For Immediate Release
Chicago, IL – June 1, 2018 – Zacks Equity Research highlights Tallgrass Energy (TEGP - Free Report) as the Bull of the Day and JetBlue Airways (JBLU - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Nike (NKE - Free Report) , Under Armour (UAA - Free Report) and Amazon (AMZN - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Saudi Arabia, other OPEC members, and non-OPEC allies like Russia appear likely to abide by previously-accepted supply cuts until at least the end of 2018, delaying concerns that some oil leaders would be increasing production to offset the effect of shortfalls from Iran and Venezuela. Oil stocks are looking strong again, and that means investors might want to give Tallgrass Energy a look.
Headquartered in Leadwood, Kansas, Tallgrass Energy is engaged in the transportation, storage and processing of oil and natural gas. It also provides a water services business to the oil and gas exploration and production industry.
Positive news from OPEC likely has investors searching for strong oil stocks, and with TEGP currently sporting a Zacks Rank #1 (Strong Buy) and a “B” grade in the VGM category of our Style Scores system, this is clearly one of the best available options right now.
Latest Outlook and Valuation
Things have been trending in the right direction for Tallgrass recently, with the stock adding about 5% in the past month and the company able to surpass earnings estimates by more than 26% in the most recent quarter.
Tallgrass’ forward-looking outlook is also improving. The Zacks Consensus Estimate for its full-year earnings has moved six cents higher in the past month, and its 2019 EPS projection has added 24 cents in that time. Meanwhile, the Most Accurate Estimates for these periods—which look at only the most recent analyst estimates—sit 20% higher than their respective consensus estimates.
Positive estimate revisions and strong recent estimates imply that analysts are more bullish about TEGP now than they were just a short time ago. This sentiment should inspire continued momentum for the stock and certainly indicates good news about the company’s current business.
Investors should also note that TEGP is trading with a respectable P/E of 18.8. This is basically in line with the average of our “Energy and Pipeline – MLPs” industry. Energy investors also love to look at the P/B ratio, which compares a stock’s price with a company’s book value.
TEGP currently has a P/B ratio of 1.8, which is a noticeable discount to its industry’s average of 2.1. The P/B is useful for energy companies with large amounts of equipment and materials, so it is nice to see that TEGP looks undervalued here.
It should also be noted that TEGP is generating cash flow growth of 18% right now, outpacing its own historical average of 14%. Earnings are projected to improve by nearly 50% this year, and revenue is expected to surge 12%. All of these metrics help the stock earn a “B” grade for Growth in our Style Scores system.
Oil was a volatile space for years, but global oil inventories have already returned to their five-year average, and despite concerns that Saudi Arabia, Russia, and others might increase production soon, it does not appear that investors have much to fear for at least the remainder of the year. This means scooping up some oil stocks is a prudent move right now.
There are plenty of great options in the energy sector, but it is clear that an improving outlook, attractive valuations, and strong growth metrics make TEGP a uniquely strong pick. Finally, investors will also notice that TEGP’s status as an MLP means it pays a juicy 9% dividend.
Bear of the Day:
With fuel costs rising, the airline industry has felt plenty of pressure lately. This means that investors should tread carefully in this space right now, acting carefully to avoid underperforming stocks with their own individual issues. Unfortunately, one of those stocks is JetBlue Airways.
JetBlue is a low-fare, low-cost passenger airline based in New York's John F. Kennedy International Airport. The company carries more than 38 million customers a year to 101 cities in the U.S., Caribbean, and Latin America with an average of 1,000 daily flights.
Rising fuel costs are a concern for everyone in this industry, with prices rising about 23% in the first quarter of 2018 alone. But JetBlue’s own passenger revenue outlook is perhaps more worrisome. The company expects Q2 revenues per available seat mile (RASM) in the range of a decline of 3% to flat year over year.
Moreover, JetBlue recently reached a new labor agreement with its pilots. This is another industry-wide trend, but it does add to the volatility for JBLU. Right now, non-fuel unit costs are expected to lie between 2% and 4% in Q2, but that figure could go up noticeably once the agreement is ratified.
Rising costs have forced analysts to turn sour on the company’s earnings outlook. In the past 60 days, the company has seen eight revisions to its full-year EPS estimates, with 100% agreement to the downside. This has dragged its Zacks Consensus Estimate for earnings in 2018 about 14 cents lower in that time, and now the company is expected to see earnings growth of just 4% this year.
Looking further ahead, the Zacks Consensus Estimate for JetBlue’s 2019 earnings has dropped by 19 cents over the past 60 days. What’s worse, the company’s Most Accurate Estimates for 2018 and 2019 earnings—which look at only the most recent analyst projections—are more than 1.5% below their consensus estimates. This spells bad news for JetBlue’s most recent business conditions.
Thanks to the above headwinds, JetBlue shares have underperformed its industry so far this year. The stock has dropped about 15% in 2018, while its industry has declined just 5%.
Shares might be looking undervalued at just 11x forward earnings, but things are trending in all the wrong directions. With many headwinds facing the broader industry, it is best to avoid sluggish stocks like JBLU.
Estimates took a hit in the days following the report.
For the current quarter, three analysts cut their outlook in the last 60 days, and the consensus has dipped five cents from $1.98 to $1.93 per share. However, earnings are expected to grow around 16% for the period.
Five analysts have revised their estimates downward for the current fiscal year, and earnings are projected to increase not even 10%. The consensus has decreased from $5.16 to $4.89 per share.
Looking at the next fiscal year, earnings could grow about 6.7%, and the current consensus sits at $5.22 per share, falling 35 cents in the past 60 days.
Can TAP Stock Turn Around?
Shares of Molson Coors are down 24% so far this year and have slipped about 35% in the past one year. Compared to the S&P 500, the index has gained 1.2% and 13%, respectively.
Assessing Nike Stock as the NBA Finals Tip Off
Nike is in the first year of its eight-year, roughly $1 billion jersey deal with the NBA. So as the NBA Finals begin Thursday night, let’s take a look at Nike stock to see if investors might want to consider buying a piece of the world’s largest sportswear company.
When Nike won the NBA jersey rights a few years back, it was a big deal not only because of how much the company paid but also because Nike’s swoosh would be the first logo ever to appear on NBA game jerseys.
Nike’s iconic logo also appears on NFL jerseys, and the company signed a 10-year extension with the NFL in March that will see it remain the official apparel brand through 2028. And now there are even reports that Nike will sign a uniform deal with MLB, starting in 2020, with Under Armour set to back out from its scheduled deal.
Nike also happens to sponsor seven of the eight most famous athletes on the planet, according to ESPN’s recently published World Fame 100 list—LeBron James and Kevin Durant are two of these seven athletes.
To some, these sponsorships might seem unnecessary, but they provide the exposure that brands like Nike need. They must have their sportswear connected to the biggest leagues, teams, and athletes in the world.
Obviously, there are many other important factors for investors to consider, but it is worth noting just how big Nike’s presence is and how much value the company places on maintaining its relationships with the lifeblood of professional sports.
Nike reported revenue of $8.98 billion during its fiscal third quarter, which marked a 7% climb from the year-ago period. Meanwhile, the company’s hugely important North American footwear sales slipped 8% to $2.29 billion. Luckily, much of this downturn can be attributed to overall market conditions in the U.S., and Nike’s presence throughout the rest of the world is bigger than ever. Nike’s Greater China revenues climbed 24% $1.34 billion, while sales in Europe, the Middle East, and Africa surged 19% to $2.29 billion.
Moving on, Nike stock has performed well recently and over the last decade. Shares of Nike have soared 322% over the last 10 years, outpacing the S&P 500’s 113% climb. Over the last three years, Nike stock is up 40%. Scaling down, even more, shares of Nike have popped 37% during the last year, which tops the S&P 500 and rival Adidas, despite the German company’s wave of North American success. Year to date, Nike Stock is up 14%.
Nike’s recent price movement has helped the stock rest just below its 52-week high of $73.49 per share, which might make some investors nervous. The company’s strong performance has also caused Nike’s valuation to look just a tad bit expensive at the moment. Coming into Thursday, Nike stock was trading at 27.3X forward 12-month Zacks Consensus EPS estimates. Over the last year, Nike has traded as high as 27.6X, as low as 20.6X, with a one-year median of 24.5X.
Investors can also see that Nike’s valuation picture has slowly grown worse since November 2016. With that said, investors have clearly seen a reason to pay a premium for Nike stock over this same time period, as the company has consistently traded above its industry’s average.
One of the last key factors many investors will want to take a look at is Nike’s growth picture. Our current Zacks Consensus Estimates are calling for Nike’s Q4 revenues to climb by 8.4% to $9.40 billion. Meanwhile, Nike’s quarterly earnings are projected to sink by 13.3% to touch $0.52 per share.
With that said, investors should not worry too much about Nike’s bottom line at the moment as the company makes a massive shift toward e-commerce and direct-to-consumer selling that is aimed at helping Nike better compete in a retail world that is shifting to Amazon’s model.
Nike is currently a Zacks Rank #3 (Hold) and sports a “B” grade for Growth in our Style Scores system.
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With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
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