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Commercial Metals and GDS Holdings highlighted as Zacks Bull and Bear of the Day

For Immediate Release

Chicago, IL – January 19, 2022 – Zacks Equity Research Shares Commercial Metals CMC  of as the Bull of the Day, GDS Holdings GDS as the Bear of the Day. In addition, Zacks Equity Research provides analysis on FedEx Corp. FDX, D.R. Horton DHI and Keysight Technologies KEYS.

Here is a synopsis of all five stocks:

Bull of the Day:

Commercial Metals is a Zacks Rank #1 (Strong Buy) that sports a B for Value and a C for Growth.  This steel company recently posted a big beat of the Zacks Consensus Estimate and the stock has been running since early December. Let’s explore more about that idea in this Bull Of The Day article.

Description

Irving, TX- based Commercial Metals Company manufactures, recycles and markets steel and metal products, related materials and services. It provides these through a network of facilities that includes eight electric arc furnace ("EAF") mini mills, two EAF micro mills, a rerolling mill, steel fabrication and processing plants, construction-related product warehouses, and metal recycling facilities in the United States and Poland.

Earnings History

When I look at a stock, the first thing I do is look to see if the company is beating the number.  This tells me right away where the market’s expectations have been for the company and how management has communicated to the market.  A stock that consistently beats has management communicating expectations to Wall Street that can be achieved.  That is what you want to see.

For CMC, I see a good history of beating the Zacks Consensus Estimate.  There are three beats over the last four quarters.

The average positive earnings surprise over the last fours quarters works out to be 13%. 

Earnings Estimates Revisions

The Zacks Rank tells us which stocks are seeing earnings estimates move higher.  For CMC, I see annual estimates moving higher.

Over the last 60 days, I see a few increases.

This quarter has increased from $0.79 to $0.92.

Next quarter has also seen a large increase from $0.69 to $0.91.

The full fiscal year 2022 has moved from $3.66 to $3.90.

Next fiscal year has seen an increase from $3.22 to $3.95.

Positive movement in earnings estimates like that is why this stock is a Zacks Rank #1 (Strong Buy).

Valuation

The forward earnings multiple for CMC checks in at 9x, which is extremely low given topline growth last quarter came in at 42%. The price to book multiple is 1.8x, and that level will keep value investors interested. The price-to-sales multiple checks in at 0.7x.

Margins have moved higher for this stock over the last three quarters and that coupled with topline growth is fueling higher earnings estimates.  I see operating margins moving from 6.09% to 6.40% and then to 7.65% over the last three quarters.

Bear of the Day:

GDS Holdings is a Zacks Rank #5 (Strong Sell) following an earnings miss back in November.  The stock was trading just over $60 before the print, but it has tumbled down to the $42 level.  Let’s take a deeper look at this stock in this Bear of the Day article.

Description

GDS Holdings Limited provides information technology service. It offers integrated solutions, consulting, service and training including data center hosting, IT management and operation outsourcing, business continuity management, disaster recovery and cloud computing services. The company operates primarily in Shanghai, Beijing, Shenzhen, Guangzhou and Chengdu. GDS Holdings Limited is headquartered in Shanghai, the People's Republic of China.

Earnings History

When I look at a stock, the first thing I do is look to see if the company is beating the number.  This tells me right away where the market’s expectations have been for the company and how management has communicated to the market.  A stock that consistently beats has management communicating expectations to Wall Street that can be achieved.  That is what you want to see.

In the case of GDS, I see four straight misess of the Zacks Consensus Estimate over the last year.  This alone does not make the stock a Zacks Rank #1 (Strong Buy) and it doesn’t make it a Zacks Rank #5 (Strong Sell) either.

The Zacks Rank does care about the earnings history, but it is much more heavily influenced by the movement of earnings estimates.

Earnings Estimates

The Zacks Rank tells us which stocks are seeing earnings estimates move higher or in this case lower.  For GDS I see estimates moving lower.

This quarter has fallen from -$0.08 to -$0.25.

Next quarter dropped from -$0.18  to -$0.31.

The Zacks Rank is more heavily influenced by the move in the annual numbers, and the movement is mixed for those numbers.

The current year 2021 consensus number has dropped 20 cents to  a loss of $0.97.

The next year has dropped from a loss of $0.33 to a loss of $0.93 over the last 60 days.

Negative movement in earnings estimates like that is why this stock is a Zacks Rank #5 (Strong Sell).

It should be noted that a majority of stocks in the Zacks universe are seeing positive earnings estimate revisions.  That means that the stocks that are seeing small but negative earnings estimate revisions are falling to a Zacks Rank #5 (Strong Sell).

Additional content:

3 Sales and Earnings Growth Winners

With thousands of companies about to report their quarterly results as a new earnings season begins, let’s take a look at the Sales & Earnings Growth Winners screen. It starts with Zacks Rank #1s (Strong Buys) and Zacks Rank #2s (Buys), but also seeks out companies with effective management through ROE and good liquidity.

The companies that pass this screen have a history of earnings and sales growth, which makes them likely to continue such success as they go to the plate in the next few weeks. Here are three names on the list right now: 

FedEx Corp.

FedEx Corp. and the holiday season is a combination that goes together like peanut butter & jelly; buy & hold; Hall & Oates, etc. It’s a match made in market heaven, which was on display in its fiscal second quarter report from mid-December.

You know what FDX does. Every time you hear a beeping sound, its either an Amazon or FedEx truck. The company provides customers and businesses worldwide with a broad portfolio of transportation, e-commerce and business services.

It operates through the following segments: FedEx Express, TNT Express, FedEx Ground and FedEx Freight. As part of the Transportation – Air Freight and Cargo space, FDX is in the top 4% of the Zacks Industry Rank.

Shares surged more than 12.5% in December as it took advantage of the holiday shopping season despite supply chain disruptions and a challenging labor market.

Fiscal second-quarter earnings per share of $4.83 beat the Zacks Consensus Estimate by more than 14%. Revenue of nearly $23.5 billion jumped 14.2% year over year while also exceeding our expectations by nearly 4.2%.

The company thinks the fiscal second half is looking pretty good, so FDX raised its outlook. Analysts followed suit and increased their estimates over the past 30 days.

The Zacks Consensus Estimate for this fiscal year (ending May 2022) is now up to $20.82, which marks a 7% advance over the past 60 days. Expectations for next fiscal year (ending May 2023) is now $23.22, which advanced 2.9% in the same time and suggests year-over-year improvement of approximately 11.5%.

Another sign of second-half optimism was FDX authorizing a new $5 billion share repurchase program. FDX repurchased about $750 million of its common stock fiscal year to date and ended the fiscal second quarter with $6.8 billion in cash.

D.R. Horton

Home is a good place to be during this pandemic, both literally (for safety) and financially (for big bucks in your portfolio). Robust housing market conditions have been a boon for the space, including major players like D.R. Horton.

This Zacks Rank #2 (Buy) homebuilder builds and sells single-family houses for entry level and move-up markets. It operates through three segments… and you’d probably never guess that Homebuilding is the biggest piece with nearly 97% of total revenues in fiscal 2020. The other segments are Forestar and Financial Services. Shares are up more than 45% over the past 12 months.

DHI reports again on Feb 2, when it will be going for a 12th straight quarter with a positive earnings surprise. In its fiscal fourth quarter report, earnings per share of $3.70 beat the Zacks Consensus Estimate by 8.8%. Total revenues of $8.1 billion improved 27% year over year and beat our expectation by more than 4%. Homebuilding revenues accounted for $7.63 billion and were up 23.9% year over year.

As for all of fiscal 2022, DHI expects consolidated revenue between $32.5 billion and $33.5 billion. Homes closed is expected at 90K to 92K.

DHI has been successfully dealing with severe disruptions in its supply chain, including restricting the pace of its sales orders. Analysts believe that the company’s upward trajectory should continue, given its industry-leading market share; solid acquisition strategy; well-stocked supply of land, lots and homes; and affordable product offerings across multiple brands.

Over the past 60 days, the Zacks Consensus Estimate for this year (ending September 2022) advanced 2.3% to $14.50. Next year increased in that time by 2.2% to $15.50. Therefore, the year-over-year improvement is currently expected at nearly 7%.

Keysight Technologies

Our dependence on semiconductors and electronics accelerated dramatically during this pandemic… and it won’t be slowing down anytime soon. In fact, the demand will continue growing exponentially into the future, so we better make sure this stuff works!

That’s what Keysight Technologies is all about. This provider of electronic design and test instrumentation systems is part of the electronics – measuring equipment space, which is in the top 5% of the Zacks Industry Rank.

It’s two segments are the Communications Solutions Group (accounting for 74% of non-GAAP revenues in fiscal 2020) and the Electronic Industrial Solutions Group (26%). Shares of KEYS are up approximately 28% over the past year.

The company topped the Zacks Consensus Estimate for six straight quarters now. Most recently, it reported fiscal fourth quarter earnings per share of $1.82, which beat expectations by 10.3%. Revenues of $1.29 billion improved 6% year over year.

Furthermore, orders increased 21% to $1.49 billion. Revenues at CSG rose 2% year over year to $919 million due to strength in 5G and aerospace, defense and government end-markets. EISG revenues jumped 18% to $375 million thanks to demand for semiconductor measurement solutions and next-generation automotive and energy technologies.

The company attributed the momentum to its software-centric solutions strategy that allows it to capitalize on long-term secular growth trends in its markets. KEYS expects to continue delivering above-market growth moving forward.

Analysts obviously agree as they have raised earnings estimates over the past 60 days. The Zacks Consensus Estimate for this year (ending October 2022) are up 3.1% to $6.91, while the advance for next year (ending September 2023) is 4.3% to $7.54. The expected year-over-year improvement is more than 9% at the moment.

KEYS is in a good position to continue capitalizing on the investment in next generation process technologies by semiconductor companies. The acceleration of 5G deployments and the defense technology modernization are also avenues for growth moving throughout 2022 and beyond.

For its fiscal first quarter, KEYS expects revenues of $1.225 billion to $1.245 billion with non-GAAP earnings between $1.50 and $1.56.

Infrastructure Stock Boom to Sweep America

A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.

The only question is “Will you get into the right stocks early when their growth potential is greatest?”

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Download FREE: How to Profit from Trillions on Spending for Infrastructure >>

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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/performancefor information about the performance numbers displayed in this press release.


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FedEx Corporation (FDX): Free Stock Analysis Report
 
D.R. Horton, Inc. (DHI): Free Stock Analysis Report
 
Commercial Metals Company (CMC): Free Stock Analysis Report
 
Keysight Technologies Inc. (KEYS): Free Stock Analysis Report
 
GDS Holdings (GDS): Free Stock Analysis Report
 
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