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EnerSys and Arcadium Lithium have been highlighted as Zacks Bull and Bear of the Day
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For Immediate Release
Chicago, IL – January 11, 2024 – Zacks Equity Research shares EnerSys (ENS - Free Report) as the Bull of the Day and Arcadium Lithium (ALTM - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Bank of America (BAC - Free Report) , U.S. Bancorp (USB - Free Report) and M&T Bank (MTB - Free Report) .
Industrial batteries manufacturer EnerSys is starting to stand out with bottom line expansion that even makes the Energizer Bunny jealous.
To that point, EnerSys stock currently covets a Zacks Rank #1 (Strong Buy) and lands the Bull of the Day while Energizer shares notably have a Zacks Rank #5 (Strong Sell). Although they are on opposite spectrums regarding battery production, EnerSys is a very reputable company in its own right with its products marketed to customers in over 100 countries.
Expansive Reach
The reasoning for the loose narrative with Energizer is that certainly many consumers and perhaps some investors may not know the name EnerSys but they understand that battery production is critical to many markets. Operating on a much larger scale in terms of industrial battery production, EnerSys' reach extends to applications in different markets as well such as aerospace, defense, and medical industries.
The revenue chart above is very impressive but it is EnerSys' probability and future earnings potential that makes its stock most compelling. EnerSys' annual earnings are expected to soar 54% in FY24 to $8.23 per share compared to $5.34 a share last year. Plus, EnerSys' FY25 EPS is expected to expand another 8% to $8.91 per share. (Energizer is expecting 2% EPS growth in FY24 and 6% EPS growth in FY25)
This is despite EnerSys' total sales being forecasted to dip -1% this year but rebound and rise 3% in FY25 to $3.77 billion. Notably, FY25 sales projections would represent 27% growth over the last five years with EnerSys' EPS growth slated at 98% during this period as annual earnings were at $4.49 a share in 2021.
Recent Performance & EPS Revisions
EnerSys' price performance has correlated with its strong earnings outlook with ENS shares rising +25% over the last year which has topped the S&P 500's +20% and its Zacks Subindustry's +15%. This has largely outperformed Energizers -14% performance in regards to a popular name among consumer battery makers.
One reason for vastly outperforming Energizer is that EnerSys' Zacks Manufacturing-Electronics Industry is currently in the top 6% of over 250 Zacks industries while the Zacks Consumer Products-Staples Industry is in the bottom 23%. With these two battery makers being a perfect example within their respective industries, earnings estimate revisions for EnerSys are nicely up in the last 30 days for both FY24 and FY25 while Energizer's EPS revisions have remained unchanged over the last month but are still noticeably lower over the last 60 days.
Bottom Line
EnerSys' expansive bottom line has made it one of the most intriguing growth stocks to watch at the beginning of the year. More importantly, battery production is critical to many markets, and EnerSys' reach among the industrial industries among others makes its stock a viable investment for 2024 and beyond.
After the completion of the all-stock merger of equals between Allkem and Livent Corporation, investors may be pondering buying shares of the newly formed Arcadium Lithium. Unfortunately, Arcadium's stock currently lands a Zacks Rank #5 (Strong Sell) and the Bear of the Day.
While a quick glance at Arcadium's long-term outlook looks attractive on paper let's see why investors may want to stay clear at the moment.
Taking a Closer Look Reveals Cause for Short-Term Concern
Arcadium began trading last Friday with the merger between Allkem and Livent creating a leading global lithium chemicals producer. The newly formed company says it is committed to safety and responsibly harnessing the power of lithium to improve people's lives and accelerate the transition to clean energy.
According to Zacks estimates, the combined companies are expected to round out fiscal 2023 with annual earnings up 35% to $1.89 per share compared to $1.40 a share in 2022. However, FY24 EPS is projected to drop -23% to $1.46 a share.
While Arcadium's bottom line may still look enticing with shares trading at $6 and just 4.4X forward earnings the trend of earnings estimate revisions shines a dimmer light. Over the last 60 days, FY23 earnings estimates have dipped -2% while FY24 EPS estimates have dropped -17%.
Negative Q4 ESP
The Zacks Earnings ESP (Expected Surprise Prediction) also has Arcadium missing fourth quarter earnings expectations by -13% with the Zacks Consensus having Q4 EPS at $0.36 but the Most Accurate Estimate at $0.31 a share.
Arcadium is scheduled to report its Q4 results on Tuesday, February 13, and for now, the possibility of better-than-expected guidance looks slim as its Zacks Chemical-Specialty Industry is in the bottom 17% of over 250 Zacks industries. For Arcadium specifically, Lithium prices have been submerged in volatility over the last year and a sharp rebound in the commodity price may be necessary before investors get overly excited about its stock being cheap.
Bottom Line
The "too-good-to-be-true" feeling about Arcadium's stock is warranted at the moment and it would be no surprise if shares moved lower even at $6. Although Arcadium's long-term prospects are still attractive its short-term price movement could be frustrating.
Additional content:
High Rates, Loans, IB, Trading to Aid BofA Q4 Earnings
Bank of America is slated to report fourth-quarter and full-year 2023 results on Jan 12, before the opening bell. Despite being the most interest rate-sensitive among its peers, the company's net interest income (NII) is less likely to have improved in the fourth quarter.
Though the Federal Reserve did not raise rates in the quarter, the policy rate stands at a 22-year high of 5.25-5.5% at present. This is likely to have aided BAC's NII and net interest margin (NIM). But the company's billions of dollars' worth of long-dated Treasuries and mortgage bonds, which it piled up at low rates that prevailed during the pandemic, is expected to have weighed on both NII and NIM.
The situation is likely to have been further aggravated by the inverted yield curve in the December-ended quarter. Also, per the Fed's latest data, the overall lending scenario was weak. The demand for commercial and industrial, real estate and consumer loans (except credit card loans) loans was subdued in October and November.
The Zacks Consensus Estimate for BAC's average interest earnings assets is pegged at $2.72 trillion, suggesting a 2.7% rise from the year-ago reported number. Our estimate for the metric is $2.63 trillion.
Management expects NII (FTE) to be around $14 billion. The Zacks Consensus Estimate for NII (FTE basis) of $14.04 billion suggests a 5.2% decrease. Our estimate for NII (FTE) implies a fall of 5.3% to $14.02 billion.
For 2023, management expects NII (FTE) to witness growth of 9%. Our estimate for the metric is $57.43 billion, implying an increase of 8.6%.
Other Factors at Play
Trading Income: Market volatility and client activity were subdued in the fourth quarter. While the risks of a recession in the near term faded, ambiguity related to geopolitical issues, inflation and high rates kept investors on the sidelines. These factors led to reduced volatility in equity markets and other asset classes, including commodities, bonds and foreign exchange.
Hence, BAC is less likely to have recorded a solid performance in trading revenues this time.
The Zacks Consensus Estimate for total sales and trading revenues of $3.76 billion suggests 6.5% growth from the year-ago reported number. Our estimate for the metric is $3.75 billion.
Management projects quarterly trading revenues to be up in the low single-digit range year over year.
Investment Banking (IB) Fees: While green shoots were visible in the IB space in the fourth quarter, overall global M&A activities remained muted on a year-over-year basis. Several concerns, including lingering geopolitical tensions, inflation concerns, higher interest rates and China's economic slowdown, weighed on deal-making. Thus, the deal volume and total value numbers were weak in the fourth quarter.
Likewise, the IPO market was subdued after witnessing considerable activity in the third quarter. On the other hand, robust equity market performance drove some activity in follow-up equity issuances. Also, despite seasonality, bond issuance volume was boosted by a decline in yields in the back half of the quarter and a slightly better operating backdrop compared with last year. Hence, BAC's underwriting fees (accounting for almost 40% of total IB fees) are expected to have improved during the to-be-reported quarter.
At Goldman Sachs' U.S. Financial Services Conference in early December 2023, Bank of America CEO Brian Moynihan noted, "The M&A deals are coming a little faster." The company will outperform the industry on IB fees in the quarter. The bank expects to earn approximately $1 billion in IB fees in the fourth quarter, reflecting a low single-digit decline on a year-over-year basis. Moynihan added that the industry-wide IB fee pool is expected to decline 10-15%.
The Zacks Consensus Estimate for IB income of $1.12 billion indicates a rise of 5.9% from the prior-year quarter level. We expect IB income to be $1.17 billion.
Expenses: While BAC was able to manage expenses prudently in the past, expansion into newer markets by opening financial centers, as well as efforts to digitize operations and upgrade existing financial centers, are expected to have kept non-interest expenses elevated in the to-be-reported quarter.
The company expects expenses to be roughly $15.6 billion. Our estimate for non-interest expenses stands at $15.83 billion, implying an increase of 1.8%.
Asset Quality: Bank of America is expected to have set aside a substantial amount of money for potential bad loans (mainly commercial loan defaults), given an uncertain macroeconomic outlook. Our estimate for provision for credit losses is pegged at $1.52 billion, reflecting a surge of 38.9% on a year-over-year basis.
The Zacks Consensus Estimate for non-performing loans of $5.19 billion implies a 36.2% jump year over year. Our estimate for the metric is pegged at $4.11 billion.
Charges Tied to Libor Transition: In a filing with the Securities and Exchange Commission on Jan 8, 2024, Bank of America stated it will incur a net non-cash pre-tax charge of $1.6 billion in the fourth quarter as it phases out the use of the Bloomberg Short-Term Bank Yield Index (BSBY).
The charge will be presented in "revenue through market making and similar activities." The company expects the $1.6 billion net impact to be recognized back in its interest income through 2026. This charge will lower BofA's common equity tier 1 ratio by eight basis points as of Dec 31, 2023.
What the Zacks Model Shows
Our proven model does not conclusively predict an earnings beat for BofA this time. This is because it doesn't have the right combination of the two key ingredients — positive Earnings ESP and Zacks Rank #3 (Hold) or better — to increase the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for BofA is -0.22%.
Zacks Rank: BAC currently carries a Zacks Rank #3.
The Zacks Consensus Estimate for fourth-quarter earnings is pegged at 70 cents, which has moved 1.4% lower over the past 30 days. The number suggests a decline of 17.7% from the year-ago reported number. Our estimate for earnings is 67 cents.
The consensus estimate for sales of $23.97 billion indicates a 2.3% fall. Our estimate for sales is $23.91 billion, reflecting a decrease of 2.5%.
Major Banks to Consider
Here are a couple of major bank stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time:
The Earnings ESP for U.S. Bancorp is +1.75% and it carries a Zacks Rank #3 at present. The company is slated to report fourth-quarter and full-year 2023 results on Jan 17.
Over the past seven days, the Zacks Consensus Estimate for USB's quarterly earnings has remained unchanged at 99 cents.
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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EnerSys and Arcadium Lithium have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – January 11, 2024 – Zacks Equity Research shares EnerSys (ENS - Free Report) as the Bull of the Day and Arcadium Lithium (ALTM - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Bank of America (BAC - Free Report) , U.S. Bancorp (USB - Free Report) and M&T Bank (MTB - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Industrial batteries manufacturer EnerSys is starting to stand out with bottom line expansion that even makes the Energizer Bunny jealous.
To that point, EnerSys stock currently covets a Zacks Rank #1 (Strong Buy) and lands the Bull of the Day while Energizer shares notably have a Zacks Rank #5 (Strong Sell). Although they are on opposite spectrums regarding battery production, EnerSys is a very reputable company in its own right with its products marketed to customers in over 100 countries.
Expansive Reach
The reasoning for the loose narrative with Energizer is that certainly many consumers and perhaps some investors may not know the name EnerSys but they understand that battery production is critical to many markets. Operating on a much larger scale in terms of industrial battery production, EnerSys' reach extends to applications in different markets as well such as aerospace, defense, and medical industries.
The revenue chart above is very impressive but it is EnerSys' probability and future earnings potential that makes its stock most compelling. EnerSys' annual earnings are expected to soar 54% in FY24 to $8.23 per share compared to $5.34 a share last year. Plus, EnerSys' FY25 EPS is expected to expand another 8% to $8.91 per share. (Energizer is expecting 2% EPS growth in FY24 and 6% EPS growth in FY25)
This is despite EnerSys' total sales being forecasted to dip -1% this year but rebound and rise 3% in FY25 to $3.77 billion. Notably, FY25 sales projections would represent 27% growth over the last five years with EnerSys' EPS growth slated at 98% during this period as annual earnings were at $4.49 a share in 2021.
Recent Performance & EPS Revisions
EnerSys' price performance has correlated with its strong earnings outlook with ENS shares rising +25% over the last year which has topped the S&P 500's +20% and its Zacks Subindustry's +15%. This has largely outperformed Energizers -14% performance in regards to a popular name among consumer battery makers.
One reason for vastly outperforming Energizer is that EnerSys' Zacks Manufacturing-Electronics Industry is currently in the top 6% of over 250 Zacks industries while the Zacks Consumer Products-Staples Industry is in the bottom 23%. With these two battery makers being a perfect example within their respective industries, earnings estimate revisions for EnerSys are nicely up in the last 30 days for both FY24 and FY25 while Energizer's EPS revisions have remained unchanged over the last month but are still noticeably lower over the last 60 days.
Bottom Line
EnerSys' expansive bottom line has made it one of the most intriguing growth stocks to watch at the beginning of the year. More importantly, battery production is critical to many markets, and EnerSys' reach among the industrial industries among others makes its stock a viable investment for 2024 and beyond.
Bear of the Day:
After the completion of the all-stock merger of equals between Allkem and Livent Corporation, investors may be pondering buying shares of the newly formed Arcadium Lithium. Unfortunately, Arcadium's stock currently lands a Zacks Rank #5 (Strong Sell) and the Bear of the Day.
While a quick glance at Arcadium's long-term outlook looks attractive on paper let's see why investors may want to stay clear at the moment.
Taking a Closer Look Reveals Cause for Short-Term Concern
Arcadium began trading last Friday with the merger between Allkem and Livent creating a leading global lithium chemicals producer. The newly formed company says it is committed to safety and responsibly harnessing the power of lithium to improve people's lives and accelerate the transition to clean energy.
According to Zacks estimates, the combined companies are expected to round out fiscal 2023 with annual earnings up 35% to $1.89 per share compared to $1.40 a share in 2022. However, FY24 EPS is projected to drop -23% to $1.46 a share.
While Arcadium's bottom line may still look enticing with shares trading at $6 and just 4.4X forward earnings the trend of earnings estimate revisions shines a dimmer light. Over the last 60 days, FY23 earnings estimates have dipped -2% while FY24 EPS estimates have dropped -17%.
Negative Q4 ESP
The Zacks Earnings ESP (Expected Surprise Prediction) also has Arcadium missing fourth quarter earnings expectations by -13% with the Zacks Consensus having Q4 EPS at $0.36 but the Most Accurate Estimate at $0.31 a share.
Arcadium is scheduled to report its Q4 results on Tuesday, February 13, and for now, the possibility of better-than-expected guidance looks slim as its Zacks Chemical-Specialty Industry is in the bottom 17% of over 250 Zacks industries. For Arcadium specifically, Lithium prices have been submerged in volatility over the last year and a sharp rebound in the commodity price may be necessary before investors get overly excited about its stock being cheap.
Bottom Line
The "too-good-to-be-true" feeling about Arcadium's stock is warranted at the moment and it would be no surprise if shares moved lower even at $6. Although Arcadium's long-term prospects are still attractive its short-term price movement could be frustrating.
Additional content:
High Rates, Loans, IB, Trading to Aid BofA Q4 Earnings
Bank of America is slated to report fourth-quarter and full-year 2023 results on Jan 12, before the opening bell. Despite being the most interest rate-sensitive among its peers, the company's net interest income (NII) is less likely to have improved in the fourth quarter.
Though the Federal Reserve did not raise rates in the quarter, the policy rate stands at a 22-year high of 5.25-5.5% at present. This is likely to have aided BAC's NII and net interest margin (NIM). But the company's billions of dollars' worth of long-dated Treasuries and mortgage bonds, which it piled up at low rates that prevailed during the pandemic, is expected to have weighed on both NII and NIM.
The situation is likely to have been further aggravated by the inverted yield curve in the December-ended quarter. Also, per the Fed's latest data, the overall lending scenario was weak. The demand for commercial and industrial, real estate and consumer loans (except credit card loans) loans was subdued in October and November.
The Zacks Consensus Estimate for BAC's average interest earnings assets is pegged at $2.72 trillion, suggesting a 2.7% rise from the year-ago reported number. Our estimate for the metric is $2.63 trillion.
Management expects NII (FTE) to be around $14 billion. The Zacks Consensus Estimate for NII (FTE basis) of $14.04 billion suggests a 5.2% decrease. Our estimate for NII (FTE) implies a fall of 5.3% to $14.02 billion.
For 2023, management expects NII (FTE) to witness growth of 9%. Our estimate for the metric is $57.43 billion, implying an increase of 8.6%.
Other Factors at Play
Trading Income: Market volatility and client activity were subdued in the fourth quarter. While the risks of a recession in the near term faded, ambiguity related to geopolitical issues, inflation and high rates kept investors on the sidelines. These factors led to reduced volatility in equity markets and other asset classes, including commodities, bonds and foreign exchange.
Hence, BAC is less likely to have recorded a solid performance in trading revenues this time.
The Zacks Consensus Estimate for total sales and trading revenues of $3.76 billion suggests 6.5% growth from the year-ago reported number. Our estimate for the metric is $3.75 billion.
Management projects quarterly trading revenues to be up in the low single-digit range year over year.
Investment Banking (IB) Fees: While green shoots were visible in the IB space in the fourth quarter, overall global M&A activities remained muted on a year-over-year basis. Several concerns, including lingering geopolitical tensions, inflation concerns, higher interest rates and China's economic slowdown, weighed on deal-making. Thus, the deal volume and total value numbers were weak in the fourth quarter.
Likewise, the IPO market was subdued after witnessing considerable activity in the third quarter. On the other hand, robust equity market performance drove some activity in follow-up equity issuances. Also, despite seasonality, bond issuance volume was boosted by a decline in yields in the back half of the quarter and a slightly better operating backdrop compared with last year. Hence, BAC's underwriting fees (accounting for almost 40% of total IB fees) are expected to have improved during the to-be-reported quarter.
At Goldman Sachs' U.S. Financial Services Conference in early December 2023, Bank of America CEO Brian Moynihan noted, "The M&A deals are coming a little faster." The company will outperform the industry on IB fees in the quarter. The bank expects to earn approximately $1 billion in IB fees in the fourth quarter, reflecting a low single-digit decline on a year-over-year basis. Moynihan added that the industry-wide IB fee pool is expected to decline 10-15%.
The Zacks Consensus Estimate for IB income of $1.12 billion indicates a rise of 5.9% from the prior-year quarter level. We expect IB income to be $1.17 billion.
Expenses: While BAC was able to manage expenses prudently in the past, expansion into newer markets by opening financial centers, as well as efforts to digitize operations and upgrade existing financial centers, are expected to have kept non-interest expenses elevated in the to-be-reported quarter.
The company expects expenses to be roughly $15.6 billion. Our estimate for non-interest expenses stands at $15.83 billion, implying an increase of 1.8%.
Asset Quality: Bank of America is expected to have set aside a substantial amount of money for potential bad loans (mainly commercial loan defaults), given an uncertain macroeconomic outlook. Our estimate for provision for credit losses is pegged at $1.52 billion, reflecting a surge of 38.9% on a year-over-year basis.
The Zacks Consensus Estimate for non-performing loans of $5.19 billion implies a 36.2% jump year over year. Our estimate for the metric is pegged at $4.11 billion.
Charges Tied to Libor Transition: In a filing with the Securities and Exchange Commission on Jan 8, 2024, Bank of America stated it will incur a net non-cash pre-tax charge of $1.6 billion in the fourth quarter as it phases out the use of the Bloomberg Short-Term Bank Yield Index (BSBY).
The charge will be presented in "revenue through market making and similar activities." The company expects the $1.6 billion net impact to be recognized back in its interest income through 2026. This charge will lower BofA's common equity tier 1 ratio by eight basis points as of Dec 31, 2023.
What the Zacks Model Shows
Our proven model does not conclusively predict an earnings beat for BofA this time. This is because it doesn't have the right combination of the two key ingredients — positive Earnings ESP and Zacks Rank #3 (Hold) or better — to increase the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for BofA is -0.22%.
Zacks Rank: BAC currently carries a Zacks Rank #3.
The Zacks Consensus Estimate for fourth-quarter earnings is pegged at 70 cents, which has moved 1.4% lower over the past 30 days. The number suggests a decline of 17.7% from the year-ago reported number. Our estimate for earnings is 67 cents.
The consensus estimate for sales of $23.97 billion indicates a 2.3% fall. Our estimate for sales is $23.91 billion, reflecting a decrease of 2.5%.
Major Banks to Consider
Here are a couple of major bank stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time:
The Earnings ESP for U.S. Bancorp is +1.75% and it carries a Zacks Rank #3 at present. The company is slated to report fourth-quarter and full-year 2023 results on Jan 17.
Over the past seven days, the Zacks Consensus Estimate for USB's quarterly earnings has remained unchanged at 99 cents.
M&T Bank is scheduled to release fourth-quarter and full-year 2023 earnings on Jan 18. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +1.01%. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
MTB's quarterly earnings estimates have moved almost 1% lower over the past week to $3.70.
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.