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Tesla, Cal-Maine Foods, Energy Transfer, Magellan Midstream Partners and Plains GP Holdings highlighted as Zacks Bull and Bear of the Day

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For Immediate Release

Chicago, IL – July 14, 2021 – Zacks Equity Research Shares of Tesla, Inc. (TSLA - Free Report) as the Bull of the Day, Cal-Maine Foods, Inc. (CALM - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Energy Transfer LP (ET - Free Report) , Magellan Midstream Partners, L.P. (MMP - Free Report) and Plains GP Holdings, L.P. (PAGP - Free Report) .

Here is a synopsis of all five stocks:

Bull of the Day:

Tesla is a Zacks  Rank #2 (Buy) and it has been leading a lot of the solar stocks higher. Sure, there is an automobile component to the company as well as having top notch leadership, but of late solar stocks have been pushing higher. Let's take a deeper look at this stock in this Bull of the Day article.

Description

Tesla, Inc. makes and sells electric vehicles, and energy generation and storage systems in the United States, China, and internationally. The company was formerly known as Tesla Motors, Inc. and changed its name to Tesla, Inc. in February 2017. Tesla, Inc. was founded in 2003 and is headquartered in Palo Alto, California

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 TSLA, I see a great history of beating the Zacks Consensus Estimate. There are three beats over the last four quarters. 

The average positive earnings surprise over the last fours quarters works out to be 147%, which means that they are posting results that are more than what is expected. 

There was a monster beat four quarters ago (544%) 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 TSLA, I see estimates moving higher.

Over the last 60 days I am seeing several increases.

This quarter has moved from 89 cents to $0.90.

Next quarter has held still at $1.10.

The full year number has increased from $4.25 to $4.30 over the last 60 days.

Next year is at $6.27 and that is up from $6.26 over the same time horizon.

Positive movement in earnings estimates like that are the reason that this stock is a Zacks Rank #2 (Buy).

Valuation

The valuation for TSLA has always been the core reason for it being widely hated and heavily shorted. For the most part, the war of the shorts is over and the longs have declared victory as short interest in the stock has dropped from a short interest level of 30% plus to a much more reasonable level of about 4.4%.

As much as that is a story in itself, the idea is that investors still see a lot of growth in this story. The topline is expected to grow at about 92% this year and 45% next year. That is huge growth for a company the size of TSLA.

So that growth makes the 159x forward earnings multiple seem a little less impossibly high. The 27x book multiple is high, but again this company is more than cars and more than solar panels.

At the end of the day, the growth will continue for TSLA and that growth will help push the stock back to new highs in the coming quarters.

Bear of the Day:

Cal-Maine Foods is a Zacks Rank #5 (Strong Sell) and after seeing its stock peak in early March the price has tumbled down some 17% to current levels. I see only one earnings report this year. Let's take a look at why that is the case in this Bear of the Day article.

Description

Cal-Maine Foods, Inc. produces and distributes shell eggs. The company offers specialty shell eggs, such as nutritionally enhanced, cage free, organic, and brown eggs under the Egg-Land's Best, Land O' Lakes, Farmhouse, and 4-Grain brand names, as well as under private labels. The company was founded in 1957 and is headquartered in Jackson, Mississippi.

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 CALM, I see one beat and one miss of the Zacks Consensus Estimate. The other two quarters we did not have an estimate for the quarter. This alone does not make the stock 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 CALM, I see estimates fluctuating.

This quarter has moved from $0.50 to $0.26.

Next quarter does not have an estimate.

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

The 2021 consensus number has fallen from $0.73 to $0.61.

The 2022 number has moved from $0.86 to $0.50 over the last 60 days.

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

Additional content:

3 Top Energy Stocks to Quell Fears of Oil & Gas Market Volatility

When it comes to investing in energy companies, concerns regarding volatility in oil and natural gas prices haunt investors. Certainly, there are strategies that can help investors sail through choppy energy market conditions. In fact, there are several stocks in the energy space that not only have low commodity-price exposure but also generate handsome distribution yields.

Volatile Commodity Prices

The price of West Texas Intermediate crude, trading at more than $74 per barrel mark, has improved drastically from the pandemic-hit April last year, when oil was in the negative territory. With coronavirus vaccines being rolled out at a massive scale, the demand for fuel will possibly improve further.

It is the same story with natural gas as its price has improved roughly 128% since last March when gas hit a low. Despite the massive recovery, long-term historical price charts of oil and gas have historically been volatile, with a number of other factors weighing in.

In fact, the stability in the recent surge in commodity prices is dependent on how quickly countries vaccinate people and vaccines' efficacies against the deadly variants of coronavirus. Hence, widespread uncertainties justify volatility in oil and gas prices.

Sailing Through the Volatility

Given that the energy market is choppy, it is possible to sail through volatilities while investing in midstream players. This is because, unlike exploration and production operations that rely primarily on oil and gas prices, midstream business is relatively more stable. Pipeline and storage assets are mostly being reserved by shippers for long term, thereby generating stable fee-based revenues for midstream players.

Backed by minimal volume risks and low direct exposure to oil and oil and gas price volatility, midstream businesses are poised to generate steady cashflow and quarterly distributions.

3 Stocks in the Spotlight

Employing our proprietary stock screener, we have zeroed down on three midstream stocks, two of which carry a Zacks Rank #2 (Buy), while one sports a Zacks Rank #1 (Strong Buy). Each of the midstream player generates handsome distribution yields, outpacing the broader energy sector. You can see the complete list of today's Zacks #1 Rank stocks here.

Energy Transfer has a huge network of midstream properties that comprise intrastate and interstate natural gas transportation and storage assets. The partnership's midstream business includes transportation and terminalling assets for crude oil, natural gas liquids (NGL) and refined products.

The interstate pipelines of the partnership, which are spread over roughly 19,000 miles, have a throughput capacity of 21 billion cubic feet per day (Bcf/D). Energy Transfer boasted that 95% of its revenues, which are derived from interstate pipelines, are based on fixed reservation fees. This signifies the stability in business and ensures handsome future distributions.

Currently, the partnership's distribution yield is 5.8%, higher than the energy sector's 3.6%. In fact, in the past year, the #2 Ranked stock's distribution yield has consistently been higher than the energy sector.

Magellan Midstream Partners has a strong midstream presence with assets transporting, storing and distributing refined petroleum products and crude oil. The partnership's business model is relatively stable since it is focused mostly on fee-based and low-risk activities. This secures Magellan Midstream's future distributions.

In fact, through various business cycles, the Zacks #2 Ranked stock has been steadily paying distributions since its IPO in 2001. Currently, the partnership's distribution yield is 8.6%.

Plains GP Holdings has an indirect, non-economic controlling general partner interest in Plains All American Pipeline LP – a leading midstream player with a huge network of pipeline, terminalling, storage and gathering properties with strong presence in prolific oil and NGL producing basins.

With an indirect limited partner interest in Plains All American Pipeline, Plains GP Holdings generates stable distributions for its unit holders. Currently, the distribution yield of Plains GP Holdings, with Zacks Rank of 1, is 6.4%.

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