For Immediate Release
Chicago, IL – July 1, 2021 – Zacks Equity Research Shares of AutoNation, Inc. (
AN Quick Quote AN - Free Report) as the Bull of the Day, JinkoSolar Holding Co., Ltd. ( JKS Quick Quote JKS - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on United Airlines Holdings, Inc. ( UAL Quick Quote UAL - Free Report) , Southwest Airlines Co. ( LUV Quick Quote LUV - Free Report) and Alaska Air Group, Inc. ( ALK Quick Quote ALK - Free Report) . Here is a synopsis of all five stocks: AutoNation is a Zacks Rank #1 (Strong Buy) company that is the largest automotive retailer in the United States. The company offers vehicle maintenance and repair services, vehicle parts, extended service contracts, vehicle protection products, and other aftermarket products. About the Company
Auto Nation employs over 21,000 and is headquartered in Fort Lauderdale, FL. The company was founded in 1991 and at the end of 2020, operated 315 new vehicle franchises from 230 stores located primarily in metropolitan markets in the Sunbelt region.
AutoNation’s business is divided into three operating segments — Domestic (33% of revenues in 2020), Import (30.4%) and Premium Luxury (36.6%).
AN is valued at $7.5 billion and has a Forward PE of 9. The company holds a Zacks Style Score of “A” in Value, but “D” in Momentum.
Q1 Earnings and Price Action
In late April, the company reported strong earnings, seeing beats on both the top and bottom lines. Q1 came on at $2.85 v the $1.80 expected, a 55% beat above Zacks estimates. Revenues came in at $5.9B v the $5.06B expected.
The company saw big year over year numbers:
- New vehicle unit sales +22% y/y - Retail used vehicle unit sales +28% y/y - Wholesale Rev +21.1% y/y - Used vehicle sales +40.1% y/y - Finance and insurance +32.7% y/y
While these were bounce back numbers from when COVID started to shutter things a year ago, they are impressive nonetheless. The earning beat was the ninth straight, which has helped drive the stock over 90 % higher since the beginning of 2020.
Estimates Headed Higher into Earnings
The earnings momentum looks to continue as we head into next quarter. Over the last 90 days, estimates are headed higher. For next quarter, estimates have gone from $1.93 to $2.37, or up 23%. For the current year, estimates have ticked 37% higher, from $7.48 to $10.15.
The company will report on July 20
th, with the consensus at $2.53. This is a slight downtick from the $2.54 expected, but recent strength in the car market could bring better than expected numbers. Industry Strength
Seasonality in Q2 usually means new car sales volumes are trending higher and data from earlier in the quarter showed just that, with April SAAR numbers coming in high. Pricing has alos remained very strong, especially for the used car market which saw a 62% uptick in April year over year.
While production issues are bringing lower volumes, car dealers are able to sell above sticker price. This creates a negative short-term outlook that has stalled earnings estimates. However, a positive earnings number will prove Auto Nation’s ability to manage the tight supply could be a tailwind for stock in the back half of the year.
The Technical Take
After pulling back about 8% from 2021 highs, the stock has rallied back to the 21-day moving average. Still up 35% on the year, investors will likely hold the stock at current levels until earnings come out.
If the bullish case plays out, look for the stock to pop above the 50-day at $99 and continue to all-time highs at $108.
However, if the bearish scenario hits earnings and the company failed to navigate the inventory issue, look for a break down to the 200-day. Bulls should step in at that level, which is $79
Earnings on deck and investors should expect an EPS beat despite current issues with inventories. Even if the company shows difficulty with this past quarter, the future is looking bright as the auto shortfall surpasses next year. Bulls should be on the lookout for any dips or looking to buy the break back over $100 and ride the stock to all-time highs.
JinkoSolar Holding is a Zacks Rank #5 (Strong Sell) that is a solar product manufacturer based in China. The company’s principal products are silicon wafers, solar cells and solar modules.
After a big earnings miss late last year and sector weakness in solar, JKS had a rough start to 2021, with the stock down over 60% from highs. However, a nice earnings report last week has the stock bouncing hard. Investors are now in a better spot after the stock cleared technical resistance, but they might want to take profits as analysts don’t seem too impressed
About the Company
JinkoSolar is headquartered in Shangrao, China and employs over 24,000 people. The company was founded in 2006 and sells its products to distributors, project developers, and system integrators; and utility, commercial, and residential customers.
JKS is valued at $2.5 billion and has a Forward PE of 55. The company holds a Zacks Style Score of “B” in both Value and Growth, but “F” in Momentum.
The company reported a strong quarter, with EPS coming in 1400% above expectations. The company beat on the top line and saw margins higher. However, Jinko guided Q2 revenues and margins lower than the previous quarter. Analysts are no doubt picking up on this and lowering estimates.
Over the last 7 days, all time frames have seen estimates falling lower. For the next quarter, analysts have dropped their numbers to $0.05 from $0.64, a plunge of 92%. For the next year things get a little better, but numbers are still falling 8%.
Despite the guidance cut and numerous analysts dropping expectations, the stock surged, moving from $38 to almost $60.
Why is the stock climbing?
Part of the reason the stock shot higher was the high short interest in the name, with about 7 million shares short. This equates to about 26% of the float and when the stock started to move higher, these shorts were forced to buy.
However, the main reasoning behind the move up stemmed from the company’s move to IPO in China’s STAR market. This action will raise funds and allow the company to expand its business more rapidly. It also gives them more access to capital if needed down the road.
The combination of the China IPO news and the short interest caused the stock to break some important technical resistance, but the stock chart isn’t 100% bullish.
JKS is still 40% off last year's highs, but investors might run into issues around the $59 level. This is the 61.8% Fib retracement drawn from 2021 highs to lows. Typically, we see selling in these areas, even if it's only temporary.
The bulls will want to either take some profits or watch a pullback to the 200-day. That area is currently at $51.50 and if it doesn’t hold, then the bears will win back control and start pointing to the fundamentals.
Solar is a very volatile sector and investors should look to take profits when they get big moves. When you throw a Chinese solar company into the equation, it amplifies the volatility, so investors should be extra cautious with Jinko.
Additional content: 3 Airline Stocks to Watch in 2H as Air Travel Brightens
The coronavirus pandemic, which was aptly described in April 2020 as the “the worst financial crisis in aviation history" by
United Airlines’ former CEO Oscar Munoz, caused an untold misery to airlines last year. With air-travel demand touching a nadir, most airline companies incurred losses in each of the four quarters of 2020. Reflecting the hardships, the Zacks Airline industry declined 26.4% last year.
However, the industry participants’ fortunes changed with the advent of 2021. Wide-spread vaccinations instilled confidence in people to fly once again without the fear of contracting the infection from a fellow-traveler. As a result of the uptick in air-travel demand (particularly for leisure), carriers are seeing a swell in passenger count despite the coronavirus-led travel restrictions, per a
Moreover, in the United States, the Transportation Security Administration screened more than two million people in not less than 10 days during June (considering the data until Jun 29). In fact,
TSA screened 2,167,380 people last Sunday i.e. Jun 27, 2021. This was the highest reading taken since Mar 5, 2020. Betterment of the scenario is well-reflected in the Zacks Airline industry’s growth of 6.9% year to date. Air Traffic Likely to Continue Northward Movement in 2H
While the weakness pertaining to business travel is unlikely to disappear soon, overall air-travel demand is likely to continue improving in the second half of 2021, driven by leisure travel. The fact that the expectation of a recovery is not only restricted to the United States is clear from the fact the European carrier Ryanair's recent addition of 200,000 seats on flights from the United Kingdom to Malta and the Balearics (Ibiza and Palma) for July, August and September.
This follows the U.K. government’s decision to include these islands on the green list for travel that allows flyers to visit these sites without having to quarantine (provided they are declared COVID negative) themselves on their return. The relaxation is effective today.
Riding on such an improved scenario, Gol’s outlook for the second half of 2021 seems rosy. The carrier, currently carrying a Zacks Rank #3 (Hold), expects net operating revenues for the latter half to be approximately R$6 billion, much higher than the second-quarter estimate of roughly R$1 billion.
You can see
. the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
Moreover, like the first half of the year, the focus on the cargo segment should continue to serve airlines well in the latter half of the year too.
The above write-up clearly suggests that things are on the mend as far as airlines are concerned and the second half of the year should see this momentum to continue on the back of improvements witnessed in the first half of the year. We therefore highlighted three airline stocks, each presently carrying a Zacks Rank of 3, that investors should keep tabs on.
Our Choices United Airlines: In response to a better air-travel demand, United Airlines plans to add in excess of 400 daily flights to its July schedule. The airline expects to operate 80% of its pre-pandemic U.S. schedule in the month as summer travel bookings soar 214% from the 2020 levels.
The company’s cost-control initiatives are supporting its bottom line. Owing to an improved air-travel demand scenario, the Zacks Consensus Estimate for 2021 is currently pegged at a loss of $14.15 per share, narrower than the loss of $14.26 estimated for the stock 60 days ago.
Southwest Airlines: Restoration of leisure-travel demand is a huge plus for this Dallas-based carrier. To meet the anticipated demand upturn in the latter half of the year, Southwest Airlines recently announced a pay hike for its hourly employees. The impending increment, which will be effective Aug 1, is aimed at retaining its existing employees as well as attracting new personnel.
Owing to bloated bookings, aided by an upswing in air-travel demand, the Zacks Consensus Estimate for 2021 is currently pegged at a loss of $1.29 per share, narrower than the loss of $1.47 estimated for the stock 60 days ago.
Alaska Air Group: With air-travel demand rising, Alaska Airlines is constantly looking to add routes and widen its network to meet the anticipated demand swell. This upbeat scenario led to a healthy cash flow from the company’s operations.
Boosted by higher bookings, attributable to a spike in air-travel demand, the Zacks Consensus Estimate for 2021 currently stands at a loss of $2.50 per share, narrower than the loss of $2.86 expected for the stock in the past 60 days.
Notably, shares of United Airlines, Southwest Airlines and Alaska Air have rallied 20.5%, 13.5% and 15.6%, respectively, so far this year.
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