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Unifirst, HomeStreet, JPMorgan Chase, Citigroup and Bank of America highlighted as Zacks Bull and Bear of the Day

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For Immediate Release

Chicago, IL – April 16, 2018 – Zacks Equity Research highlights Unifirst Corporation (UNF - Free Report) as the Bull of the Day, HomeStreet Inc. (HMST - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on JPMorgan Chase (JPM - Free Report) , Citigroup (C - Free Report) and Bank of America (BAC - Free Report) .

Here is a synopsis of all five stocks:

Bull of the Day:

Unifirst Corporation, a Zacks Rank #1 (Strong Buy), is an industry leader and remains one of the fastest growing companies in the Uniform and Textile Services business. Its business is the rental Lease and Sale of work clothing, uniforms, protective apparel, careerwear, and facility service products to businesses in virtually all industrial categories. The major portion of the Company's business is Uniform Rental Service Programs, wherein it provides customers with all necessary products plus weekly cleaning, maintenance, and any needed replacements of work clothing.

Recent Earnings Results

The company reported Q2 18 results where they beat the Zacks consensus earnings and revenue estimates for the fifth consecutive quarter. On a year over year basis, earnings grew by +25.5% while revenues rose by +7.2%. The core laundry segment saw revenues increase by +5.7% with operating margins improved to +10% from +9.2% in the year ago quarter. The revenues in the specialty garment rose by +24% with operating income increasing by +33.3%. UNF has also experienced impressive organic growth in its core uniform rental area, as it was up +5%, well above the expected increase of +3%. Lastly, the company ended the quarter with $387.7 million in cash, cash equivalents, and short term investments.

Positive Drivers

After 15 years of inactivity management announced its first new capital allocation plan. This plan included repurchasing 1.178 million shares, and an increase in its dividend; from $0.0375 to $0.1125 per share. One of the big drivers behind the plan was the consistent growth of the company’s cash flows.

Further, due to higher than expected specialty garment sales, and the benefit of a lower corporate tax rate management increased both FY 18 EPS, and revenue guidance. EPS guidance was increased from a range of $5.10-5.30 to $7.45-7.65, and revenue guidance was lifted from a range of $1.63-1.65 billion to $1.66-1.67 billion.

Management’s Take

According to Steve Sintros, President and CEO, “I am pleased with the results of the quarter and the first half of the year. I want to take this opportunity to thank our thousands of Team Partners across North America and Europe for their combined efforts in helping us achieve these results while continuing their primary focus of providing high quality products and services to our customers.”

Bear of the Day:

HomeStreet Inc., a Zacks Rank #5 (Strong Sell) is a diversified financial services company. The Company is engaged in real estate lending, including mortgage banking activities and retail and business banking operations and serves consumers and businesses in the Pacific Northwest and Hawaii. It offers deposit and investment products and cash management services and single family loans and commercial loans.

Recent Earning Report

In its most recent earnings report the company beat the Zacks consensus earnings estimate, and met the revenue estimate. Earnings grew by +330%, and revenues improved by +2.5%. The bulk of the gains came from the commercial and consumer banking results. The platform realized a +36% YoY improvement in net income. But the mortgage banking segment came in below expectations.

Future Headwinds

The Seattle area, which accounts for more than half of the company’s earnings production, has been suffering from limited housing inventory for the past few quarters.  Further, early indications are that the supply of homes in Seattle have continued to decline in the first few months of 2018.

Another obstacle for the company going forward is the increase of interest rates, which caused many home owners to refinance their properties at longer fixed rates in Q4 17; the refinancing helped Q4 results, but expectations are for much fewer homeowners to refinance properties in 2018. The combination of these two factors has reduced the total amount of opportunities in the region and therefore competition is rising for the smaller pool of clients.

Management’s Take

According to Mark K. Mason, Chairman, President, and CEO, “While the results of our Mortgage Banking segment continue to be adversely impacted by the limited supply of new and resale housing in many of our primary markets, as well as the seasonal production slowdown we typically experience at the end of the year, we have begun to see the benefits of the restructuring we implemented during 2017. Direct origination expenses are lower and the successful implementation of our new loan origination system during 2017 will create opportunities for additional operating efficiencies going forward. We will continue to focus on optimizing our mortgage banking capacity within our existing geographic footprint and remain committed to being a leading mortgage originator and servicer in our markets.”

Additional content:

After JPMorgan and Citi Beat Earnings, Should You Buy Bank of America?

With JPMorgan Chase and Citigroup reporting better-than-expected earnings results this morning, fellow commercial and investment banking giant Bank of America will hope to continue the positive trend with its own earnings announcement on Monday. Earnings season is just heating up, and these financial bellwethers should give investors a great read on the economy.

The big story for both JPMorgan and Citi was increased revenue from equity trading, with the firms reporting revenue growth of 26% and 38%, respectively, in this segment. Overall, JPM notched total revenue growth of 12% and earnings growth of 44%, while Citi’s total revenue and earnings improved 3% and 24.4%, respectively.

So what should Bank of America investors expect? Let’s take a closer look!

Latest Outlook and Valuation

Based on our latest Zacks Consensus Estimates, we expect Bank of America to post earnings of $0.59 per share and total revenue of $22.91 billion. These results would represent year-over-year growth of 43.9% and 3.0%, respectively.

Heading into its report date, BAC is trading with a Forward P/E of 11.9, which is basically in line with the industry’s average of 12.0. Within the past year, the stock has traded as high as 16.8x forward 12-month earnings and as low as 11.3x. Its median earnings multiple over that time is 12.5. Investors might conclude that BAC shares are currently cheap compared to their valuation recently.

Earnings ESP Whispers

Investors will also want to anticipate the likelihood that Bank of America surprises investors with better-than-anticipated earnings results. For this, we turn to our Earnings ESP figure.

Zacks Earnings ESP (Expected Surprise Prediction) looks to find earnings surprises by focusing on the most recent analyst estimates. This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.

A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.

Bank of America is currently holding a Zacks Rank #3 (Hold) and an Earnings ESP of -0.4%. This is because the company’s Most Accurate Estimate for earnings sits at $0.58, meaning that the most recent analyst estimates have been lower than the consensus. In other words, our model is not conclusively calling for a beat.

Surprise History

Another important thing to consider ahead of Bank of America’s report is the company’s history of earnings surprises and the effect that these surprises have had on share prices. The company has met or surpassed earnings estimates in each of the trailing seven quarters, and the stock has responded well to these positive surprises.

We judge the price effect of these earnings beats by comparing the closing price of the stock two days before the report and two days after the report. Over the course of BAC’s recent streak, the stock has turned positive during this window six times.

Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!

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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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