Unum Group and Louisiana-Pacific have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – August 18, 2022 – Zacks Equity Research shares Unum Group UNM as the Bull of the Day and Louisiana-Pacific Corp. LPX as the Bear of the Day. In addition, Zacks Equity Research provides analysis on American Airlines AAL, SkyWest SKYW and C.H. Robinson Worldwide CHRW.
Here is a synopsis of all five stocks:
Unum Group, a Zacks Rank #1 (Strong Buy), has weathered the bear market gracefully this year and is currently hitting new 52-week highs. Part of the Zacks Finance sector, the company sports the highest-possible 'A' rating for our Zacks Value Style Score, indicating a strong likelihood that the stock propels higher based on its valuation metrics. The company's longevity and continued stock price ascent speak to management's ability to adapt to the ever-changing market landscape.
UNM is part of the Zacks Insurance – Accident and Health industry, which is currently ranked in the top 5% out of approximately 250 industries. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform over the next 3 to 6 months. Digging a bit deeper, this industry has performed very well (+9.8% YTD) versus the S&P 500 (-10.33% YTD).
Quantitative research studies suggest about half of a stock's future 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. By targeting stocks contained within leading industry groups, we can dramatically improve our odds of success.
Unum Group provides financial protection benefits solutions primarily in the United States, the United Kingdom, and Poland. UNM provides group long-term and short-term disability, group life, and accidental death and dismemberment products. The company also offers cancer and critical illness, dental and vision, group pension, and voluntary life insurance products.
UNM is ranked as the leading disability income writer and second-largest writer of voluntary business in the United States. The company sells its products through field sales personnel, independent brokers, consultants, and independent contractor agencies. Unum Group was founded in 1848 and is headquartered in Chattanooga, TN.
Earnings Trends and Future Estimates
UNM has built up an impressive earnings history, surpassing earnings estimates in three of the last four quarters. Earlier this month, the company reported Q2 EPS of $1.91/share, a 55.28% surprise over the $1.23 consensus estimate. UNM has delivered a +30.13% average earnings surprise over the last four quarters.
Positive earnings estimate revisions are at the heart of the Zacks Rank. Our research shows that rising earnings estimates are the most powerful force impacting stock prices.
In a sign of strength, analysts covering the insurance company have increased their full-year EPS estimates by +11.79% in the past 60 days. The 2022 Zacks Consensus EPS Estimate now stands at $5.69/share, reflecting potential growth of 30.8% relative to last year. It's exactly the type of trend we want to look for when narrowing down our list of potential stocks.
Let's Get Technical
UNM has continued its winning ways this year while the market has been in correction mode. This is the kind of stock we want to include in our portfolio – one with both strong fundamentals as well as technicals. The stock has trended very well year-to-date, advancing over 65%. Only stocks that are in extremely powerful uptrends are able to make this type of price move.
Both the 50-day and 200-day moving average lines are sloping up and the stock continues to make a series of new 52-week highs. Cautious investors may feel hesitant about investing in a stock that has come this far, but the fact is this elite company is still outperforming.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, Unum Group has recently witnessed positive revisions. As long as this trend remains intact (and UNM continues to deliver earnings beats), the stock will likely continue its bullish run this year.
Other Factors to Consider
Despite the massive price run, as we can see below UNM is relatively undervalued, irrespective of the metric used.
Unum Group has consistently enhanced shareholders' value through dividend hikes and share buybacks. The board approved a quarterly dividend hike of 10% back in May, marking the 13th dividend hike in the last 12 years. The company currently pays a $1.32 (3.35%) dividend.
In October of last year, the company authorized the repurchase of up to $250 million worth of outstanding shares. Through the first half of 2022, UNM bought back $94.9 million worth of stock and expects a $200 million buyback program annually through 2024.
Solid institutional buying should continue to provide a tailwind for the stock price. UNM is ranked favorably by our Style Score Categories with an 'A' for Value and an overall 'B' VGM score. Robust fundamentals combined with a strong technical trend certainly justify adding shares to the mix.
Backed by a leading industry group and robust history of earnings beats, it's not difficult to see why this company is a compelling investment. Recent positive earnings estimate revisions should also serve to create a 'floor' regarding any sudden or unexpected downside moves. If you haven't already done so, make sure to put UNM on your shortlist.
Louisiana-Pacific Corp. manufactures and markets building products for the use in new home construction, repair and remodeling, and outdoor structure markets. The company offers trim and siding products, air and water barriers, lumber and sub-flooring, and joists used in commercial floorings and roofing systems.
LPX sells its products primarily to retailers, wholesalers, and homebuilding and industrial businesses. Louisiana-Pacific Corp. was incorporated in 1972 and is based in Nashville, TN.
The Zacks Rundown
LPX, a Zacks Rank #5 (Strong Sell), is a component of the Zacks Building Products – Wood industry group, which ranks in the bottom 6% out of more than 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.
The group has widely underperformed the market this year with a -18.02% return versus a -10.33% for the S&P 500.
Candidates in the bottom tiers of industries can often be solid potential short candidates. While individual stocks have the ability to outperform even when included in a poor-performing industry group, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much tougher.
LPX is also overvalued relative to its industry group based on the Price/Book ratio.
Weak Foundation: Falling Short on Earnings and Deteriorating Forecasts
Earnings misses have been a sore spot for LPX this year. The building products provider fell short of earnings estimates in second quarter, reporting EPS earlier this month of $4.19/share – a -4.34% surprise versus the $4.38 consensus estimate. Last year, the company reported earnings of $4.74/share during the second quarter. This is the type of negative trend that the bears like to see.
Analysts have been revising earnings estimates downward as of late. For the current quarter, estimates have been slashed -21.12% over the past 60 days. The Q3 Zacks Consensus EPS Estimate now stands at $1.83, translating to a -52.71% earnings regression relative to the same quarter last year.
For the year, analysts have also reduced their EPS estimate by -12.64% in the past 60 days. The 2022 Zacks Consensus EPS Estimate is now $12.99, reflecting a -7.02% decline compared to last year.
LPX stock staged a failed breakout late last year and has now entered a sustained downtrend. Both the 50-day and 200-day moving averages are sloping down. Shares have declined more than 23% this year. The stock continues to trade below both averages.
While not the most accurate indicator, LPX has also experienced what is known as a 'death cross', wherein the stock's 50-day moving average crosses below its 200-day moving average. LPX would have to make a serious move to the upside and show increasing earnings estimate revisions to warrant taking any long positions in the stock.
Recent earnings misses and an unpredictable equity market don't exactly favor bullish LPX investors. Our Zacks Style Scores depict a weakening outlook for this stock, as LPX is rated a second worst-possible 'D' in our Momentum category. A deteriorating fundamental and technical backdrop show that this stock is fighting an uphill battle.
The fact that LPX is part of one of the worst-performing industry groups simply adds another headwind to a long list of concerns. Potential investors should only think about including this stock in their portfolio as part of a hedge or short strategy. Bulls will want to steer clear of an overvalued LPX until the situation shows major signs of improvement.
American Airlines to Buy Super-Fast Passenger Jets
In a bid to modernize its fleet, American Airlines inked a deal with Boom Supersonic to purchase up to 20 Overture planes from the latter. AAL already made a non-refundable deposit for the fleet. The agreement also includes the option of buying 40 more such high-speed jets for the airline that are expected to carry passengers at twice the speed of the fastest commercial aircraft available currently. Financial details of the deal remain undisclosed.
Boom expects to start rolling out the new super-fast jets in 2025. These planes are anticipated to start ferrying passengers by 2029. They are expected to carry 65-80 passengers on every trip.
Boom is designing the Overture aircraft in such a way that it manages to travel at Mach 1.7, with a range of 4,250 nautical miles. Introducing these planes to AAL's fleet will make travel much faster. For example, passengers can travel on these jets from Miami to London in less than five hours and from Los Angeles to Honolulu in just three hours.
Expressing his delight at the deal win, American Airlines' CFO Derek Kerr said, "Looking to the future, supersonic travel will be an important part of our ability to deliver for our customers. We are excited about how Boom will shape the future of travel both for our company and our customers."
Zacks Rank & Key Picks
American Airlines currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Zacks Transportation sector are C.H. Robinson Worldwide and SkyWest, presently flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
C.H. Robinson is being aided by the improving freight scenario in the United States. Efforts to control costs also bode well. Measures to reward CHRW's shareholders instill further confidence in the stock.
C.H. Robinson has a pleasant earnings track record. The bottom line surpassed the Zacks Consensus Estimate in three of the trailing four quarters (missing the mark in the remaining one). The stock has witnessed the Zacks Consensus Estimate for 2022 earnings being revised 13.8% upward over the past 60 days.
Continued recovery in air-travel demand bodes well for SkyWest. With improvement in air-travel demand, SkyWest carried 32.7% more passengers in first-half 2022 than the year-ago level. As a result, the passenger load factor (percentage of seats filled by passengers) expanded 1450 basis points to 82.1% in first-half 2022. SKYW's fleet-modernization efforts are commendable as well.
The positivity surrounding the SkyWest stock is evident from the Zacks Consensus Estimate for current-year earnings being revised in excess of 100% upward over the past 60 days. SKYW has a Momentum Style Score of A.
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C.H. Robinson Worldwide, Inc. (CHRW): Free Stock Analysis Report
Unum Group (UNM): Free Stock Analysis Report
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American Airlines Group Inc. (AAL): Free Stock Analysis Report
SkyWest, Inc. (SKYW): Free Stock Analysis Report
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