For Immediate Release
Chicago, IL – June 18, 2021 – Zacks Equity Research Shares of Thor Industries, Inc. (
THO Quick Quote THO - Free Report) as the Bull of the Day, Tupperware Brands Corporation ( TUP Quick Quote TUP - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on UGI Corporation ( UGI Quick Quote UGI - Free Report) , New Jersey Resources Corporation ( NJR Quick Quote NJR - Free Report) and Unitil Corporation ( UTL Quick Quote UTL - Free Report) .
Here is a synopsis of all five stocks:
Thor Industries is a Zacks Rank #1 (Strong Buy) that makes a wide range of recreational vehicles (RVs). The company manufactures in Indiana and Ohio and sells its products through independent dealers in the U.S. and Canada.
After doubling from the COVID lows last year, the stock has struggled as of late. Investors seem to be concerned that the momentum from last year has faded and the stock is off over 30% from highs.
Recent earnings were solid and the company showed a huge backlog. Investors should be watching for a bounce shortly as the stock tests old support levels.
About the Company
Thor is headquartered in Elkhart, Indiana and employs over 22,000 people. The company was founded in 1980 and sells popular brands like Four Winds, Majestic, Windsport and more.
THO is valued at $6 billion and has a Forward PE of 10. The company holds a Zacks Style Score of "A" in Momentum and "B" Value. Thor also pays a 1.5% dividend.
Travel Has Changed
There was a lot of fear surrounding travel at the height of the pandemic. Because the U.S. had one of the highest cases counts, some countries issued quarantine rules for travelers. This wasn't appealing for someone on vacation so we saw a big uptick in domestic travel. And since all the hotels were closed, the demand for RV's and the desire to camp increased.
While America has opened up, the demand for camping is still there as we head through the summer months. We saw that when Thor reported earnings and the company showed a massive backlog.
Before we get to that demand, let's talk about the specifics within the latest earnings report. On June 8
th, the company reported an earnings beat of 39%. Revenues came in at $3.46 billion v the $3.02 billion expected. Gross profit margin came in at 14.6% or +240bps year over year.
The order backlog is impressive, with $14B on the books, up 5.5X year over year. This is great to see such strong demand, but it's not a good problem to have as its sales aren't being delivered until the company can ramp production.
That being said, the demand factor should be a tailwind. CEO David Butt said the following on the call:
"We continue to see robust demand for our RVs and see no signs of demand slowing even as the economy recovers from the pandemic. Demand for our products continues to grow at both the retail and wholesale levels"
Thor is focused on increasing capacity and maximizing production, but supply chain issues are hampering their efforts. This is part of the reason for the stock slide.
This change in the RV market took the stock to highs not seen since 2017. However, for THO to return back to those levels this year, the next quarters earnings need to give investors' confidence that the backlog can be met.
Because the quarter was so impressive, analysts were forced to take numbers higher. For the current year, analysts have raised estimates from $9.55 to $10.38, a hike of 9%. For the next year, we see an 8 % hike, from $10.31 to $11.19,
The Technical Take
The recent move lower has done a lot of technical damage. The 50-day broke in early May and the stock had pretty much gone straight down. More recently, the 200-day has given way to selling and the stock is now threatening the $100 mark.
The $90-100 level should offer the bulls a great buying opportunity. Some stops will be taken out under $100 and the $90-95 area will offer solid support as it did late last year. Expect the 200-day to be challenged by the bulls and then short-term traders can determine if a bottom has been put in.
Campers are still in demand. If you go on the road, you'll see them. If you try to reserve a campsite, good luck, they are all booked! Traders have been recently cautious on higher gas prices, supply chain issues and technical failures. However, this is giving a great opportunity for new investors to come in for the long-term.
Tupperware Brands is a Zacks Rank #5 (Strong Sell) that manufactures, markets, and sells design-centric preparation, storage, and serving solutions for the kitchen and home, as well as a line of cookware, knives, microwave products, microfiber textiles, water-filtration related items, and an array of products for on-the-go consumers under the Tupperware brand name
The stock hit $1.15 back in March of last year, but has since seen a move over to $35 a share. However, the stock has fallen from its heights and is starting to crack as both the fundamentals and the technicals look unhealthy.
About the Company
Tupperware is headquartered in Orlando, FL and employs over 10,000 people. The company was founded in 1946 and distributes its products to approximately 80 countries primarily through independent sales force members, including independent distributors, directors, managers, and dealers.
TUP is valued at $1.1 billion and has a Forward PE of 8. The company holds a Zacks Style Score of "A" in both Value and Momentum, but "C" in Growth.
The company reported in early May, seeing a nice 24% beat on expectations.The company also beat on revenues, seeing $460 million v the $434 million expected. The company did a nice job creating a more profitable company by selling non-core assets and reducing debt.
However, that doesn't speak to future earnings and while the stock reacted positively at first, it has since fallen lower. Let's take a look at estimates as investors might be focusing on the future instead of this past quarter.
For the current year, estimates have fallen 13% over the last 60 days, from $3.26 to $2.83. For next year, estimates have fallen 18% over the same timeframe, from $4.19 to $3.41.
So while earnings looked good, analysts are lowering estimates, which has helped the stock drop.
The Technical Take
The bulls tried to hold the 200-day MA throughout March and April, but eventually failed in early May. The $25 level saw some support, but it didn't last long and the stock has fallen to the $20 level.
While there might be a bounce coming, the stock really shows no support until the $15 level, another 25% lower from current levels. This $15 area would offer the 61.8% Fibonacci support and the support level shown in July. Investors who like the stock might want to hold off until that area.
Tupperware had a monstrous run, but the momentum has died as the fundamentals have taken over. Investors should wait for estimates to tick higher or for technical support before entering the stock.
Additional content: Fed to Keep Rates Unchanged: 3 Utility Stocks to Benefit
The Federal Reserve has decided to keep the federal funds rate unchanged at 0-0.25%. The basic objective of keeping the rate low is to support the U.S. economy. The Fed aims to create more employment and keep the inflation rate at 2% over a longer period of time by keeping the rates unchanged.
The novel coronavirus outbreak drastically lowered economic activities in 2020, primarily due to lockdowns and stay-at-home directives. Distribution of vaccines and increasing knowledge about the virus helped to control the spread of COVID-19 in the United States.
The Fed officials expect the unemployment level for fourth-quarter 2021 to be 4.5%, down from the May-end level of 5.8% backed by favorable policy and reopening of economic activities. The Fed will support the economy by purchasing bonds worth $120 billion per month until employment increases and inflation stabilizes to the desired level of 2%. It now expects GDP growth of 7% in 2021, up from 6.5% expected in the March meeting, and inflation rate to touch 3.4% at 2021-end.
If the situation improves, the Fed might revise the interest rates once in 2022 and follow that up with more revisions in 2023. However, it is not going to take any drastic decision, and will revise the rates only if the economic conditions are conducive and appropriate to accommodate the change.
Given the above backdrop, capital-intensive industries like utilities will gain from the Fed's decision to keep interest rates unchanged this year as well. The domestic-focused, regulated and capital-intensive utilities tend to benefit when interest rates are low as it lowers the cost of capital. The low rate enables utilities to source funds at a cheaper rate, continue with infrastructure upgrades and pay out regular dividends to shareholders.
It is advisable to stay invested in domestic-focused utilities, which are often considered as an alternative to bonds for steady returns. Moreover, demand for utility services doesn't fluctuate much, even amid weak economic conditions.
At times when internal sources of funding of the utilities are insufficient, they have to borrow the same from the market to continue with costly long-term projects. A low rate allows utilities to avail cheap funding and refinance high-cost debt with low-cost debt. Moreover, the continuation of utility capital projects will assist in the creation of new jobs, which are quite essential to bring the economy back on track.
Our Utility Picks
Per the proprietary
Style Scores, stocks with the combination of a VGM Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer solid investment opportunities. We have utilized the Zacks Stock Screener for selecting three stocks from the Zacks Utilities sector based on features that make them attractive despite their prevailing debt levels.
All these stocks have a debt to capital of more than 55%, which indicates that they have been utilizing more borrowed funds to operate their business. The low-interest rate environment will give these companies an opportunity to refinance their existing debts with low interest bearing debts and extend the period of repayment of the borrowed funds.
UGI Corp., which currently carries a Zacks Rank #2, delivered an earnings surprise of 58.6% in the last four quarters. It has a VGM Score of B and long-term (three to five years) estimated earnings growth of 8%. Its dividend yield is 2.93% and return on equity (TTM) is 14.86%, better than its sector's 9.3%. You can see . the complete list of today's Zacks #1 Rank stocks here
The Zacks Consensus Estimate for fiscal 2021 earnings has moved up 3.4% to $3 per share in the past 60 days.
New Jersey Resources, which currently carries a Zacks Rank #2, delivered an earnings surprise of 27.4% in the last two quarters. It has a VGM Score of B and long-term estimated earnings growth of 7.1%. Its dividend yield is 3.06% and TTM is 14.72%, better than its sector's 9.3%.
The Zacks Consensus Estimate for fiscal 2021 earnings has moved up by 19.7% to $2.07 per share in the past 60 days.
Unitil Corp., which currently carries a Zacks Rank #2, delivered an earnings surprise of 9.5% in the last two quarters. It has a VGM Score of B and long-term estimated earnings growth of 3.9%. Its dividend yield is 2.65% and TTM is 9.22%, better than the industry's 8.9%.
The Zacks Consensus Estimate for 2021 earnings has moved up 1.7% to $2.43 per share in the past 60 days.
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