For Immediate Release
Chicago, IL – August 24, 2022 – Zacks Equity Research shares BJ’s Wholesale Club (
BJ Quick Quote BJ - Free Report) as the Bull of the Day and Burlington Stores ( BURL Quick Quote BURL - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Regions Financial Corp. ( RF Quick Quote RF - Free Report) , M&T Bank Corp. ( MTB Quick Quote MTB - Free Report) and Comerica Inc. ( CMA Quick Quote CMA - Free Report) .
Here is a synopsis of all five stocks.
The market’s jump to the 200-day was met with cheers across the globe. As quickly as the bounce took us to that key technical level, it’s smacked us lower. Gaps do get filled, and it looks like a downside gap has been filled. That does not mean that the market has no chance of heading lower. There are ways to insulate your portfolio over the long term, as well as add quality names during the downside action. Finding stocks in the good graces of our Zacks Rank is one way to accomplish this task.
That’s why I’m naming
BJ’s Wholesale Club as today’s Bull of the Day. BJ's Wholesale Club Holdings, Inc., together with its subsidiaries, operates warehouse clubs on the east coast of the United States. It provides perishable, general merchandise, gasoline, and other ancillary services. The company sells its products through the websites BJs.com, BerkleyJensen.com, Wellsleyfarms.com, and Delivery.bjs.com as well as the mobile app. As of June 10, 2022, it operated 229 warehouse clubs and 160 gas locations in 17 states.
The reason for the favorable rank is the series of positive earnings estimate revisions coming from analysts. Over the last week alone, seven analysts have jacked up their estimates for the current year and next year. The bullish moves have pushed up our Zacks Consensus Estimates from $3.28 to $3.56 for the current year and from $3.59 to $3.84 for next year.
This comes on the heels of this last quarter’s big earnings surprise. EPS came in at $1.06, smashing expectations calling for 83 cents by 27.71%. Over the last year alone, the stock has beat our Zacks Consensus Estimates by an average of 13 cents each quarter.
The market bounced sharply off the lows, rocketing up to the 200-day in true bull market fashion. That does not mean the risk is off the table. Investors are still thoroughly paranoid about the possibility of a retest of the lows. With the Fed continuing to tighten, and inflation still running rampant, the future remains murky at best. If you’re loading the boat on investments, looking for stocks with a good chance of bouncing and remaining green throughout this run, look to the Zacks Rank.
Stocks in the good graces of our Zacks Rank have the strongest earnings trends. These are the stocks that are built for the long run, with the best chances of future success. Avoid stocks that have weak earnings trends or earnings moving in the wrong direction.
One such stock with earnings moving in the wrong direction is today’s Bear of the Day. It’s Zacks Rank #5 (Strong Sell)
Burlington Stores. Burlington Stores, Inc. operates as a retailer of branded apparel products in the United States. The company provides fashion-focused merchandise, including women's ready-to-wear apparel, menswear, youth apparel, footwear, accessories, toys, gifts, and coats, as well as baby, home, and beauty products. As of January 29, 2022, it operated 837 stores under the Burlington Stores name, 2 stores under the Cohoes Fashions name, and 1 store under the MJM Designer Shoes name in 45 states and Puerto Rico.
The reason for the unfavorable Zacks Rank is that several analysts have cut their expectations for the current year and next year. Five analysts have dropped their numbers for the current year while five have also followed suit for next year. The bearish sentiment has cut our Zacks Consensus Estimates for the current year from $7.24 to $5.73 while next year’s number is off from $9.74 to $7.67.
Additional content: S&P 500 Banks Make a Resounding Comeback: 3 Picks
Similar to all the industries/sectors in the S&P 500 Index, banks too had a rough start to 2022 and witnessed historically low-price performances. Nonetheless, since July, bank stocks have been showing signs of a rebound.
In the quarter-to-date period, the S&P Regional Banks Select Industry Index has rallied 12%, outperforming the S&P 500 Index and the Zacks
Finance sector growth of 9.3% and 6.9%, respectively. Of the constituent banks in the Index, we have picked – Regions Financial Corp., M&T Bank Corp. and Comerica Inc. – as these have not only outperformed the S&P 500 but are also fundamentally strong to withstand any macroeconomic downturn.
As the banks’ financial performance is tied to that of the economy, the near-term prospects look decent. The interest rate hikes and solid loan demand are expected to support banks this year. Also, several macroeconomic factors like job additions, a slight fall in inflation and gas prices and improving consumer sentiments are pointing toward an improving U.S. economy.
Yet, the long-term prospects look a bit dim. There’s a huge chance that the economy might be heading toward a recession. But the Federal Reserve’s stress test for 2022 shows that the major banks will be able to keep lending even during the severe downturn. Also, the banks would have roughly twice the amount of capital with them than required under the rules. This will likely provide a cushion to banks against unexpected losses.
Thus, this is the right time to invest in bank stocks that are expected to keep growing even in the face of an economic slowdown. The above-mentioned three banks were chosen with the help of the Zacks
Stocks Screener. These stocks currently carry a Zacks Rank #2 (Buy). You can see . the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
Now, let’s discuss these stocks in detail:
Regions Financial is a Birmingham, AL-based financial holding company providing retail and commercial and mortgage banking, and other financial services. RF operates through four business segments – Corporate Bank, Consumer Bank, Wealth Management and Others.
Decent economic growth and a strong lending pipeline are expected to drive loan growth, thereby aiding the company's net interest income (NII). Further, RF continues to take actions with respect to making investments in talent and technology to support financials.
Regions Financial also keeps exploring opportunities for bolt-on buyouts, primarily in mortgage servicing rights, besides adding capabilities in the wealth management unit. As RF is committed to diversifying its revenue streams, such endeavors will likely support growth in the long term.
Regions Financial has a solid balance sheet position. Also, its senior unsecured debt enjoys investment-grade credit rating of BBB+ from both Standard & Poor’s, and Fitch. This renders the company favorable access to debt at attractive rates. Further, its robust cash position shows the ability to meet debt obligations if the economic situation worsens.
The company’s strong balance sheet and consistent earnings make its capital-deployment activities sustainable. The bank has a dividend yield of 3.01% and a five-year annualized dividend growth of 14.14%. At present, RF's payout ratio is 30% of earnings.
The stock has rallied 18% so far this quarter. While the company’s earnings are projected to witness a year-over-year decline of 6.8%, the same is expected to rise 5.9% for 2023.
M&T Bank Corporation, headquartered in Buffalo, NY, is the holding company for M&T Bank and Wilmington Trust, National Association. MTB operates in New York, MD, New Jersey, PA, Delaware, CT, Virginia, WV and the District of Columbia.
Organic growth, driven by higher fee income, rising rates and solid loans and deposits, will likely continue leading to revenue growth for MTB. The company is growing inorganically backed by a sound liquidity position. The acquisition of People's United Financial (completed this April) is expected to be accretive to its earnings and will result in substantial cost savings.
Further, MTB seems to be well positioned in terms of its liquidity profile and is likely to be able to continue meeting the debt obligations if the economic situation worsens. Also, the bank has come a long way in displaying its capital strength, as indicated by its impressive capital deployment activities. The company has a dividend yield of 2.54% and a five-year annualized dividend growth of 9.92%. Also, MTB's payout ratio is 37% of earnings at present.
In the quarter-to-date period, MTB stock has gained 15.5%. For 2022 and 2023, the company’s earnings are projected to grow 10.2% and 30.7%, respectively, on a year-over-year basis.
Comerica, based in Dallas, TX, is a banking and financial services company. CMA delivers financial services in three primary regional markets — Texas, California and Michigan — as well as Arizona and Florida. It has operations in numerous other U.S. states as well as in Canada and Mexico.
Decent economic growth, higher interest rates and gradually improving loan commitments will support CMA’s NII. Given the aggressive rate hike expectations and solid loan demand, the company is projecting a 31% year-over-year increase in NII (including PPP) this year.
Also, Comerica’s revenues and efficiency improvement initiative – GEAR Up (started in mid-2016) – have been bearing fruits. The company's efforts in product enhancements, improved sales tools and training as well as better customer analytics bode well for robust revenue growth.
Given its ample liquidity, it is less likely to default interest and debt repayments, even if the economic situation worsens. Further, the bank’s capital deployment activities are encouraging. CMA’s improving performance and favorable debt-equity ratio than the industry reflect that its enhanced capital deployment activities are sustainable in the future.
The company has a dividend yield of 3.20% and a five-year annualized dividend growth of 17.45%. Currently, CMA's payout ratio is 40% of earnings.
For 2022, the company’s earnings are projected to witness year-over-year growth of almost 1%. For 2023, earnings are expected to rise 22.4%. CMA’s shares have rallied 12.2% in the quarter-to-date period.
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