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Homebuilder and building product stocks could see an upward trend if the Federal Reserve cuts the key interest rate on Wednesday, based on historical performance, according to a major U.S. bank.
The Fed is expected to lower rates by either 25 or 50 basis points, marking the first change since July 2023 when it raised the rate to a range of 5% to 5.25%.
“Builders and building product stocks have outperformed in anticipation of rate cuts,” BofA Securities said in a note on Tuesday.
“Lower rates would benefit home demand.”
Homebuilder and building product stocks have rallied since early July as 30-year mortgage rates have fallen from 7% to roughly 6.2%, boosting new home demand and spending on home improvements, BofA said.
“In our view, the stock performance has been stronger than the improvement in underlying fundamentals as investors look through near-term weakness to a 2025 recovery fueled by lower mortgage rates and pent-up demand,” the note stated.
Read Also: Homebuilder Stocks Rally To Record Highs On Rate-Cut Frenzy But Housing Sales Still Struggle
“Housing sector outperformance ahead of rate cuts is consistent with prior cycles, but the magnitude and valuations are higher this time around. Stock performance following the first cut is more mixed although usually positive for homebuilders.”
BofA noted that homebuilders outperformed the S&P 500 in the three months before three of the last five initial rate cuts, and building products outperformed in four of the last five.
In the last three months, homebuilder stocks have gone up 26% and building product shares have risen 13%, compared to the S&P 500’s 2% uptick over the same period, BofA said.
“Assuming the Fed starts to cut rates in September, homebuilder and building product stocks will be trading at a higher valuation than going into any of the last five periods when the Fed started to cut.”
BofA also pointed out that homebuilders and building products typically underperform the S&P 500 ahead of a recession but outperform it during and after a recession.
Price Action: Homebuilder stocks traded higher on Tuesday.
Building products also saw gains and losses.
The S&P 500, which is tracked by SPDR S&P 500 ETF Trust , was up 0.02% to 5,634.58.
Read Now:
Image created using artificial intelligence via Midjourney.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Shares of Interface (TILE) have been strong performers lately, with the stock up 10.1% over the past month. The stock hit a new 52-week high of $19.18 in the previous session. Interface has gained 50.7% since the start of the year compared to the 0.4% move for the Zacks Consumer Discretionary sector and the 48.7% return for the Zacks Textile - Home Furnishing industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on August 2, 2024, Interface reported EPS of $0.4 versus consensus estimate of $0.28.
For the current fiscal year, Interface is expected to post earnings of $1.28 per share on $1.31 billion in revenues. This represents a 28% change in EPS on a 3.87% change in revenues. For the next fiscal year, the company is expected to earn $1.40 per share on $1.35 billion in revenues. This represents a year-over-year change of 9.38% and 3.02%, respectively.
Valuation Metrics
Interface may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.
Interface has a Value Score of B. The stock's Growth and Momentum Scores are C and D, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 14.9X current fiscal year EPS estimates, which is not in-line with the peer industry average of 15.6X. On a trailing cash flow basis, the stock currently trades at 9.6X versus its peer group's average of 5X. Additionally, the stock has a PEG ratio of 0.99. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Interface currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Interface passes the test. Thus, it seems as though Interface shares could have a bit more room to run in the near term.
How Does TILE Stack Up to the Competition?
Shares of TILE have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Mohawk Industries, Inc. (MHK). MHK has a Zacks Rank of # 2 (Buy) and a Value Score of A, a Growth Score of C, and a Momentum Score of C.
Earnings were strong last quarter. Mohawk Industries, Inc. beat our consensus estimate by 8.70%, and for the current fiscal year, MHK is expected to post earnings of $10 per share on revenue of $10.78 billion.
Shares of Mohawk Industries, Inc. have gained 4.3% over the past month, and currently trade at a forward P/E of 15.59X and a P/CF of 4.74X.
The Textile - Home Furnishing industry is in the top 2% of all the industries we have in our universe, so it looks like there are some nice tailwinds for TILE and MHK, even beyond their own solid fundamental situation.
Zacks Investment Research
NEW YORK, NY, Sept. 17, 2024 (GLOBE NEWSWIRE) -- Antelope Enterprise Holdings Limited (NASDAQ Capital Market: AEHL) (“Antelope Enterprise”, “AEHL” or the “Company”), the majority owner of Hainan Kylin Cloud Services Technology Co., Ltd (“Kylin Cloud”), the operator of a livestreaming ecommerce business in China, announced that it expects to shortly enter into the energy field through the production of electricity using natural gas generators in Texas. AEHL has launched this business in the US to meet the rapidly growing needs of computing power industries.
“We believe that our strategic positioning in the energy supply sector is extremely timely to meet the high expected demand for energy due to the growth in cryptocurrency mining,” Will Zhang, CEO of Antelope Enterprise, commented. “We believe that we can offer cost-effective solution that will provide sustainable value for crypto-mining companies in Midland, Texas.”
The Company believes that the demand for electricity for new data centers to accommodate the growth in the use of generative artificial intelligence and crypto-currency mining is being driven to unprecedented heights due to the y. The price of Bitcoin has increased 113.98% in the past year and has repeatedly exceeded the $70,000 mark, while Ethereum has also increased by 41.07% during the year. This trend has fueled the enthusiasm of investors around the world.
According to the US Energy Information Administration (EIA), the electricity consumption of cryptocurrency mining accounts for 0.6% to 2.3% of the total electricity consumption in the US, which is equivalent to the electricity consumption of some medium-sized countries. In particular, the US’ share of Bitcoin mining activity has soared from 3.4% in 2020 to 37.8% in 2022, making the US the world’s major cryptocurrency mining center. We believe that this phenomenon not only puts great pressure on the power supply chain, but it also brings unprecedented growth opportunities to the power supply market. Given the strong market demand, the Company believes it has a runway for significant growth in the near future.
About Antelope Enterprise Holdings Limited
Antelope Enterprise Holdings Limited AEHL US LLC ("AEHL US"), the 51% owner of Hainan Kylin Cloud Services Technology Co., Ltd (“Kylin Cloud”), the operator of a growing livestreaming ecommerce business in China with access to 800,000+ hosts and influencers. Through its wholly owned U.S. subsidiary, AEHL US LLC, the Company expect to begin generating electricity for a crypto-mining company in Midland Texas in the fourth quarter of 2024.
For more information, please visit our website at https://aehltd.com/.
Safe Harbor Statement
Certain of the statements made in this press release are "forward-looking statements" within the meaning and protections of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions, and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause the actual results, performance, capital, ownership or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements in this press release include, without limitation, the continued stable macroeconomic environment in the PRC, the PRC technology sectors continuing to exhibit sound long-term fundamentals, and our ability to continue to grow our energy, livestreaming ecommerce, business management and information system consulting businesses. All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as “may,” “will,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “plan,” “point to,” “project,” “could,” “intend,” “target” and other similar words and expressions of the future.Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct, and the Company cautions investors that actual results may differ materially from the anticipated results and encourages investors to review other factors that may affect its future results in the Company's registration statement and other filings with the U.S. Securities and Exchange Commission.
All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary notice, including, without limitation, those risks and uncertainties described in our annual report on Form 20-F for the year ended December 31, 2023 and otherwise in our SEC reports and filings. Such reports are available upon request from the Company, or from the Securities and Exchange Commission, including through the SEC's Internet website at http://www.sec.gov. We have no obligation and do not undertake to update, revise or correct any of the forward-looking statements after the date hereof, or after the respective dates on which any such statements otherwise are made.
Source: Antelope Enterprise Holdings, Ltd.
Contact Information:Antelope Enterprise Holdings LimitedEdmund Hen, Chief Financial OfficerEmail: info@aehltd.com
Precept Investor Relations LLCDavid Rudnick, Account ManagerEmail: david.rudnick@preceptir.comPhone: +1 646-694-8538
For Immediate Release
Chicago, IL – September 17, 2024 – Zacks Equity Research shares Sprouts Farmers Market SFM as the Bull of the Day and Tenaris TS as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Berkshire Hathaway Inc.’s (BRK.B), NVR, Inc. NVR and Lennar Corp. LEN.
Here is a synopsis of all five stocks:
Bull of the Day:
Sprouts Farmers Market, a Zacks Rank #1 (Strong Buy), provides natural and organic food products primarily in the United States. Shares of the healthy grocer are widely outperforming the market this year with the backing of a leading industry group. The stock is hitting a series of 52-week highs and displaying relative strength as buying pressure accumulates in this top-ranked stock.
SFM stock is part of the Zacks Foods – Natural Foods Products industry group, which currently ranks in the top 29% out of more than 250 Zacks Ranked Industries. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform the market over the next 3 to 6 months, just as it has consistently over the past year.
Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
Company Description
Sprouts Farmers Market boasts a unique grocery model, offering a variety of fresh produce, meats, seafood, dairy, vitamins, and other supplements. Founded in 1943, the Phoenix-based grocer operates more than 400 stores in 23 states.
The company’s focus on product innovation and expansion of private label offerings bodes well for the future. The organic foods provider has witnessed a remarkable surge in e-commerce sales this year, expanding its digital footprint through key partnerships with Uber Eats, DoorDash, and Instacart.
An aggressive expansion plan to open 35 new stores in 2024 underscores its confidence in long-term growth. Sprouts has invested heavily to improve operational efficiencies, highlighted by its Fresh Item Management Technology which deploys computer-assisted ordering methods.
Earnings Trends and Future Estimates
The top-ranked company has put together an impressive earnings history, surpassing earnings estimates in each of the past twenty consecutive quarters. Back in July, Sprouts reported second-quarter earnings of $0.94/share, a 22.1% surprise over the $0.77/share consensus estimate.
The grocer has delivered a trailing four-quarter average earnings surprise of nearly 12%. Consistently beating earnings estimates is a recipe for success and bolsters the bullish case.
SFM shares received a boost as analysts covering the company have been increasing their third-quarter earnings estimates lately. For the current quarter, earnings estimates have risen 8.7% in the past 60 days. The Q3 Zacks Consensus EPS Estimate now stands at $0.75/share, reflecting a potential growth rate of 15.4% relative to the year-ago period.
Let’s Get Technical
SFM stock has advanced more than 100% this year alone. This is the kind of stock we want to include in our portfolio – one that is trending well and receiving positive earnings estimate revisions.
Only stocks that are in extremely powerful uptrends are able to witness this type of price move. SFM shares broke out to a series of all-time highs back in August, even as the general market pulled back. Stocks that hold up well through periods of volatility tend to lead the next leg higher.
Notice how both the 50-day (blue line) and 200-day (red line) moving averages are sloping up. The stock has been widely outperforming the major indices, indicating a prolonged period of relative strength. With both strong fundamental and technical indicators, SFM stock is poised to continue its outperformance.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, Sprouts Farmers Market has recently witnessed positive revisions. As long as this trend remains intact (and SFM continues to deliver earnings beats), the stock will likely continue its bullish run into the end of this year and beyond.
Bottom Line
A promising combination of accelerating growth and momentum metrics bodes well for SFM shareholders, as the trend appears set to continue in the quarters ahead.
Backed by a top industry group and impressive history of earnings beats, it’s not difficult to see why this company is a compelling investment. Robust fundamentals combined with an appealing technical outlook certainly justify adding shares to the mix. The future looks bright for this highly-ranked, leading stock.
Bear of the Day:
Tenaris is a global manufacturer and supplier of steel pipe products and associated services to the oil and gas, energy, and related industries. The company produces and sells seamless and welded steel tubular products such as steel casings, which sustain the walls of oil and gas wells during and after drilling.
Based in Luxembourg, Tenaris also manufactures and distributes steel line pipes to transport crude oil and natural gas from wells to refineries, storage tanks and distribution centers. In addition, the company provides premium joints and couplings for use in high pressure or high temperature environments, as well as coiled tubing for oil drilling and subsea pipelines.
The Zacks Rundown
Tenaris, a Zacks Rank #5 (Strong Sell) stock, is a component of the Zacks Steel – Pipe and Tube industry group, which currently ranks in the bottom 26% out of approximately 250 Zacks Ranked Industries. As such, we expect this industry group as a whole to underperform the market over the next 3 to 6 months, just as it throughout the year.
Candidates in the bottom tiers of industries can often be intriguing short candidates. While individual stocks have the ability to outperform even when included in a lackluster industry, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much more difficult.
Along with many other steel-related stocks, TS shares have been struggling this year while the general market returned to new heights. The stock is hitting a series of lower lows and represents a compelling short opportunity as we head deeper into the latter half of the year.
Recent Earnings Misses & Deteriorating Outlook
Tenaris has fallen short of earnings estimates in four of the past eight quarters. Back in July, the company reported second-quarter earnings of $0.59/share, missing the $0.97/share Zacks Consensus estimate by -39.2%. Consistently falling short of earnings estimates is a recipe for underperformance, and TS is no exception.
CEO Paolo Rocca stated during the Q2 earnings call that despite high levels of oil and gas production in the United States, drilling activity has decreased, resulting in “reduced overall demand for pipes.” He also touched on the company’s outlook in other regions.
“The change in the government in Mexico and the uncertainties surrounding the policy for the energy sector are limiting drilling investment in the country. In Argentina, the necessary stabilization of the macroeconomic environment is delaying investment in drilling and the development of infrastructure in Vaca Muerta. This factor will affect our sales and results in the second half, when we expect that our sales volume will be 10% to 15% below those of the first half.”
Tenaris has been on the receiving end of negative earnings estimate revisions as of late. Looking at the current quarter, analysts have slashed estimates by -19.44% in the past 60 days. The Q3 Zacks Consensus Estimate is now $0.58/share, reflecting negative growth of -36.3% relative to the prior year.
Falling earnings estimates are a huge red flag and need to be respected. Negative growth year-over-year is the type of trend that bears like to see.
Technical Outlook
As illustrated below, TS stock is in a sustained downtrend. Notice how the stock has made a series of lower lows, widely underperforming the major indices. Also note that shares are trading below downward-sloping 50-day (blue line) and 200-day average (red line) moving averages – another good sign for the bears.
TS stock has experienced what is known as a “death cross,” whereby the stock’s 50-day moving average crosses below its 200-day moving average. The stock would have to make an outsized move to the upside and show increasing earnings estimate revisions to warrant taking any long positions. Shares have fallen nearly 17% this year alone.
Final Thoughts
A deteriorating fundamental and technical backdrop show that this stock is not set to make its way to new highs anytime soon. The fact that TS is included in one of the worst-performing industry groups provides yet another headwind to a long list of concerns. A history of earnings misses and falling future earnings estimates will likely serve as a ceiling to any potential rallies, nurturing the stock’s downtrend.
Potential investors may want to give this stock the cold shoulder, or perhaps include it as part of a short or hedge strategy. Bulls will want to steer clear of TS until the situation shows major signs of improvement.
Additional content:
Mortgage Rates Are Falling: A Boon for 2 Warren Buffett Stocks
Warren Buffett-led Berkshire Hathaway Inc.’s portfolio hasn’t fared badly against the S&P 500’s return amid a higher interest rate environment. However, Buffett hopes for interest rate cuts like several market pundits as it would jack up the share price of two of his beloved housing stocks NVR, Inc. and Lennar Corp. Here’s why –
Freddie Mac Report: U.S. Mortgage Rates Drop
According to Freddie Mac, for the week ending Sept. 12, the 30-year fixed-rate mortgage slipped to its lowest level since February 2023. The rate on the 30-year loan averaged 6.2%, down from the four-week and 52-week averages of 6.34% and 6.93%, respectively. The 30-year mortgage rate hovered around the 7% mark for most of the year, but since late July, it has begun to cool off and has fallen since then.
The 15-year fixed mortgage average rate was 5.27%, down from the four-week and 52-week averages of 5.47% and 6.21%, respectively, a positive development for aspiring homeowners, added Freddie Mac. Mortgage rates in the United States have continued to soften over the past year.
Why Are Mortgage Rates Falling?
An increase in expectations of a much-awaited interest rate cut in the Federal Reserve’s September policy meeting is pushing the yields on long-term bonds lower leading to a drop in mortgage rates.
The Fed is expected to trim interest rates as price pressures ebb toward the central bank’s 2% target. The interest rate cut would be the first one since March 2020, when the Fed slashed rates to boost economic growth derailed due to the pandemic. The interest rates have remained elevated for the past 14 months, waiting for economic conditions to improve.
According to the CME FedWatch Tool, around 59% of market participants expect the Fed to trim interest rates by 50 basis points in the upcoming policy meeting. Nearly 41% of traders are pricing in a quarter-point interest rate cut.
Drop in Mortgage Rates to Boost 2 Warren Buffett Stocks
The steady decline in mortgage rates on interest rate cut expectations should increase new home purchases, and boost homebuilders’ bottom line. Thus, two of Warren Buffett’s homebuilders, NVR and Lennar,are expected to see an increase in their stock prices.
After giving away his stake in D.R. Horton, Inc. DHI, the Oracle of Omaha hung onto these housing stocks as they would benefit from urbanization and a strong brand value. Berkshire Hathawayhas roughly $100 million of NVR shares and around $26 million of Lennar shares as of the company’s latest 13F filing, citing a CNBC article.
Key NVR Tailwinds: Increase in New Orders, Very Strong ROE
NVR’s profit margin is expected to improve as the company has witnessed an increase in new orders. In the second quarter, NVR’s new orders increased by 3% to 6,067 units from 5,905 units a year ago.
NVR has proficiently generated profits as the company’s return on equity (ROE) is 38.5%, more than the Building Products - Home Builders industry’s 18.3%. An ROE of more than 20% is usually considered very strong.
NVR’s expected earnings growth rate for the next five years is 7.6%. Its shares have gained 33.9% so far this year.
Key LEN Tailwinds: Dynamic Pricing Model, Lower Debt
Lennar is well-positioned to gain from its dynamic pricing model, which helps the company set prices based on demand trends and ever-changing market scenarios. This, in turn, aids Lennar in improving cash flow and return on inventory.
Lennar has a debt-to-equity of 8.3%, less than the industry’s 15.4%, a tell-tale sign that the company has less debt on its balance sheet than its peers, and can operate more efficiently in the long run.
LEN’s expected earnings growth rate for the next five years is 7.8%. Its shares have gained 24.7% year to date.
Fear Not, If the Fed Doesn’t Cut Rates
In the worst-cum-worst situation, if the Fed doesn’t cut interest rates, shares of NVR and Lennar would still scale upward, thanks to the presidential election in November. Kamala Harris, a Democratic nominee wants to boost construction activity and provide financial assistance to first-time home buyers.
Moreover, millennials are about to settle into a family life leading to increased demand for houses, a blessing for NVR and Lennar. Both stocks have a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
https://www.zacks.com
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
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 https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Zacks Investment Research
Corsair Gaming, Inc. CRSR has entered into a definitive agreement with Endor AG to acquire the Fanatec Sim Racing brand and all associated personnel.
Situated in Landshut, Germany, Fanatec’s product portfolio includes force feedback steering wheels and wheelbases, pedals, shifters and other accessories for PlayStation, Xbox and PC-based racing simulators.
Following the announcement, CRSR stock gained 3.9% during the trading hours and 0.3% in the after-hours on Monday.
CRSR’s Prospects From the Buyout
Corsair recently announced its breakthrough product, Sim Racing chassis, showcasing its take on product innovation and customer experience leadership. The acquisition of the Fanatec brand will uniquely position it as a leading Sim Racing end-to-end product solution, given the product portfolio enhancement and market expansion.
By leveraging the significant popularity and growth of Fanatec over the past few years and its existing product lines, Corsair aims to enhance users’ customer service experience, increase sales opportunities and foster profitability. Per Endor, in 2023, Fanatec’s product sales were approximately $110 million.
CRSR plans to maintain the core business in Landshut while expanding the Fanatec brand’s position as a world-class product development center for Sim Racing products. Furthermore, the company plans to make significant investments in the brand and its products and increase global availability through its channels. Going forward, all present and future Fanatec customers will benefit from Corsair’s top-tier support, including warranty and software updates.
New Product Offerings Bode Well for CRSR
Corsair is sparking its growth momentum and expanding market share through new product launches. Its consistent strategic investments in product innovations and related launch requirements have resulted in impressive growth synergies.
In the trailing nine months, the company has increased its footprint and market reach through new product launches. One of its significant new launches is the K65 wireless keyboard, which immediately garnered a positive response from the United States market. CRSR also launched teleprompters, PC controllers and mobile controllers under its gamer and creator peripheral segment. The company aims to continue expanding its product range and market reach through organic and inorganic moves, thereby fostering growth and profitability. It also expects to maintain a healthy balance sheet with sufficient cash to fund these strategic developments.
Shares of this computer peripherals and hardware company have lost 40.7% in the past three months against the Zacks Gaming industry’s 0.1% growth. Although CRSR’s shares have underperformed its industry, consistent product innovations and new launches are likely to aid it in gaining growth momentum in the upcoming period.
CRSR’s Zacks Rank & Key Picks
Corsair currently carries a Zacks Rank #5 (Strong Sell).
Here are some better-ranked stocks from the Zacks Consumer Discretionary sector.
Interface, Inc. TILE currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
TILE has a trailing four-quarter earnings surprise of 65%, on average. The stock has surged 95.1% in the past year. The Zacks Consensus Estimate for TILE’s 2024 sales and earnings per share (EPS) indicates growth of 3.9% and 28%, respectively, from the year-ago levels.
DoubleDown Interactive Co., Ltd. DDI currently sports a Zacks Rank of 1. DDI has a trailing four-quarter earnings surprise of 22.1%, on average. The stock has gained 43.5% in the past year.
The Zacks Consensus Estimate for DDI’s 2024 sales and EPS indicates an increase of 12.6% and 15.8%, respectively, from the year-ago levels.
Norwegian Cruise Line Holdings Ltd. NCLH presently sports a Zacks Rank of 1. NCLH has a trailing four-quarter earnings surprise of 5.7%, on average. The stock has gained 16% in the past year.
The Zacks Consensus Estimate for NCLH’s 2024 sales and EPS indicates an increase of 9.8% and 125.7%, respectively, from the year-ago levels.
Zacks Investment Research
For Immediate Release
Chicago, IL – September 16, 2024 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Oracle ORCL, Adobe ADBE, Lennar LEN and FedEx FDX.
Q3 Earnings: What Can Investors Expect?
The Q3 earnings season will take the spotlight when the big banks start reporting their quarterly results from October 11th onwards. However, we count the ‘official’ start of the Q3 reporting cycle much earlier, when companies with fiscal quarters ending in August come out with quarterly results.
The results in recent days from Oracle and Adobe fall in this category and, therefore, get counted as part of the overall 2024 Q3 earnings season tally. Of these two, the Oracle report was really impressive, with the company legitimately staking its claim as a notable player in the emerging artificial intelligence (AI) struggle.
The Adobe results were also fairly strong, with earnings increasing by +25.8% from the same period last year on +6.9% higher revenues, but the stock lost ground on the report due to underwhelming guidance.
Adobe shares were up big following the last quarterly release in June but were down in response to each of the three quarterly reports before that. Adobe shares are down -10.5% this year, lagging the Zacks Tech sector’s +18.9% gain and the S&P 500 index’s +17.1% gain.
Oracle shares’ favorable reaction to the September 9th report builds on the stock’s impressive momentum this year. The stock is now up +55.4% this year, handily outperforming the Tech sector and the broader market, with many in the market seeing the stock’s ongoing momentum as very much sustainable.
We have another 5 S&P 500 members on deck to report such August-quarter results this week, including Lennar and FedEx after the market’s close on Thursday, September 19th.
We discuss expectations for Lennar and the broader homebuilder space later in this note, but we first want to look at evolving earnings expectations for 2024 Q3 as a whole.
The Earnings Big Picture
Total Q3 earnings for the S&P 500 index are expected to be up +3.8% from the same period last year on +4.6% higher revenues. This would follow the +10% earnings growth for the index in the preceding period on +5.5% higher revenues.
Regular readers of our earnings commentary are familiar with our sanguine view on corporate profitability – the earnings picture isn’t great, but it isn’t bad either.
The one recent negative development on this front is the reversal of the earlier favorable revisions trend that we have regularly flagged in our commentary. This negative revisions trend is particularly notable concerning expectations for 2024 Q3, with earnings estimates for the period getting revised down much more than we had seen in other recent periods.
Not only is the magnitude of cuts to Q3 estimates bigger than what we saw in the comparable periods for the last three quarters, but it is also widespread and not concentrated in one or a few sectors.
Of the 16 Zacks sectors, estimates have been revised down for 14 sectors, with the Transportation, Energy, Business Services, and Aerospace sectors suffering the biggest declines. The Tech and Finance sectors are the only sectors whose estimates have modestly risen since the period got underway.
Notwithstanding the aforementioned negative revisions trend, the expectation is for an accelerating growth trend over the coming periods. Also, the aggregate earnings total for the period is expected to be a new all-time quarterly record.
Please note that this year’s +8% earnings growth improves to +9.7% on an ex-Energy basis.
Expectations for LEN and the Construction Sector
Lennar is expected to bring in $3.62 per share in earnings on $9.29 billion in revenues, representing year-over-year changes of -7.4% and +6.4%, respectively. Estimates have been under pressure lately, with the current $3.62 EPS estimate down -4% over the last three months.
Elevated interest rates have been a significant headwind for this interest-rate-sensitive business. As a result, the earnings outlook for Lennar and the broader homebuilder space has been under pressure ever since mortgage rates rose in response to Fed tightening. But with the central bank on the cusp of starting to ease policy, the outlook for the group has been steadily improving.
These hopes of a favorable interest rate backdrop in the days ahead have been helping Lennar and the stocks of other homebuilders gain ground lately.
For 2024 Q3, total earnings for the Zacks Construction sector are expected to be down -3% on +3.7% higher revenues. This would follow the sector’s +5.6% earnings growth on +4.4% higher revenues.
For full-year 2024, total earnings for the Zacks Construction sector are expected to be up +1.1% from the 2023 level on +4.6% revenue growth. Earnings for the sector were down -6.5% in 2023, which followed +21.5% earnings growth in 2022 and +45% in 2021.
The space’s profitability has bottomed already, with growth resuming from next year onwards.
For a detailed look at the overall earnings picture, including expectations for the coming periods, please check out our weekly Earnings Trends report >>>> What Will the Q3 Earnings Season Show?
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