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The Zacks Analyst Blog Highlights JPMorgan Chase, Citigroup, Transdigm, Copart and Lennar
Read MoreHide Full Article
For Immediate Release
Chicago, IL – July 11, 2023 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: JPMorgan Chase (JPM - Free Report) , Citigroup (C - Free Report) , Transdigm Group (TDG - Free Report) , Copart (CPRT - Free Report) and Lennar (LEN - Free Report) .
Here are highlights from Monday’s Analyst Blog:
Major U.S. Banks Report: Global Week Ahead
In the Global Week Ahead, tensions between the political capitals of Washington DC and Beijing remain a focus.
In terms of macro, U.S. consumer price inflation (CPI) data will critically update the FOMC. The CPI data lands on Wednesday.
At mid-week, monetary policy rate-setters in New Zealand and Canada meet.
Next are Reuters' five world market themes, reordered for equity traders—
(1) U.S. Major Bank Reports Kick Off Q2 Earnings Season
U.S. banking giants sailed through the Fed's annual health check in late June, highlighting they have enough capital to weather a severe economic downturn.
But now it's time for earnings, with JPMorgan Chase and Citigroup scheduled to report second quarter earnings on July 14th.
The picture looks not so rosy with results predicted to be weighed down by sluggish dealmaking and trading revenue while a dearth of investment-banking activity has prompted banks to lay off thousands of employees.
Meanwhile, the largest U.S. lenders are expected to keep tightening credit standards given the uncertain economic environment, particularly after bank failures earlier this year.
Analysts focus on banks' lending outlook and how much they set aside in rainy-day funds to cushion losses from souring loans.
(2) Traders Now Accept "Higher for Longer"
Markets have come around fast to the Fed's view that instead of being cut anytime soon, rates will remain high for longer.
After another brutal bond sell off, focus turns to Wednesday's U.S. inflation data. Price pressures have been easing but perhaps not fast enough with a July rate hike seen as likely.
May CPI data showed the smallest year-on-year increase since March 2021 — but at 4%, that was still well above the Fed's 2% target. Just like the latest personal consumption expenditures index showed similarly slowing inflation also above the Fed's comfort zone.
June meeting minutes showed a united Fed agreed to hold rates steady, buy time and assess whether further hikes would be needed. The answer seems yes.
And the most deeply inverted bond yield curve since the 1980s suggests investors bracing for another hike also expect Fed tightening raises recession risks.
(3) Debt-laden Firms — Around the World — Running into Trouble
Debt-laden companies are running into trouble:
· Embattled French retailer Casino (CASP), with 3 billion euros ($3.3 billion) of debt maturing in the next two years, has until end-July to agree a restructuring plan
· Britain's Thames Water, with 14 billion pounds of borrowings, faces temporary state ownership if it can't raise fresh capital
· Sweden's commercial landlord SBB is fighting for survival
In the U.S., junk-rated companies have to refinance almost $1.2 trillion of borrowings by 2026, according to S&P Global Ratings.
At the same time, the market for collateralized loan obligations — vehicles formed by specialist asset managers that buy about 60% of all junk-rated loans and package them up into bonds — has almost shuddered to a halt.
Stock market valuations do not reflect any credit-related worries yet — but that may just be the eye of a storm.
(4) Capitals of Beijing and DC Fight High-Tech Trade War
China is fighting a hi-tech trade war with Washington while grappling with a sputtering economy.
After months of tightening of restrictions by the U.S. and key allies on chip-related imports, Beijing hit back in recent days with curbs on chip-making metal exports, and a warning of more to come — just in time for Treasury Secretary Janet Yellen's visit.
Washington has been mulling curbing Chinese companies' access to cloud-computing services.
Things aren't looking bright on the economic front, either. Monday's inflation data should show more deflationary pressure at factories and retailers, while Thursday's trade numbers are expected to see a continued decline in exports — all pointing to lackluster demand.
Hopes for major Politburo policy support at month-end seem to have faded. Goldman Sachs said that conversations with their local clients showed they now expected to see measures aimed only at easing economic headwinds, rather than generating strong growth.
(5) On Wednesday, the Reserve Bank of New Zealand (RBNZ) and the Bank of Canada (BoC) Give Supply Updates
Skips, pauses and pivots dominate monetary policy conversations as persistent inflation has seemingly consigned central-bank forward guidance to the dustbin of history.
Increasingly, policymakers say decisions depend on future data, making it harder for traders to formulate a view on the outlook.
The Reserve Bank of New Zealand (RBNZ) — one of the first major central banks to start tightening policy — has raised rates by 525 basis points since October 2021 - the most among the G10.
In May, it signaled it had finished raising rates, but at its meeting on Wednesday longer-term clarity may remain out of reach with inflation running at 6.7% and the economy in recession.
The Bank of Canada, meeting the same day, is in the data-dependent corner, leaving markets split down the middle on whether it will raise or pause.
Zacks #1 Rank (STRONG BUY) Stocks
(1) Transdigm Group : This Aerospace and Defense company's stock prices at a whopping $879. There is a current market cap of $48.3B.
I see a Zacks Value score of F, a Zacks Growth score of F, and a Zacks Momentum score of D.
Incepted in 1993, TransDigm Group is a leading global designer, producer and supplier of highly-engineered aerospace components that used in commercial and military aircraft.
The company, through its well-diversified business, offers a broad range of products to its customers.
TransDigm currently has four reportable segments:
The Airframe segment produces systems and components like engineered latching and locking devices, security components and systems, aircraft audio systems, specialized lavatory components, seat belts and safety restraints, engineered interior surfaces and related components, military personnel parachutes and cargo delivery systems. These are used in non-power airframe applications utilizing airframe and cabin structure technologies. It contributed 44.1% to the company's total sales in fiscal 2022.
The Power & Control segment develops products like mechanical/electro-mechanical actuators and controls, ignition systems and engine technology, specialized pumps and valves, power conditioning devices, specialized AC/DC electric motors and generators, and lifting devices and cargo loading and handling systems. These are used in controlling power of the aircraft utilizing electronic, fluid, power and mechanical motion control technologies. It contributed 52.9% to the company's total sales in fiscal 2022.
The Non-aviation segment's products include seat belts and safety restraints for ground transportation applications, mechanical/electro-mechanical actuators and controls for space applications, and refueling systems for heavy equipment used in mining, construction and other industries. It contributed 3% to the company's total sales in fiscal 2022.
Esterline Technologies became a reportable segment of TransDigm, post its acquisition in March 2019. Notably, Esterline includes a collection of approximately 20 reporting units that primarily develop, produce and market products for the aerospace and defense industry. Each Esterline reporting unit is included in one of TransDigm's segments.
(2) Copart: This is a $89 stock, in the Auction and Valuation Services industry.
This company's stock currently has a market cap of $42.5B.
I see a Zacks Value score of F, a Zacks Growth score of B, and a Zacks Momentum score of D.
Based in Dallas, TX, Copart was founded in 1982.
The company provides online auction and a wide range of remarketing services to process and sell salvage and clean title vehicles.
This is done mainly over the Internet, through its Virtual Bidding Third Generation (VB3) Internet auction-style sales technology.
Sellers are primarily insurance companies, banks and financial institutions, charities, car dealerships, fleet operators, and vehicle rental companies.
Buyers include licensed vehicle dismantlers, rebuilders, repair licensees, used vehicle dealers and exporters, along with the general public.
The company primarily has two revenue streams: service revenue and purchased vehicles.
Copart derives service revenues from vehicle sales when it acts as an intermediary. In such cases, the firm doesn't take ownership of the vehicle. It makes money through fees when it is auctioned through its website.
Purchased vehicles revenues come from sales when Copart has acquired the ownership of the vehicle and sells it at a higher price, pocketing the difference.
In the United States, Canada, Brazil, the Republic of Ireland, Finland, the U.A.E., Oman, Bahrain, and Spain, Copart sells vehicles primarily as an agent and earns revenue from auction related sales transaction fees paid by vehicle suppliers and vehicle buyers, as well as the associated fees for services following the auction, such as towing and storage.
In the United Kingdom, Spain and Germany, it operates both as an agent as well as on a principal basis. It also serves as an agent in the United Kingdom.
In Germany and Spain, Copart also generates revenue from sales listing fees for listing vehicles on behalf of insurance companies.
With operations at over 200 locations in 11 countries, Copart has more than 250,000 vehicles available online every day.
(3) Lennar: This is a $120 U.S. stock found in the Home Builders industry.
This company's stock has a market cap of $34.9B.
I see a Zacks Value score of B, a Zacks Growth score of F, and a Zacks Momentum score of C.
Founded in 1954 and based in Miami, FL, Lennar is engaged in homebuilding and financial services in the United States.
The company's reportable segments consist of Homebuilding, Lennar Financial Services, Rialto and Lennar Multifamily.
Despite the varied product portfolio, homebuilding remains Lennar's core business. Homebuilding operations (accounting for 94.9% of fiscal 2022 total revenues) include the sale and construction of single-family attached and detached homes as well as the purchase, development and sale of residential land directly and through unconsolidated entities.
Lennar's reportable homebuilding segments consist of Homebuilding East, which covers Florida, Georgia, Maryland, New Jersey, North Carolina, South Carolina and Virginia; Homebuilding Central covers Arizona, Colorado and Texas; Homebuilding West covers California and Nevada.
Homebuilding Other covers Illinois, Indiana, Minnesota, Oregon, Tennessee, Utah and Washington. However, Homebuilding Other is not considered a reportable segment.
The Financial Services business (2.4%) includes mortgage financing, title insurance and closing services to the company's homebuyers as well as others through Lennar's financial services subsidiaries — Universal American Mortgage Company and Eagle Home Mortgage.
Lennar Multi-Family (2.6%) is involved in the development, construction and property management of multi-family rental apartments in premium markets of California through unconsolidated entities.
Lennar & Other (0.1%) includes operations primarily from the company's share of carried interests in Rialto fund investments, retained after the sale of Rialto's asset and investment management platform, along with equity in earnings/loss from Rialto fund investments and strategic technology investments, including other income (expense).
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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The Zacks Analyst Blog Highlights JPMorgan Chase, Citigroup, Transdigm, Copart and Lennar
For Immediate Release
Chicago, IL – July 11, 2023 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: JPMorgan Chase (JPM - Free Report) , Citigroup (C - Free Report) , Transdigm Group (TDG - Free Report) , Copart (CPRT - Free Report) and Lennar (LEN - Free Report) .
Here are highlights from Monday’s Analyst Blog:
Major U.S. Banks Report: Global Week Ahead
In the Global Week Ahead, tensions between the political capitals of Washington DC and Beijing remain a focus.
In terms of macro, U.S. consumer price inflation (CPI) data will critically update the FOMC. The CPI data lands on Wednesday.
At mid-week, monetary policy rate-setters in New Zealand and Canada meet.
Next are Reuters' five world market themes, reordered for equity traders—
(1) U.S. Major Bank Reports Kick Off Q2 Earnings Season
U.S. banking giants sailed through the Fed's annual health check in late June, highlighting they have enough capital to weather a severe economic downturn.
But now it's time for earnings, with JPMorgan Chase and Citigroup scheduled to report second quarter earnings on July 14th.
The picture looks not so rosy with results predicted to be weighed down by sluggish dealmaking and trading revenue while a dearth of investment-banking activity has prompted banks to lay off thousands of employees.
Meanwhile, the largest U.S. lenders are expected to keep tightening credit standards given the uncertain economic environment, particularly after bank failures earlier this year.
Analysts focus on banks' lending outlook and how much they set aside in rainy-day funds to cushion losses from souring loans.
(2) Traders Now Accept "Higher for Longer"
Markets have come around fast to the Fed's view that instead of being cut anytime soon, rates will remain high for longer.
After another brutal bond sell off, focus turns to Wednesday's U.S. inflation data. Price pressures have been easing but perhaps not fast enough with a July rate hike seen as likely.
May CPI data showed the smallest year-on-year increase since March 2021 — but at 4%, that was still well above the Fed's 2% target. Just like the latest personal consumption expenditures index showed similarly slowing inflation also above the Fed's comfort zone.
June meeting minutes showed a united Fed agreed to hold rates steady, buy time and assess whether further hikes would be needed. The answer seems yes.
And the most deeply inverted bond yield curve since the 1980s suggests investors bracing for another hike also expect Fed tightening raises recession risks.
(3) Debt-laden Firms — Around the World — Running into Trouble
Debt-laden companies are running into trouble:
· Embattled French retailer Casino (CASP), with 3 billion euros ($3.3 billion) of debt maturing in the next two years, has until end-July to agree a restructuring plan
· Britain's Thames Water, with 14 billion pounds of borrowings, faces temporary state ownership if it can't raise fresh capital
· Sweden's commercial landlord SBB is fighting for survival
In the U.S., junk-rated companies have to refinance almost $1.2 trillion of borrowings by 2026, according to S&P Global Ratings.
At the same time, the market for collateralized loan obligations — vehicles formed by specialist asset managers that buy about 60% of all junk-rated loans and package them up into bonds — has almost shuddered to a halt.
Stock market valuations do not reflect any credit-related worries yet — but that may just be the eye of a storm.
(4) Capitals of Beijing and DC Fight High-Tech Trade War
China is fighting a hi-tech trade war with Washington while grappling with a sputtering economy.
After months of tightening of restrictions by the U.S. and key allies on chip-related imports, Beijing hit back in recent days with curbs on chip-making metal exports, and a warning of more to come — just in time for Treasury Secretary Janet Yellen's visit.
Washington has been mulling curbing Chinese companies' access to cloud-computing services.
Things aren't looking bright on the economic front, either. Monday's inflation data should show more deflationary pressure at factories and retailers, while Thursday's trade numbers are expected to see a continued decline in exports — all pointing to lackluster demand.
Hopes for major Politburo policy support at month-end seem to have faded. Goldman Sachs said that conversations with their local clients showed they now expected to see measures aimed only at easing economic headwinds, rather than generating strong growth.
(5) On Wednesday, the Reserve Bank of New Zealand (RBNZ) and the Bank of Canada (BoC) Give Supply Updates
Skips, pauses and pivots dominate monetary policy conversations as persistent inflation has seemingly consigned central-bank forward guidance to the dustbin of history.
Increasingly, policymakers say decisions depend on future data, making it harder for traders to formulate a view on the outlook.
The Reserve Bank of New Zealand (RBNZ) — one of the first major central banks to start tightening policy — has raised rates by 525 basis points since October 2021 - the most among the G10.
In May, it signaled it had finished raising rates, but at its meeting on Wednesday longer-term clarity may remain out of reach with inflation running at 6.7% and the economy in recession.
The Bank of Canada, meeting the same day, is in the data-dependent corner, leaving markets split down the middle on whether it will raise or pause.
Zacks #1 Rank (STRONG BUY) Stocks
(1) Transdigm Group : This Aerospace and Defense company's stock prices at a whopping $879. There is a current market cap of $48.3B.
I see a Zacks Value score of F, a Zacks Growth score of F, and a Zacks Momentum score of D.
Incepted in 1993, TransDigm Group is a leading global designer, producer and supplier of highly-engineered aerospace components that used in commercial and military aircraft.
The company, through its well-diversified business, offers a broad range of products to its customers.
TransDigm currently has four reportable segments:
The Airframe segment produces systems and components like engineered latching and locking devices, security components and systems, aircraft audio systems, specialized lavatory components, seat belts and safety restraints, engineered interior surfaces and related components, military personnel parachutes and cargo delivery systems. These are used in non-power airframe applications utilizing airframe and cabin structure technologies. It contributed 44.1% to the company's total sales in fiscal 2022.
The Power & Control segment develops products like mechanical/electro-mechanical actuators and controls, ignition systems and engine technology, specialized pumps and valves, power conditioning devices, specialized AC/DC electric motors and generators, and lifting devices and cargo loading and handling systems. These are used in controlling power of the aircraft utilizing electronic, fluid, power and mechanical motion control technologies. It contributed 52.9% to the company's total sales in fiscal 2022.
The Non-aviation segment's products include seat belts and safety restraints for ground transportation applications, mechanical/electro-mechanical actuators and controls for space applications, and refueling systems for heavy equipment used in mining, construction and other industries. It contributed 3% to the company's total sales in fiscal 2022.
Esterline Technologies became a reportable segment of TransDigm, post its acquisition in March 2019. Notably, Esterline includes a collection of approximately 20 reporting units that primarily develop, produce and market products for the aerospace and defense industry. Each Esterline reporting unit is included in one of TransDigm's segments.
(2) Copart: This is a $89 stock, in the Auction and Valuation Services industry.
This company's stock currently has a market cap of $42.5B.
I see a Zacks Value score of F, a Zacks Growth score of B, and a Zacks Momentum score of D.
Based in Dallas, TX, Copart was founded in 1982.
The company provides online auction and a wide range of remarketing services to process and sell salvage and clean title vehicles.
This is done mainly over the Internet, through its Virtual Bidding Third Generation (VB3) Internet auction-style sales technology.
Sellers are primarily insurance companies, banks and financial institutions, charities, car dealerships, fleet operators, and vehicle rental companies.
Buyers include licensed vehicle dismantlers, rebuilders, repair licensees, used vehicle dealers and exporters, along with the general public.
Copart's services include online supplier access, salvage estimation services, end-of-life vehicle processing, virtual insured exchange, transportation services, vehicle inspection stations, on-demand reporting, DMV processing and flexible vehicle processing programs, among others.
The company primarily has two revenue streams: service revenue and purchased vehicles.
Copart derives service revenues from vehicle sales when it acts as an intermediary. In such cases, the firm doesn't take ownership of the vehicle. It makes money through fees when it is auctioned through its website.
Purchased vehicles revenues come from sales when Copart has acquired the ownership of the vehicle and sells it at a higher price, pocketing the difference.
In the United States, Canada, Brazil, the Republic of Ireland, Finland, the U.A.E., Oman, Bahrain, and Spain, Copart sells vehicles primarily as an agent and earns revenue from auction related sales transaction fees paid by vehicle suppliers and vehicle buyers, as well as the associated fees for services following the auction, such as towing and storage.
In the United Kingdom, Spain and Germany, it operates both as an agent as well as on a principal basis. It also serves as an agent in the United Kingdom.
In Germany and Spain, Copart also generates revenue from sales listing fees for listing vehicles on behalf of insurance companies.
With operations at over 200 locations in 11 countries, Copart has more than 250,000 vehicles available online every day.
(3) Lennar: This is a $120 U.S. stock found in the Home Builders industry.
This company's stock has a market cap of $34.9B.
I see a Zacks Value score of B, a Zacks Growth score of F, and a Zacks Momentum score of C.
Founded in 1954 and based in Miami, FL, Lennar is engaged in homebuilding and financial services in the United States.
The company's reportable segments consist of Homebuilding, Lennar Financial Services, Rialto and Lennar Multifamily.
Despite the varied product portfolio, homebuilding remains Lennar's core business. Homebuilding operations (accounting for 94.9% of fiscal 2022 total revenues) include the sale and construction of single-family attached and detached homes as well as the purchase, development and sale of residential land directly and through unconsolidated entities.
Lennar's reportable homebuilding segments consist of Homebuilding East, which covers Florida, Georgia, Maryland, New Jersey, North Carolina, South Carolina and Virginia; Homebuilding Central covers Arizona, Colorado and Texas; Homebuilding West covers California and Nevada.
Homebuilding Other covers Illinois, Indiana, Minnesota, Oregon, Tennessee, Utah and Washington. However, Homebuilding Other is not considered a reportable segment.
The Financial Services business (2.4%) includes mortgage financing, title insurance and closing services to the company's homebuyers as well as others through Lennar's financial services subsidiaries — Universal American Mortgage Company and Eagle Home Mortgage.
Lennar Multi-Family (2.6%) is involved in the development, construction and property management of multi-family rental apartments in premium markets of California through unconsolidated entities.
Lennar & Other (0.1%) includes operations primarily from the company's share of carried interests in Rialto fund investments, retained after the sale of Rialto's asset and investment management platform, along with equity in earnings/loss from Rialto fund investments and strategic technology investments, including other income (expense).
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
See Stocks Free >>
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.