For Immediate Release
Chicago, IL – April 10, 2018 – Zacks Equity Research highlights Stoneridge (SRI - Free Report) as the Bull of the Day and Kimco Realty Corp. (KIM - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Boeing Company (BA - Free Report) .
Here is a synopsis of all three stocks:
Bull of the Day:
With the recent market volatility, investors are looking for a safe bet. While we all know that volatility can put pressure on stocks everywhere, we also know that those stocks with solid underlying earnings have a great chance of weathering the storm. In fact, periods of market volatility provide fantastic buying opportunities for stocks like this. By leaning on the Zacks Rank, you can uncover stocks with earnings estimates moving in a positive direction. This can lead to big winners when the market comes to its senses. One of these stocks is today’s Bull of the Day, Stoneridge.
Stoneridge, Inc. designs and manufactures engineered electrical and electronic components, modules, and systems for the automotive, commercial, motorcycle, off-highway, and agricultural vehicle markets. It operates through three segments: Control Devices, Electronics, and PST. It offers its products and systems to various OEM and tier one customers, as well as aftermarket distributors and mass merchandisers for use in various vehicle platforms. Stoneridge, Inc. operates in North America, South America, Europe, and internationally. The company was founded in 1965 and is headquartered in Novi, Michigan.
The stock is a Zacks Rank #1 (Strong Buy), mostly due to a flurry of bullish estimate revisions for the current year. Two analysts have increased their EPS estimates for the company’s current year. The bullish revisions have pushed up our Zacks Consensus Estimate from $1.54 to $1.97. Next year’s numbers have also jumped, increasing from $1.65 to $2.13 over the last ninety days.
Bear of the Day:
Today’s Bear of the Day lies at the epicenter of two strong trends which are bearish for the company. Those trends are interest rates on the rise and the death of the retail. While the bad news for retail may be overblown, there’s no question that malls in America are going to have to adapt to get back to the levels of success they’ve seen in the past. Interest rates certainly will rise, putting pressure on REITs and other income-producing equities. Today’s Bear of the Day is a REIT which operates malls.
Kimco Realty Corp. is a real estate investment trust (REIT) headquartered in New Hyde Park, N.Y., that is one of North America's largest publicly traded owners and operators of open-air shopping centers. As of December 31, 2017, the company owned interests in 492 U.S. shopping centers comprising 83 million square feet of leasable space primarily concentrated in the top major metropolitan markets. Publicly traded on the NYSE since 1991, and included in the S&P 500 Index, the company has specialized in shopping center acquisitions, development and management for 60 years.
Boeing Set to Fly High as Tariff Woes Seem Overdone
The Boeing Company (BA - Free Report) has been one of Wall Street’s favorites. In the past two years, the industrial giant’s shares have jumped nearly 150% from the $130 mark to around $330. However, the favorite trade, of late, has begun to unwind as fears of a full-fledged trade war escalates.
The United States is planning to impose hefty tariffs on a series of Chinese products due to the country’s “illicit trade practices.” China hit back with the announcement of tariffs of up to 25% on 106 American products including airplanes with empty weights between 15,000 kg and 45,000 kg. This naturally sent Boeing’s stock spiralling down more than 10% from the all-time high scaled this year. After all, Boeing has high revenue exposure to China-based customers.
Such bitter tariff talks, however, are overblown as in reality it will affect only a limited number of Boeing jets, while the aerospace giant’s fundamentals remain strong. Here’s a detailed look.
Trade War Fears Overhyped
The tariffs announcement will affect Boeing’s 737-800, 737-700 and 737-900 ER models as their operating empty weights are in the range targeted by China. But, Boeing is aiming to phase out all these models as soon as possible. These models will be replaced by the 737 MAX 8, which flaunts a heavier state-of-the-art engine with an operating empty weight of 45,070 kg. Such a weight will help the model to be just beyond the reach of China’s tariffs. To top it, Boeing’s larger airlines such as the 737 MAX 9 and 737 MAX 10 models will no doubt have operating empty weights above 45,000 kg.
Market pundits also believe that tariffs are only applicable for new orders and won’t impact Boeing’s existing backlog in China. Boeing, in the meanwhile, is constructing a 737-completion centre in Zhoushan, where almost 100 planes will be delivered to Chinese customers annually. Completing such aircraft in China will surely help it to stay away from the purview of tariffs. But, the big takeaway is that China’s fleet has around 3,000+ aircraft. This fleet size remains insufficient considering China’s ballooning population. Thus, tariff talks may have dented Boeing’s stock for the time being, but underlying demand signals higher production in the long run.
Fundamentals Remains Solid
Fundamentals in the Boeing’s core airline market are strong. First and foremost, the economy is growing at a steady pace both at home and abroad, while consumers remain optimistic about their financial well-being. Both of these provide enough tailwind for Boeing’s business.
Second, Boeing is a big gainer from the tax overhaul policy. The latest tax law was a massive tax relief for the company as it will now be paying between 8% and 15.5% instead of the earlier 35% for bringing back money held overseas.
Third, international tensions are rising, if we look at North Korea, Russia and China. This is compelling many countries to bump up their defence spending. With military outlays on the rise, we are looking for a streak of growth years ahead for Boeing.
Boeing Stock Verdict
Boeing’s fundamentals remain strong amid elevated trade tensions. The company may lose some business in China, but, beyond that the growth narrative remains impressive. Moreover, trade concerns are just an isolated case and there is much ado about nothing. Especially, when the company’s expected earnings growth rate for the current year is a solid 16.7%, and 13.8% compounded annually over the next five years. In fact, the company’s projected earnings growth rate for the current quarter is 26.9%, whereas the industry is expected to decline 6.2%.
To top it, investors have seen four earnings estimates move higher, compared with none lower, at least when looking at the current year time frame. And the consensus estimate for Boeing has trended upward over the past 60 days, as estimates have risen from $13.59/share two months ago to $14.05/share right now.
And if you are a growth investor then you should definitely bet on Boeing. It has an average trailing 12-month P/E ratio of 27, which is above the industry’s average of 24.68. This higher P/E ratio means that investors are anticipating higher growth compared to peers.
If this wasn’t enough, Boeing flaunts a Zacks Rank #2 (Buy) and a Growth Style Score of A, which offers the best investment opportunities in the growth investing space, per our research. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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