For Immediate Release

Chicago, IL – May 9, 2023 – Zacks Equity Research shares Enfusion (ENFN Quick QuoteENFN - Free Report) as the Bull of the Day and Granite Construction (GVA Quick QuoteGVA - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on AB Electrolux (ELUXY Quick QuoteELUXY - Free Report) and Allegiant Travel Company (ALGT Quick QuoteALGT - Free Report) .

Here is a synopsis of all four stocks:

Bull of the Day:

Enfusion is a Zacks Rank #1 (Strong Buy) and it sports an F for Value and a C for Growth. This company makes software and analytical tools for its clients in the financial sector. Let's explore more about this company in this Bull of The Day article.

Description

Enfusion, Inc. provides software-as-a-service solutions for the investment management industry in the United States, Europe, the Middle East, Africa, and the Asia Pacific. The company provides portfolio management system, which generates a real-time investment book of record that consists of valuation and risk tools that allows users to analyze aggregated or decomposed portfolio data for chief investment officers (CIOs) and portfolio managers; and order and execution management system that enables portfolio managers, traders, compliance teams, and analysts to electronically communicate trade orders for a variety of asset classes, manage trade orders, and systemically enforce trading regulations and internal guidelines.

It also offers accounting/general ledger system, a real-time accounting book of record for chief financial officers, chief operating officers, accountants, and operations teams; Enfusion analytics system, which enables CIOs, portfolio managers, traders, and analysts to analyze portfolios through time horizons and automate customized visualized reports for internal and external stakeholders; and technology-powered and managed services. The company was founded in 1997 and is headquartered in Chicago, IL.

Earnings History

When I look at a stock, the first thing I do is look to see if the company is beating the number. This tells me right away where the market's expectations have been for the company and how management has communicated to the market.  A stock that consistently beats has management communicating expectations to Wall Street that can be achieved. That is what you want to see.

For Enfusion, I see one beat of the Zacks Consensus Estimate that is sandwiched by a miss and two earnings meets. That is not that great to see, but by itself that is not enough to make the company a Zacks Rank #1 (Strong Buy).

Earnings Estimates Revisions

The Zacks Rank tells us which stocks are seeing earnings estimates move higher. 

Over the last 60 days, earning estimates have increased for ENFN.

The full fiscal year 2023 has increased from $0.18 to $0.19 over the last 30 days. 

Next fiscal year, estimates spike higher to $0.30 from $0.29 over the same time period.

Those are significant moves higher in a time when so many are calling for recession.

Valuation

The valuation is not for the faint of heart. I see a forward PE 46x which is high no matter who you compare it to. The company showed good topline growth in the most recent quarter and analysts are looking for 24% revenue growth this year and 25% next year. This name is certainly a good one to keep on your radar screen.

Bear of the Day:

Granite Construction is a Zacks Rank #5 (Strong Sell) and has seen earnings estimates slide lower recently. I wanted to flag this com[any as we are seeing most stocks with decreases in this year and also seeing decreases in estimates for next year. This article will look at why this stock is a Zacks Rank #5 (Strong Sell) as it is the Bear of the Day.

Description

Granite Construction Incorporated operates as an infrastructure contractor and a construction materials producer in the United States. The company operates through two segments, Construction and Materials segments. The Construction segment engages in the construction and rehabilitation of roads, pavement preservation, bridges, rail lines, airports, marine ports, dams, reservoirs, aqueducts, infrastructure, and site development for use by the public. The Materials segment is involved in the production of aggregates and asphalt for internal use, as well as for sale to third parties. It also focuses on water-related construction for municipal agencies, commercial water suppliers, industrial facilities, and energy companies; and constructs various complex projects, including infrastructure/site development, mining, public safety, tunnel, solar, and power projects.

In addition, the company offers site preparation, mining, and infrastructure services for residential development, energy development, commercial and industrial sites, and other facilities; and provides construction management professional services. It serves federal agencies, state departments of transportation, local transit authorities, county and city public works departments, school districts and developers, utilities, contractors, landscapers, manufacturers of products requiring aggregate materials, retailers, homeowners, farmers, brokers, and private owners of industrial, commercial, and residential sites. The company was incorporated in 1922 and is headquartered in Watsonville, California.

Earnings History

When I look at a stock, the first thing I do is look to see if the company is beating the number. This tells me right away where the market's expectations have been for the company and how management has communicated to the market. A stock that consistently beats has management communicating expectations to Wall Street that can be achieved. That is what you want to see.

In the case of GVA, I see two beats and two misses of the Zacks Consensus Estimate. This alone does not make the stock a Zacks Rank #1 (Strong Buy) and it doesn't make it a Zacks Rank #5 (Strong Sell) either.

The Zacks Rank does care about the earnings history, but it is much more heavily influenced by the movement of earnings estimates.

Earnings Estimates

The Zacks Rank tells us which stocks are seeing earnings estimates move higher or in this case lower. For GVA I see annual estimates moving lower of late.

The current fiscal year consensus number moved lower from $2.96 to $2.55 over the last 7 days. 

The next year has not moved from $4.04 over the last 60 days.

Negative movement in earnings estimates like that is why this stock is a Zacks Rank #5 (Strong Sell).

It should be noted that a majority of stocks in the Zacks universe are seeing negative earnings estimate revisions. That means that the stocks that are seeing small but negative earnings estimate revisions are falling to a Zacks Rank #5 (Strong Sell).

Additional content:

2 Stocks Set to Sail Through Any Recession

It isn't always the larger companies that come out on top of any economic downturn. At any given time, there may also be a number of smaller companies that do just as well. Even if they don't have the huge cash balances, strong relationships and long-term agreements that tend to steady a business in times of unusual market volatility, there may be certain circumstances that work out in their favor.

This could be something related to the markets in which they operate. It could be because of the efficiency of their business models. It could be because of specific actions taken by management that set the company up for steadier performance. Whatever the case, it would be a mistake to simply write off these smaller players, because you could be missing out on some real opportunities.

It may be a good idea to ensure that they're not too overvalued, however.

On that cautionary note, here are a few smaller stocks that you may want to pick up about now-

AB Electrolux

Stockholm, Sweden-based Electrolux is a well-known brand that manufactures and sells home appliances in Europe, North America, Latin America, the Asia/Pacific, the Middle East and Africa. Its refrigerators, freezers, cookers, dryers, washing machines, dishwashers, room air-conditioners, microwave ovens, floor-care products, vacuum cleaners, water heaters, heat pumps and other small domestic appliances have made it a household name. The company also sells consumables and accessories.

Just because I have chosen this stock today doesn't mean that it will come out unscathed from the recession. Not at all. In fact, management said at the last earnings announcement that the demand situation continues to deteriorate, with weakening consumer buying power impacting overall volumes. This situation is not expected to improve in the next several quarters.

However, there are other positives that sets this company apart.

First, Electrolux has been launching new products that have helped with volumes and allowed the company to take share in both the Americas (by management estimates).

Second, its pricing power has had a positive impact on margins. Both these factors will have lasting impact.

Third, management has initiated a turnaround in the North America business. The goal is to grow higher value categories in the region, and this strategy is already yielding results. They have invested in modularized architectures and highly automated, modern factories that are expected to increase the efficiency of operations by better utilization of fixed assets and better use of resources.  

Fourth, there is an ongoing company-wide cost-cutting initiative, which is expected to generate SEK4-5 billion in savings in the current fiscal year and another SEK2-3 billion in 2024. This should buffer earnings in any economic recession, leading to relatively stronger performance versus peers.

Finally, it is also focused on the aftermarket, which generates more than 4X the profit margin of the appliance business. Therefore, the goal is to increase the aftermarket business to around 10% of group sales by 2025 from 7% in 2022.

The Zacks Rank #1 (Strong Buy) stock is up 22.9% year to date. At an 11.3X P/E, the shares are trading at a 14.3% discount to their median value over the past year and a 38.2% discount to the P/E for the S&P 500 right now. Its estimates for 2023 and 2024 have jumped a respective 68 cents (49.6%) and $2.25 (93.8%) in the last 30 days.

Allegiant Travel Company

Las Vegas-based Allegiant is a low-cost passenger airlines company linking leisure travelers in small and medium sized cities in the U.S. to world-class leisure destinations. Therefore, these flights tend to be non-stop and limited in frequency. In addition, it provides travelers ancillary services, such as car rentals and hotel bookings, and also air transportation services through fixed-fee agreements and charter service on a year-round and ad-hoc basis. Further, its Sunseeker resort is on track to open on Oct 16. The company also operates a golf course.

Allegiant is a beneficiary of the post-pandemic rebound in leisure activity of all kinds, and especially in travel. Therefore, it is seeing record demand for air tickets. As projected by all the credit card companies, this year is shaping up to be a huge one for leisure. While the wealthier travelers were the first to get out, they were the ones booking the more expensive flights. But Allegiant offers low prices and targets a different customer segment, one that started a bit later. Therefore, this segment should be particularly strong in 2023, economic slowdown notwithstanding.

As a result of the strong demand, the company has identified 1,400 incremental routes, which will help expand the revenue base.

Management has said that its Allways credit card remains as popular as ever, with holders increasing by 46,000 in the last quarter alone, to total 435,000 active holders. This represents future business potential.

A number of factors are expected to continue driving profitability this year. These include a high load factor, 99.9% controllable completions (a measure of cancellations because of the airlines and not uncontrollable factors such as the weather) and anticipated softness in fuel cost (guided fuel cost per gallon in 2023 was reduced from $3.60 to $3.00).

The company is harnessing data and AI to drive efficiency in its business. Using the data from its 16.5 million customers and these advanced technologies, it was able to generate 30% revenue growth from the prior year on 10% lower advertising spend.

Allegiant already has a strategy of acquiring older planes that still have years of service left because that helps to keep costs down. But it is also steadily modernizing its fleet to take advantage of stronger engines and greater fuel efficiency. As of February 2023, it had 122 A320 series aircraft.

The Zacks Rank #2 (Buy) stock is up 57.2% year to date. But at 11.3X P/E, its discount to the S&P 500 is similar to Electrolux's. it also trades at a 14.2% discount to its own median level over the past year. As far as estimates are concerned, the one for 2023 has increased $1.76 (27.2%) in the last 30 days. The 2024 estimate has increased $1.79 (18.0%).

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