Back to top

Image: Bigstock

Beazer Homes and Carrols Restaurant have been highlighted as Zacks Bull and Bear of the Day

Read MoreHide Full Article

For Immediate Release

Chicago, IL – November 16, 2021 – Zacks Equity Research shares Beazer Homes USA, Inc. (BZH - Free Report) as the Bull of the Day, and Carrols Restaurant Group (TAST - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Rivian (RIVN - Free Report) , Tesla (TSLA - Free Report) and Walmart (WMT - Free Report) .

Here is a synopsis of all five stocks:

Bull of the Day:

Beazer Homes USA, still seeing strong demand for new homes as it heads into fiscal 2022. This Zacks Rank #1 (Strong Buy) is dirt cheap with a single digit P/E.

Beazer Homes is headquartered in Atlanta and builds new homes in most of the popular states people are flocking to such as Arizona, California, Delaware, Florida, Georgia, Indiana, Maryland, Nevada, North Carolina, South Carolina, Tennessee, Texas and Virginia.

Another Big Beat in Fiscal Q4

On Nov 10, Beazer reported its fiscal fourth quarter 2021 results and blew by the Zacks Consensus by 92%. Earnings were $1.57 versus the consensus of $0.82.

It was the 7th earnings beat in a row and the 6th huge earnings beat in a row.

The Street has significantly underestimated the earnings power of the home builders since the start of the pandemic.

Revenue fell 13.2% to $589.1 million due to a 19% decrease in home closings, partially offset by a 7.1% increase in average selling price to $418,700.

Adjusted gross margin, a key real estate metric, rose 150 basis points to 23.2%, driven by price increases and lower sales incentives.

What's Going on with New Orders?

A big number which stands out in Q4 is that net new orders fell 46.8% to 1,069. But that was due to a 21.6% decrease in the average community count to 119 and a 32.1 decrease in sales pace to 3 order per community from 4.4 per community last year.

The 4.4 orders per community from Q4 2020 was the highest fourth quarter level in more than a decade.

Like many of the home builders, Beazer took actions to moderate sales in the quarter. They literally were actively trying to slow it, due to the ongoing supply chain and labor pressures.

Why put a home under contract, if you can't build it for months?

Beazer's cancellation rate in the quarter was 11.7%, down 50 basis points from the previous year.

Can this Bull Market in Housing Continue Next Year?

Beazer is bullish going into fiscal 2022 even with the strong year it just delivered.

It's positioning itself for the future as its controlled lots for fiscal 2021 rose 23.3% to 21,987 from 17,830 in the prior year. Excluding land held for future development and land held for sale lots, active controlled lots rose 26.7% to 21,422.

"The new home market continues to be characterized by strong demand and limited supply, supported by growth in both employment and household income," said Beazer's CEO Allan P. Merrill.

"While affordability and supply chain challenges are expected to persist, we believe our strong backlog and operational momentum will allow us to generate earnings per share above $5.00. We also expect further growth in our active lot position and to achieve our multi-year goal of reducing total debt below $1 billion," he added.

Analysts Raise Beazer's F2022 Earnings Estimates

After another solid quarter from Beazer, and Beazer's bright outlook, the analysts raised their earnings estimates for fiscal 2022.

2 estimates were raised for fiscal 2022 since Beazer reported earnings, pushing the Zacks Consensus up to $4.30 from $3.48.

This is still well under the company's guidance of "above $5.00" that it mentioned in the press release.

Beazer Still Dirt Cheap

Beazer shares have rallied nearly 42% year-to-date but are off their 2021 5-year highs.

Over the last 3 months, they haven't done much of anything on fears of "peak earnings" until the earnings report sent shares soaring 15%.

Beazer is still dirt cheap, with a forward P/E of just 4.98. Yes, it's about 5x earnings.

How much cheaper can Beazer get?

For investors looking for a way to play the hot housing market, Beazer is a stock to keep on your shortlist.

Bear of the Day:

Carrols Restaurant Group, one of the largest Burger King franchisees in the United States, is getting hit by inflationary pressures in 2021. This Zacks Rank #5 (Strong Sell) is expected to see a bigger earnings loss in 2021 compared to 2020, when the pandemic had shut many of its restaurants.

Carrols operates both Burger King and Popeye franchises in North America. It's the largest Burger King franchisee, operating 1,028 restaurants in 23 states. But it also operates 65 Popeye restaurants in 7 states.

A Beat in the Third Quarter

On Nov 10, Carrols reported its third quarter results and beat on the Zacks Consensus Estimate by a penny. Earnings were a loss of $0.16 versus the Zacks Consensus of a loss of $0.17.

Total restaurant sales rose 3.6% to $421.7 million compared to $407 million last year.

But inflation and labor shortages really hit Carrols in the quarter.

Burger King comparable sales jumped 2.7% with monthly trends improving sequentially through the quarter resulting in October comparable sales, in the fourth quarter, up 5% year-over-year.

Burger King traffic was about 95% of 2020 levels, however. But it offset that decline through higher pricing and reduced promotional activity. It also saw a nearly 5% delivery sales mix, which raised the average check by approximately 7.8%.

But ongoing staff issues resulted in $3.5 million in lost sales and impacted the Burger King comparables by about 1%.

Popeyes comparable sales fell 3.2% compared to a 5.5% increase in the third quarter last year. Staffing problems also hit Popeyes, particularly in the evening hours.

But Popeyes were just 4.8% of Carrols total restaurant sales in the third quarter.

Costs Rise Sharply

Inflation also played havoc with the quarter as beef prices rose 15.5% year-over-year while team member average hourly wage costs jumped 13.3% compared to the same period last year.

In response, Carrols has been raising prices. It took two price actions during the third quarter and another one in October to help manage the cost pressures.

Carrols believes it will be able to "claw back" a portion of the margin erosion as it moves into next year. This will be achieved through menu price actions taken to date and in the future combined with continued menu and promotional activity optimization.

Analysts Cut Carrols Earnings Estimates

Given all the challenges, it's not surprising that the analysts have gotten pessimistic on Carrols.

2 estimates were lowered in the week after the earnings report, pushing down 2021's Zacks Consensus Estimate to a loss of $0.53 from a loss of $0.32 just 30 days ago.

That's an earnings decline of 657% as the company only lost $0.07 last year during the height of the pandemic.

The 2022 Zacks Consensus also fell to a loss of $0.23 from a loss of $0.07 in the last month as 2 analysts cut in the last week.

Carrols Shares Sink

It's tough being in the restaurant business in 2021. Investors have been fleeing Carrols stock over the last several months, with the shares now hitting new 52-week lows, down 47% year-to-date.

They haven't yet reached the coronavirus lows set last March, however.

Until the pandemic challenges of inflation and labor shortages ease, hopefully, Carrols believes, by the second half of 2022, these shares are likely to continue to be pressured.

Investors should watch the analyst estimate revisions for clues on when things are expected to improve with Carrols.

Additional content:

Flat-as-a-Pancake Markets Temper Exuberance

Markets closed Monday regular trading flat as a pancake, following a morning high that saw investors reacting to a stronger-than-expected Empire State survey, and looking forward to the signing of a $1.2 trillionInfrastructure Bill into law by President Biden, which is occurring as I write this. The Dow and Nasdaq were both -0.04% on the day, while the S&P 500 closed at +0.001%. Only the small-cap Russell 2000 had any depth to its performance today, finishing down -0.45% on the day.

The Dow was +136 points at session highs, and the Nasdaq has just snapped a two-day winning streak on the markets. For the S&P 500, it remains within 1% of its all-time trading high. So what we may be seeing today is a “sell the news” event, especially in relation to the long-expected Infrastructure Bill finally being enacted.

Analysts are still taking a hard look at inflation creeping into the economy — as well as the tools used to fight inflation either potentially being ineffective or actually contributing to further strains pushing prices higher. Treasury Secretary and former Fed Chair Janet Yellen recently stated that inflation might be kept at bay if the labor force escalates in a timely manner. Increased productivity is traditionally a good remedy for capping inflation, as is raising interest rates. Yet with the Fed only today beginning its tapering process, rising rates are some ways off, and if it takes significantly higher wage growth (which is already notably up) to bring the labor force to desired capacity, this could actually exacerbate inflation conditions.

In the Infrastructure package is also included $7.5 billion to build-out EV charging stations. As a result, the EVB market had been seeing a surge in share prices. None higher, in fact, than Rivian, which just held the most successful IPO in recent memory last week. Rivian shares grew another 15% today, now +90% since the IPO. On the other side of the coin, Tesla has so far given up -11% month to date. While no one sees Rivian as a direct competitor to Tesla in 2021 or ’22, what this trading suggests is a finite amount of money being invested in the EV market at this time, even with the infrastructure boost.

Tomorrow morning brings up Walmart fiscal Q3 earnings results, with expectations up modestly year over year: to $1.39 per share on $135.74 billion in revenues for the quarter. Walmart is looking for its third-straight positive earnings surprise. Shares are +3.7% in the past month, but flat year to date. Walmart also leads the surge of big-box retailers reporting this week.

Questions or comments about this article and/or its author? Click here>>

5 Stocks Set to Double

Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2021. Previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>

Media Contact

Zacks Investment Research

800-767-3771 ext. 9339 provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer.

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit information about the performance numbers displayed in this press release.