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The Zacks Analyst Blog Highlights: Bank of America, Citigroup, Koninklijke Philips, Zoom Video and The Clorox Company
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For Immediate Release
Chicago, IL – April 14, 2020 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Bank of America (BAC - Free Report) , Citigroup (C - Free Report) , Koninklijke Philips N.V (PHG - Free Report) , Zoom Video (ZM - Free Report) and The Clorox Company (CLX - Free Report) .
Here are highlights from Monday’s Analyst Blog:
Trading a Record "Cannonball Run:" Global Week Ahead
Stock traders enter this Global Week Ahead with the S&P500 at a critical juncture.
That key U.S. large cap stock benchmark bounced to 2800, after gaining back +12.1% last week. This is close to a 50% retracement. The 12-month low is a tad under 2,200. The high is a tad under 3,400.
Added to that, this Global Week Ahead begins Q1 earnings season. Given the vast uncertainty, company conference calls will be especially important.
Noted firms in the Zacks major bank industry kick it off.
Our big bank industry includes Bank of America, which reports on April 15th and so does Citigroup.
Big bank shares have bounced back from the March 23rd lows. But their retracement has lagged the broader market.
As a result, while the S&P500 index was down -13.6% YTD through Friday, April 10th, the KBW Bank Index (with 24 names) was down -33.6%.
The price to book ratio on that index? It is below one at 0.86. The P/E ratio? It is 8.0.
At this juncture, any investor should have a list of questions:
Have we seen the bottom in stock prices?
When will we re-start the economy?
Is it time to start buying stocks?
If so, which ones?
Chuck Carnivale of the Dividend Kings, writing in Seeking Alpha, offered a solid answer:
“So, what is an investor to do?
“For me personally, I’m acting like Santa Claus — I’m making my list and checking it twice. My rational mind says that quality is supreme in this environment, and in that same regard cash is king.
“Therefore, I am actively conducting research on the highest quality companies that I can identify and find. Then I am building lists of high-quality stocks that fit various investment objectives.
“For example, I have put together a list of dividend growth stocks as well as a list of pure growth stocks that I believe will not only prevail during this crisis, but perhaps even prosper.”
To gauge that, will the future macro-economic path resemble one of these letters: V, U, L, or W?
Good news first.
Pre-COVID-19 macro reports continued to show strength.
U.S. job openings were near highs. The ratio of unemployed persons per job opening had been 0.8 in Feb. 2020. This ratio wasn’t above 1.0 going back to late 2017.
U.S. consumer inflation data was low on core (+2.1% ex-food and energy) and negative for the headline (+1.5% y/y, with -0.4% showing up for March).
Then, the load of bad news…
Everything else plummeted.
(1) To start, the NY Times wrote that the nation’s epically uncrowded highway system allowed a white 2019 Audi A8 L sedan with extra fuel tanks to depart a NYC garage and arrive in LA less than 27 hours later.
That’s a record — for the sprint known as the “Cannonball Run.”
That car clocked an average of 103 mph. Google Maps says 41 hours is the average.
Traffic levels have dropped more than -90% in some major cities, and at least -50% nearly everywhere.
(2) The number of scheduled flights in the last week of March was almost half that of the same period a year ago, according to OAG, a data consultancy.
In the first week of April, air travel hubs such as the U.K., Hong Kong and Switzerland experienced declines of more than -90% in their flight numbers, OAG said.
Globally, flight numbers are down -70% so far this month, according to the International Air Transport Association.
Some aviation analysts now predict: It could take up to three years for the industry to return to the traffic levels of 2019.
(3) Cruise stocks quite literally sell like they are going out of business.
(4) WTI crude oil prices fell on Monday to $23 a barrel, a day after OPEC+ oil producers reached a historic (but voluntary) agreement to cut oil production.
Analysts at Goldman Sachs and elsewhere said the moves were “too little, too late.”
(5) The decline in U.S. rail traffic has been the largest since the Great Recession.
(6) Nearly a third of U.S. apartment renters did not pay rent in April.
(7) U.S. mortgage applications dropped -17.9% from the prior week. They now track the weakest years in recent history.
(8) Michigan consumer sentiment dropped to 71. This was the lowest reading since 2011 and the largest monthly decline in history.
One U.S. specialty retail analyst added: Full closures likely run through the end of May, coinciding with furloughs for all part-time and up to 50% of corporate staff.
Across the board, U.S. restaurant sales should be down -70% in Q2. Maybe -35% in Q3 and -20% in Q4?
(9) Last week, U.S, initial jobless claims hit 6.6 million, down from the prior week’s 6.9 million, but worse than the expected 5.0 million. With the rapid shutdown of so much of the economy the spike in claims is not really a surprise. We simply have no background to evaluate the large numbers, or how long the surge might last.
Most layoffs are described as temporary. Many are covered by increased unemployment insurance under the CARES Act.
(10) Over one-quarter of the U.S. economy has gone idle.
Top Zacks #1 Rank (STRONG BUY) Stocks
The choice for stock pickers looks bifurcated.
Very short term? Play “the cannonball run” regime. That means buy defensive names, and/or steer clear of stocks altogether.
Or bet on a big cyclical recovery – aka the “long-term” -- and strap in tightly.
Next are three examples. These stocks lay out the current landscape well.
Koninklijke Philips N.V: This is a $42 a share stock with a market cap of $37 billion.
Shares used to price at $48 pre-shutdowns. I see a B for Zacks Value, and A for Zacks Growth, and an A for Zacks momentum.
Zoom Video: Remote video is the shutdown game. This company is leading the way. It’s a $124 stock currently, with a market cap near $35 billion.
Entering 2020, shares traded near $70 each. I see a Zacks Value score of F, a Zacks Growth score of D, and a Zacks Momentum score of D.
The Clorox Company: This Soap & Cleaning materials company now has its defensive shares priced at $184, making for a $23 billion market cap.
Entering 2020, shares traded near $160 each. I see a Zacks Value score of D, a Zacks Growth score of B, and a Zacks Momentum score of D.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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The Zacks Analyst Blog Highlights: Bank of America, Citigroup, Koninklijke Philips, Zoom Video and The Clorox Company
For Immediate Release
Chicago, IL – April 14, 2020 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Bank of America (BAC - Free Report) , Citigroup (C - Free Report) , Koninklijke Philips N.V (PHG - Free Report) , Zoom Video (ZM - Free Report) and The Clorox Company (CLX - Free Report) .
Here are highlights from Monday’s Analyst Blog:
Trading a Record "Cannonball Run:" Global Week Ahead
Stock traders enter this Global Week Ahead with the S&P500 at a critical juncture.
That key U.S. large cap stock benchmark bounced to 2800, after gaining back +12.1% last week. This is close to a 50% retracement. The 12-month low is a tad under 2,200. The high is a tad under 3,400.
Added to that, this Global Week Ahead begins Q1 earnings season. Given the vast uncertainty, company conference calls will be especially important.
Noted firms in the Zacks major bank industry kick it off.
Our big bank industry includes Bank of America, which reports on April 15th and so does Citigroup.
Big bank shares have bounced back from the March 23rd lows. But their retracement has lagged the broader market.
As a result, while the S&P500 index was down -13.6% YTD through Friday, April 10th, the KBW Bank Index (with 24 names) was down -33.6%.
The price to book ratio on that index? It is below one at 0.86. The P/E ratio? It is 8.0.
At this juncture, any investor should have a list of questions:
Chuck Carnivale of the Dividend Kings, writing in Seeking Alpha, offered a solid answer:
“So, what is an investor to do?
“For me personally, I’m acting like Santa Claus — I’m making my list and checking it twice. My rational mind says that quality is supreme in this environment, and in that same regard cash is king.
“Therefore, I am actively conducting research on the highest quality companies that I can identify and find. Then I am building lists of high-quality stocks that fit various investment objectives.
“For example, I have put together a list of dividend growth stocks as well as a list of pure growth stocks that I believe will not only prevail during this crisis, but perhaps even prosper.”
To gauge that, will the future macro-economic path resemble one of these letters: V, U, L, or W?
Good news first.
Pre-COVID-19 macro reports continued to show strength.
U.S. job openings were near highs. The ratio of unemployed persons per job opening had been 0.8 in Feb. 2020. This ratio wasn’t above 1.0 going back to late 2017.
U.S. consumer inflation data was low on core (+2.1% ex-food and energy) and negative for the headline (+1.5% y/y, with -0.4% showing up for March).
Then, the load of bad news…
Everything else plummeted.
(1) To start, the NY Times wrote that the nation’s epically uncrowded highway system allowed a white 2019 Audi A8 L sedan with extra fuel tanks to depart a NYC garage and arrive in LA less than 27 hours later.
That’s a record — for the sprint known as the “Cannonball Run.”
That car clocked an average of 103 mph. Google Maps says 41 hours is the average.
Traffic levels have dropped more than -90% in some major cities, and at least -50% nearly everywhere.
(2) The number of scheduled flights in the last week of March was almost half that of the same period a year ago, according to OAG, a data consultancy.
In the first week of April, air travel hubs such as the U.K., Hong Kong and Switzerland experienced declines of more than -90% in their flight numbers, OAG said.
Globally, flight numbers are down -70% so far this month, according to the International Air Transport Association.
Some aviation analysts now predict: It could take up to three years for the industry to return to the traffic levels of 2019.
(3) Cruise stocks quite literally sell like they are going out of business.
(4) WTI crude oil prices fell on Monday to $23 a barrel, a day after OPEC+ oil producers reached a historic (but voluntary) agreement to cut oil production.
Analysts at Goldman Sachs and elsewhere said the moves were “too little, too late.”
(5) The decline in U.S. rail traffic has been the largest since the Great Recession.
(6) Nearly a third of U.S. apartment renters did not pay rent in April.
(7) U.S. mortgage applications dropped -17.9% from the prior week. They now track the weakest years in recent history.
(8) Michigan consumer sentiment dropped to 71. This was the lowest reading since 2011 and the largest monthly decline in history.
One U.S. specialty retail analyst added: Full closures likely run through the end of May, coinciding with furloughs for all part-time and up to 50% of corporate staff.
Across the board, U.S. restaurant sales should be down -70% in Q2. Maybe -35% in Q3 and -20% in Q4?
(9) Last week, U.S, initial jobless claims hit 6.6 million, down from the prior week’s 6.9 million, but worse than the expected 5.0 million. With the rapid shutdown of so much of the economy the spike in claims is not really a surprise. We simply have no background to evaluate the large numbers, or how long the surge might last.
Most layoffs are described as temporary. Many are covered by increased unemployment insurance under the CARES Act.
(10) Over one-quarter of the U.S. economy has gone idle.
Top Zacks #1 Rank (STRONG BUY) Stocks
The choice for stock pickers looks bifurcated.
Very short term? Play “the cannonball run” regime. That means buy defensive names, and/or steer clear of stocks altogether.
Or bet on a big cyclical recovery – aka the “long-term” -- and strap in tightly.
Next are three examples. These stocks lay out the current landscape well.
Koninklijke Philips N.V: This is a $42 a share stock with a market cap of $37 billion.
Shares used to price at $48 pre-shutdowns. I see a B for Zacks Value, and A for Zacks Growth, and an A for Zacks momentum.
Zoom Video: Remote video is the shutdown game. This company is leading the way. It’s a $124 stock currently, with a market cap near $35 billion.
Entering 2020, shares traded near $70 each. I see a Zacks Value score of F, a Zacks Growth score of D, and a Zacks Momentum score of D.
The Clorox Company: This Soap & Cleaning materials company now has its defensive shares priced at $184, making for a $23 billion market cap.
Entering 2020, shares traded near $160 each. I see a Zacks Value score of D, a Zacks Growth score of B, and a Zacks Momentum score of D.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performancefor information about the performance numbers displayed in this press release.