For Immediate Release
Chicago, IL – May 15, 2023 – Zacks Equity Research shares M.D.C. Holdings (
MDC Quick Quote MDC - Free Report) as the Bull of the Day and ArcBest ( ARCB Quick Quote ARCB - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Meta Platforms, Inc. ( META Quick Quote META - Free Report) , Broadcom Inc. ( AVGO Quick Quote AVGO - Free Report) and CrowdStrike Holdings, Inc. ( CRWD Quick Quote CRWD - Free Report) .
Here is a synopsis of all five stocks:
After blasting first-quarter expectations earlier in the month,
M.D.C. Holdings stock looks attractive sporting a Zacks Rank #1 (Strong Buy) and an overall "A" VGM Style Scores grade for the combination of Value, Growth, and Momentum.
MDC's Building Products-Home Builders Industry is also in the top 3% of over 250 Zacks industries. Pent-up demand from the pandemic and a hefty backlog led to MDC having expansive growth over the last few years and the company remains intriguing as mortgage rates show signs of stabilization.
Homebuyers may be more inclined to shop again and MDC should continue benefiting as the company's primary homebuilding operations include land acquisition and development, home construction, sales and marketing along with customer service.
After recently hitting 52-week highs on strong first-quarter results, higher highs could be around the corner for MDC stock. To that point, MDC checks all the boxes as it relates to the Zacks Style Scores which serve as a complementary set of indicators to use alongside the Zacks Rank.
"A" Momentum Grade
MDC stock continued to soar this year after its first-quarter report on May 2. MDC very impressively surpassed Q1 bottom-line expectations by an astonishing 145% on EPS of $1.08 compared to estimates of $0.44 per share.
On the top line, MDC topped estimates by 18% with Q1 sales at $1.04 billion compared to estimates of $888.80 million. First quarter results confirmed MDC is benefiting from its strong business industry and provided a further catalyst to the stock's impressive rally over the last six months.
Trading at $41 a share, MDC stock is up +10% over the last month to roughly match the Building Products-Home Builders Markets +11% and top the S&P 500's virtually flat performance. Even better, MDC stock is now up +31% year to date to also match its Zacks Subindustry and outperform the broader indexes.
"A" Growth Grade
Despite mortgage rates rising to over 6%, MDC had a couple of monster years in terms of growth in 2021 and 2022 with the company's top and bottom lines expected to come back to reality this year. With that being said, earnings estimate revisions have soared over the last month which correlates to MDC's strong stock performance.
Fiscal 2023 earnings estimates have jumped 27% over the last 30 days with FY24 EPS estimates climbing 30%. Earnings are now expected to drop -58% this year at $3.23 per share after an extremely tough-to-compete-against year that saw EPS at $7.67 in 2022. Still, fiscal 2024 earnings are forecasted to rebound and jump 21% at $3.90 per share.
Fiscal 2024 EPS would still be 13% above pre-pandemic levels with 2019 earnings at $3.44 per share. Plus, fiscal 2024 sales estimates of $4.19 billion would remain 27% higher than pre-pandemic sales of $3.29 billion in 2019.
"A" Value Grade
In regards to valuation fundamentals, MDC trades at 14.5X forward earnings which is nicely beneath the S&P 500's 19.1X but slightly above the industry average of 10.2X. Still, MDC's growth in recent years has made the stock worthy of a slight premium with the rising earnings estimates offering further support.
Furthermore, when considering enterprise value, MDC's EV/EBITDA of 3.9X is on par with the industry and attractively below the benchmark's 19.7X.
Piggybacking off of MDC's valuation, the company's strong balance sheet and liquidity allow for an industry-leading dividend. To that point, MDC's total cash and equivalents have skyrocketed 176% over the last year at $1.61 billion compared to $581.9 million in Q1 2022.
Regardful to investors, MDC appears to be in great financial health and its 4.76% dividend yield is much higher than the industry average of 0.43% and the S&P 500's 1.53% average.
Now may be a good time to buy MDC shares and the company also looks like a sound investment for 2023 and beyond with management effectively taking advantage of immense profits in recent years. It looks quite possible that MDC's impressive YTD performance could continue, especially after easily topping first-quarter expectations.
ArcBest currently lands a Zacks Rank #5 (Strong Sell) with its Transportation-Truck Industry in the bottom 4% of over 250 Zacks industries. To that point, ArcBest missed its first-quarter expectations in late April and investors may want to be cautious at the moment.
Despite being a logistics leader in freight transportation and solutions, the broader economic environment continues to weigh on the Transportation-Truck Industry and may lead to more near-term volatility in ArcBest stock.
ArcBest reported its first-quarter results on April 28 with earnings of $1.58 per share missing EPS estimates of $1.78 by -11%. Sales also came up short by -10% at $1.10 billion compared to top-line estimates of $1.22 billion.
Year over year, earnings declined -49% with EPS at $3.08 in Q1 2022, although this was a tougher-to-compete-against prior-year quarter. First quarter sales were down -17% from a year ago.
Declining Earnings Estimates
With ArcBest already up against a tough year to follow, earnings estimate revisions have continued to decline following the subpar Q1 results.
Within the last 30 days, fiscal 2023 earnings estimates have declined -14% with FY24 EPS estimates dropping -5%.
ArcBest earnings are now forecasted to drop -36% this year at $8.67 per share compared to EPS of $13.66 in 2022. Fiscal 2024 earnings are expected to stabilize and rise 30% but the declining earnings estimates are taking away from the anticipated rebound.
ArcBest stock is still up +24% year to date but has started to give back gains. Currently, ArcBest has an "F" Zacks Style Scores grade for Momentum in correlation with its broader industry concerns and shares of ARCB are now down -7% since its first-quarter report.
With ArcBest's outlook starting to weaken at the moment, shares of ARCB could continue to fall for now and it may be best to stay on the sidelines until the smoke clears. There should continue to be longer-term value but investors will want to see a stop to the trend of declining earnings estimates.
Additional content: 3 Top Tech Stocks to Buy on a Likely Rate Hike Pause
Inflation at the moment has started to show signs of cooling down both at the consumer and producer levels. Consumer prices in the United States recently fell below the coveted 5% mark for the first time in two years, while wholesale prices moderated.
This new development raised expectations that the Federal Reserve may lower rate hikes, a win-win situation for tech players. Thus, investors should consider sound tech companies such as
Meta Platforms, Inc., Broadcom Inc. and CrowdStrike Holdings, Inc.. Inflation Pressures Ease
The Labor Department added that the Consumer Price Index (CPI) may have increased 0.4% month over month in April, but over the past 12-month period, the CPI has risen 4.9%, and that's down from the 5% year-over-year increase in March. It's also way below the 9.1% increase in the summer of last year, which by the way was the fastest increase since 1981.
The core rate of inflation did increase by 5.5% over the past 12 months in April. However, that's down from March's annual gain of 5.6%, and less than last fall's high of 6.6%. In reality, an increase in shelter costs, to some extent, pushed the headline inflation higher. But the increase in shelter costs itself is coming down. Shelter costs increased 0.4% in April, but that's the lowest gain in a year.
Wholesale prices, too, increased less than the estimate, providing more hope that inflation is ebbing. The Labor Department added that the Producer Price Index (PPI) increased 0.2% month over month in April, but that's less than the Dow Jones estimate of an increase of 0.3%. On the other hand, the headline PPI rose just 2.3% year over year in April, less than the 2.7% increase in March. It also registered its lowest reading since January 2021.
Tech Stocks Poised to Benefit
With inflation starting to show signs of moderating, market pundits are now expecting that the Fed may refrain from hiking interest rates further, particularly in its next meeting to be held in mid-June. Having said that, the Fed-rate-hike cycle may not be completely over, but surely the central bank will ease off on interest rates. The Fed is also in no mood to push the economy into a recession through its aggressive monetary policy at a time when the economy is in the tank due to the ongoing banking disorder.
Thus, with the likelihood of interest rate hikes slowing down, growth-oriented tech stocks are positioned to gain the most. This is because higher interest rates generally impact tech stocks' future cash inflows. In the process, it reduces tech companies' ability to reinvestment in innovation, thereby disrupting growth prospects. Needless to say, a rate hike increases the cost of borrowings of tech companies, which burns cash and increases losses.
3 Solid Choices
Thus, with tech stocks now poised to gain traction, it's prudent for investors to place their bets on the following solid tech companies that carry a Zacks Rank #1 (Strong Buy) or 2 (Buy) and have a
Growth Score of A or B, a combination that offers the best opportunities in the growth investing space. You can see . the complete list of today's Zacks Rank #1 stocks here Meta Platforms is the world's largest social media platform. An uptick in its user growth mostly in the Asia Pacific region, along with an increase in engagement in its various products like Facebook, Instagram, and WhatsApp, to name a few, is primarily driving growth.
META has a Zacks Rank #1 and a Growth Score of B. The Zacks Consensus Estimate for its current-year earnings has moved up 20.2% over the past 60 days. The company's expected earnings growth rate for the current year is 19.6%.
Broadcom is a premier designer, developer and global supplier of a broad range of semiconductor devices. The company's VMware acquisition, along with growth in its storage connectivity and strength in networking should boost its growth prospects.
AVGO has a Zacks Rank #2 and a Growth Score of B. The Zacks Consensus Estimate for its current-quarter earnings has moved up 0.5% over the past 60 days. The company's expected earnings growth rate for the current year is 9.5%.
CrowdStrike Holdings is a leader in next-generation endpoint protection, threat intelligence, and cyberattack response services. Thanks to a flurry of data breaches in recent times, demand for cyber security solutions has increased, thereby benefiting CrowdStrike.
CRWD has a Zacks Rank #2 and a Growth Score of B. The Zacks Consensus Estimate for its current-year earnings has moved up 3.1% over the past 60 days. The company's expected earnings growth rate for the current year is 49.4%.
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