For Immediate Release
Chicago, IL – October 3, 2022 – Zacks Equity Research shares Clearwater Paper (
CLW Quick Quote CLW - Free Report) as the Bull of the Day and Zumiez ( ZUMZ Quick Quote ZUMZ - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on General Motors ( GM Quick Quote GM - Free Report) , Ford ( F Quick Quote F - Free Report) and Tesla ( TSLA Quick Quote TSLA - Free Report) .
Here is a synopsis of all five stocks.
The Zacks – Paper and Related Products Industry is currently ranked in the top 16% of all Zacks Industries.
Studies have shown that 50% of a stock's price movement can be attributed to the group it’s in, making it crucial to ensure that investors target stocks in a thriving industry.
In fact, the top 50% of Zacks Ranked Industries outperform the bottom 50% by a factor of more than two to one.
A stock in the realm,
Clearwater Paper, sports the highly-coveted Zacks Rank #1 (Strong Buy) paired with an overall VGM Score of a B.
Right off the bat, that’s a stellar combination.
Clearwater Paper, a standalone company, produces pulp and paperboard at six facilities across the country.
The company manufactures quality paperboard, consumer tissue, and wood products with direct access to the public capital markets.
Let’s take a deeper dive in.
Earnings Outlook & Share Performance
Analysts have had a bullish stance over the last several months, substantially upping their bottom-line outlook across the board and pushing the stock into a Zacks Rank #1 (Strong Buy).
The company is forecasted to grow at a breakneck pace; the Zacks Consensus EPS Estimate of $4.10 calls for Y/Y earnings growth of an almost unbelievable 300%.
Further, Clearwater Paper shares have been notably strong in 2022, up a solid 3% vs. the S&P 500’s 23% descent.
Over the last three months, shares have continued on their market-beating trajectory, up 12% vs. the general market’s nearly 4% decline.
The favorable price action of CLW shares alludes to one thing – buyers have defended the stock all year long, undoubtedly a positive in a historically-volatile 2022.
In addition, valuation levels don’t appear stretched; the company’s 0.3X forward price-to-sales ratio is nowhere near 2018 highs of 0.5X and represents a sizable 79% discount relative to its Zacks Sector.
CLW sports a Style Score of a B for Value.
Clearwater Paper has consistently exceeded quarterly estimates, beating out the Zacks Consensus EPS Estimate in seven of its last ten prints.
Top-line results have primarily come in above expectations as well, with CLW registering six revenue beats across its last ten quarters.
One of the best ways investors can find expected winners within the market is by utilizing the Zacks Rank – one of the most potent market tools out there.
A portfolio consisting of Zacks Rank #1 (Strong Buy) stocks has beaten the market in 26 of the last 31 years with an average annual return of 24%.
Additionally, the top 5% of all stocks receive the highly coveted Zacks Rank #1 (Strong Buy). These stocks should outperform the market more than any other rank.
Clearwater Paper would be an excellent stock for investors to keep on their watchlists, as displayed by its Zack Rank #1 (Strong Buy).
Down nearly 50% in 2022, it’s been a harsh road for the Zacks Retail – Apparel and Shoes Industry.
Further, the industry is currently ranked in the bottom 17% of all Zacks Industries.
According to studies, 50% of a stock's price movement can be attributed to its group, proving critical for investors to target stocks in a thriving industry.
In fact, the top 50% of Zacks Ranked Industries outperform the bottom 50% by a factor of more than two to one.
Due to its unfavorable industry ranking, we expect it to underperform the market in the short term.
A company residing in the industry,
Zumiez, has found itself carrying a disheartening Zacks Rank #5 (Strong Sell) paired with an overall VGM Score of a D, indicating its near-term earnings outlook is cloudy.
Analysts have been in full agreement. Clearly, analysts have accounted for margin compression due to soaring costs.
Zumiez is one of the leading global lifestyle retailers. Its distinctive brand offerings and diverse product selection have carved a niche in the rapidly changing apparel industry.
Let’s take a closer look at the company.
Year-to-date, it’s been anything but fun for Zumiez shares, down more than 55% and widely underperforming the S&P 500.
Over the last three months, the adverse price action of ZUMZ shares has continued, losing 15% in value and underperforming the general market in this timeframe as well.
Clearly, buyers have been nowhere to be found.
Zumiez has struggled to exceed quarterly estimates, falling short of the Zacks Consensus EPS estimate in three of its last four quarters, with the average surprise being -46%.
Just in its latest print, ZUMZ missed on the bottom-line by a disheartening 66%.
Top-line results have also been less-than-desired; Zumiez has exceeded the Zacks Consensus Sales estimate just once over its last four quarters.
And in its latest release, the company fell short of top-line expectations by 5%.
Disheartening quarterly results and negative estimate revisions from analysts paint a grim picture for the company in the short term.
Zumiez is a Zacks Rank #5 (Strong Sell), telling us it has a weak near-term earnings outlook.
Instead, investors should pivot to stocks that either carry a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy) – these stocks have a much stronger earnings outlook and potential to deliver explosive gains in the short-term.
Additional content: Are New Vehicle Sales Headed for a New Decade Low?
Hit by coronavirus woes, U.S. light vehicle sales in 2020 totaled 14.47 million units, marking the lowest level since 2012. The year 2021 turned out to be slightly better, with light vehicle sales up more than 3% to 14.9 million units. Total vehicle sales last year were 15.07 million units in 2021, up 3.4% year over year.
If you were hoping that the momentum will continue this year as well, you might be highly mistaken. In fact, going by Cox Automotive’s recent forecast, 2022 sales might just hit a decade low. Cox slashed the full-year vehicle sales outlook to 13.7 million units, around 9% lower than 2021 levels. And this is the third time this year that the company has cut the sales forecast, which was originally pegged at 16 million units.
So, what has led to this downshift in expectations?
The shortage of microchips had choked supplies and the low stockpiles put the automakers on edge. Just when industry watchdogs and auto giants were predicting the chip deficit to gradually start easing out from mid-2022, the geopolitical conflict between Russia and Ukraine triggered the second round of global microchip shortage. That, coupled with fresh rounds of COVID-induced lockdowns in China, aggravated the chip crisis and supply chains. It crushed any hopes of improvement in inventories.
And now the auto space is facing another major problem. Since the auto industry is a highly cyclical one, the demand for vehicles seems to have started to cool off given the uncertain economic condition. Chesbrough — a senior economist at Cox Automotive — said “It seems likely that much of the pent-up demand from limited supply is quickly disappearing as high interest rates eat away at vehicle buyers' willingness and ability to purchase."
The only bright spot for automakers currently is the rising average prices of vehicles amid the supply-demand mismatch. But rising sticker prices may soon prompt consumers to put these discretionary expenses on hold owing to recessionary fears.
With inflation at levels not seen in decades, the Fed has been forced to become more aggressive, cranking up borrowing rates. On Sep 21, the Fed jacked up interest rates by 75 bps for the third time in a row. The rising interest rates will increase the financing costs of vehicles. With borrowing getting expensive and threats of a recession looming large, consumers might be unwilling to pay a heavy premium for cars and demand may gradually soften.
Macro headwinds such as soaring interest rates, stubborn inflation and looming economic uncertainty have muted the prospects of the auto sector.
Automakers are set to unveil their third-quarter U.S. sales results early next week.
Edmunds forecasts a 0.9% and 2.7% year-over-year and sequential decline, respectively, in vehicle sales in the September-end quarter. S&P Global Mobility analysts expect U.S. light-vehicle sales to be somewhere around 1.1 million units in September, representing a seasonally adjusted annualized rate of 13.4 million units, well below the 15-million-unit sales level the industry considers ideal and the 17-million-unit sales recorded from 2015 to 2019. Cox envisions new vehicle sales in September to increase 8% year over year but dwindle 4% sequentially.
It forecasts total new vehicle sales in the third quarter to reach 3.4 million units, down around 1% from the year-ago period. It also implies a modest decline from 3.5 million units sold in the second quarter of 2022. To put it in perspective, sales in third-quarter 2019 totaled 4.3 million units.
Cox predicts that
General Motors, Ford and Tesla will be the biggest year-over-year gainers in the third quarter in terms of sales volume. On the other hand, sales of Japanese counterparts are expected to decline on a year-over-year basis.
It expects General Motors to retain the crown of the top-selling automaker in the United States. Per Cox forecasts, GM is expected to sell 539,028 vehicles in the third quarter, up 21% year over year but down around 7% sequentially.
It expects Ford to come in third in terms of sales volumes. Cox predicts sales volumes for Ford in the third quarter to be 473,595 units, up 19.1% year over year and down 1.4% sequentially.
Meanwhile, Tesla is set to hold #1 spot as the hot-selling luxury automaker in the United States. Per Cox, third-quarter sales for the electric vehicle giant are forecast to jump 38% year over year, driving Tesla's year-to-date sales 63% higher than the corresponding period of 2021.
GM, TSLA and F currently carry a Zacks Rank #3 (Hold). You can see
. the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here Why Haven’t You Looked at Zacks' Top Stocks?
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