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The Zacks Analyst Blog Highlights Harley-Davidson, AGCO, Crocs, AutoNation and KB Home

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For Immediate Release

Chicago, IL – March 8, 2022 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Harley-Davidson Inc. (HOG - Free Report) , AGCO Corp. (AGCO - Free Report) , Crocs Inc. (CROX - Free Report) , AutoNation Inc. (AN - Free Report) and KB Home (KBH - Free Report) .

Here are highlights from Monday’s Analyst Blog:

Shrug Off Market Gyrations with These Top 5 Value Stocks

Wall Street has suffered from severe volatility since the beginning of 2022 with no sign of a near-term trend reversal. Market participants were skeptical about the Fed’s policy shift toward a tougher-than-expected line. Moreover, the geopolitical conflict between Russia and Ukraine has raised serious doubts about global economic growth.

At this stage, it would be prudent to pick value stocks with a favorable Zacks Rank to cushion the portfolio as well as to make some gains from the upside potential. These stocks could prove to be valuable once the rally resumes. Five of them are Harley-Davidson Inc., AGCO Corp., Crocs Inc., AutoNation Inc. andKB Home.

Geopolitical Conflict Intensifies

The geopolitical conflict between Russia and Ukraine heightened as Russia started entering more territories of Ukraine with massive shelling and missile firing that devastated a major part of Ukraine. Millions of people have fled from Ukraine to neighboring countries. The UNHRC has said that this has turned out to be the biggest refuge problem in Europe after World War II.

The United States and its allies agreed to exclude select Russian banks from the SWIFT interbank messaging system. This measure has effectively detached Russian banks from the global financial network. Two negotiation meetings between Russia and Ukraine ended without any fruitful result. President Joe Biden said that his administration is considering more punitive actions against Russia to isolate that country from the global financial markets.

The major impact so far of the Russian invasion in Ukraine is that commodity prices have skyrocketed. The first is that of crude oil. As the U.S. government has intended to stop importing Russian oil, a major source of global energy, the U.S. benchmark — WTI crude — topped $130 per barrel, the highest since July 2008. The global benchmark — Brent crude — climbed nearly $140 per barrel, the highest since July 2008. Gasoline price is expected to hit $5 gallon very soon.  

Other commodity prices like aluminum, nickel, zinc and palladium are quickly approaching to their all-time highs as Russia is a major exporter of these metals. Steel and coal prices have also started elevating. Wheat prices have soared as Ukraine is known as the “wheat bowl” of Europe.

Inflation to Become Worse

The January data of several inflation measures in the United States like the Personal consumption expenditure price index, consumer price index and producer pride index, came in at 40-year highs. The Fed is set to hike the benchmark interest rate after three years in March. Although, the Fed Chairman Jerome Powell said that the first rate increase may be of 25 basis points, the central bank will not hesitate to take harder stance if it falls to control inflation effectively.

The developments after the Russian invasion in Ukraine is likely to elevate inflation even more. Commodity prices, especially the price of crude oil and natural gas, are primary sources of inflation globally. These may compel the Fed to adopt harsher policies going forward.

Our Top Picks

At this juncture, investors should be prepared to minimize fluctuations in their portfolio and consequently rebalance it with suitable financial assets to maintain stability. We have narrowed our search to five value stocks. Each of our picks carries a Zacks Rank #1 (Strong Buy) and a Value Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.

Harley-Davidson is focusing on motorcycle models and technologies that better align with market trends. HOG’s turnaround plan, ‘Rewire,’ and the five-year strategic plan ‘Hardwire’ boosts optimism. Harley-Davidson's new operating model and organizational structure have improved effectiveness across all functions.

HOG’s decision to evolve its original LiveWire motorcycle into a dedicated electric vehicle brand is set to bolster its prospects. The popularity of Grand American Touring motorcycles and the successful launches of Pan American and Sportster S. augurs well for the company’s top-line growth.

The forward price-to-earnings ratio (P/E) for the current financial year is 9.1X, lower than the industry average of 12.2X. HOG has a PEG ratio of 0.2, lower than the industry average of 0.8. Harley-Davidson has expected earnings growth of 1.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 20.3% over the last 30 days.  

AGCO manufactures and distributes agricultural equipment like high horsepower tractors, utility tractors and compact tractors and related replacement parts worldwide. It offers hay tools and forage equipment also.

Gross and operating margins of AGCO are likely to increase on higher sales and production volumes as well as pricing actions to mitigate cost inflation. Stabilization in the U.S farm sector and an upbeat net farm income forecast will lead to higher agricultural equipment demand. Investments in precision farming technology, product innovations, smart-farming solutions and cost-control initiatives will stoke AGCO’s growth.

The forward P/E for the current financial year is 11.1X, lower than the industry average of 17.1X. AGCO has a PEG ratio of 0.6, lower than the industry average of 1.5. The company has expected earnings growth of 12.4% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 11% over the last 30 days.  

Crocs designs, develops, manufactures, markets and distributes casual lifestyle footwear and accessories for men, women and children worldwide. Solid consumer demand, as well as broad-based growth across all markets, channels and categories, contributed to the strong quarterly results of CROX.

Clogs, sandals and Jibbitz remained the key growth drivers. Crocs’ focus on product innovation and marketing, digital capabilities and potential gains from the HEYDUDE buyout bode well. Increased focus on the Crocs mobile app and global social platforms have aided digital sales. CROX issued an upbeat 2022 view.

The forward P/E for the current financial year is 7.1X, lower than the industry average of 11.8X. CROX has a PEG ratio of 0.5, lower than the industry average of 1.1. Crocs has expected earnings growth of 22.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1% over the last 30 days.  

AutoNation is the largest automotive retailer in the United States. A diversified product mix, strong footprint, large dealer network and aggressive store expansion efforts are set to fuel AN’s profitability. Acquisition of Peacock Automotive Group and Priority 1 have strengthened the AutoNation’s portfolio.

Enhanced digital solutions have helped AN to further boost profitability and market presence. With the launch of its digital platform AutoNation Express — which enables customers to buy and sell vehicles online — the company has stepped up its digitization game, which is driving its top-line growth. Increased focus on cost discipline is also aiding margins. A strong liquidity profile and investor-friendly moves instill optimism for AN.

The forward P/E for the current financial year is 6X, lower than the industry average of 6.9X. AN has a PEG ratio of 0.2, lower than the industry average of 0.4. AutoNation has expected earnings growth of 4.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.8% over the last 7 days.  

KB Home operates as a homebuilding company in the United States. It operates in four segments: West Coast, Southwest, Central and Southeast. With a resilient U.S. housing market, the backlog value of KBH at fiscal fourth quarter-end grew 67% from a year ago to $4.95 billion, marking the highest fourth-quarter level since 2005.

Robust backlog level, a strong lineup of community openings and a solid return-focused growth model will help KB Home generate as much as $7.6 billion in housing revenues and double-digit operating margin in fiscal 2022.

The forward P/E for the current financial year is 3.8X, lower than the industry average of 4.4X. KBH has a PEG ratio of 0.1, lower than the industry average of 0.5. KB Home has expected earnings growth of 67.8% for the current year (ending November 2022). The Zacks Consensus Estimate for current-year earnings has improved 28.9% over the last 60 days.

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