For Immediate Release
Chicago, IL – September 20, 2022 – Zacks Equity Research shares Clearfield CLFD as the Bull of the Day and PVH PVH asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Chesapeake Energy Corp. CHK, Shell plc SHEL and Repsol SA REPYY.
Here is a synopsis of all five stocks.
Clearfield is a Zacks Rank #1 (Strong Buy) that manufactures, markets, and sells standard and custom passive connectivity products to the fiber-to-the-premises, enterprises, and original equipment manufacturers markets in the United States and internationally.
While the markets have gone lower in 2022, CLFD has gone higher. Despite a big drop in price over the last month, the stock is still up over 10% on the year.
Obviously, Clearfield is doing something right, but in a market that is so negative, investors are asking if the stock can maintain its relative strength. And if it can hold up, should the bulls expect a move back to 2022 highs into the end of the year?
About the Company
Clearfield was founded in 1979 and is headquartered in Minneapolis,MN. It employs 250 people and has a market cap of $1.25 Billion.
Clearfield provides fiber protection, fiber management and fiber delivery solutions that enable rapid and cost-effective fiber-fed deployment throughout the broadband service provider space. The company has a strong competitive position as 5G and NG-PON2 technologies are rolled out to meet rapidly growing demand.
The stock has Zacks Style Scores of “F” in Growth and Value. However, a recent earnings beat has caught investors’ attention.
Q3 Earnings Beat
In late July, Clearfield reported a 37% EPS beat for Q3. The company saw Q3 revenues almost double year over year and raised its FY revenue outlook. FY22 revenues were taken to a range of $243-247M v the $218M expected.
Gross profit margin was down year over year, but their quarter over quarter backlog was up 16% to $157M.
The quarter saw new records for quarterly net sales and quarter end backlog.
Management commented that they are “making meaningful progress on our ‘Now of Age’ strategic plan to expand our capacity and rapidly scale our business to meet the significant market demand for high-speed broadband.”
Investors cheered the news, sending the stock from $85 to $100 in just a few days. This move over 15% higher broke all-time highs and the stock eventually hit $130 before pulling back.
Over the last 60 days, estimates have been trending higher. For the current quarter, we have seen a move from $0.70 to $0.80, or 14%.
Looking down the road, analysts see the momentum continuing. Over the last 60 days, the current year has seen estimates go from $2.77 to $3.13, or 13%. For next year, analysts have taken numbers 16% higher.
Since earnings the stock also got positive news that it would be added to the S&P Small Cap 600.
The stock started to gain traction in 2020, slowly moving off the COVID lows and closing out the year with almost a 100% gain. In 2021 the stock broke out and closed the year up about 250%.
Like most tech in 2022, the stock initially took a big hit and dropped 50% in the first month of the year. But from there, the series of earnings beats fueled the stock back to all-time highs and beyond.
CLFD hit an August and 2022 high of $130.01 to put the stock up over 50% on the year. This while most stocks suffered their worst performance in a decade.
The recent market sell-off brough too much selling pressure and the CLFD fell back under the $100 level.
This move lower broke the 50-day moving average, but there are still many support areas that bulls should eye.
The $91 level is the 50% retracement from June lows to August highs. $82.25 is the 61.8% retrace from that same setup. And if the market were to severely weaken, bulls might get lucky enough to get the 200-day moving average, which is way down at $72.
Clearfield has shown investors relative strength all year, so the current pullback should be viewed as a buying opportunity.
I would expect the current support levels to hold and for the stock to gain some momentum back into the end of the year. If the market can rally into Q4 and Clearfield earnings can impress again, look for CLFD bulls to shoot for those all-time highs.
PVH is a Zacks Rank #5 (Strong Sell) that operates as a global apparel company. PVH specializes in designing and marketing branded dress shirts, neckwear, sportswear, jeanswear, intimate apparel, swim products, footwear, handbags, and related products.
The stock has had a rough year, down almost 50% in 2022. As PVH continues to fall to levels not seen since the height of the pandemic, investors might be tempted to buy.
But the company recently cut their guidance for the year, which has forced analysts to cut estimates. Investors might want to be patient with this name until earnings start to improve.
About the Company
PVH is headquartered in New York, NY. The company was founded in 1881 and employs 19,000.
The company's portfolio includes its owned and licensed brands. PVH Corp’s owned brands comprise Calvin Klein, Tommy Hilfiger, Van Heusen, IZOD, ARROW, Warner’s, Olga and Geoffrey Beene. Its licensed brands include Speedo, Kenneth Cole New York, Michael Kors, Kenneth Cole Reaction, Unlisted, a Kenneth Cole Production, Michael Kors Collection, DKNY and Chaps.
PVH is valued at $3.5 billion and has a Forward PE of 7. The company holds Zacks Style Scores of “A” in Value, but a “C” in Growth and Momentum. The stock pays out a dividend of 0.3%.
In late August the company reported EPS, beating expectations by 3%. Q2 came in at $2.08 v the $2.01 expected, but revenues came in light at $2.13B v the $2.23B expected.
The company cut their Q3 guidance to a range of $2.10-2.15 v the $2.94 expected. They see revenues down 5-4% year over year.
PVH also cut FY22 EPS to $8.00 v the $8.81 expected. They see FY22 operating margin down 9% and inventory up 19% year over year.
Analysts have slashed estimates since the EPS guide lowered. Over the last 30 days, there has been a big move lower in the numbers.
For the current quarter, estimates have dropped from $2.94 to $2.21, or 25%. For next quarter, we see a 19% drop, from $2.08 to $1.67. The current year dropped 10%, from $8.80 to $7.89.
Next year the trouble continues, with estimates falling to $10.30 from $8.61, or 16%.
With estimates going lower, price targets are dropping as well. BMO cut their price target to $79 from 88, while JPMorgan Chase went to $75 from $90.
The stock is bleeding lower and has been all year. After starting the year near the $110 mark, PVH is trading at $55.
The stock has not been able to get above and hold the 50-day moving average. The 200-day MA is way up at $77.50 and PVH has not traded that level since January 2022.
The stock is trading at levels not seen since July of 2020. This was during the pandemic and before the vaccines, so clearly something is wrong with this chart.
The stock will likely break the $50 area and then the bears will go hunting for the July 2020 lows around $42. If bulls must buy, that area might be the spot.
It is a rough time for some retail as margins fall and inventories build. This atmosphere could last a while, so investors should put their patience over their FOMO in regards to this stock.
Energy Market Remains Volatile: 3 Low-Beta Stocks to Watch
Broad inflationary pressures are increasing. Investors now expect the Federal Reserve to keep raising rates aggressively, thereby increasing fears of recession and spurring market volatility. The energy sector is known for its volatile business scenario, and a slowdown in economic activities could significantly dent energy fuel demand.
Companies belonging to the sector have been witnessing a choppy business environment since the onset of the coronavirus pandemic. The initial pandemic period, when there were no vaccines, saw an environment of heightened uncertainties. The commodity’s price plunged to a negative $36.98 per barrel on Apr 20, 2020.
However, with the rapid developments of vaccines by the scientists, which in turn led to the gradual opening of the economies, the pricing scenario of West Texas Intermediate (WTI) crude improved drastically over time to reach $123.64 per barrel on Mar 8, 2022. Oil price data is per the U.S. Energy Information Administration.
Considering the backdrop, it would be wise for investors to keep their eyes on low-beta energy stocks like Chesapeake Energy Corp., Shell plc and Repsol SA.
Understanding of Beta
Beta measures the volatility or risk of a particular asset compared to the market. In other words, beta measures the extent of a security’s price movement relative to the market.
If a stock has a beta of 1, then the price of the stock will move with the market. So, the stock is more volatile than the market if its beta is more than 1. In the same way, the stock is not as volatile as the market if its beta is less than 1.
For example, if the market offers a return of 20%, a stock with a beta of 3 will return 60%, which is overwhelming. Similarly, when the market slips 20%, the stock will sink 60%, which is devastating.
3 Energy Stocks to Gain
We have employed our Stock Screener to zero in on three stocks that are not as volatile as the broader market, reflecting that beta for all the stocks lies between 0 and 0.7. One of the stocks sports a Zacks Rank #1 (Strong Buy), while another two stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
Chesapeake Energy Corp.: Chesapeake Energy is a premium natural gas operator and is well-positioned to gain from the significant improvement in gas prices in the past year. In the prolific gas-rich Marcellus shale play, CHK’s operation spreads across roughly 650,000 net acres, where an average of four to five rigs will be operating this year.
Chesapeake Energy also has a strong presence in Haynesville and Eagle Ford shale play, making the production outlook bright. Overall, being a leading upstream energy player, CHK has more than 15 years of inventory, signifying more than 2,200 gas locations. #1 Ranked CHK has a strong focus on returning capital to shareholders, as reflected in June 2022.
It has doubled its buyback program to up to $2 billion in an aggregate value of its common stock from the prior $1 billion. The program will possibly continue through year-end 2023. Stockholders are also getting rewarded through lucrative dividend payments, as reflected in the announcement of a base dividend increment of 10% to $2.20 per share annually.
Shell plc: Shell has a strong upstream portfolio across the world with key projects under construction that will start in 2022 through 2023, and some will probably begin operating beyond 2024. Shell is also leading energy transitions, as reflected in its ambitious plan of setting up a net zero-emissions energy business by 2050. Over the past seven days, the stock, with Zacks Rank of 3, has witnessed upward earnings estimate revisions for 2022 and 2023, respectively.
Repsol SA: Having a strong focus on allocating capital toward core and more profitable oil and gas resources, Repsol completed additional investments in Marcellus. This year, the company completed its divestments and exit from nations like Malaysia, Russia, Greece and Ecuador. Repsol is a leader in energy transition with a goal of becoming a net zero emissions company by 2050. For 2022, Zacks #3 Ranked firm is likely to see earnings growth of 119.8%.
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Chesapeake Energy Corporation (CHK): Free Stock Analysis Report
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