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The Gap and Sociedad Quimica y Minera de Chile have been highlighted as Zacks Bull and Bear of the Day
Read MoreHide Full Article
For Immediate Release
Chicago, IL – November 1, 2023 – Zacks Equity Research shares The Gap (GPS - Free Report) as the Bull of the Day and Sociedad Quimica y Minera de Chile (SQM - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on APA Corp.'s (APA - Free Report) , American International Group Inc.'s (AIG - Free Report) and DoorDash Inc. (DASH - Free Report) .
The Gap, a Zacks Rank #1 (Strong Buy), operates as an apparel retail company. GPS shares are widely outperforming the market over the past six months thanks to improved margins, resulting in a bevy of brokerage upgrades and price target hikes. The stock is hitting a series of higher highs and displaying relative strength as buying pressure accumulates in this top-ranked stock.
GPS stock is part of the Zacks Retail – Apparel and Shoes industry group, which ranks in the top 33% out of more than 250 Zacks Ranked Industries. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform the market over the next 3 to 6 months.
Historical research studies suggest that approximately half of a stock's price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1. It's no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
Company Description
With more than 3,800 stores worldwide, The Gap is a premier international specialty retailer that offers a diverse range of clothing, accessories, and personal care products. The company tailors to both men and women with products under well-established brands such as Old Navy, Gap, Banana Republic, and Athleta. Gap's main offerings include denim and khakis; eyewear, jewelry, shoes, handbags, and fragrances; and fitness and lifestyle products for use in yoga, training, sports, and travel.
The Gap provides its products through company-operated stores, franchise stores, websites, and third-party arrangements. The company has franchise agreements to operate its portfolio of brands in stores and websites across Asia, Europe, Latin America, the Middle East, and Africa.
Earnings Trends and Future Estimates
The apparel retailer has put together an impressive earnings history, surpassing earnings estimates in three of the last four quarters. Back in August, the company reported second-quarter earnings of $0.34/share, a 277.8% surprise over the $0.09/share consensus estimate. The Gap has delivered a trailing four-quarter average earnings surprise of 1,001.6%.
GPS shares have received a boost on the back of lower airfreight and improved promotions, which aided margins during the second quarter. Management expects gross margins to expand in the current fiscal year. Lower advertising expenses and other cost-saving actions bode well for future quarters and are projected to generate $300 million in annualized savings.
Analysts covering GPS are in agreement and have been increasing their full-year earnings estimates as of late. For the current fiscal year, analysts have increased earnings estimates by 2.9% in the past 60 days. The Zacks Consensus EPS Estimate now stands at $0.71/share, reflecting a staggering potential growth rate of 277.5% relative to the prior year.
Let's Get Technical
GPS shares have advanced nearly 38% in the past 6 months. This is the kind of stock we want to include in our portfolio – one that is trending well and receiving positive earnings estimate revisions.
Notice how both the 50-day (blue line) and 200-day (red line) moving averages are sloping up. The stock has been making a series of higher highs and recently experienced a 'golden cross', whereby the 50-day moving average crosses above the longer-term 200-day average. With both strong fundamentals and technicals, GPS is poised to continue its outperformance.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, The Gap has recently witnessed positive revisions. As long as this trend remains intact (and GPS continues to deliver earnings beats), the stock will likely continue its bullish run into the end of this year and beyond.
Bottom Line
Backed by a leading industry group and impressive history of earnings beats, it's not difficult to see why this company is a compelling investment. Robust fundamentals combined with an appealing technical trend certainly justify adding shares to the mix.
The Gap is ranked favorably by our Zacks Style Scores, with top marks in our Value, Growth, and Momentum categories. A resurgence in apparel stocks bodes well for GPS shares. The future looks bright for this highly-ranked, leading stock.
Sociedad Quimica y Minera de Chile produces and distributes specialty plant nutrients and fertilizers, lithium derivatives, and industrial chemicals. The company provides potassium chloride and sulfate for crops such as corn, rice, wheat, and sugar. It also provides iodine for use in medical, industrial, and pharmaceutical applications.
In addition, SQM offers lithium carbonates for various applications such as materials for batteries, air-conditioning chemicals, and heat-resistant glass. Sociedad Quimica y Minera de Chile was incorporated in 1968 and is headquartered in Santiago, Chile.
The Zacks Rundown
SQM stock is a Zacks Rank #5 (Strong Sell) and is a component of the Zacks Fertilizers industry group, which ranks in the bottom 30% out of more than 250 Zacks Ranked Industries. As such, we expect this industry group as a whole to underperform the market over the next 3 to 6 months, just as it has over the course of the year.
Candidates in the bottom tiers of industries can often be potential short candidates. While individual stocks have the ability to outperform even when included in a poorly-performing industry group, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much more difficult.
Adding to the underperformance this year, stocks in this group are experiencing negative earnings growth.
As a part of this group, SQM stock has experienced considerable volatility in 2023; shares recently touched a 52-week low.
Recent Earnings Misses and Deteriorating Outlook
SQM has fallen short of earnings estimates in each of the last two quarters. The company most recently reported second-quarter earnings back in August of $2.03/share, missing the $2.62/share consensus EPS estimate by 22.5%. Earnings plunged 32.6% from the same quarter in the prior year.
The fertilizer company has missed earnings estimates by an average of 4.74% over the past four quarters. Consistently falling short of earnings estimates is a recipe for underperformance, and SQM is no exception.
Sociedad Quimica y Minera de Chile has been on the receiving end of negative earnings estimate revisions as of late. For the third quarter, analysts have decreased estimates by 12.82% in the past 60 days. The Q3 Zacks Consensus EPS Estimate now stands at $2.38/share, translating to negative growth of -38.2% relative to last year.
Falling earnings estimates are a huge red flag and need to be respected. Negative growth year-over-year is the type of trend that bears like to see.
Technical Outlook
As illustrated below, SQM stock is in a sustained downtrend. Notice how shares have plunged below both the 50-day and 200-day moving averages signaled by the blue and red lines, respectively. The stock is making a series of lower lows, with no respite from the selling in sight. Also note how both moving averages have rolled over and are sloping down – another good sign for the bears.
While not the most accurate indicator, SQM stock has also experienced what is known as a 'death cross', wherein the stock's 50-day moving average crosses below its 200-day moving average. SQM would have to make a stern move to the upside and show increasing earnings estimate revisions to warrant taking any long positions in the stock. Shares have fallen more than 45% in the past year alone.
Final Thoughts
A deteriorating fundamental and technical backdrop show that this stock is not set to hit new highs anytime soon. The fact that SQM is included in one of the worst-performing industry groups provides yet another headwind to a long list of concerns. A history of earnings misses will likely serve as a ceiling to any potential rallies, nurturing the stock's downtrend.
SQM shares continue to experience substantial volatility and have widely underperformed this year. With negative earnings estimate revisions continuing to pile up, this stock should be avoided as there are plenty of better alternatives in the current market environment.
Additional content:
3 Top Stocks Set to Beat Earnings Wednesday Afternoon
We are in the middle of the third-quarter 2023 earnings season. So far, the results are better than expected. The season started with weak expectations as the market's benchmark — the S&P 500 Index — was expected to witness the fourth consecutive quarter of earnings decline. However, the scenario took a complete turnaround as the season progressed.
As of Oct 27, 246 companies have reported results. Total earnings of these companies are up 6% year over year on 2.1% higher revenues, with 79.3% beating EPS estimates and 64.2% beating revenue estimates. For third-quarter 2023, total earnings of the S&P 500 companies are currently expected to be up 1.2% year over year on 1.2% higher revenues.
If this estimation holds, then third-quarter 2023 will be the first quarter of positive earnings growth for the S& 500 Index after three consecutive quarters of earnings decline.
Our research shows that for stocks with the combination of a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, the chance of an earnings beat is as high as 70%. These stocks are anticipated to appreciate after their earnings releases. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
APA Corp.'s large geographically diversified reserve base and high-quality drilling inventory bode well. APA's increased focus on the Permian basin, known for its high internal rates of return, is the real driver.
APA's slew of discoveries in offshore Suriname, through its joint venture with TotalEnergies, is another positive catalyst for the company. Over time, Suriname is expected to become one of APA's major assets with significant cash flow potential.
APA has an Earnings ESP of +1.29%. The Zacks Consensus Estimate for current-year earnings has improved 3.3% over the last 30 days. APA recorded earnings surprises in the last four reported quarters, with an average beat of 13.9%. The company is set to release earnings results on Nov 1, after the closing bell.
American International Group Inc.'s cost-cutting efforts under the AIG 200 transformative program are driving its operational efficiency and margins. Revenues have been growing on the back of the well-performing commercial lines unit. The hardening of insurance rates and new business bodes well for AIG's premium growth. We expect the 2023 premium income to jump almost 16% year over year.
Divestitures streamlined its business operations as well as enhanced capital allocation and operating leverage. AIG now has around 65.3% ownership interest remaining in Corebridge. Massive underwriting gains and growing net investment income are driving its results.
American International Group has an Earnings ESP of +4.02%. It has an expected earnings growth rate of 47.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 60 days.
AIG recorded earnings surprises in the last four reported quarters, with an average beat of 13.5%. The company is set to release earnings results on Nov 1, after the closing bell.
DoorDash Inc. is expanding its global footprint, powered by Wolt and Bbot acquisitions. The Wolt acquisition is helping DASH spread operations in more than 25 countries across the globe and address a larger customer base which is expected to drive top-line growth.
Expanding partner base, including Albertson and Grocery Outlet, will help DASH provide express grocery delivery to consumers. DASH's revenues have been growing rapidly in the past four years driven by increasing total orders and marketplace GOV.
DoorDash has an Earnings ESP of +6.48%. It has an expected earnings growth rate of 33.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last seven days.
DASH recorded earnings surprises in two out of the last four reported quarters, with an average beat of 0.9%. The company is set to release earnings results on Nov 1, after the closing bell.
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.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
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/performancefor information about the performance numbers displayed in this press release.
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The Gap and Sociedad Quimica y Minera de Chile have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – November 1, 2023 – Zacks Equity Research shares The Gap (GPS - Free Report) as the Bull of the Day and Sociedad Quimica y Minera de Chile (SQM - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on APA Corp.'s (APA - Free Report) , American International Group Inc.'s (AIG - Free Report) and DoorDash Inc. (DASH - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
The Gap, a Zacks Rank #1 (Strong Buy), operates as an apparel retail company. GPS shares are widely outperforming the market over the past six months thanks to improved margins, resulting in a bevy of brokerage upgrades and price target hikes. The stock is hitting a series of higher highs and displaying relative strength as buying pressure accumulates in this top-ranked stock.
GPS stock is part of the Zacks Retail – Apparel and Shoes industry group, which ranks in the top 33% out of more than 250 Zacks Ranked Industries. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform the market over the next 3 to 6 months.
Historical research studies suggest that approximately half of a stock's price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1. It's no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
Company Description
With more than 3,800 stores worldwide, The Gap is a premier international specialty retailer that offers a diverse range of clothing, accessories, and personal care products. The company tailors to both men and women with products under well-established brands such as Old Navy, Gap, Banana Republic, and Athleta. Gap's main offerings include denim and khakis; eyewear, jewelry, shoes, handbags, and fragrances; and fitness and lifestyle products for use in yoga, training, sports, and travel.
The Gap provides its products through company-operated stores, franchise stores, websites, and third-party arrangements. The company has franchise agreements to operate its portfolio of brands in stores and websites across Asia, Europe, Latin America, the Middle East, and Africa.
Earnings Trends and Future Estimates
The apparel retailer has put together an impressive earnings history, surpassing earnings estimates in three of the last four quarters. Back in August, the company reported second-quarter earnings of $0.34/share, a 277.8% surprise over the $0.09/share consensus estimate. The Gap has delivered a trailing four-quarter average earnings surprise of 1,001.6%.
GPS shares have received a boost on the back of lower airfreight and improved promotions, which aided margins during the second quarter. Management expects gross margins to expand in the current fiscal year. Lower advertising expenses and other cost-saving actions bode well for future quarters and are projected to generate $300 million in annualized savings.
Analysts covering GPS are in agreement and have been increasing their full-year earnings estimates as of late. For the current fiscal year, analysts have increased earnings estimates by 2.9% in the past 60 days. The Zacks Consensus EPS Estimate now stands at $0.71/share, reflecting a staggering potential growth rate of 277.5% relative to the prior year.
Let's Get Technical
GPS shares have advanced nearly 38% in the past 6 months. This is the kind of stock we want to include in our portfolio – one that is trending well and receiving positive earnings estimate revisions.
Notice how both the 50-day (blue line) and 200-day (red line) moving averages are sloping up. The stock has been making a series of higher highs and recently experienced a 'golden cross', whereby the 50-day moving average crosses above the longer-term 200-day average. With both strong fundamentals and technicals, GPS is poised to continue its outperformance.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, The Gap has recently witnessed positive revisions. As long as this trend remains intact (and GPS continues to deliver earnings beats), the stock will likely continue its bullish run into the end of this year and beyond.
Bottom Line
Backed by a leading industry group and impressive history of earnings beats, it's not difficult to see why this company is a compelling investment. Robust fundamentals combined with an appealing technical trend certainly justify adding shares to the mix.
The Gap is ranked favorably by our Zacks Style Scores, with top marks in our Value, Growth, and Momentum categories. A resurgence in apparel stocks bodes well for GPS shares. The future looks bright for this highly-ranked, leading stock.
Bear of the Day:
Sociedad Quimica y Minera de Chile produces and distributes specialty plant nutrients and fertilizers, lithium derivatives, and industrial chemicals. The company provides potassium chloride and sulfate for crops such as corn, rice, wheat, and sugar. It also provides iodine for use in medical, industrial, and pharmaceutical applications.
In addition, SQM offers lithium carbonates for various applications such as materials for batteries, air-conditioning chemicals, and heat-resistant glass. Sociedad Quimica y Minera de Chile was incorporated in 1968 and is headquartered in Santiago, Chile.
The Zacks Rundown
SQM stock is a Zacks Rank #5 (Strong Sell) and is a component of the Zacks Fertilizers industry group, which ranks in the bottom 30% out of more than 250 Zacks Ranked Industries. As such, we expect this industry group as a whole to underperform the market over the next 3 to 6 months, just as it has over the course of the year.
Candidates in the bottom tiers of industries can often be potential short candidates. While individual stocks have the ability to outperform even when included in a poorly-performing industry group, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much more difficult.
Adding to the underperformance this year, stocks in this group are experiencing negative earnings growth.
As a part of this group, SQM stock has experienced considerable volatility in 2023; shares recently touched a 52-week low.
Recent Earnings Misses and Deteriorating Outlook
SQM has fallen short of earnings estimates in each of the last two quarters. The company most recently reported second-quarter earnings back in August of $2.03/share, missing the $2.62/share consensus EPS estimate by 22.5%. Earnings plunged 32.6% from the same quarter in the prior year.
The fertilizer company has missed earnings estimates by an average of 4.74% over the past four quarters. Consistently falling short of earnings estimates is a recipe for underperformance, and SQM is no exception.
Sociedad Quimica y Minera de Chile has been on the receiving end of negative earnings estimate revisions as of late. For the third quarter, analysts have decreased estimates by 12.82% in the past 60 days. The Q3 Zacks Consensus EPS Estimate now stands at $2.38/share, translating to negative growth of -38.2% relative to last year.
Falling earnings estimates are a huge red flag and need to be respected. Negative growth year-over-year is the type of trend that bears like to see.
Technical Outlook
As illustrated below, SQM stock is in a sustained downtrend. Notice how shares have plunged below both the 50-day and 200-day moving averages signaled by the blue and red lines, respectively. The stock is making a series of lower lows, with no respite from the selling in sight. Also note how both moving averages have rolled over and are sloping down – another good sign for the bears.
While not the most accurate indicator, SQM stock has also experienced what is known as a 'death cross', wherein the stock's 50-day moving average crosses below its 200-day moving average. SQM would have to make a stern move to the upside and show increasing earnings estimate revisions to warrant taking any long positions in the stock. Shares have fallen more than 45% in the past year alone.
Final Thoughts
A deteriorating fundamental and technical backdrop show that this stock is not set to hit new highs anytime soon. The fact that SQM is included in one of the worst-performing industry groups provides yet another headwind to a long list of concerns. A history of earnings misses will likely serve as a ceiling to any potential rallies, nurturing the stock's downtrend.
SQM shares continue to experience substantial volatility and have widely underperformed this year. With negative earnings estimate revisions continuing to pile up, this stock should be avoided as there are plenty of better alternatives in the current market environment.
Additional content:
3 Top Stocks Set to Beat Earnings Wednesday Afternoon
We are in the middle of the third-quarter 2023 earnings season. So far, the results are better than expected. The season started with weak expectations as the market's benchmark — the S&P 500 Index — was expected to witness the fourth consecutive quarter of earnings decline. However, the scenario took a complete turnaround as the season progressed.
As of Oct 27, 246 companies have reported results. Total earnings of these companies are up 6% year over year on 2.1% higher revenues, with 79.3% beating EPS estimates and 64.2% beating revenue estimates. For third-quarter 2023, total earnings of the S&P 500 companies are currently expected to be up 1.2% year over year on 1.2% higher revenues.
If this estimation holds, then third-quarter 2023 will be the first quarter of positive earnings growth for the S& 500 Index after three consecutive quarters of earnings decline.
Our Top Picks
We have narrowed our search to five corporate behemoths that are set to beat third-quarter earnings estimates on Wednesday. Each of these stocks carries a Zacks Rank #2 (Buy) and has a positive Earnings ESP. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Our research shows that for stocks with the combination of a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, the chance of an earnings beat is as high as 70%. These stocks are anticipated to appreciate after their earnings releases. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
APA Corp.'s large geographically diversified reserve base and high-quality drilling inventory bode well. APA's increased focus on the Permian basin, known for its high internal rates of return, is the real driver.
APA's slew of discoveries in offshore Suriname, through its joint venture with TotalEnergies, is another positive catalyst for the company. Over time, Suriname is expected to become one of APA's major assets with significant cash flow potential.
APA has an Earnings ESP of +1.29%. The Zacks Consensus Estimate for current-year earnings has improved 3.3% over the last 30 days. APA recorded earnings surprises in the last four reported quarters, with an average beat of 13.9%. The company is set to release earnings results on Nov 1, after the closing bell.
American International Group Inc.'s cost-cutting efforts under the AIG 200 transformative program are driving its operational efficiency and margins. Revenues have been growing on the back of the well-performing commercial lines unit. The hardening of insurance rates and new business bodes well for AIG's premium growth. We expect the 2023 premium income to jump almost 16% year over year.
Divestitures streamlined its business operations as well as enhanced capital allocation and operating leverage. AIG now has around 65.3% ownership interest remaining in Corebridge. Massive underwriting gains and growing net investment income are driving its results.
American International Group has an Earnings ESP of +4.02%. It has an expected earnings growth rate of 47.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 60 days.
AIG recorded earnings surprises in the last four reported quarters, with an average beat of 13.5%. The company is set to release earnings results on Nov 1, after the closing bell.
DoorDash Inc. is expanding its global footprint, powered by Wolt and Bbot acquisitions. The Wolt acquisition is helping DASH spread operations in more than 25 countries across the globe and address a larger customer base which is expected to drive top-line growth.
Expanding partner base, including Albertson and Grocery Outlet, will help DASH provide express grocery delivery to consumers. DASH's revenues have been growing rapidly in the past four years driven by increasing total orders and marketplace GOV.
DoorDash has an Earnings ESP of +6.48%. It has an expected earnings growth rate of 33.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last seven days.
DASH recorded earnings surprises in two out of the last four reported quarters, with an average beat of 0.9%. The company is set to release earnings results on Nov 1, after the closing bell.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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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.
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
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/performancefor information about the performance numbers displayed in this press release.