For Immediate Release
Chicago, IL – May 23, 2023 – Zacks Equity Research shares Conagra (
CAG Quick Quote CAG - Free Report) as the Bull of the Day and Boot Barn ( BOOT Quick Quote BOOT - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on NiSource ( NI Quick Quote NI - Free Report) , NewJersey Resources ( NJR Quick Quote NJR - Free Report) and Campbell Soup ( CPB Quick Quote CPB - Free Report) .
Here is a synopsis of all five stocks.
Conagra is a Zacks Rank #1 (Strong Buy) that is a leading branded food company. It specializes in the production, distribution and marketing of a wide range of packaged food products, with a diverse portfolio of well-known brands.
The stock experienced selling for most of the year, which has the stock down about 9% on the year. Investors just have not been excited about the short-term growth prospects with higher costs issues as a major headwind. And when you look at the chart, we see sideways action for the last three years.
But longer-term investors might be starting to find some value in a company that continues to beat earnings and pays a healthy dividend.
About the Company
Conagra was founded in 1919 and is headquartered in Chicago, IL. The company employs over 18,000 and has a market cap of $17 billion. The stock has a Forward P/E of 13 and pays a dividend of 3.7%.
Conagra operates in various categories including frozen meals, snacks, condiments, sauces, soups, desserts, and more.Some iconic brands of the company are Reddi-Wip, Hunt's, Healthy Choice, Frontera, Slim Jim, Blake's and Marie Callender.
The stock has a Zacks Style Score of “C” in Value and Growth, but “F” in momentum.
Value and Risks
As the stock has come in this year, the value prospects for the stock have become greater. The P/E of 13, is below other packaged peers, which averages around 19. With a nice dividend just under the 4% area, any further drop in the stock price should see buyers come in based on valuation.
The main risk for the stock is a lack of growth combined with higher commodity prices. However, this is priced into the stock and the recent and continued drop in commodity prices could start to become a tailwind for the company in the back half of the year.
Q3 Earnings Beat
In early April, the company reported an earnings beat of 19%. This was the fifth straight EPS beat and the ninth beat out of the last ten quarters.
Digging into the third quarter, the company reported EPS of $0.76 v the $0.64 expected. Revenues came in at $3.09B, which was as expected.
Conagra raised its FY23 EPS to $2.70-2.75 and narrowed its organic revenue to +7-7.5%. The FY23 operating margins midpoint was raised as productivity and service level improvement helped operating margins recover.
Year over year Grocery and Snacks were up 3.7%, the Refrigerated & Frozen Segment was up 5.6% and international sales were up 9.5%.
Organic sales were up 6.1%, which was driven by a 15.1% improvement in price/mix. Although, this was offset by a 9% decrease in volume. Even so, the higher prices have had less impact than they have historically.
The company has successfully navigated higher input costs by raising prices. Margins are recovering and this is helping longer-term earnings estimates tick higher.
The stock meandered after earnings and recently took a leg lower. Now CAG is trading close to 2023 lows after a mostly positive earnings report.
The reasoning behind the bearishness is the focus on growth rather than value. Additionally, short-term estimates just aren’t that exciting.
For the current quarter, estimates have ticked lower since EPS, moving from $0.64 to $0.61. Analysts still see short-term headwinds with higher costs.
However, the long-term view looks much better. For the current year, estimates have ticked higher since EPS, going from $2.66 to $2.75 or 3%.
Looking at next year, we also see estimates trending the right way. Over the last 60 days, numbers have gone from $2.75 to $2.83, also 3%.
When you look at the chart, CAG has not done much since 2015. Minus the COVID crash, the stock has basically traded sideways with $35 being the consistent level.
As the stock approaches this area, there seems to be a buyable setup for both the short and long-term approaches.
The stock recently broke the 200-day moving average. This is typically a negative, but sometimes when this happens, weak hands are taken out of the market and the stock can bounce rather quickly. For CAG, this scenario last played out in early March. The stock broke the 200-day MA at 35.50, fell under $35, but rallied to $39 in under a month’s time. This was a quick 10% gain for any short-term trader that recognized the opportunity.
While this pattern might not repeat itself, longer-term traders should be starting positions around the $35 area. This has been a stronghold for over half a decade and creates a solid risk/reward scenario. Additionally, investors have a dividend of almost 4% that they can collect while they wait for the company to navigate the current inflationary environment.
Conagra is coming into its long-term support area and considering the earnings momentum, dividend, and value seen in the name, now is the time to start considering the stock.
Short-term investors have a nice setup for a bounce at current levels. Long-term investors should consider this dividend-paying consumer staple name as part of their portfolio.
Boot Barn is a Zacks Rank #5 (Strong Sell) that operates as a lifestyle retail chain devoted to western and work-related footwear, apparel, and accessories. It offers boots, shirts, jackets, hats, belts and belt buckles, handbags, western-style jewelry, rugged footwear, outerwear, overalls, denim, and flame-resistant and high-visibility clothing.
Investors had been having a great year, with the stock taking off in January and accelerating higher after a solid earnings report that month. At its peak, the stock was up about over 40 % on the year.
But almost all of the gains have been erased after a very disappointing earnings report took the stock down 15% in one day.
About the Company
Boot Barn is headquartered in Irvine, CA.The company was founded in 1978 and employs over 4,000 people.
Boot Barn has 315 stores across 40 states and sells its products through e-commerce websites, including
bootbarn.com; sheplers.com; and countryoutfitter.com.
BOOT is valued at $2 billion and has a Forward PE of 12. The stock holds Zacks Style Scores of “A” in Growth, “A” in Value, but “C” in Momentum. The stock pays no dividend.
Boot Barn reported earnings for Q4 on May 17
th, beating expectations by 5%. This was the eleventh straight EPS beat, which started back in 2020. During that stretch, the earnings momentum took the stock from $20 to $134 at its peak. However, the magnitude of the beats has gotten smaller and failed to impress investors.
Unfortunately for investors, the company guided Q1 and FY24 lower.
Boot Barn now expects Q1 at $0.79-0.85 v the $1.23 expected. Revenues are expected much lower and SSS are expected -9% to -7%.
For FY24, the company now expects $4.70-5.00 v the $6.07 previously. They see SSS at -6.5% to -4.5%
The guide lower took the stock down over 15%.
The bad guide forced analysts to take their estimates lower.
Over the last 7 days, numbers for the current quarter plummeted from $1.23 to $0.87, or 28%.
For the current year, analysts lowered estimates from $5.93 to $5.24, or 12%.
The stock was holding up well last year and even saw a big rally to start the year. But after the earnings report, BOOT has fallen to the lower end of the 2022 trading range. The move also broke the 200-day moving average for the first time since January.
The bulls have lost the momentum and will need to get price back above the 200-day at $69 to take control back. Until then, investors should be cautious as the stock could trend lower.
The $60 level could offer support, but if not, look for the 2022 low at $50 to be challenged.
For the bulls to pull themselves up by the bootstraps, they will need some help in the coming quarters. Until there is a fundamental improvement in earnings estimates or a technical move back above the 200-day, the stock will struggle.
Additional content: Wall Street Braces for Debt Ceiling Crisis: 3 Safe Picks
The dilemma over increasing the U.S. debt ceiling at the moment is creating panic among investors. President Joe Biden recently said that the Republicans’ latest proposal on lifting the debt ceiling is “quite frankly, unacceptable.”
House Speaker Kevin McCarthy alleged that White House officials are backpedaling in discussions over raising the debt ceiling during the weekend. In reality, GOP negotiators halted the continuing talks over pushing up the debt ceiling, raising uncertainties about an arrangement being reached shortly.
However, the Jun 1 deadline is coming up, and the U.S. Government may run out of money to pay for its expenses unless Congress gives the go-ahead to borrow further.
Now, if the Government is not in a position to pay for its debts, there would be pandemonium across global economies. The Government won’t be able to finance any of its operations and provide funds for national defense, medical, and various other social security prerogatives.
Credit rating agencies invariably would downgrade the economy, borrowing costs would surge, and consumer sentiment could take a beating, eventually tipping the economy into a recession. Millions of people may lose their jobs, and such worries may compel investors to sell U.S. treasury bonds, leading to a weaker dollar and a lot of gyration in the stock market.
Thus, raising the debt ceiling has now become imperative, and approval from both chambers of Congress is the need of the hour. But since negotiations to increase the debt ceiling paused in Washington, Wall Street should undeniably brace for volatility. This calls for placing bets on risk-adjusted stocks that remain unperturbed by market instability.
These stocks flaunt a low beta (ranges from 0 to 1) that helps them counter market vagaries. They also provide dividends, indicating a sound business model. At the same time, these stocks are non-cyclical in nature. In other words, these are defensive stocks that exist in the utilities and consumer staples sectors. Demand for their products and services like electricity, gas, water, and food remains unaltered during recession-induced market mayhem.
We have, thus, selected three stocks from the aforesaid areas that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). The search was also narrowed down with a
VGM Score of A or B. Here V stands for Value, G for Growth, and M for Momentum; the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners. You can see the complete list of today’s Zacks #1 Rank stocks here. NiSource is an energy holding company and, together with its subsidiaries, provides natural gas, electricity, and other products and services in the United States. NiSource, currently, has a Zacks Rank #2 and a VGM Score of B.
NI has a beta of 0.47 and a dividend yield of 3.7%. The company’s expected earnings growth rate for the current year is 6.8%. The company’s estimated earnings growth for the next five-year period is 6.9%.
NewJersey Resources is an energy services holding company that, through its subsidiaries, provides safe and reliable natural gas and clean energy , asset management, and home services. NewJersey Resources, at present, has a Zacks Rank #2 and a VGM Score of B.
NJR has a beta of 0.65 and a dividend yield of 3.2%. The company’s expected earnings growth rate for the current year is 5.6%. The company’s estimated earnings growth for the next five-year period is 6%.
Campbell Soup is a worldwide manufacturer and marketer of high-quality, branded convenience food products. The company was instituted as a business corporation under the laws of New Jersey. Campbell Soup, presently, has a Zacks Rank #2 and a VGM Score of A.
CPB has a beta of 0.34 and a dividend yield of 2.8%. The company’s expected earnings growth rate for the current year is 5.6%. The company’s estimated earnings growth for the next five-year period is 3.9%.
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