For Immediate Release

Chicago, IL – June 13, 2023 – Zacks Equity Research shares Rockwell Automation, Inc. (ROK Quick QuoteROK - Free Report) as the Bull of the Day and International Paper (IP Quick QuoteIP - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Nvidia (NVDA Quick QuoteNVDA - Free Report) , Advanced Micro Devices (AMD Quick QuoteAMD - Free Report) , and Intel (INTC Quick QuoteINTC - Free Report) .

Here is a synopsis of all five stocks:

Bull of the Day:

Rockwell Automation, Inc. is an industrial automation and digital transformation company that’s posting strong top and bottom-line growth as it benefits from broader mega-trends across the economy, including reshoring and a never-ending push to streamline work through technological advancement.

Rockwell aims to help companies throughout various sectors and industries improve via an array of smart manufacturing offerings. ROK shares have soared over the last year, including an impressive climb over the last month.

Despite Rockwell’s market-crushing performance during the last 12 months and the last decade, ROK trades 10% below its own highs. And investors with a technical outlook might appreciate where ROK stands. Rockwell also pays a dividend and boasts other potentially attractive fundamentals right now.

Smart Manufacturing

Rockwell is an industrial automation and digital transformation company that aims to create what it often refers to as the next generation of smart manufacturing. ROK is helping drive forward the tech-supported and constantly-connected economy to help its customers with all of their automation challenges.

ROK operates three core business units: Intelligent Devices, Software & Control, and Lifecycle Services. Rockwell’s products and solutions serve an array of industries including power generation, aerospace, infrastructure, semiconductors, life sciences, warehouse and fulfillment, and beyond.

Rockwell’s product categories include connection devices, energy monitoring, human machine interface, motion control, industrial control, sensors & switches, and much, much more. ROK’s software offerings broadly cover areas such as analytics and data management, design, industrial communications, and beyond.

Growth and Outlook

The economic trends that have helped Rockwell thrive are almost certainly going to keep progressing. Rockwell is also benefitting from reshoring in places such as the U.S. as companies reevaluate their own supply chains and manufacturing following covid bottlenecks and geopolitical pressures.

Companies are now diving headfirst into building semiconductors, EVs, solar panels, and much more in the U.S. and other places outside of China. Rockwell’s revenue climbed by roughly 11% in both FY21 and FY22. ROK most recently posted blowout Q2 FY23 results and provided upbeat guidance in late April.

Zacks estimates call for Rockwell’s revenue to climb by over 14% in FY23 to $8.87 billion and then pop another 4% in FY24. Meanwhile, its adjusted earnings are projected to jump by 27% and 7%, respectively to hit $12.84 a share next year.

ROK’s upward earnings revisions for FY23 and FY24 help it land a Zacks Rank #1 (Strong Buy) right now.

Price, Technical Levels & Valuation

Rockwell shares have soared roughly 1,200% in the last 20 years to blow away the S&P 500’s 340% and its Zacks Industrial Products sector’s 230%. ROK’s total return over this stretch of around 1,900% also tops the benchmark’s 600%.

Rockwell has posted a 255% run over the past 10 years to top the S&P 500’s 175% and its sector’s 60%. ROK shares are closer to neck-and-neck with the benchmark in the past three years, with its recent surge helping Rockwell look slightly stronger.

As we touched on up top, Rockwell has soared 55% in the last year as Wall Street jumps back into the beaten-down stock. ROK trades near its 52-week highs, but around 10% beneath its late 2021 records.   

ROK’s year-long comeback helped it achieve the bullish golden cross back in November. Rockwell found support at its 50-day moving average at the end of May and has rebounded higher since then.

ROK is coming up against the edge of overbought RSI levels on a 12-month basis, which means it could face some near-term selling pressure. But ROK remains closer to neutral on a five-year time scale.

On the valuation side, ROK trades at a roughly 27% discount to its own 10-year highs at 24.3X forward 12-month earnings, while trading 10% below its peaks in terms of price. And Rockwell is trading not too far above its own five-year median even though its stock price has jumped 90% during this stretch.

Bottom Line

Rockwell’s dividend currently yields around 1.5%. And the company closed last quarter with $1.1 billion remaining under its existing share repurchase authorization.

Investors have shown their love for Rockwell given its ability to grow alongside crucial segments of the economy, and benefit from the never-ending need to automate and infuse tech into every aspect of the industrial ecosystem.

Most recently, Rockwell is poised to ride the newfound wave and commitment to domestic manufacturing and reshoring in the U.S. and elsewhere for years, if not decades.

Bear of the Day:

International Paper is a global producer of paper, packaging, and more. International Paper is coming off two strong years of revenue growth.

International Paper shares have, however, tumbled over the past two years after getting overheated. Wall Street also sold IP stock as its outlook for earnings began to fade further and further.

What’s Going On with IP?

International Paper is a global producer of packaging, pulp, and other fiber-based products. The company also boasts that it is one of the largest recyclers in North America. And as its name suggests, IP operates around various parts of the world, with manufacturing in North America, Latin America, North Africa, and Europe.

International Paper’s packaging unit includes corrugated, bulk, solid fiber, retail packaging & display, and more. IP’s paper segment features containerboard and beyond, with a pulp segment that includes fluff, papergrade, and more. International Paper also has an expansive recycling unit, alongside various packaging services from printing and testing to graphic and structural design.   

International Paper’s revenue climbed roughly 9% in 2022 after it jumped by 10% in 2021. Zacks estimates call for IP’s revenue to slip by 6% in FY23 and another 3% next year.

On top of that, IP’s adjusted earnings are projected to slide by 26% YoY this year and then slip another 9% lower in FY24 to hit $2.14 a share.

International Paper’s projected downturn comes amid a wider global economic slowdown and a difficult to compete against stretch of growth during the post-covid boom. IP’s CEO noted in prepared Q1 remarks that it is "navigating a challenging and dynamic macro environment."

Bottom Line

Unfortunately, Wall Street has continued to be disappointed by International Paper’s guidance. IP’s FY23 Zacks consensus earnings outlook is down 19% in the last two months, with FY24’s figure about 20% lower. These downward estimate revisions help it land a Zacks Rank #5 (Strong Sell) right now.

The nearby chart also showcases that International Paper’s rough earnings outlook has continued to get worse over the last year-plus. IP shares are now down around 50% over the last two years. The paper company has also seen its stock price drop by 45% in the past five years.

IP stock is trading below both its 50-day and 200-day moving averages. Some investors might want to think about trying to call a bottom. But it might be best for investors who think highly of International Paper to wait for it to start showing signs of life instead of trying to catch a falling knife. 

Additional content:

Nvidia: 5 Reasons the Tech Giant's Ascent is Far From Finished

Nvidia is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit, or GPU. Though the company has been public for decades, it has pulled away from former industry juggernauts such as Intel (INTC Quick QuoteINTC - Free Report) and is dominating the chip space. Before the tech-centric bear market of 2022, Nvidia was enjoying strong growth in its chips for high-performance computing, autonomous vehicle technology, crypto mining, gaming, and more. In 2022, inflation soared to 40-year highs, and investors punished high-valuation growth stocks such as Nvidia, Advanced Micro Devices, and Shopify. However, in early 2023, two significant factors began driving Nvidia:

A broad tech rebound: After shedding 32.58% in 2022, the Nasdaq 100 ETF (QQQ) bottomed out in October and never looked back (QQQ is up 33% year-to-date). What was behind the move? Inflation petered out at 40-year highs, and the Federal Reserve recently began to ease up on raising interest rates. Remember, a rising tide lifts all ships (especially the strong ones).

Artificial Intelligence went Mainstream: In early 2023, Open AI unveiled its Microsoft (MSFT) backed chatbot, Chat GPT. Though Artificial Intelligence has been around for years and has been used by well-known companies such as Amazon (AMZN), Chat GPT became the first AI product to gain widespread use. A mere two months after its release, Chat GPT amassed a massive 100 million monthly active user base – making it the fastest-growing consumer app in history. Today, that number is more than 1.8 billion visitors per day. Why is Chat GPT driving NVDA? Nvidia’s GPUs are rapidly benefiting from the proliferation of AI because they are necessary for large computers to run generative AI and process large swaths of data.

In May, Nvidia reported first-quarter results that were better than expected. However, the news that sent shares soaring by more than 20% was Nvidia’s forward guidance. In one of the largest guides higher, Nvidia management is forecasting revenue of $11 billion for Q2 – a mind-boggling $4 billion above the consensus estimates of $7.1 billion! While many investors believe that Nvidia is overvalued, and the strong fundamentals are priced in, 5 factors suggest that the move may just be getting started, including:

High but realistic expectations: In a recent interview, Nvidia founder and CEO Jensen Huang made a bold statement. Huang touted his company’s future AI growth by saying, “We have reinvented computing for the first time since the IBM (IBM) 360 system, 60 years ago. There’s a trillion dollars’ worth of data center infrastructure installed in the world based on that old method of doing computation. Now, we have accelerated computing and we have the killer app for generative computing: generative AI.” Though the rhetoric is intriguing, in my experience, it is best to not blindly trust but rather verify such statements. Huang is not a CEO who makes bold statements without backing them up – he built the nearly 1 trillion-dollar company with more than empty rhetoric. Furthermore, Nvidia has beaten expectations in 17 of the past 20 quarters. In other words, all else being equal, the company is likely to live up to the lofty expectations.

The AI Race is Just Getting Started: The more the world moves to AI, the better it is for Nvidia. Though Chat GPT has the early lead in the AI space, other tech giants are scrambling to make their foray into the industry. For example, Alphabet (GOOGL) released its Chat GPT competitor Bard in March. Chinese search giant Baidu (BIDU) will release its generative AI model in the coming months. Nvidia’s relationships with cloud providers such as Amazon and enterprise giants like Microsoft should spur even further growth.

Institutional Sponsorship: Institutional investors (mutual funds, pension funds, etc.) are the most important market participants to monitor. Because of their deep pockets and in-depth research, having smart institutional money in a stock is a confidence booster. Stanley Druckenmiller has one of the most impressive track records ever. Over four decades of investing, the billionaire investor has never had a down year. In recent interviews, Druckenmiller has talked up AI and NVDA’s role in the AI revolution. In recent interviews, Druckenmiller said, “AI could be as impactful as the internet” and that he could see himself holding the stock for at least two to three years. Druckenmiller isn’t alone – according to the latest filings, Will Danoff’s Fidelity Contra Fund (FCNTX) holds more than 10 million shares of NVDA. Fidelity Contra Fund has the second-largest assets under management (AUM). Despite the mutual fund’s massive size, it has outperformed the S&P 500 Index over the past 10 years.

Robust Estimates: Don’t just take Jensen Huang’s word for it. Wall Street analysts tracked by Zacks have finally come around to the stock and have provided some eye-popping estimates for the foreseeable future. NVDA also earns the best possible Zacks Rank #1 (Strong Buy).

Price & Volume Action Provides Clues: On May 25^th, NVDA shares gapped up by 25% on volume 241% above the norm. The massive price jump and volume are evidence of institutional accumulation. However, what the stock has done since is even more interesting. The past three weekly closes have been within 1.5% of each other. After a significant move, you would expect investors with large gains to take chips off the table – this is not the case with NVDA. If the stock clears its recent range, expect fireworks to the upside over the next 6-12 months.

Conclusion

Though Nvidia has gone on a huge run over the past few months, ample evidence suggests that the move may be just getting started. Strong fundamentals are just one piece of the puzzle. Forward expectations, institutional sponsorship, and robust price and volume action are all flashing green signals. 

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