bigger risks, this can be a really bad thing. Losing a year means losing a ton of money.
So that’s why it pays to select the names with growth potential that are also trading below their historical averages.
And finally, because we are getting closer to the earnings season, I thought it would be a good idea to see which way estimates are heading. As you may know already, there is a Zacks tool called Zacks Earnings ESP (expected surprise prediction) to check positive momentum in estimates. It’s essentially the percentage difference between the most recent estimate and the Zacks Consensus. If the most recent estimate is higher, we can assume that there is positive news or developments driving it. So there is a good chance that the company’s results will be closer to the most recent estimate and therefore, better than the Zacks Consensus Estimate.
So now, let’s get to the stocks-
CoreLogic, Inc. provides consumer, financial and property information, analytics and services by leveraging its core data bases that combine public, contributory and proprietary data. Both businesses (in automotive, cable, financial services, employment, geospatial information service, insurance, legal, oil and gas, real estate, retail, utility, and telecommunications) and governments use its services.
The company operates in the consulting services industry, which is in the top 24% of Zacks-classified industries. The Business Services sector to which it belongs is currently expected to see a 9.0% decline in earnings this year on revenue that’s expected to decline 2.3%.
CoreLogic has been making a number of acquisitions that have helped it pick up market share over the past year. With conditions improving this year, the momentum should continue. The investment is not without risks however as balance sheet debt and goodwill are both on the high side.
Private equity firms CoStar and Warburg are in conversation to take over the company.
The shares carry a Zacks Rank #2 (Buy), Value, Growth and Momentum Scores of B, A and B, respectively, and an Earnings ESP of 42.11%. The ESP indicates that the company is likely to report a positive surprise.
The current valuation of the shares is 18.07X forward earnings, which is below its median value of 20.21X over the past year. So the shares are undervalued.
Hillenbrand Inc (HI - Free Report) has two focus areas: one dealing with engineered industrial equipment targeted at the global industrial market and the other with death care services in North America.
Because of its leadership in death care services, the company has been grouped under the funeral services industry. This industry is currently in the top 3% of Zacks-classified industries, so it’s one of the most attractive. The concerned sector is Consumer Staples, which is expected to see fourth-quarter earnings decline 3.7% on revenue that is expected to grow 0.3%.
While 2020 was positive for the funeral services business, it was negative for industrial. The order book points to a much stronger 2021 as the full benefits of the Milacron acquisition kick in and orders related to several large plastic projects are fulfilled.
The shares carry a Zacks Rank #1, Value, Growth and Momentum Scores of B, A and A, respectively, and an Earnings ESP of 4.11%. The ESP indicates that the company is likely to report a positive surprise.
The current valuation of the shares is 11.95X forward earnings, which is just below its median value of 11.99X over the past year. So the shares are undervalued.
Lennar Corporation (LEN - Free Report) is a leading national home builder with offerings in the affordable, move-up and retirement categories. Other than construction and sale of single-family attached and detached homes, it also engages in the purchase, development and sale of residential land.
The company is part of the building products – homebuilders industry, which is in the top 13% of Zacks-classified industries. This again is part of the Construction sector, which is currently expected to see fourth quarter revenue and earnings growth of 8.7% and 26.9%, respectively.
The company’s fiscal year ends in November, so we already have its fourth quarter numbers. It topped estimates by 18.5%. The estimate revision trend for 2021 is on an upward trajectory. The Zacks Consensus Estimate is up 60 cents (7.6%) in the last 30 days.
Lennar’s recent strength is attributable to both market conditions (including the near-term pandemic and longer-term millennial driven hunt for new homes) and strong operating performance. The strong demand also drove pricing strength, enabling the company to grow earnings despite selling fewer homes. While there was a pandemic induced hit to production earlier on, the company is making up for that now.
The shares carry a Zacks Rank #1, Value, Growth and Momentum Scores of B, B and A, respectively, and an Earnings ESP of 6.79%. The ESP indicates that the company is likely to report a positive surprise in the upcoming quarter.
The current valuation of the shares is 8.58X forward earnings, which is just below its median value of 10.23X over the past year. So the shares are undervalued.
Through its ManpowerGroup Solutions, Experis, Manpower and Right Management brands, ManpowerGroup Inc. (MAN - Free Report) serves both small and large organizations across all industries all over the world. It is in fact the world leader in innovative workforce solutions.
Given its product range, it stands to reason that Manpower is a part of the staffing firms industry (top 14% of Zacks-classified industries), which is in turn part of the Business Services sector.
The company was severely impacted by the pandemic, leading it to streamline offerings and restructure operations with the goal of increasing efficiency. Demand is coming back gradually, as is evident from year on year revenue growth. While earnings recovery is expected to take time and is somewhat dependent on its ability to execute on its digitization initiatives, the estimate revision trend has turned positive. As such it’s a good time to get into the shares.
MAN shares carry a Zacks Rank #2, Value, Growth and Momentum Scores of A, B and A, respectively, and an Earnings ESP of 1.79%. The ESP indicates that the company is likely to report a positive surprise in the upcoming quarter.
The current valuation of the shares is 16.33X forward earnings, which is just below its median value of 16.82X over the past year. So the shares are undervalued.
Old Dominion Freight Line, Inc. (ODFL - Free Report) offers transportation and logistics services. Its primarily less than truckload (LTL) carrier services are used by dealers of general commodities, including consumer goods, textiles and capital goods. Its logistics services include ground and air expedited transportation, supply chain consulting, transportation management, truckload brokerage and container delivery and warehousing.
The company belongs to the transportation- truck industry, which is in the top 23% of Zacls-classified industries. That makes it a part of the Transportation sector, which is one of the weakest today. In fact, the sector is expected to see its fourth-quarter earnings drop more than 100% on revenue that is expected to decline 21.3%. Trucking is a bright spot here, partially driven by the ecommerce boom.
Old Dominion was impacted by the mandatory lockdown and shelter in place orders that impacted its customers last year. But business started picking up strongly thereafter, allowing it to jump back.
ODFL shares carry a Zacks Rank #2, Value, Growth and Momentum Scores of B, B and B, respectively, and an Earnings ESP of 1.95%. The ESP indicates that the company is likely to report a positive surprise in the upcoming quarter.
The current valuation of the shares is 27.92X forward earnings, which is below its median value of 30.53X over the past year. So the shares are undervalued.
OneWater Marine Inc. (ONEW - Free Report) is a premium recreational boat retailer operating mainly in the U.S. It offers new and pre-owned boats, parts and accessories, finance and insurance products, maintenance and repair services, as well as ancillary services.
The company is part of the leisure and recreation products industry, which is in the top 7% of Zacks-classified industries. The Consumer Discretionary sector, of which it is a part, is currently expected to see its fourth quarter revenue and earnings decline 15.5% and 73.0%, respectively. So while it isn’t so hot right now, this industry is a bright spot.
In its first year as a publicly traded company, OneWater delivered solid results across all its segments on the back of exceptionally strong demand, helped by the pandemic. With the boating season around the corner, the strength may be expected to continue.
ONEW shares carry a Zacks Rank #2, Value, Growth and Momentum Scores of A, A and A, respectively, and an Earnings ESP of 62.5%. The ESP indicates that the company is likely to report a positive surprise in the upcoming quarter.
The current valuation of the shares is 7.74X forward earnings, which is below its median value of 8.01X since it started trading in March. So the shares are undervalued.
Sonic Automotive, Inc. (SAH - Free Report) is one of the largest automotive retailers in the United States.
It belongs to the Automotive - Retail and Whole Sales industry, which is in the top 3% of Zacks-classified industries. It is part of the Retail/Wholesale sector, which is expected to grow fourth-quarter revenue 10.2% on seasonality but still see an earnings decline of 6.5%.
Sonic is benefiting from strength in its used-car business and its ability to offer a more digitized selling experience that complements its dealership business. So the company was able to offer customers the omni-channel experience that people were looking for in this age of social distancing. This strength should continue in 2021, as auto demand gains momentum.
SAH shares carry a Zacks Rank #2, Value, Growth and Momentum Scores of A, B and B, respectively, and an Earnings ESP of 2.13%. The ESP indicates that the company is likely to report a positive surprise in the upcoming quarter.
The current valuation of the shares is 8.89X forward earnings, which is below its median value of 10.38X over the past year. So the shares are undervalued.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Image: Bigstock
7 Cheap Stocks That Are Poised to Pop
With just around 10 days to go before the earnings season kicks in, I thought it would be a good idea to take a look at some stocks that have started showing signs of pulling ahead of the others.
As always, I reply on the Zacks Ranks for stocks, which go from #1 for Strong Buys to #5 for Strong Sells. The historical success of the Zacks Rank is just too great to ignore.
I also like to stick to industries that have things going for them. It seems crazy to do otherwise given that half the price appreciation on any stock is related to the industry that it’s in.
While I like growth stories, sometimes we tend to overpay for growth. So we think we are headed for a 20% increase and it actually goes up with 5%. We don’t make a loss in absolute terms, but that certainly wasn’t what you signed up for.
And these low-growth selections can add up, especially when you do make a loss on some names as well. Older people with less working years ahead may prefer safe returns, even if they are low. But if you’re new to investing, or are willing and able to take bigger risks, this can be a really bad thing. Losing a year means losing a ton of money.
So that’s why it pays to select the names with growth potential that are also trading below their historical averages.
And finally, because we are getting closer to the earnings season, I thought it would be a good idea to see which way estimates are heading. As you may know already, there is a Zacks tool called Zacks Earnings ESP (expected surprise prediction) to check positive momentum in estimates. It’s essentially the percentage difference between the most recent estimate and the Zacks Consensus. If the most recent estimate is higher, we can assume that there is positive news or developments driving it. So there is a good chance that the company’s results will be closer to the most recent estimate and therefore, better than the Zacks Consensus Estimate.
So now, let’s get to the stocks-
CoreLogic, Inc. provides consumer, financial and property information, analytics and services by leveraging its core data bases that combine public, contributory and proprietary data. Both businesses (in automotive, cable, financial services, employment, geospatial information service, insurance, legal, oil and gas, real estate, retail, utility, and telecommunications) and governments use its services.
The company operates in the consulting services industry, which is in the top 24% of Zacks-classified industries. The Business Services sector to which it belongs is currently expected to see a 9.0% decline in earnings this year on revenue that’s expected to decline 2.3%.
CoreLogic has been making a number of acquisitions that have helped it pick up market share over the past year. With conditions improving this year, the momentum should continue. The investment is not without risks however as balance sheet debt and goodwill are both on the high side.
Private equity firms CoStar and Warburg are in conversation to take over the company.
The shares carry a Zacks Rank #2 (Buy), Value, Growth and Momentum Scores of B, A and B, respectively, and an Earnings ESP of 42.11%. The ESP indicates that the company is likely to report a positive surprise.
The current valuation of the shares is 18.07X forward earnings, which is below its median value of 20.21X over the past year. So the shares are undervalued.
Hillenbrand Inc (HI - Free Report) has two focus areas: one dealing with engineered industrial equipment targeted at the global industrial market and the other with death care services in North America.
Because of its leadership in death care services, the company has been grouped under the funeral services industry. This industry is currently in the top 3% of Zacks-classified industries, so it’s one of the most attractive. The concerned sector is Consumer Staples, which is expected to see fourth-quarter earnings decline 3.7% on revenue that is expected to grow 0.3%.
While 2020 was positive for the funeral services business, it was negative for industrial. The order book points to a much stronger 2021 as the full benefits of the Milacron acquisition kick in and orders related to several large plastic projects are fulfilled.
The shares carry a Zacks Rank #1, Value, Growth and Momentum Scores of B, A and A, respectively, and an Earnings ESP of 4.11%. The ESP indicates that the company is likely to report a positive surprise.
The current valuation of the shares is 11.95X forward earnings, which is just below its median value of 11.99X over the past year. So the shares are undervalued.
Lennar Corporation (LEN - Free Report) is a leading national home builder with offerings in the affordable, move-up and retirement categories. Other than construction and sale of single-family attached and detached homes, it also engages in the purchase, development and sale of residential land.
The company is part of the building products – homebuilders industry, which is in the top 13% of Zacks-classified industries. This again is part of the Construction sector, which is currently expected to see fourth quarter revenue and earnings growth of 8.7% and 26.9%, respectively.
The company’s fiscal year ends in November, so we already have its fourth quarter numbers. It topped estimates by 18.5%. The estimate revision trend for 2021 is on an upward trajectory. The Zacks Consensus Estimate is up 60 cents (7.6%) in the last 30 days.
Lennar’s recent strength is attributable to both market conditions (including the near-term pandemic and longer-term millennial driven hunt for new homes) and strong operating performance. The strong demand also drove pricing strength, enabling the company to grow earnings despite selling fewer homes. While there was a pandemic induced hit to production earlier on, the company is making up for that now.
The shares carry a Zacks Rank #1, Value, Growth and Momentum Scores of B, B and A, respectively, and an Earnings ESP of 6.79%. The ESP indicates that the company is likely to report a positive surprise in the upcoming quarter.
The current valuation of the shares is 8.58X forward earnings, which is just below its median value of 10.23X over the past year. So the shares are undervalued.
Through its ManpowerGroup Solutions, Experis, Manpower and Right Management brands, ManpowerGroup Inc. (MAN - Free Report) serves both small and large organizations across all industries all over the world. It is in fact the world leader in innovative workforce solutions.
Given its product range, it stands to reason that Manpower is a part of the staffing firms industry (top 14% of Zacks-classified industries), which is in turn part of the Business Services sector.
The company was severely impacted by the pandemic, leading it to streamline offerings and restructure operations with the goal of increasing efficiency. Demand is coming back gradually, as is evident from year on year revenue growth. While earnings recovery is expected to take time and is somewhat dependent on its ability to execute on its digitization initiatives, the estimate revision trend has turned positive. As such it’s a good time to get into the shares.
MAN shares carry a Zacks Rank #2, Value, Growth and Momentum Scores of A, B and A, respectively, and an Earnings ESP of 1.79%. The ESP indicates that the company is likely to report a positive surprise in the upcoming quarter.
The current valuation of the shares is 16.33X forward earnings, which is just below its median value of 16.82X over the past year. So the shares are undervalued.
Old Dominion Freight Line, Inc. (ODFL - Free Report) offers transportation and logistics services. Its primarily less than truckload (LTL) carrier services are used by dealers of general commodities, including consumer goods, textiles and capital goods. Its logistics services include ground and air expedited transportation, supply chain consulting, transportation management, truckload brokerage and container delivery and warehousing.
The company belongs to the transportation- truck industry, which is in the top 23% of Zacls-classified industries. That makes it a part of the Transportation sector, which is one of the weakest today. In fact, the sector is expected to see its fourth-quarter earnings drop more than 100% on revenue that is expected to decline 21.3%. Trucking is a bright spot here, partially driven by the ecommerce boom.
Old Dominion was impacted by the mandatory lockdown and shelter in place orders that impacted its customers last year. But business started picking up strongly thereafter, allowing it to jump back.
ODFL shares carry a Zacks Rank #2, Value, Growth and Momentum Scores of B, B and B, respectively, and an Earnings ESP of 1.95%. The ESP indicates that the company is likely to report a positive surprise in the upcoming quarter.
The current valuation of the shares is 27.92X forward earnings, which is below its median value of 30.53X over the past year. So the shares are undervalued.
OneWater Marine Inc. (ONEW - Free Report) is a premium recreational boat retailer operating mainly in the U.S. It offers new and pre-owned boats, parts and accessories, finance and insurance products, maintenance and repair services, as well as ancillary services.
The company is part of the leisure and recreation products industry, which is in the top 7% of Zacks-classified industries. The Consumer Discretionary sector, of which it is a part, is currently expected to see its fourth quarter revenue and earnings decline 15.5% and 73.0%, respectively. So while it isn’t so hot right now, this industry is a bright spot.
In its first year as a publicly traded company, OneWater delivered solid results across all its segments on the back of exceptionally strong demand, helped by the pandemic. With the boating season around the corner, the strength may be expected to continue.
ONEW shares carry a Zacks Rank #2, Value, Growth and Momentum Scores of A, A and A, respectively, and an Earnings ESP of 62.5%. The ESP indicates that the company is likely to report a positive surprise in the upcoming quarter.
The current valuation of the shares is 7.74X forward earnings, which is below its median value of 8.01X since it started trading in March. So the shares are undervalued.
Sonic Automotive, Inc. (SAH - Free Report) is one of the largest automotive retailers in the United States.
It belongs to the Automotive - Retail and Whole Sales industry, which is in the top 3% of Zacks-classified industries. It is part of the Retail/Wholesale sector, which is expected to grow fourth-quarter revenue 10.2% on seasonality but still see an earnings decline of 6.5%.
Sonic is benefiting from strength in its used-car business and its ability to offer a more digitized selling experience that complements its dealership business. So the company was able to offer customers the omni-channel experience that people were looking for in this age of social distancing. This strength should continue in 2021, as auto demand gains momentum.
SAH shares carry a Zacks Rank #2, Value, Growth and Momentum Scores of A, B and B, respectively, and an Earnings ESP of 2.13%. The ESP indicates that the company is likely to report a positive surprise in the upcoming quarter.
The current valuation of the shares is 8.89X forward earnings, which is below its median value of 10.38X over the past year. So the shares are undervalued.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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