For Immediate Release
Chicago, IL – March 23, 2020 – Zacks Equity Research Shares of American States Water Company (AWR - Free Report) as the Bull of the Day, Tupperware Brands (TUP - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on JPMorgan (JPM - Free Report) , Bank of America (BAC - Free Report) and Wells Fargo (WFC - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
American States Water Company, along with its subsidiaries Golden State Water Company and American States Utility Services, provides fresh water, wastewater services, and electricity to customers in the U.S.
AWR has three reportable segments: Water, Electric, and Contracted Services; each contributed 67.5%, 8.3% and 24.2% to total revenues in 2019, respectively.
For Q4, consolidated diluted EPS of 45 cents a chare beat the Zacks Consensus Estimate and grew 22% year-over-year. AWR also reported increased EPS in all of its business segments in 2019.
Cash flow remains steady thanks so the company’s primary water utility.
And with American States Utility Services, which serves privatized military bases in the U.S. under 50-year contracts, AWR essentially takes care of all water distribution and waste water collection and treatment for these bases.
This is a resilient business for AWR to have under its umbrella, especially during the current market volatility.
Earnings & Dividend Growth
Shares of AWR are up about 31% over the last one year, and have only lost 4% in value in the past three months. Earnings estimates have been rising, and American States Water Co. is a Zacks Rank #1 (Strong Buy) right now.
For the current fiscal year, one analyst has revised their bottom line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up seven cents from $2.16 to $2.23 per share; earnings could see positive growth compared to the prior year period, too. 2021 looks pretty strong as well, with earnings and revenue expected to continue positive year-over-year growth.
While AWR’s 1.3% dividend yield may seem smaller compared to other utilities, it’s proven to be a great play for income investors. The company has not only paid a dividend every year since 1931, but increased its cash payout every year for the last 65 years. This gives AWR the coveted title of “Dividend King.”
Plus, management remains confident that it will be able to grow its dividend at a CAGR of 7% for the long-term.
If you’re an investor searching for a solid utility stock to add to your portfolio, make sure to keep AWR on your shortlist.
Bear of the Day:
Tupperware Brands is a consumer staples giant, making a wide range of items like beauty products and storage and serving solutions for the home and kitchen.
TUP plunged more then 35% after it announced in late February that it was delaying the release of its full 2019 results.
It said it was looking into “financial reporting issues” in its Fuller Mexico business, in addition to finalizing its tax rate, before it would release results.
Last October, TUP warned that its full-year results would come in well below expectations, between $1.35 and $1.70 per share (vs. $2.78 per share consensus forecast). The company blamed "continued execution challenges and unfavorable macroeconomic trends" in Brazil, China, and North America for its weak performance.
Along with a reduced 2019 earnings outlook, 2020 could pose a challenge as well. TUP sees revenue in the range of $1.58 billion and $1.62 billion, lagging the $1.67 billion analyst consensus.
Management expects the second half of 2020 to be better than the first, with improved sales trends thanks to streamlining initiatives.
TUP is now a Zacks Rank #5 (Strong Sell).
Shares of the consumer staples stock are down over 80% since January, and slumped almost 20% in the past five trading days alone. The S&P 500 is down over 28% year-to-date in comparison.
With its current outlook, TUP could have trouble meeting required leverage ratios on the $650 million credit agreement it has. The company’s future is uncertain right now, and investors will want to stay for now.
Here's Why You Should Hold Onto JPMorgan Despite the Rate Cut
Amid the current market turmoil, people are shying away from investing in equity markets, more so in banking stocks. Several factors, including the Federal Reserve’s accelerated move to cut interest rates to near zero, the coronavirus outbreak, and several economists and analysts’ prediction of a recession, have led to bearish investor sentiments.
The two emergency rate cuts reflect that the U.S. economy is slowing down. This will likely have an adverse impact on banks’ financials, as their performance largely depends on the nation’s economic health.
Also, near-zero interest rates will likely hurt banks’ top-line growth significantly, as net interest income (NII) and net interest margin will likely witness a fall. Further, reduced business activities due to the coronavirus outbreak are likely to result in lower demand for loans, at least over the next few months.
Further, as economic growth slows down, there will be a rise in delinquency rates. Thus, banks’ asset quality is expected to deteriorate. The factors suggest a grim near-term outlook for all the industry players.
If these concerns are weighing on your mind and you are thinking of getting rid of banking stocks, don’t take any hasty decision. There are many banks, which have solid fundamentals and strong growth prospects for the longer term.
Today, we are going to take a look at one of the well-known names in the industry — JPMorgan — the largest U.S. bank in terms of total assets. Similar to other industry players, the company’s shares have been adversely impacted by the coronavirus pandemic.
So far this year, the stock has lost 38.8% compared with the industry’s decline of 44.6%.Though the bank’s shares rallied 1.7% yesterday, it has been hitting 52-week lows for the past several days.
Further, lower rates will hurt the company’s net interest yield. Notably, as the Fed had cut the interest rates thrice last year, its net interest yield contracted to 2.46% in 2019 from 2.52% in 2018.
Therefore, JPMorgan’s profitability is expected to take a hit from the above-mentioned factors over the next couple of quarters. Nonetheless, the bank’s financials are quite solid unlike during the 2008 crisis, when it along with other major industry players like Bank of America and Wells Fargo had to take a bailout package. Once these matters get resolved, JPMorgan is expected to swiftly regain its solid footing in the market.
Here’s Why JPMorgan Should be Part of Your Portfolio
The company’s organic growth is impressive. Over the last four years (2016-2019), NII witnessed a CAGR of 7.5%, driven by steady loan growth and higher rates. Also, JPMorgan remains focused on acquiring the industry's best deposit franchise and strengthening its loan portfolio. Thus, despite the Fed’s accommodative monetary policy stance, a continued rise in loan balances is expected to keep supporting the company’s interest income to an extent.
Further, JPMorgan has been expanding its footprint in newer markets. The bank aims to enter 15-20 markets by the end of 2022, by opening roughly 400 new branches. It has already made progress on this front, having added more than 70 branches in 16 new markets in 2019.
Apart from enhancing market share, the strategy will help the bank to grab cross-selling opportunities by increasing its presence in the card and auto loan sectors. Also, the acquisition of InstaMed in July 2019 enabled JPMorgan to expand into the lucrative U.S. healthcare payments market.
At present, JPMorgan’s capital position is quite strong compared to the last financial crisis. Also, the company has been clearing the Fed’s annual stress test every year since 2011 and subsequently announcing enhanced capital deployment actions. It has come a long way from paying a dividend of 5 cents per share during the height of the financial crisis to the current 90 cents per share.
The bank has also been rewarding shareholders through share buybacks. As part of its 2019 capital plan, share repurchase authorization was worth $29.4 billion. As of Dec 31, 2019, a repurchase authorization worth $15.8 billion remained. Nonetheless, JPMorgan has suspended its share buyback plan and intends to use the capital for lending activities amid the coronavirus outbreak-related slowdown.
The company currently carries a Zacks Rank #3 (Hold). This along the above-mentioned factors bode well for JPMorgan. Notably, its 2020 and 2021 earnings estimates of $10.57 and $11.42, respectively, have been stable over the past seven days.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The company also has an impressive earnings growth history. In the last three-five years, its earnings grew at a rate of 16.2%, higher than the industry average of 13.6%. Beside this, its long-term (three-five years) projected earnings growth rate of 5% promises rewards for investors.
Therefore, based on the above-mentioned factors, JPMorgan must be part of your investment portfolio as it will help generate solid returns over time.
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