For Immediate Release
Chicago, IL – September 29, 2022 – Zacks Equity Research shares Oxford Industries, Inc. (
OXM Quick Quote OXM - Free Report) as the Bull of the Day and KB Home ( KBH Quick Quote KBH - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Diamondback Energy, Inc. ( FANG Quick Quote FANG - Free Report) , Chevron Corp. ( CVX Quick Quote CVX - Free Report) and Exxon Mobil Corp. ( XOM Quick Quote XOM - Free Report) .
Here is a synopsis of all five stocks:
Oxford Industries, Inc.is one of the rare retailers bucking the negative sentiment. This Zacks Rank #1 (Strong Buy) has raised guidance three times this year.
Oxford Industries operates several retail and lifestyle brands including Tommy Bahama, Lilly Pulitzer, Southern Tide, The Beaufort Bonnet Company and Duck Head. It owns retail stores, sells wholesale and on its own e-commerce sites and operates Tommy Bahama restaurants.
Acquiring Johnny Was and Raising Guidance Again
On Sep 19, Oxford announced it was acquiring California retailer Johnny Was for $270 million. Johnny Was is a boho vintage retailer which has 61 stores in 24 states.
Oxford expects the acquisition to be accretive to earnings this fiscal year. As a result it has raised full year fiscal 2022 guidance for the second time in the month of September and the third time this year.
But it's not just the acquisition that drove the guidance increase. Oxford estimates that about 2/3rds of the EPS guidance increase was driven by the anticipated Johnny Was results. But the remainder 1/3 was due to strong quarter-to-date performance in their full-price direct-to-consumer channels and a successful Lilly Pulitzer e-commerce flash sale.
The company now expects full year earnings in the range of $10.25 to $10.60.
Analysts Raise Earnings Estimates Again
As a result of the higher earnings guidance, the analysts also had to raise estimates.
4 estimates are higher in the last 30 days, pushing up the Fiscal 2022 Zacks Consensus Estimate to $10.50 from $9.87. That is at the high end of the company's new guidance range.
That's earnings growth of 31.4% over last year, when the company made $7.99.
Analysts are bullish on next year too, with another 11.2% earnings growth expected, or $11.68.
All Brands Humming
On Sep 1, 2022, Oxford reported its fiscal second quarter results and saw another earnings beat. Earnings were $3.61 versus the Zacks Consensus of $3.45. It was the fourth earnings beat in a row.
It was also another record quarter, after a record first quarter.
Tommy Bahama, its flagship brand, saw sales up 17% year-over-year. Lilly Pulitzer was up 2%. The Tommy restaurants also had a strong quarter, with sales up 6% to $27 million.
Full-price direct to consumer comp sales were up 14% from the second quarter of last year.
Full-price retail sales were also up 14% to $135 million.
With many retailers having to be promotional to move product, these full-price sales results are impressive.
Shares are Cheap
Oxford Industries shares have fallen in 2022 like most stocks. But they're down just 7.8% for the year.
Over the last 2 years, they've surged 144.8%.
They're still cheap, with a forward P/E of just 8.6.
And Oxford is shareholder friendly. It pays a dividend, currently yielding 2.4%.
If you are looking for a top retailer which is actually raising guidance in this challenging environment, then Oxford is one you should keep on your short list.
KB Homeis facing the highest mortgage rates in 20 years. As a result, this Zacks Rank #5 (Strong Sell) is expected to see falling earnings next year.
KB Home is one of the nation's largest homebuilders. It builds in 47 markets from coast to coast.
A Beat in the Third Quarter
KB Home is on a fiscal year calendar so it reported third quarter results on Sep 21. It beat the Zacks Consensus by $0.17, reporting $2.86 compared to the Zacks Consensus of $2.69.
It was the second earnings beat in a row.
It was also a record third quarter, with year-over-year growth in revenue, margins and diluted earnings per share. Total revenue rose 26% to $1.84 billion.
Then what is going wrong for it to be a Zacks Rank #5 (Strong Sell)?
Mortgage rates are now 7%.
"The long-term outlook for the housing market remains favorable. However, the combination of rising mortgage interest rates, ongoing inflation and other macro concerns has caused many prospective buyers to pause on their homebuying decision," said Jeffrey Mezger, CEO.
Analysts Cut Full Year 2022 and 2023 Estimates
The analysts are pessimistic as rates continue to rise and sales slow.
4 estimates were lowered for 2022 in the week since the company reported earnings, pushing the Zacks Consensus down to $9.73 from $10.19.
That's still earnings growth of 60.8%, however, as KB Home made $6.05 last year. It will still deliver its big backlog.
But 5 estimates were also lowered in the last week for 2023. That has pushed down the Zacks Consensus to $8.16 from $9.60. That's a decline of 16.2% from 2022 as sales are expected to slow.
Shares are Dirt Cheap
Shares of KB Home have sunk this year as mortgage rates have risen and are down 39.7% year-to-date.
Over the last 2 years, they're down 25.8%. They haven't yet retaken the March 2020 pandemic lows, however.
But it's a stunning reversal in the shares given that it's still reporting record quarters thanks to pandemic demand.
Even with the estimates being cut, KB Home shares are dirt cheap. It's trading with a forward P/E of just 2.6. That's among the lowest P/Es I've seen on a homebuilder this cycle.
It also has a PEG of only 0.37. It has both growth and value.
KB Home is also shareholder friendly and pays a dividend, currently yielding 2.4%.
However, investors who are interested in the homebuilders might want to wait on the sidelines for stabilization in mortgage rates and the economy. It looks like a challenging few months ahead for the homebuilders.
Additional content: Boost Your Portfolio with These 3 Permian Explorers
Oil price remains favorable for exploration and production businesses, although fears of recessions are haunting the market. It is expected that oil prices will stay solid, thereby aiding operations of
Diamondback Energy, Inc., Chevron Corp. and Exxon Mobil Corp.. Oil Price Still Handsome
West Texas Intermediate crude price, trading at more than $75 per barrel, is still handsome for exploration and production activities. Possibilities of weak global economic growth, as central banks continue to raise interest rates to combat high inflations, could hurt oil demand. This bearish factor will probably be outweighed by the looming winter, which could increase the demand for heating oil, supporting crude prices, at least in the short run.
Shale Oil Production to Rise
In October, total oil production from shale resources in the United States will likely increase by 132,000 barrels per day to 9,115 thousand barrels per day (MBbl/D), per the U.S. Energy Information Administration ("EIA"). The shale resources comprise Anadarko, Appalachia, Bakken, Eagle Ford, Haynesville, Niobrara and Permian.
Of all the resources, Permian will witness the highest increase in daily oil production next month, according to the EIA's drilling productivity report. In the Permian, the EIA projects oil production to rise by 66,000 barrels per day to 5,413 MBbls/D in October.
Permian Explorers to Gain
It is clear that a favorable crude pricing scenario is backing higher production volumes. Improving Permian production amid healthy oil prices has raised the incentive to bet on stocks of companies operating in the most prolific basin.
3 Stocks in the Spotlight Diamondback Energyis a leading pure-play Permian operator, having a solid footprint in 421,000 net acres in the prolific Midland and Delaware sub-basins. Diamondback Energy, carrying a Zacks Rank #2 (Buy), projects its oil production for 2022 to be almost flat with 2021 and expects its free cash flow to increase more than 90%.
The Zacks Consensus Estimate for the firm's earnings per share for 2022 and 2023 has been revised upward in the past 30 days.
The primary growth driver of
Chevron is its low-cost Permian projects. In the prolific basin, CVX has had a strong presence since the early 1920s. Most of its acreage in the basin has either insignificant or zero royalty payments, thereby improving Chevron's prospects. The company, sporting a Zacks Rank #1 (Strong Buy), has a much stronger balance sheet compared to the composite stocks belonging to the industry.
Hence, the leading integrated player has the capabilities to sail through business uncertainties, backed by its strong financials. You can see
the complete list of today's Zacks #1 Rank stocks here . ExxonMobil is banking on Permian, where it has a deep pipeline of projects. Considering the low cost of production in the basin, XOM is likely to generate handsome returns. In Permian, ExxonMobil continues to invest, which is the key to the energy major's success. The #2 Ranked integrated player also has a stronger balance sheet than the composite stocks belonging to the industry. Why Haven't You Looked at Zacks' Top Stocks?
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