For Immediate Release

Chicago, IL – December 20, 2023 – Zacks Equity Research shares Beacon Roofing Supply (BECN Quick QuoteBECN - Free Report) as the Bull of the Day and America’s Car-Mart (CRMT Quick QuoteCRMT - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on JPMorgan (JPM Quick QuoteJPM - Free Report) , Bank of America (BAC Quick QuoteBAC - Free Report) and Citigroup (C Quick QuoteC - Free Report) .

Here is a synopsis of all five stocks.

Bull of the Day:

Beacon Roofing Supply, a Zacks Rank #1 (Strong Buy), is engaged in the distribution of roofing materials in the United States and Canada. BECN shares are widely outperforming the market this year and appear poised to continue that trend in 2024. The stock looks primed to break out of a multi-month consolidation pattern, touching a new 52-week high during yesterday’s trading session. Renewed volume has attracted investor attention as buying pressure accumulates in this top-ranked stock.

BECN is part of the Zacks Building Products – Retail industry group, which currently ranks in the top 37% 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

Beacon Roofing Supply provides residential and non-residential roofing materials and building products to contractors, homebuilders, building owners, lumberyards, and retailers. The company offers a variety of solutions such as pitched and low-slope roofing, gutters and siding, HVAC, and commercial insulation products. BECN also provides building materials such as lumber and composite, plywood, decking and railing, skylights, and windows.

In addition, Beacon Roofing supplies waterproofing products and vapor barriers, as well as tools and equipment such as ladders, power tools, nails, screws, drill bits, and saw blades. The company was founded in 1928 and is headquartered in Herndon, Virginia.

Earnings Trends and Future Estimates

The roofing supplier has put together an impressive earnings history, surpassing earnings estimates in three of the last four quarters. Back in November, the company reported third-quarter earnings of $2.85/share, a 12.2% surprise over the $2.54/share consensus estimate. Beacon Roofing Supply has delivered a trailing four-quarter average earnings surprise of 11.1%.

BECN shares have received a boost as analysts covering the company have been increasing their Q4 earnings estimates lately. For the fourth quarter, earnings estimates have risen 16.08% in the past 60 days. The Q4 Zacks Consensus EPS Estimate now stands at $1.66/share, reflecting a potential growth rate of 36.07% relative to the year-ago period.

Let’s Get Technical

BECN shares have advanced more than 60% this year. Only stocks that are in extremely powerful uptrends are able to experience this type of outperformance. 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, widely outperforming the major indices. With positive fundamental and technical indicators, BECN stock 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, Beacon Roofing Supply has recently witnessed positive revisions. As long as this trend remains intact (and BECN continues to deliver earnings beats), the stock will likely continue its bullish run into the end of this year and beyond.

Bottom Line

Beacon Roofing Supply is ranked favorably by our Zacks Style Scores with top marks across our Growth, Value, and Momentum categories. This indicates that further upside is likely based on a combination of favorable earnings and sales metrics, as well as valuation and price performance.

Backed by a top 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 future looks bright for this highly-ranked, leading stock.

Bear of the Day:

America’s Car-Mart operates automotive dealerships in the United States. The company primarily sells used vehicles while providing financing for its customers. The auto retailer focuses on the Buy Here/Pay Here segment of the used car market. America’s Car-Mart operates its dealerships in small cities and rural locations, mainly in the South-Central region of the country.

The Zacks Rundown

America’s Car-Mart, a Zacks Rank #5 (Strong Sell), is a component of the Zacks Automotive – Retail and Whole Sales industry group. This industry ranks in the bottom 13% 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.

Candidates in the bottom tiers of industries can often be potential candidates for short positions. While individual stocks have the ability to outperform even when included in a lackluster 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.

Despite a rebound in stocks this year, CRMT shares have not been participating lately. The stock has experienced considerable volatility over the past year. CRMT hit a 52-week low earlier this month, all while the general market nears new highs.

Recent Earnings Misses and Deteriorating Outlook

CRMT has fallen short of earnings estimates in each of the last four quarters. The company most recently reported a fiscal second-quarter loss earlier in December of -$4.30/share, missing the $0.74/share consensus EPS estimate by a whopping -681.08%.

America’s Car-Mart has posted a trailing four-quarter average earnings miss of -210.38%. Consistently falling short of earnings estimates is a recipe for underperformance, and CRMT is no exception.

The company has been on the receiving end of negative earnings estimate revisions as of late. The current quarter’s outlook has been slashed by -222.73% in the past 60 days. The fiscal Q3 Zack Consensus Estimate stands at -$1.08/share, reflecting negative earnings growth of -569.57% relative to the year-ago period.

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, CRMT 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, and a recent uptick presents a compelling short opportunity. Also note how both moving averages have rolled over and are sloping down – another good sign for the bears.

CRMT 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. America’s Car-Mart would have to make a surprising move to the upside and show increasing earnings estimate revisions to warrant taking any long positions in the stock. CRMT shares have fallen more than 23% in the past 6 months alone, all while the major indexes have shown strength.

Final Thoughts

A deteriorating fundamental and technical backdrop show that this stock is not set to hit new highs anytime soon. The fact that CRMT stock 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 and falling future earnings estimates will likely serve as a ceiling to any potential rallies, nurturing the stock’s downtrend.

Highlighted underperformance bodes well for the bears. Potential investors may want to consider including this stock as part of a short or hedge strategy. Bulls will want to steer clear of CRMT shares until the situation shows major signs of improvement.

Additional content:

Is JPMorgan (JPM Quick QuoteJPM - Free Report) Likely to Impress in 2024, Too?

JPMorgan’s shares have rallied 24% this year, significantly outperforming the industry’s rise of 10.2% and the Zacks Finance sector growth of 14.1%. This also marks a turnaround from dismal 2022 performance, wherein the stock lost 15.3%.

So, what led to the reversal?

This year started on a positive note on the back of the Federal Reserve’s monetary tightening to control ‘sticky’ inflation. Nonetheless, the early March regional banking crisis that led to the fall of three large banks because of deposit flight to higher-yielding investment options was a wake-up call for banks and regulators alike.

The ultra-aggressive pace of rate hikes turned counterproductive for banks that generally perform well in the higher interest rate regime. Though big banks weathered this turmoil better than their smaller regional peers, they, too, faced pressure from rising deposit and funding costs. This, thus, adversely impacted net interest income (NII) and margins.

The bright spot from the crisis for JPMorgan was it acquired First Republic Bank, the third large bank to collapse in 2023, for $10.6 billion. It must be noted that JPM is not permitted to buy another bank because of its size and scale. But this time, these factors helped the company secure the deal.

Following the transaction, JPMorgan’s balance sheet has swelled to almost $3.9 trillion. The deal resulted in increased penetration within the high-net-worth clients and added prime locations in wealthy markets. Recently, at an investor conference call, top management noted that they were able to retain 90% of FRC clients and the integration process is on track.

While the current higher rate environment is hurting other big banks like Bank of America and Citigroup, JPMorgan (driven by the FRC deal) witnessed robust improvement in NII. In the nine months ended Sep 30, 2023, the company’s NII jumped 40% to $65.2 billion. BAC recorded a 14% rise in NII and the metric for C grew 16% in the same time frame.

Additionally, JPMorgan kept on raising its 2023 NII guidance. Now, the company expects NII to be roughly $88.5 billion, driven by higher rates and slower-than-expected deposit repricing across both consumers and wholesale. Earlier, the company had guided NII to be $87 billion for this year.

Nevertheless, this Zacks Rank #3 (Hold) company believes that the current NII run rate is not sustained as competition for deposits and annual NII is estimated to be near $80 billion over the medium term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Though the latest Summary of Economic Projections doesn’t indicate a recession for the U.S. economy, the growth rate will slow down to 1.4% in 2024. For 2023, the U.S. economy is anticipated to grow 2.6%. Thus, the demand for loans is expected to remain moderate over the next year. This, along with the central bank signaling 75 basis points cut in interest rates in 2024, the company’s NII is not expected to improve much.

JPMorgan is heavily investing in technology, spending more than $12 billion annually. Thus, its expenses keep on mounting. The company’s non-interest expenses witnessed a five-year (ended 2022) compound annual growth rate (CAGR) of 5.3%. Further, the First Republic acquisition is expected to result in $2 billion of post-tax restructuring charges to be incurred this year and in 2024. For 2023, management anticipates adjusted expenses to be approximately $84 billion (including integration-related charges) amid inflationary pressure.

Though some green shoots are visible in the investment banking (IB) business, IB fees are less likely to improve soon. This, along with the volatile nature of the capital markets business and high mortgage rates, will likely hamper JPMorgan’s fee income growth. In the first three quarters of 2023, the metric grew just 14%.

Thus, slowing NII growth, challenging fee income growth and elevated expenses are worrisome.

Yet, one should keep this banking behemoth on the radar due to its scale and leverage in terms of its huge branch network and presence in 48 of 50 states in the United States over other big banks like Bank of America and Citigroup.

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 >>

Media Contact

Zacks Investment Research

800-767-3771 ext. 9339

https://www.zacks.com

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/performance for information about the performance numbers displayed in this press release.