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Should You Buy the Dip on the Omicron Scare?

The stock markets went into a bit of a tizzy Friday, as fears of a new variant of the coronavirus hit the markets. Omicron, as it’s being called, appears to have originated in South Africa and has now been detected in a number of European countries, as well as Canada, Israel, Hong Kong and Australia. A number of countries have imposed travel restrictions from South African countries.

Early reports do, however, indicate that the variant while being more contagious, is doing less damage than Delta. But who knows how things will finally play out?

So yes, people are scared. They are not rushing outdoors and thinking that maybe there will be lockdowns or partial lockdowns all over again.

In response to the uncertainties, investors piled into bonds on Friday, ditching stocks, especially the reopening plays like airlines, restaurants and retail. As may be expected, the vaccine makers were more in demand, especially Moderna, which was quick to say that it would have a vaccine for Omicron in early 2022.

But investors returned to the market by Monday to take advantage of the dip. So major indexes are again in the green. What’s more, the volatility index (VIX) is down over 12% as of this writing, indicating that investors are back in action.  

So there’s a narrow window of opportunity for those still hoping to buy the dip. And SNDR, ARCB, ARW, CC and CLS could help you do just that-

Schneider National Inc. SNDR

Schneider is a leading transportation and logistics services company offering premier truckload, intermodal, dry van, bulk transport and supply chain management. It has one of the largest for-hire truck fleets in North America.

Reopening encourages people to use more services while the virus pushes people back indoors, making it more of a goods economy. So any virus scare is generally advantageous for companies that deal in goods. Plus truckers are currently in huge demand because of supply chain issues.

Analysts are optimistic about Schneider’s growth prospects in 2022 and think that its revenue and earnings will be up 6.5% and 4.1%, on top of the very strong double-digit growth this year. The estimate revisions trend is also encouraging, with the 2022 estimate climbing 13.2% in the last 90 days.

That’s why Schneider’s 1.4% dip over the past week does not make much sense and may be considered an opportunity to buy.

Supporting that thesis is the valuaton. Schneider trades at 11.4X 2022 earnings (P/E), 0.85X sales (P/S) and 0.66X earnings growth (PEG).

The shares carry a Zacks Rank #1 (Strong Buy).

ArcBest Corporation ARCB

Arcbest offers freight transportation services and solutions for road, air and ocean transportation of goods, as well as customizable supply chain solutions and integrated warehousing services in the U.S. and internationally.

So the factors helping Schneider at the moment also apply to Arcbest.

Additionally, analysts are extremely optimistic about the company’s growth in 2022. Even coming off the strong double-digit growth this year, they expect the company to grow its earnings by 15.2% on revenue that’s expected to grow 18.7%. The estimate revisions trend is positive with the 2022 earnings estimates having jumped 41.3% over the past 90 days.

Therefore, the 4.0% decline in its share prices over the past week doesn’t make much sense. But it does help the valuation, which is attractive to say the least. Arcbest shares currently trade at a P/E multiple of 12.0X, a P/S multiple of 0.75X and a PEG ratio of 0.30X.

The shares carry a Zacks Rank #1.

Arrow Electronics Inc. ARW

Arrow Electronics is one of the world’s largest distributors of electronic components and enterprise computing products. It also offers value-added-services.

Being an enabler of the digital economy, Arrow stands to gain from the growing volumes of online sales, remote working and other digitally dependent activity. And as we all know, digitization has accelerated over the past year because of the pandemic.

So Arrow has seen good growth over the past year and analysts expect more to follow this year. They currently see earnings growing 6.5% in 2022 on revenue growth of 1.5%. The estimate revisions trend (up 9.0% in the last 90 days) indicates that final growth numbers could be considerably stronger.

So the 1.8% decline in Arrow’s share prices is an invitation to buy. Especially because its valuation based on P/E of 8.0X, P/S of 0.25X and PEG of 0.31 makes it really cheap at these levels.

The shares carry a Zacks Rank #2 (Buy).

The Chemours Company CC

Chemours is a leading provider of performance chemicals that are key ingredients in end-products and processes across a host of industries including plastics and coatings, refrigeration and air conditioning, mining and general industrial manufacturing and electronics.

Industrial production and manufacturing activity has picked up as far as possible given materials and labor constraints. And tightness in the supply chain is allowing Chemours to pass on raw material cost inflation to customers.

The possibility of a slowdown in the economy, or of a slowdown in manufacturing and industrial operations, is therefore a bit of a concern for Chemours and explains the 2.8% decline in its share prices over the past week.

But the estimate revisions trend remains positive as of now with the 2022 earnings estimate up 10.6% in the last 90 days. Moreover, analysts are looking for 8.2% earnings growth in 2022 on top of the 105.5% growth this year. The revenue growth estimate of 6.4% is also encouraging.

Chemours’ valuation is also attractive with P/E, P/S and PEG at 7.03X, 0.83X and 0.22, respectively.

The shares carry a Zacks Rank #1.

Celestica Inc. CLS

Celestica is one of the largest electronics manufacturing services companies in the world, serving the computer, and communications sectors. The company provides competitive manufacturing technology and service solutions for printed circuit assembly and system assembly, as well as post-manufacturing support to many of the world's leading original equipment manufacturers.

Given the nature of its business, Celestica is a beneficiary of the increased digitization over the past year and a half. Coronavirus-related shutdowns/restrictions would increase our digital dependency, which would be positive for a company like Celestica. But there are many other reasons for increased digitization, which is the way the world is moving. One concern is related to infection rates, which if they hit the electronics supply chain can be a big impediment for the company. That’s probably why we’ve seen its shares retreat 3.9% over the past week.

The lone analyst providing estimates on Celestica sees revenue and earnings growth of 12.4% and 19.8%, respectively in 2022. And he appears to have erred on the side of caution for the most part, in the past. The 2022 estimate is up 17.3% over the past 90 days.

Celestica’s valuation is also attractive, as seen from its P/E multiple of 7.3X, P/S of 0.25X and PEG of 0.86.

Celestica shares carry a Zacks Rank #2.

3 Month Price Movement

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