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PDC Energy, CommVault Systems, Ally Financial, Regions Financial and Huntington Bancshares highlighted as Zacks Bull and Bear of the Day

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For Immediate Release

Chicago, IL – June 4, 2021 – Zacks Equity Research Shares of PDC Energy, Inc. (PDCE - Free Report) as the Bull of the Day, CommVault Systems, Inc. (CVLT - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Ally Financial Inc. (ALLY - Free Report) , Regions Financial Corporation (RF - Free Report) and Huntington Bancshares Incorporated (HBAN - Free Report) .

Here is a synopsis of all five stocks:

Bull of the Day:

PDC Energy is a Zacks Rank #1 (Strong Buy) and it could be the oil patch play for your portfolio.   Let's take a deeper look at this stock in this Bull of the Day article.

Description

PDC Energy, Inc. is an independent upstream operator engaged in the exploration, development and production of natural gas, crude oil and natural gas liquids. Headquartered in Denver, CO, the firm is focused on the Wattenberg Field in Colorado and the Delaware Basin in Texas.

Earnings History

The first thing I do when I look at stock is look to see if the company is beating the number.  This tells me right away where the market's expectations have been for the company and how management has been able to communicate to the market.  A stock that consistently beats is one that has management communicating expectations to Wall Street that can be achieved.  That is what you want to see.

For PDCE, I see great history of beating the Zacks Consensus Estimate.  There are four beats over the last four quarters. 

The average positive earnings surprise over the last fours quarters works out to be 79%, which means that they are posting results that are more than what is expected. 

There was a monster beat four quarters ago (160%) and that skewed the average up quite a bit.  Still, the company beats and that helps boost estimates higher and higher.

Earnings Estimates Revisions

The Zacks Rank tells us which stocks are seeing earnings estimates move higher.  For PDCE, I see estimates moving higher.

Over the last 60 days I am seeing several increases.

This quarter has moved from 78 cents to $1.00 to $1.07.

Next quarter has seen a similar move from 68 cents to 93 cents and is now at $1.16.

The full year number has increased from $3.17 to $4.54 over the last 60 days.

Next year is at $5.32 and that is up from $3.38 over the same time horizon.

Positive movement in earnings estimates like that are the reason that this stock is a Zacks Rank #1 (Strong Buy).

Valuation

PDCE has a very reasonable valuation.  I see a 9.9x forward earnings multiple and that compares favorably with the industry average of a little more than 12x.  The price book of 1.7x is also very reasonable.  Price to sales at 5x is a little above the industry average of 3.5x. Analysts are calling for topline growth of 24% this year and 11% next year, so that is why the stock has a Zacks Style Score of A for Growth.

Bear of the Day:

CommVault Systems is a Zacks Rank #5 (Strong Sell) and has the growth divergence that I always look for.  That means I see a strong Zacks Growth Style Score and weak Zacks Value Style Score.  Growth investors and value investors are looking for different things so I know I am on the right path when I see that.  CVLT also recently beat the Zacks Consensus Estimate, yet it has the lowest Zacks Rank.  Let's take a look at why that is the case in this Bear of the Day article.

Description

CommVault provides Unified Data Management solutions for high-performance data protection, universal availability and simplified management of data on complex storage networks. The CommVault QiNetix platform, based on CommVault's Common Technology Engine, integrates Galaxy backup and recovery, snapshot management and recovery, remote replication, active data migration and archiving, e-mail compliance, enterprise service level management and reporting and storage resource management software solutions. The QiNetix unified approach is designed to allow customers to add integrated QiNetix components, at a fraction of the time, effort and money required by separate point products.

Earnings History

The first thing I do when I look at stock is look to see if the company is beating the number.  This tells me right away where the market's expectations have been for the company and how management has been able to communicate to the market.  A stock that consistently beats is one that has management communicating expectations to Wall Street that can be achieved.  That is what you want to see.

In the case of CVLT, I see four straight beats of the Zacks Consensus Estimate.  This makes the case even more strange that it is a Zacks Rank #5 (Strong Sell). 

The Zacks Rank does care about the earnings history, but it is much more heavily influenced by the movement of earnings estimates.

Earnings Estimates

The Zacks Rank tells us which stocks are seeing earnings estimates move higher or in this case lower.  For CVLT, I see estimates fluctuating.

This quarter has moved from $0.49 to $0.51.

Next quarter has seen a similar increase from $0.58 to $0.59.

The Zacks Rank is more heavily influenced by the move in the annual numbers, and the movement is negative for those numbers.

I see 2021 moving from $2.56 to $2.54 over the last 60 days.

The 2022 number has moved from $3.15 to $3.11 over the same time horizon.

Negative movement in earnings estimates like that are the reason that this stock is a Zacks Rank #5 (Strong Sell).

The real read through is that if revisions like this cause a stock to move to a Zacks Rank #5 (Strong Sell) imagine what the other end of the spectrum must be seeing in terms of estimate revisions.

Valuation

The valuation for CVLT isn't that bad when comparing the stock to the industry average.  I see a forward PE of 30x and that is lower than the 26x industry average. The price to book of 9,1x is right in line with the industry average and the price to sales of 5.1x is well below the 9.1x industry average. I see margins increasing for CVLT over the last few quarters and that is another positive thing.

Additional content:

Ally Bank Eliminates Overdraft Fees: Other Banks to Follow?

In an unprecedented move, Ally Bank — the digital bank and a division of Ally Financial — announced the elimination of overdraft fees on all accounts (including checking and savings), effective immediately. All Ally Bank customers are entitled to the same and there is no additional requirement or conditions to be fulfilled.

Jeffrey Brown, the CEO of Ally Financial, said, "Overdraft fees are a pain point for many consumers but are particularly onerous for some. It is time to end them. Nationwide, more than 80% of overdraft fees are paid by consumers living paycheck to paycheck or with consistently low balances – precisely the people who need help stabilizing their finances. Eliminating these fees helps keep people from falling further behind and feeling penalized as they catch up."

It is worth noting that while the overdraft fees used to be $25 per transaction, Ally Bank has never charged the same for debit card transactions or charged more than one overdraft fee per day. Further, beginning April 2020, the company had begun waiving overdraft fees, amid the coronavirus pandemic as many customers faced financial hardships.

In an e-mail to Yahoo Finance, Justin Nicolette, Ally Financial spokesperson, stated, "Other banks say they've eliminated overdraft fees, but that's because they don't allow overdrafts."

Additionally, for Ally Bank, overdraft fees are not a major source of revenues. But the same can't be said for others.

Overdraft fees are a huge income generator for banks. Per the 2021 FinHealth Spend Report, banks (in aggregate) earned $12.4 billion in overdraft fees last year. Notably, the report states that 95% of the customers who paid these fees were "financially vulnerable."

Last month, the CEOs of several big banks faced tough questions from Senator Elizabeth Warren with regard to overdraft fees. According to the Senator, four banks collectively earned approximately $4 billion in overdraft fees in 2020.

Though the amount is not huge in comparison to what these banks earn in total fee income, the CEOs declined when asked by Senator Warren if they would voluntarily refund the fees to their customers. Nonetheless, for several small and mid-sized banks like Regions Financial and Huntington Bancshares, overdraft fees remain one of the major sources of fee revenues.

At the time, when banks are facing faltering loan demand and lower interest rates, any step to eliminate such lucrative sources of income could hurt their financials. Yet, the step taken by Ally Bank may turn out to be a game changer and help garner more market share.

Hence, we might see banks taking similar steps, going forward.

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