For Immediate Release

Chicago, IL – December 12, 2022 – Zacks Equity Research shares Thermon Group (THR Quick QuoteTHR - Free Report) as the Bull of the Day and Delta Apparel (DLA Quick QuoteDLA - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Crocs (CROX Quick QuoteCROX - Free Report) , Hilton Grand Vacations (HGV Quick QuoteHGV - Free Report) and Wyndham Hotels & Resorts (WH Quick QuoteWH - Free Report) .

Here is a synopsis of all five stocks.

Bull of the Day:

Thermon Group, a Zacks Rank #1 (Strong Buy), has broken out to the upside in a bullish move that recently pushed the stock to 52-week highs. After widely outperformed during the latter half of the year, a slight retreat in price over the past few weeks presents investors with a solid buying opportunity. As we’ll see, THR has been witnessing positive earnings estimate revisions and is set to experience phenomenal growth even in this difficult environment.

Thermon Group is part of the Zacks Instruments – Control industry group, which ranks in the top 11% out of approximately 250 Zacks Ranked Industries.

Because this group is ranked in the top half of all Zacks Ranked Industries, we expect it to outperform the market over the next 3 to 6 months. Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping.

In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1. It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.

Company Description

Thermon Group provides engineering industrial process heating solutions globally. Its products include electric heating products such as air heaters, boilers and calorifiers, tank systems, and thermostats, along with gas heating products such as catalytic heaters and fired blowers. These products provide an external heat source to various instruments for the purposes of freeze protection, temperature maintenance, and environmental monitoring.

THR offers its solutions to a host of industries including chemical and petrochemical, oil and gas, power generation, rail and transit, semiconductor, as well as food and beverage. The company was founded in 1954 and is based in Austin, TX.

Earnings Trends and Future Estimates

THR has built up an impressive earnings history, surpassing earnings estimates in each of the past four quarters with an average surprise of 67.1%. Back in November, the industrial heating provider reported Q3 EPS of $0.38/share, an 80.95% surprise over the $0.21 consensus estimate. Revenues of $100.56 million during the quarter also exceeded estimates.

Analysts covering the company are bullish on the stock and have revised their earnings projections upward across the board. The current fiscal year’s EPS estimates have been increased by +19.47% in the past 60 days. The Zacks Consensus EPS Estimate now stands at $1.35/share, reflecting potential growth of 62.65% relative to last year. Sales are anticipated to climb 16.01% to $412.63 million.

Let’s Get Technical

Since bottoming out in July, THR shares have advanced over 40% in the latter half of the year. Only stocks that are in extremely powerful uptrends are able to make this type of price move while the market hovers in a deep correction. This is the kind of stock we want to include in our portfolio – one that is trending well and receiving positive earnings estimate revisions.

Notice how both the 50-day (blue line) and 200-day (red line) moving averages are sloping up. The stock had been making a series of higher highs through November, and the recent pullback represents a solid buying opportunity. With both strong fundamentals and technicals, THR is poised to continue its outperformance.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. And as we know, Thermon Group has recently witnessed positive revisions. As long as this trend remains intact (and THR continues to deliver earnings beats), the stock will likely continue its bullish run into the new year.

Despite the impressive price run, THR currently trades relatively undervalued, irrespective of the metric used.

Bottom Line

Solid institutional buying should continue to provide a tailwind for the stock price. Backed by a leading industry group and robust history of earnings beats, it’s not difficult to see why this company is a compelling investment.

Robust fundamentals combined with a strong technical trend certainly justify adding shares to the mix. Recent positive earnings estimate revisions should also serve to create a ‘floor’ in terms of any sudden or unexpected downside moves. This market winner continues to prove its doubters wrong, and investors would be wise to consider THR as a portfolio candidate if they haven’t already done so.

Bear of the Day:

Delta Apparel designs, manufactures, and markets activewear and lifestyle products. The company offers digitally-printed apparel under the DTG2GO brand; silhouettes and fleece products; as well as polos, outerwear, and bags and accessories. In addition, Delta Apparel offers swimwear, sunglasses and related apparel under the Salt Life brand. DLA distributes its products to sporting goods and outdoor retailers, specialty and resort shops, department stores, and online.

The Zacks Rundown

DLA has been severely underperforming the market over the past year. A Zacks Rank #5 (Strong Sell) stock, DLA experienced a climax top in May of last year and has been in a price downtrend ever since. The stock is hitting a series of 52-week lows and represents a compelling short opportunity as the market continues to hover in a deep correction.

Delta Apparel is part of the Zacks Textile - Apparel industry group, which currently ranks in the bottom 28% out of approximately 250 industries. Because this industry is ranked in the bottom half of all Zacks Ranked Industries, we expect it to underperform the market over the next 3 to 6 months. Candidates in the bottom half of industry groups can often represent solid potential short candidates.

While individual stocks have the ability to outperform even when included in poor-performing industries, their industry association serves as a headwind for any potential rallies.

Weak Foundation: Falling Short on Earnings and Deteriorating Forecasts

Earnings misses have been a sore spot for DLA during the past year. The apparel designer has fallen short of estimates in two of the past four quarters. DLA most recently reported a fiscal Q4 loss last month of -$0.04/share, missing the $0.61 consensus estimate by -106.56%. Revenues of $115.5 million also missed estimates. Last year, the company reported earnings in the fourth quarter of $0.96/share. This is the type of negative trend that the bears like to see. Consistently missing estimates by a wide margin is a recipe for stock price underperformance.

Analysts are bearish on the stock and have been revising earnings estimates downward as of late. For the current quarter, estimates have been slashed -145.1% over the past 60 days. The Q1 Zacks Consensus EPS Estimate now stands at $-0.23/share, translating to a -145.1% earnings regression relative to the same quarter last year.

For the current fiscal year, analysts have also reduced their EPS estimate by -58.05% in the past 60 days. The 2023 Zacks Consensus EPS Estimate is now $1.72/share, reflecting a -38.57% decline compared to last year.

Technical Outlook

As illustrated below, DLA is in a sustained downtrend. Notice how the stock has plunged below both the 50-day and 200-day moving averages signaled by the blue and red lines, respectively. The stock is making a series of lower lows, with no respite from the selling in sight. Also note how both moving averages have rolled over and are sloping down – another good sign for the bears.

While not the most accurate indicator, DLA has also experienced what is known as a ‘death cross’, wherein the stock’s 50-day moving average crosses below its 200-day moving average. DLA would have to make a serious move to the upside and show increasing earnings estimate revisions to warrant taking any long positions in the stock. The stock has fallen nearly 60% this year alone.

Final Thoughts

A deteriorating fundamental and technical backdrop show that this stock is a laggard. The fact that DLA is included in one of the worst-performing industry groups is simply another headwind in a long list of concerns. A history of earnings misses and falling future earnings estimates will likely serve as a ceiling to any potential rallies, nurturing the stock’s downtrend.

DLA’s characteristics have resulted in a Zacks Growth Style Score of ‘C’, indicating its prospects are dwindling. Potential investors may want to give this stock the cold shoulder, or perhaps include it as part of a short or hedge strategy. Bulls will want to steer clear until the situation shows major signs of improvement.

Additional content:

Unusual Santa Claus Rally This Time? These 3 Stocks Don’t Care

December, traditionally, has been a good time for Wall Street. The Dow Jones Market Data noted that the Dow’s record in December has been commendable. The blue-chip index has given an average return of 1.4% in the said period. Similarly, the broader S&P 500 and the tech-laden Nasdaq have also scaled upward in December by gaining on average 1.4% and 1.7%, individually.

What’s more, historically, U.S. stocks have moved northward in the last five trading sessions of December as well as the beginning two trading days of January, better known as the Santa Claus Rally. According to the Stock Trader’s Almanac, the S&P 500, in particular, has advanced an average 1.3% during the said period since 1969.Meanwhile, CFRA Research added that stocks actually have moved upward 75% of the times during the Santa Claus Rally since 1945.

However, this December, things aren’t looking so encouraging. In the month-to-date period, the S&P 500 and the Nasdaq have just held onto the gains, while the Dow remains in the negative territory. This is because the possibility of the Federal Reserve being more aggressive in its monetary policy stance coupled with China’s economic crisis continues to weigh on investors’ sentiment, which could easily extend till the year-end.

Lately, an upbeat service sector report of the economy along with an increase in wages fueled worries that the Fed may be compelled to remain hawkish to tame inflation, consequently dragging the economy into a recession. The Institute of Supply Management added that the barometer of the service sector climbed to 56.5% in November, indicating exceptional growth. On top of that, wages increased more than 5% in November from a year ago. Needless to say, that wage growth and a healthy economy could easily lead to consumers spending more and increasing the prices of indispensable goods and services.

Now, inflationary pressure may not be good for the overall economy but as long as consumers are willing to spend, consumer discretionary stocks stand to gain. In reality, households have been spending on essential commodities as well as big-ticket items despite higher prices. In October, consumer outlays increased 0.8% on a seasonally adjusted basis from the prior month, per the Commerce Department. Lest we forget, sales at U.S. retailers did increase in October after consumers stepped up their spending.

Thus, courtesy of an uptick in consumer spending, consumer discretionary stocks like Crocs, Hilton Grand Vacations and Wyndham Hotels & Resorts are surely poised to gain traction this month even if there are doubts about a broader year-end stock market rally. After all, outlays do play a significant role in determining their revenues.At present, these stocks flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

Crocs is one of the leading footwear brands focusing on comfort and style. CROX has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved up 2.5% over the past 60 days. The company’s expected earnings growth rate for the current year is 23.7%. CROX’s projected earnings growth rate for the next year is 4.5%.

Hilton Grand Vacations, a division of Hilton Worldwide, is engaged in the hospitality business. HGV sports a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has moved up 19.3% over the past 60 days. The company’s expected earnings growth rate for the current year is 60.9%. HGV’s projected earnings growth rate for the next year is 24.6%.

Wyndham Hotels & Resorts provides a hotel and resort chain. WH carries a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved up 6.3% over the past 60 days. The company’s expected earnings growth rate for the current year is 22.2%. WH’s projected earnings growth rate for the next year is 3.1%.

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