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NRG Energy and Nutrien have been highlighted as Zacks Bull and Bear of the Day
Read MoreHide Full Article
For Immediate Release
Chicago, IL – January 5, 2024 – Zacks Equity Research shares NRG Energy (NRG - Free Report) as the Bull of the Day and Nutrien (NTR - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on The Goldman Sachs Group, Inc. (GS - Free Report) , BlackRock Inc. (BLK - Free Report) and JPMorgan Chase & Co. (JPM - Free Report) .
NRG Energy, a Zacks Rank #1 (Strong Buy), operates as an integrated power company in the United States. Renewed strength in interest rate sensitive utilities provides a durable backing for this industry leader. NRG stock is displaying relative strength, recently surging to 52-week highs even as the general market has encountered volatility early in 2024. Increasing volume has attracted investor attention as buying pressure accumulates in this top-ranked stock.
NRG is part of the Zacks Utility – Electric Power industry group, which currently ranks in the top 27% 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.
Quantitative 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
NRG Energy is involved in producing and selling electricity and related services to residential, commercial, industrial, and wholesale customers. The company generates electricity using natural gas, coal, oil, solar, nuclear, and battery storage. NRG also provides system power, distributed generation, renewable products, and energy efficiency and advisory services.
In addition, NRG Energy trades in electric power, natural gas, and related commodities; environmental and weather products; and financial products including forwards, futures, options, and swaps. The company sells energy, services, and products under the NRG, Reliant, Direct Energy, Green Mountain, Stream, and XOOM Energy brands.
Earnings Trends and Future Estimates
The utility provider 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 $1.62/share, a 5.88% surprise over the $1.53/share consensus estimate. NRG Energy has delivered a trailing four-quarter average earnings surprise of 4.73%.
NRG shares received a boost as analysts covering the company have been increasing their 2024 earnings estimates lately. For the full year, earnings estimates have risen 5.3% in the past 60 days. The 2024 Zacks Consensus EPS Estimate now stands at $5.96/share, reflecting a potential growth rate of 17.9% relative to the prior year.
Let's Get Technical
NRG shares have advanced more than 67% in the past 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 52-week highs, widely outperforming the major indices. With positive fundamental and technical indicators, NRG 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, NRG Energy has recently witnessed positive revisions. As long as this trend remains intact (and NRG continues to deliver earnings beats), the stock will likely continue its bullish run this year.
Bottom Line
NRG Energy's management continues to approve share repurchases with a $950 million accelerated program currently authorized. A 7-9% long-term target dividend growth rate will also further enhance shareholder value. A positive string of acquisitions over the past several years has resulted in realized synergies that bode well moving forward.
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.
Nutrien produces and sells fertilizers and related industrial and feed products. NTR offers potash, nitrogen, phosphate, and sulfate products. Based in Saskatoon, Canada, Nutrien also distributes crop nutrients, protection products, and seeds through approximately 2,000 retail locations internationally.
A decline in fertilizer prices is leading to reduced revenues and margins. The company's nitrogen business is also expected to face pricing headwinds in the short-term. Moreover, Nutrien's high debt level poses a concern and raises the risk of a potential default.
The Zacks Rundown
NTR, a Zacks Rank #5 (Strong Sell), is a component of the Zacks Fertilizers industry group, which ranks in the bottom 4% out of approximately 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 past year:
Candidates in the bottom tier of industry groups can often be solid potential short candidates. While individual stocks have the ability to outperform even when included in an underperforming 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.
Along with many other fertilizer stocks, NTR has been lagging throughout the past year. The share price is hovering near 52-week lows and represents a compelling short opportunity as the market remains volatile to begin the New Year.
Recent Earnings Misses & Deteriorating Outlook
NTR has fallen short of earnings estimates in each of the past four quarters. The company most recently reported a Q3 profit of $0.35/share back in November, missing the $0.71/share consensus EPS estimate by -50.7%.
Over the past four quarters, NTR has delivered an average earnings miss of -28.1%. Consistently falling short of earnings estimates is a recipe for underperformance, and Nutrien is no exception.
NTR has been on the receiving end of negative earnings estimate revisions as of late. Looking into last year's fourth quarter, analysts have decreased Q4 estimates by -18.37% in the past 60 days. The Zacks Consensus Estimate is now $0.80/share, reflecting negative growth of -60.4% 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, NTR in a sustained downtrend. Notice how the stock continues to trade below the 200-day moving average (signaled by the red line). The stock is making a series of lower lows, with no respite from the selling in sight. Also note how both moving averages are sloping down – another good sign for the bears.
While not the most accurate indicator, NTR has also experienced what is known as a 'death cross', wherein the stock's 50-day moving average (blue line) crosses below its 200-day moving average. NTR would have to make a serious move to the upside and show increasing earnings estimate revisions to warrant taking any long positions in the stock. The stock has fallen about 20% in the past year alone.
Final Thoughts
A deteriorating fundamental and technical backdrop show that this stock is not set to return to its former highs anytime soon. The fact that NTR is included in one of the worst-performing industry groups adds 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.
A series of 52-week lows indicate that the downtrend is likely far from over. Potential investors may want to give this stock the cold shoulder, or perhaps include it as part of a short or hedge strategy. Bulls will want to steer clear of NTR until the situation shows major signs of improvement.
Additional content:
Goldman Sachs (GS - Free Report) Considered Possible AP for Spot Bitcoin ETF
The Goldman Sachs Group, Inc. is being considered to become the authorized participant (AP) for the spot Bitcoin exchange-traded fund (ETF), which Grayscale and BlackRock Inc. are planning to launch.
Apart from GS, JPMorgan Chase & Co. is being considered as a potential AP for the ETF. This was first reported by Coindesk.
BLK became the first asset manager to file for the spot Bitcoin ETF in June 2023, paving the way for a wave of filings by other asset managers like Fidelity and Invesco.
The U.S. Securities and Exchange Commission (SEC) is expected to announce its decision on the trading of spot bitcoin ETF's latest by Jan 10, 2024. To date, the approved cryptocurrency ETFs in the United States are those that include future contracts on Bitcoin and Ethereum. The pending approval from SEC will provide investors direct exposure to the price of cryptocurrency without having to purchase them.
BlackRock also filed for a spot Ethereum ETF named iShares Ethereum Trust in November 2023. The Ethereum ETF, if approved, will be the first of its kind in the United States.
While BLK is expanding its cryptocurrency exposure, JPM has been undertaking measures to subdue them. In September 2023, JPM stated that its retail bank, Chase, in the U.K. had decided to restrict customers' access to cryptocurrency-related transactions due to increased scams and fraud cases. Nonetheless, it has been exploring the concept of launching a blockchain-based deposit token for customers, provided it receives the required regulatory approval.
JPMorgan and Goldman as APs for spot Bitcoin ETF would be entrusted with the responsibility of tracking the ETF share price with underlying assets of fund. The companies will be required to create and redeem the shares of ETF, thus supplying the required liquidity.
Beside this, Goldman has been focusing on growth in its core strengths of investment banking and trading since it has been pulling back from its consumer lending business. Such growth moves by GS are necessary to support its top-line expansion.
Per an internal memo circulated last year, GS had disclosed changes in its senior executives' positions as it intended to expand its operations in the private credit space. It further aims to double the size of business targeting assets worth $110 billion under management over the medium term.
Further, it has been aiming to expand its offerings across the high growth countries. In December 2023, Bloomberg reported that GS was planning to enhance its credit business in India as it is one of the fastest-growing economies in the world. Per Sonjoy Chatterjee, chairman and chief executive officer of Goldman in India, the bank intends to broaden the range of its loan offerings in this country.
The firm also desires to obtain a license to boost its currency trading that would permit it to deal with counterparties like financial investors, equity customers or a corporate customer. This apart, GS believes that deal-making activity in the country is likely to receive a boost.
Goldman's shares have gained 16.9% over the past six months compared with the industry's 11.3% growth.
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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NRG Energy and Nutrien have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – January 5, 2024 – Zacks Equity Research shares NRG Energy (NRG - Free Report) as the Bull of the Day and Nutrien (NTR - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on The Goldman Sachs Group, Inc. (GS - Free Report) , BlackRock Inc. (BLK - Free Report) and JPMorgan Chase & Co. (JPM - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
NRG Energy, a Zacks Rank #1 (Strong Buy), operates as an integrated power company in the United States. Renewed strength in interest rate sensitive utilities provides a durable backing for this industry leader. NRG stock is displaying relative strength, recently surging to 52-week highs even as the general market has encountered volatility early in 2024. Increasing volume has attracted investor attention as buying pressure accumulates in this top-ranked stock.
NRG is part of the Zacks Utility – Electric Power industry group, which currently ranks in the top 27% 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.
Quantitative 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
NRG Energy is involved in producing and selling electricity and related services to residential, commercial, industrial, and wholesale customers. The company generates electricity using natural gas, coal, oil, solar, nuclear, and battery storage. NRG also provides system power, distributed generation, renewable products, and energy efficiency and advisory services.
In addition, NRG Energy trades in electric power, natural gas, and related commodities; environmental and weather products; and financial products including forwards, futures, options, and swaps. The company sells energy, services, and products under the NRG, Reliant, Direct Energy, Green Mountain, Stream, and XOOM Energy brands.
Earnings Trends and Future Estimates
The utility provider 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 $1.62/share, a 5.88% surprise over the $1.53/share consensus estimate. NRG Energy has delivered a trailing four-quarter average earnings surprise of 4.73%.
NRG shares received a boost as analysts covering the company have been increasing their 2024 earnings estimates lately. For the full year, earnings estimates have risen 5.3% in the past 60 days. The 2024 Zacks Consensus EPS Estimate now stands at $5.96/share, reflecting a potential growth rate of 17.9% relative to the prior year.
Let's Get Technical
NRG shares have advanced more than 67% in the past 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 52-week highs, widely outperforming the major indices. With positive fundamental and technical indicators, NRG 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, NRG Energy has recently witnessed positive revisions. As long as this trend remains intact (and NRG continues to deliver earnings beats), the stock will likely continue its bullish run this year.
Bottom Line
NRG Energy's management continues to approve share repurchases with a $950 million accelerated program currently authorized. A 7-9% long-term target dividend growth rate will also further enhance shareholder value. A positive string of acquisitions over the past several years has resulted in realized synergies that bode well moving forward.
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:
Nutrien produces and sells fertilizers and related industrial and feed products. NTR offers potash, nitrogen, phosphate, and sulfate products. Based in Saskatoon, Canada, Nutrien also distributes crop nutrients, protection products, and seeds through approximately 2,000 retail locations internationally.
A decline in fertilizer prices is leading to reduced revenues and margins. The company's nitrogen business is also expected to face pricing headwinds in the short-term. Moreover, Nutrien's high debt level poses a concern and raises the risk of a potential default.
The Zacks Rundown
NTR, a Zacks Rank #5 (Strong Sell), is a component of the Zacks Fertilizers industry group, which ranks in the bottom 4% out of approximately 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 past year:
Candidates in the bottom tier of industry groups can often be solid potential short candidates. While individual stocks have the ability to outperform even when included in an underperforming 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.
Along with many other fertilizer stocks, NTR has been lagging throughout the past year. The share price is hovering near 52-week lows and represents a compelling short opportunity as the market remains volatile to begin the New Year.
Recent Earnings Misses & Deteriorating Outlook
NTR has fallen short of earnings estimates in each of the past four quarters. The company most recently reported a Q3 profit of $0.35/share back in November, missing the $0.71/share consensus EPS estimate by -50.7%.
Over the past four quarters, NTR has delivered an average earnings miss of -28.1%. Consistently falling short of earnings estimates is a recipe for underperformance, and Nutrien is no exception.
NTR has been on the receiving end of negative earnings estimate revisions as of late. Looking into last year's fourth quarter, analysts have decreased Q4 estimates by -18.37% in the past 60 days. The Zacks Consensus Estimate is now $0.80/share, reflecting negative growth of -60.4% 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, NTR in a sustained downtrend. Notice how the stock continues to trade below the 200-day moving average (signaled by the red line). The stock is making a series of lower lows, with no respite from the selling in sight. Also note how both moving averages are sloping down – another good sign for the bears.
While not the most accurate indicator, NTR has also experienced what is known as a 'death cross', wherein the stock's 50-day moving average (blue line) crosses below its 200-day moving average. NTR would have to make a serious move to the upside and show increasing earnings estimate revisions to warrant taking any long positions in the stock. The stock has fallen about 20% in the past year alone.
Final Thoughts
A deteriorating fundamental and technical backdrop show that this stock is not set to return to its former highs anytime soon. The fact that NTR is included in one of the worst-performing industry groups adds 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.
A series of 52-week lows indicate that the downtrend is likely far from over. Potential investors may want to give this stock the cold shoulder, or perhaps include it as part of a short or hedge strategy. Bulls will want to steer clear of NTR until the situation shows major signs of improvement.
Additional content:
Goldman Sachs (GS - Free Report) Considered Possible AP for Spot Bitcoin ETF
The Goldman Sachs Group, Inc. is being considered to become the authorized participant (AP) for the spot Bitcoin exchange-traded fund (ETF), which Grayscale and BlackRock Inc. are planning to launch.
Apart from GS, JPMorgan Chase & Co. is being considered as a potential AP for the ETF. This was first reported by Coindesk.
BLK became the first asset manager to file for the spot Bitcoin ETF in June 2023, paving the way for a wave of filings by other asset managers like Fidelity and Invesco.
The U.S. Securities and Exchange Commission (SEC) is expected to announce its decision on the trading of spot bitcoin ETF's latest by Jan 10, 2024. To date, the approved cryptocurrency ETFs in the United States are those that include future contracts on Bitcoin and Ethereum. The pending approval from SEC will provide investors direct exposure to the price of cryptocurrency without having to purchase them.
BlackRock also filed for a spot Ethereum ETF named iShares Ethereum Trust in November 2023. The Ethereum ETF, if approved, will be the first of its kind in the United States.
While BLK is expanding its cryptocurrency exposure, JPM has been undertaking measures to subdue them. In September 2023, JPM stated that its retail bank, Chase, in the U.K. had decided to restrict customers' access to cryptocurrency-related transactions due to increased scams and fraud cases. Nonetheless, it has been exploring the concept of launching a blockchain-based deposit token for customers, provided it receives the required regulatory approval.
JPMorgan and Goldman as APs for spot Bitcoin ETF would be entrusted with the responsibility of tracking the ETF share price with underlying assets of fund. The companies will be required to create and redeem the shares of ETF, thus supplying the required liquidity.
Beside this, Goldman has been focusing on growth in its core strengths of investment banking and trading since it has been pulling back from its consumer lending business. Such growth moves by GS are necessary to support its top-line expansion.
Per an internal memo circulated last year, GS had disclosed changes in its senior executives' positions as it intended to expand its operations in the private credit space. It further aims to double the size of business targeting assets worth $110 billion under management over the medium term.
Further, it has been aiming to expand its offerings across the high growth countries. In December 2023, Bloomberg reported that GS was planning to enhance its credit business in India as it is one of the fastest-growing economies in the world. Per Sonjoy Chatterjee, chairman and chief executive officer of Goldman in India, the bank intends to broaden the range of its loan offerings in this country.
The firm also desires to obtain a license to boost its currency trading that would permit it to deal with counterparties like financial investors, equity customers or a corporate customer. This apart, GS believes that deal-making activity in the country is likely to receive a boost.
Goldman's shares have gained 16.9% over the past six months compared with the industry's 11.3% growth.
GS presently carries a Zacks Rank #4 (Sell).
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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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.