Yahoo Finance FedEx and Charles Schwab have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – April 28, 2023 – Zacks Equity Research shares FedEx Corporation FDX as the Bull of the Day and Charles Schwab SCHW as the Bear of the Day. In addition, Zacks Equity Research provides analysis on PepsiCo PEP, Kimberly-Clark KMB and Procter & Gamble PG.
Here is a synopsis of all five stocks.
Bull of the Day:
Company Overview
Memphis-based Zacks Rank #1 (Strong Buy) FedEx Corporation is the leader in global express delivery services. Since 1971, it has been providing transportation, e-commerce, and business services for its customers. Three main segments drive FedEx: FedEx Express, FedEx Ground, and FedEx Freight.
FedEx Express: Offers time definite delivery to more than 220 countries and territories.
FedEx Ground: A low-cost, day-certain service to any business address in the United States and Canada.
FedEx Freight: Offers less-than-truckload (LTL) freight services in the United States
A Straightforward Bull Case
The meteoric rise of e-commerce in the United States and worldwide presents significant opportunities for freight companies to grow and expand their business. Beyond traditional delivery, e-commerce consumers demand more efficient and innovative delivery solutions, producing more potential revenue.
Industry Tailwinds
Zack’s in-house studies have shown that the top 50% of industry groups tend to outperform the bottom 50% by a factor of two to one. The Transportation – Air Freight and Cargo group meets the threshold by a long shot. The group is ranked in the top 9% of all industries tracked by Zacks and has drastically outperformed the S&P 500 Index over the past three years.
Fundamentals
Despite a recent earnings slowdown, FDX has delivered positive surprises on earnings for two quarters running. Though earnings growth slowed last quarter, investors must look to the future. Analysts have earnings per share soaring to new highs within the next two years.
The Total Package
Beyond strong industry tailwinds and a larger total addressable market, FedEx management is intent on rewarding shareholders through dividend payouts. In April, FDX raised its dividend by 10% to $1.26 per share or $5.05 annually. The company also raised its full-year outlook based on its cost savings plan, saying, “We are pleased with the company’s efforts to reward its shareholders even in these difficult times.”
Technical View
One of the most impressive traits of FedEx is its stable yet robust technical performance. FDX has a beta of 1.01, meaning it’s a very tame stock, and its volatility is in line with that of the S&P 500. Despite the low beta, year-to-date, the stock has returned 30% versus 6% in the S&P. Furthermore, the share price is pulling back to the 50-day moving average – an area the stock has found support at for months.
Takeaway
Overall, the rise of e-commerce presents significant opportunities for freight companies like FDX to improve their profitability, increase their market share, and enhance their competitiveness. Furthermore, FDX’s drive to reward shareholders through dividends and cost savings should drive the stock higher in 2023.
Bear of the Day:
Company Overview
Zacks Rank #5 (Strong Sell) stock Charles Schwab is a financial services company that offers a broad range of investment and wealth management services. The company was founded in 1971 and is headquartered in San Francisco, California.
Schwab’s investment services include trading and investing in stocks, bonds, mutual funds, exchange-traded funds (ETFs), options, futures, and more.
Toxic Combo: Rising Costs + A Regional Banking Crisis
Prior to 2023, a rising interest rate environment was mostly viewed as a positive for the banking sector. However, the unusually rapid hikes from unprecedented, near-zero interest rates caused mayhem in the regional banking sector – leading to the collapse of Silicon Valley Bank (SVB).
At the root of SVB’s collapse was a large amount of bank deposits in the long-term U.S. treasuries and mortgage-backed securities (assets that typically fall when interest rates rise). As word spread of SVB’s liquidity crisis and investment issues, depositors began to panic, leading to a classic bank run.
Though Schwab is not a regional bank, rumors and fears are leading to real world issues for the bank. According to Bloomberg, Schwab is “facing dwindling deposits.” As if that wasn’t enough, Schwab’s costs are rising rapidly and have been doing so for years. In fact, between 2016-2022 expenses rose at a compound annual growth rate of more than 15%.
Industry Woes
Our studies show that stocks within the bottom half of the Zacks industry group list tend to underperform dramatically. By now, it is no secret that the banking sector is underperforming. The Zack’s Financial Investment Banking Industry is in the bottom 13% of all industries tracked by Zacks.
Bearish Price and Volume Action
Schwab is dramatically underperforming the S&P 500 Index. Year-to-date SCHW is down 37.9%, while the S&P is up 6.1%. Furthermore, a few weeks ago, Schwab’s CEO tried to inject life into the stock by purchasing one million dollars’ worth of stock. Since then, the stock has barely budged and is setting up in a bearish chart pattern.
Takeaway
Between rising costs and dwindling deposits, Charles Schwab is stuck between a rock and a hard place. Expect volatility on both sides of the tape and avoid the stock at this juncture.
Additional content:
3 Companies That Recently Raised Guidance
There have been several pockets of strength during earnings season so far, particularly in the Consumer Staples sector. We’ve seen many companies in the realm come out and post better-than-expected results, with pricing power leading the way.
In fact, several companies – PepsiCo, Kimberly-Clark and Procter & Gamble – have raised guidance following better-than-expected quarterly results, causing buyers to swarm as of late.
As we can see, all three have displayed relative strength over the period, outperforming the market handily. Let’s take a deeper dive into each company’s current standing.
PepsiCo
PepsiCo reported earnings of $1.50 per share, handily exceeding the Zacks Consensus EPS Estimate by nearly 10%. Quarterly revenue totaled $17.8 billion, above expectations and improving 10% from the year-ago quarter.
Investors cheered on the results, with PEP shares closing 2.5% higher post-earnings. The company’s shares have regularly gotten a boost following quarterly releases.
Regarding the strong results, CEO Ramon Laguarta said, “We are very pleased with our performance and business momentum as our categories and geographies remained resilient during the first quarter. Given our strong start to the year, we now expect our full-year 2023 organic revenue to increase 8 percent (previously 6 percent) and core constant currency EPS to increase 9 percent (previously 8 percent).”
And consistent with its previous guidance for FY23, PepsiCo expects total cash returns to shareholders to total roughly $7.7 billion, consisting of $6.7 billion in dividends and share repurchases of $1 billion.
Kimberly-Clark
Kimberly-Clark also posted a double-beat, exceeding earnings expectations by nearly 25%. Top line results were also solid, with the company generating $5.2 billion in revenue and improving modestly from the year-ago quarter.
In addition, KMB’s gross margin increased 340 basis points year-over-year, primarily driven by favorable net revenue realization amid increased prices. Cash generated from operations totaled $613 million, reflecting a sizable jump from the year-ago value of $204 million.
KMB shares saw a nice reaction from the market post-earnings, closing 1.5% higher. The market has had somewhat-mixed reactions following quarterly releases from Kimberly-Clark.
The company raised its FY23 EPS guidance, now expecting 6% - 10% growth compared to FY22 and up from prior views of 2% - 6%. In addition, KMB increased its operating profit outlook to low double digits, again up from the previous mid to high single digits expected.
Procter & Gamble
Like the companies above, Procter & Gamble posted better-than-expected results, exceeding the Zacks Consensus EPS Estimate by 3.8% and delivering a positive 4% revenue surprise. Earnings improved 3% year-over-year, whereas revenue saw growth of 4%.
Impressively, PG’s recently declared dividend increase reflects the 67th consecutive year that the company has increased its dividend. The company returned more than $2.2 billion in dividends to shareholders throughout the quarter.
Procter & Gamble raised its FY23 all-in revenue guidance, now expecting growth of 1% compared to FY22, up from a prior guidance range of down -1% to flat year-over-year. In addition, PG raised its organic revenue growth guidance for FY23, expecting growth of 6% compared to prior expectations of 4% – 5%.
Bottom Line
Stocks in the Zacks Consumer Staples sector carry a defensive nature, as these companies’ products have an advantageous ability to generate consistent demand in the face of many economic situations.
And as seen by the quarterly results from all three companies above, consumers have had little issue forking up extra cash for their products.
In addition to uplifting guidance, all three companies currently sport a favorable Zacks Rank #2 (Buy), indicating bullish sentiment among analysts.
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Procter & Gamble Company (The) (PG) : Free Stock Analysis Report
The Charles Schwab Corporation (SCHW) : Free Stock Analysis Report
Kimberly-Clark Corporation (KMB) : Free Stock Analysis Report
PepsiCo, Inc. (PEP) : Free Stock Analysis Report
FedEx Corporation (FDX) : Free Stock Analysis Report
