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The Zacks Analyst Blog Highlights: Gerdau, L Brands, Covestro, Bank of Montreal, PetroChina and Daimler

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For Immediate Release

Chicago, IL – June 2, 2021 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Gerdau S.A. (GGB - Free Report) , L Brands, Inc. ), Covestro AG (COVTY - Free Report) , Bank of Montreal (BMO - Free Report) , PetroChina Company Limited (PTR - Free Report) and Daimler AG (DDAIF - Free Report) .

Here are highlights from Tuesday’s Analyst Blog:

These Large-Cap Stocks Have More Room to Run

The markets have been treading water through May, shrugging off an earnings season that was one of the strongest on record. But that need not be a bad thing because the last thing we need is an overheated situation, leading to the inevitable correction that we hear of every once in a while.

So while the inflation concern remains very much on and a rate hike seems to be on the horizon, there is little to dampen the excitement surrounding the reopening. And while money is pouring into manufacturing, materials, industrials, restaurants, etc segments, there’s still the chance that a few good names are slipping through the cracks. So despite attractive growth prospects, they remain relatively underappreciated and therefore, undervalued.

Today, I’ve picked a few buy-ranked large cap stocks with solid value-growth-momentum scores, operating in attractive industries, with strong growth prospects for the year and seeing positive estimate revisions. But guess what. They still look undervalued. So let’s take a look-

Gerdau

Gerdau S.A. is the largest long steel producer in Latin America, and is a central player in Brazil. Gerdau steel is used in construction, industry, automotive and agricultural sectors.

The shares carry a Zacks Rank #2 (Buy) and Value, Growth and Momentum Scores of A. The company is part of the Steel – Producers industry (top 6%).

Its 2021 revenue is currently expected to grow 42.9% in 2021 before dropping off 5.9% in 2022. Earnings are expected to follow a similar pattern, growing a whopping 303.7% this year and then declining 25.2% in the next. Also, the last 30 days have seen the Zacks Consensus Estimate for 2021 earnings move up 38.0% while that for 2022 moved up 13.9%.

Valuation: Given the PEG value of 0.33X and P/E of 5.73X, it’s safe to say that the shares are going cheap.

L Brands

Columbus, OH-based L Brands evolved from an apparel-based specialty retailer to a segment leader focused on women’s intimate and other apparel, personal care, beauty and home fragrance products. The company sells its merchandise primarily through mall-based specialty retail stores in the U.S., Canada, the UK, Ireland and Greater China (China and Hong Kong), as well as through its websites, catalogue and other channels. Its Victoria’s Secret brand has been struggling and the company is considering options to sell or spin off the segment.

The shares carry a Zacks Rank #1 (Strong Buy) and Value, Growth and Momentum Scores of A. They belong to the Retail - Apparel and Shoes industry (top 16%).

L Brands is expected to grow 2021 revenue by 21.6%, which will be followed by 7.8% growth in 2022. Earnings are expected to be up 67.3% in 2022 (ending January) but flat-line in the following year. This could change as we get through the year because the estimate revision trend remains encouraging: The Zacks Consensus for 2022 jumped 25.9% in the last 30 days while the estimate for 2023 jumped 13.4%.

Valuation: The shares are trading at a PEG of 0.93X and P/E of 12.07X, so they look undervalued.

Covestro AG

Based in Leverkusen, Germany, Covestro AG manufactures polymers and performance plastics including coatings, adhesives, insulating materials, sealants, polycarbonates and polyurethanes. It serves automotive, construction, health, electronics and medical engineering industries.

The shares carry a Zacks Rank #1 and Value and Growth Scores of A and Momentum Score of B. They are part of the Chemical – Plastic industry, which is in the top 30% of Zacks classified industries.

Its 2021 revenue is currently expected to grow 33.1% in 2021 and 5.5% in 2022. Earnings are expected to be up a very strong 154.2% this year, dropping off 10.9% in the next. The earnings estimate revision trend also looks encouraging: Zacks Consensus for 2021 up 29.4% and for 2022 up 11.8% in the last 30 days.

Valuation: The shares trade at a PEG of 0.35X and P/E of 9.70X, so they look rather cheap.

Bank of Montreal

Bank of Montreal, one of the largest banks in North America, is also one of Canada's oldest banks. It offers a complete range of financial services in select markets on both sides of the Canada-United States border. In addition to financial products, the bank offers clients custom-made knowledge-based solutions to add value to their financial affairs.

The shares carry a Zacks Rank #2 and Value and Growth Scores of B, and Momentum Score of A. They belong to the Banks – Foreign industry, which is in the top 39% of Zacks-classified industries.

The company’s 2021 revenue is expected to grow 11.4% in 2021, flattening out in 2022. Earnings too are currently expected to grow 68.8% this year before flattening out in the next. Moreover, the Zacks Consensus Estimates for 2021 and 2022 earnings have grown 17.5% and 6.3%, respectively in the last 30 days, indicating positive sentiment.

Valuation: The price-to-earnings growth (PEG) ratio of 0.73X and price-to-earnings (P/E) of 10.86X indicate that the shares are still relatively undervalued.

PetroChina Company

PetroChina Company is the largest integrated oil company in China. It was established in Nov 1999 as a part of a restructuring of China National Petroleum Corporation, a state-owned entity, which currently holds a stake of 81.03% in PetroChina. PetroChina operates in four segments: Exploration & Production, Natural Gas & Pipelines, Refining & Chemicals, and Marketing. In 2020, the segments accounted for approximately 5%, 17%, 15% and 63% of the company’s revenue, respectively.

PTR shares carry a Zacks Rank #1 (Strong Buy), Value Score of A and Growth and Momentum Scores of B. They belong to the Oil and Gas - Integrated - International industry (top 35%).

The company’s revenues are currently expected to grow 4.7% in 2021 and decline 3.4% the following year. Earnings are however expected to grow 203.5% this fiscal year and 8.7% in the next. The Zacks Consensus Estimate for 2021 and 2022 earnings are up 67.7% and 3.4%, respectively in the last 30 days.

Valuation: Trading at a PEG of 0.19X and P/E of 7.64X, the shares may be considered cheap.

Daimler

Daimler with its businesses Mercedes-Benz Cars, Daimler Trucks, Daimler Financial Services, Mercedes-Benz Vans and Daimler Buses, is a leading producer of premium passenger cars and the largest manufacturer of commercial vehicles in the world.

The shares carry a Zacks Rank #1, Value Score A, Growth Score B and Momentum Score B. The company belongs to the Automotive – Foreign industry (top 38%).

Daimler’s revenue is expected to grow 13.5% this year and another 5.6% in 2022. Earnings will grow 250.1% this year followed by another 6.6% increase in 2022. The estimate revision trend indicates positive momentum: up 26.5% for 2021 and up 24.2% for 2022 in the last 60 days.

Valuation: The PEG value is just 0.42X and the P/E is just 6.89X, so the shares are rather undervalued.

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