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Fiat Chrysler, El Paso, Wal-Mart, Amazon and Target as Zacks Bull and Bear of the Day

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For Immediate Release         

Chicago, IL – February 22, 2018 – Zacks Equity Research highlights Fiat Chrysler (FCAU - Free Report) as the Bull of the Day and El Paso Energy (EE - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Wal-Mart (WMT - Free Report) , Amazon (AMZN - Free Report) , Target (TGT - Free Report) .

Here is a synopsis of all five stocks:

Bull of the Day:

Last year was great year for auto sales. This year though, manufacturers are worried that rising interest rates and falling used car prices are going to put a damper on things. The good news for one company is that higher margin vehicles like SUVs are still selling very well. Today’s Bull of the Day is selling SUVs like hotcakes.

I’m talking about Zacks Rank #1 (Strong Buy) Fiat Chrysler. Fiat Chrysler Automobiles N.V., together with its subsidiaries, designs, engineers, manufactures, distributes, and sells vehicles, components, and production systems.

The company operates through six segments: NAFTA, LATAM, APAC, EMEA, Maserati, and Components. It provides passenger cars, light trucks, and light commercial vehicles under the Abarth, Alfa Romeo, Chrysler, Dodge, Fiat, Fiat Professional, Jeep, Lancia, and Ram brand names; and luxury vehicles under the Maserati brand, as well as related service parts and accessories, and service contracts under the Mopar brand.

The company also produces and sells lighting components, body control units, suspensions, shock absorbers, electronic systems, exhaust systems, powertrain components, engine control units, plastic molding components, and after-market products under the Magneti Marelli brand name.

Over the course of the last ninety days, three analysts have increased their earnings estimates for the current year. This bullish sentiment has pushed up the Zacks Consensus Estimate from $2.80 to $3.36 for the current year. That’s a major reason why this company is a Zacks Rank #1 (Strong Buy) right now.

Bear of the Day:

Interest rates are on the move all across the yield curve. Whether you look at the 2 Year or the 30 Year the direction is the same. The yield on the 10-Year Treasury Note topped 2.94% during yesterday’s session. Also, with our Federal Reserve beginning to inch the overnight rate higher, many feel rates have nowhere to go but up. That’s not good news for industries with interest rate sensitivity.

One of the most sensitive industries in the market is utilities. As rates rise, their yields don’t catch up quick enough to save them from downside risk.

Today’s Bear of the Day is one of those utility stocks. I’m talking about Zacks Rank #5 (Strong Sell) El Paso Energy. El Paso Electric Company, a public utility company, engages in the generation, transmission, and distribution of electricity in west Texas and southern New Mexico. It generates electricity through nuclear fuel, natural gas, and coal facilities, as well as solar photovoltaic panels and wind turbines.

The company owns or has ownership interests in various electrical generating facilities with a net dependable generating capability of approximately 2,080 megawatts; four 345 kilovolt (kV) transmission lines in New Mexico and Arizona; and three 500 kV lines in Arizona. It distributes electricity to retail customers principally in El Paso, Texas; and Las Cruces, New Mexico. The company serves approximately 411,100 residential, commercial, industrial, public authority, and wholesale customers. 

The reason for the unfavorable Zacks Rank is an analyst drop next year’s estimate from $2.73 down to $2.66. This was in the wake of El Paso’s last earnings report where the company reported EPS of $1.47 versus expectations calling for $1.58. The company is set to report earnings again on February 27th before the bell, with analysts looking for 22 cents for the quarter.

Additional content:

Why Should You Buy Walmart After Worst Decline in 3 Decades?

The world's largest retailer, Wal-Mart, suffered its worst one-day stock decline in three decades following its fourth-quarter fiscal 2018 results.

The stock tumbled more than 10% at the close of Tuesday’s trading session, representing its steepest one-day drop since Jan 8 1988, and wiping out more than $31 billion in the company’s market value. It trumped its average volume figures, as nearly 52.1 million shares exchanged hands compared with around 9 million on an average.

The mega retailer posted sluggish results for fourth-quarter fiscal 2018 results. Although it beat revenue estimates, earnings fell shy of the Zacks Consensus Estimate by 3 cents. Slowdown in e-commerce sales was the biggest reason for the earnings miss. Online sales grew just 23% year over year, a massive drop from 50% growth seen in the third quarter and 29% growth in the year-ago quarter. This is because Wal-Mart struggled to manage its online inventory, amassing holiday-related items such as electronics, toys and gifts and falling short of stocking everyday items.

The turmoil spilled over to the broader U.S. stock market, shaving off roughly 73 points from the Dow Jones Industrial Average and a 2.3% pullback in S&P 500 consumer-staples stocks. Wal-Mart has been underperforming the industry, having shed 4.7% so far this year against the latter’s 5.6% increase.

However, the dip could be a good entry point given its solid fundamentals. We have highlighted some solid reasons to add the stock to your portfolio at a beaten down price.

Guidance Solid

Despite the slowdown in e-commerce sales, the discount chain is still optimistic as it reiterated its prior guidance of 40% online sales growth for the current fiscal. Additionally, it expects U.S. same-store sales to grow at least 2% and earnings per share in the range of $4.75-$5.00. The high-end of the guidance is above the Zacks Consensus Estimate of $4.91.

High Return on Equity

The discount chain store has a solid track of returning cash to shareholders. After returning $14.4 billion to shareholders in the form of dividends and share repurchases last fiscal year, Wal-Mart lifted its annual dividend by 2% to $2.08 per share, which will translate to a yield of 1.95%. This marks the 45th consecutive year of dividend increases..

As such, Wal-Mart has higher return on equity of 16.92% versus the industry average of 12.40%.

Encouraging Estimate Revisions

Wal-Mart has seen positive earnings estimate revision of 23 cents for the current fiscal over the past three months. For FY18, the Zacks Consensus Estimate is pegged at $4.91, representing double-digit growth from the prior year. Revenues are expected to grow 2.66% year over year.

Additionally, the stock carries a Zacks Rank #2 (Buy) and belongs to a top-ranked Zacks industry (top 41%), suggesting that the worst might be over. It is a triple play stock with a solid Value, Growth and Momentum Score of B each.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Low Beta

Wal-Mart has a lower beta of 0.42, which makes the stock safe and resilient amid the current rocky market. Beta measures the price volatility of stocks relative to the overall market. It has direct relationship to market movements. A beta of 1 indicates that the price of the stock tends to move with the broader market. A beta of more than 1 indicates that the price tends to move higher than the broader market and is extremely volatile while a beta of less than 1 indicates that the price of the stock is less volatile than the market.

Competitive Position

Although Wal-Mart is trying to catch up with Amazon in the online retail space, it is way ahead in the brick-and-mortar retail business. The company also has an edge over another retailer Target in a fiercely competitive digital space.

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About the Bull and Bear of the Day

Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

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