Comerica and NIKE have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – July 12, 2022 – Zacks Equity Research shares Comerica Inc. CMA as the Bull of the Day and NIKE, Inc. NKE asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Baker Hughes Co. BKR, EOG Resources EOG and Continental Resources, Inc. CLR.
Here is a synopsis of all five stocks:
Bull of the Day:
Comerica Inc. shares are weak even as the analysts get bullish on this Texas regional bank. Analysts are raising full year earnings estimates on this Zacks Rank #1 (Strong buy) heading into its second quarter earnings report on July 20, 2022.
Is this a buying opportunity in Comerica?
Comerica is a financial services company headquartered in Dallas, Texas with locations in Arizona, California, Florida and Michigan. It operates in three segments: The Commercial Bank, the Retail Bank and Wealth Management.
It has a market cap of $9.7 billion.
Missed by a Penny in the First Quarter 2022
On Apr 20, 2022, Comerica reported its first quarter results and missed the Zacks Consensus by $0.01. Earnings were $1.37 versus the consensus of $1.38.
It's credit metrics remained strong in the first quarter, including net charge-offs of only 6 basis points.
"We are closely monitoring the portfolio, looking for signs of stress from supply chain disruptions, labor constraints and inflation. Overall, our customers are managing through these current challenges, continue to
perform well and have maintained strong balance sheets," said Comerica in its earnings press release.
The bank is on many lists of one that will benefit as the Fed raises rates. Comerica said its balance sheet remained well-positioned for the rising rate environment.
Analysts Get Bullish in the Last Week
2 estimates have been raised for 2022 and 2023 in the last 7 days as the analysts are suddenly bullish on Comerica moving forward.
The 2022 Zacks Consensus Estimate has jumped to $7.86 from $6.74 in the last 90 days. However, that's still an earnings decline of 5.9% as Comerica made $8.35 last year.
But they are equally bullish on 2023, pushing up the Zacks Consensus to $10.08 from $8.65 in the last 3 months. That's earnings growth of 28.2%.
Shares Sell-Off in 2022
Even while earnings are expected to rise, Wall Street is selling the shares. Comerica has fallen 14.7% year-to-date.
It's cheaper than ever with a forward P/E of 9.4.
Comerica also has a price-to-book ratio of 1.5. For banks, a P/B ratio of 1.0 is considered cheap and 2.0 is considered fully valued.
Investors also get a generous dividend, currently yielding 3.7%.
For investors looking for a bank which will benefit from the Fed raising rates, Comerica is one to keep on the shortlist.
Bear of the Day:
NIKE, Inc. is struggling as China faces further COVID restrictions and transit costs rise. This Zacks Rank #5 (Strong Sell) has seen its fiscal 2023 earnings estimates slashed.
NIKE designs, makes and distributes athletic footwear, apparel, equipment and accessories globally for a wide variety of sports and fitness activities.
It also owns Converse, which designs, markets and distributes athletic lifestyle footwear, apparel and accessories.
Another Beat in the Fourth Quarter of Fiscal 2022
On June 27, 2022, NIKE reported its fiscal fourth quarter 2022 results and beat the Zacks Consensus Estimate by $0.09. It reported $0.90 versus the Zacks Consensus Estimate of $0.81.
It was the 8th earnings beat in a row. NIKE has only missed on earnings 2 times in the last 5 years. That's impressive given the difficult retail market conditions during the pandemic with the supply chain, transit and logistics and rising costs.
Revenue fell 1% to $12.2 billion versus the prior year but was up 3% on a currency-neutral basis.
In it's largest market of North America, NIKE saw sales fall 5% year-over-year. But the worst market was Greater China, which sank 19% year-over-year as China's COVID restrictions hit sales.
Gross margin fell 80 basis points to 45%, as higher inventory obsolescence reserves in Greater China and elevated freight and logistics costs, which was partially offset by strategic pricing actions, favorable changes in net foreign currency exchange rates, including hedges, and margin expansion in the NIKE Direct business.
Inventories were up 23% to $8.4 billion.
Analysts Slash Fiscal 2023 and 2024 Earnings Estimates
The analysts are bearish on NIKE. 10 estimates have been cut for fiscal 2023 since the fourth quarter earnings report came out in June.
The Fiscal 2023 Zacks Consensus Estimate has fallen to $3.93 from $4.60 over the last 60 days. That's just a 4.8% rise in earnings as NIKE made $3.75 last year.
However, they are also bearish on fiscal 2024. 6 have been lowered for that year, pushing the Zacks Consensus down to $4.72 from $5.48 in the last 60 days.
Shares Sink in 2022
NIKE shares were initially big winners during the pandemic, but over the last 2 years, they are up just 7.3% compared to a 22.4% gain on the S&P 500.
This year, they have plunged 36.9%.
But with earnings being slashed, are the shares even cheap?
NIKE trades with a forward P/E of 27.5 and a PEG ratio of 2.2. Neither of those metrics fall within the classic value parameters.
NIKE is shareholder friendly, however, with a dividend currently yielding 1.1%. The board also announced a massive, new, 4-year $18 billion share buyback.
But with uncertainty remaining about China's COVID restrictions to start their fiscal year, and continued rising costs, investors might be wise to wait on the sidelines.
Additional content:
Permian Basin & Granite Wash Crude Oil Rig Count Increases
In its weekly release, Baker Hughes Co. reported that the U.S. rig count was higher than the prior-week tally. The rotary rig count, issued by BKR, is usually published in major newspapers and trade publications.
Baker Hughes' data, issued at the end of every week since 1944, helps energy service providers gauge the overall business environment of the oil and gas industry. The number of active rigs and its comparison with the prior-week figure indicates the demand trajectory for Baker Hughes' oilfield services from exploration and production companies.
Details
Total U.S. Rig Count Rises: The count of rigs engaged in the exploration and production of oil and natural gas in the United States was 752 for the week ended Jul 8. The figure is higher than the prior week's count of 750. The current national rig count is higher than the year-ago level of 479.
The onshore rigs in the week ended Jul 8 totaled 731 compared with the prior week's count of 730. In offshore resources, 17 rigs were operating, in line with the prior-week count.
U.S. Oil Rig Count Rises: Oil rig count was 597 for the week ended Jul 8, higher than the prior week's figure of 595. The current number of oil rigs — far from the peak of 1,609 attained in October 2014 — is up from the year-ago figure of 378.
U.S. Natural Gas Rig Count Flat: Natural gas rig count of 153 was in line with the prior-week figure. The count of rigs exploring the commodity is higher than the prior-year week's tally of 101. Per the latest report, the number of natural gas-directed rigs is 90.5% lower than the all-time high of 1,606 recorded in 2008.
Rig Count by Type: The number of vertical drilling rigs totaled 27 units, higher than the prior-week count of 25. Horizontal/directional rig count (encompassing new drilling technology with the ability to drill and extract gas from dense rock formations, also known as shale formations) of 725 was in line with the prior-week level.
Gulf of Mexico (GoM) Rig Count Flat: GoM rig count was 16 units, all oil-directed. The count was in line with the prior-week number.
Rig Count in the Most Prolific Basin
Permian — the most prolific basin in the United States — recorded a weekly oil rig tally of 349, higher than the prior week's count of 348. In the Granite Wash, the tally for weekly oil drilling rigs was three, higher than the prior-week count of two.
Outlook
The West Texas Intermediate crude price is trading higher than the $100-per-barrel mark, reflecting a massive improvement in the past year. Higher oil prices will likely pave the way for rig additions despite a slowdown in drilling activities as upstream players mainly focus on stockholder returns rather than boosting output.
Meanwhile, investors may keep a close eye on energy stocks like EOG Resources and Continental Resources, Inc.. The companies are expected to benefit from the current healthy oil price scenario.
EOG Resources, a leading oil and natural gas exploration and production company carrying a Zacks Rank #3 (Hold), is well placed to capitalize on the crude rally. EOG has estimated roughly 11,500 net undrilled premium locations, resulting in a brightened production outlook. In the Eagle Ford shale play alone, EOG identified 1,900 undrilled premium locations, while in the prolific Delaware Basin, the upstream firm identified 6,300 drilling sites.
EOG Resources is strongly committed to returning capital to shareholders. Since its transition to premium drilling, EOG Resources has returned more than $10 billion in cash to stockholders. With the employment of premium drilling, EOG will be able to reduce its cash operating costs per barrel of oil equivalent, thereby aiding its bottom line.
Continental Resources is also a leading upstream energy company with proven reserves in North Dakota and Oklahoma. The oil inventories of the company are among the best in the industry.
Headquartered in Oklahoma City, Continental Resources has witnessed upward earnings estimate revisions for 2022 and 2023 in the past 30 days. CLR — currently carrying a Zacks Rank #2 (Buy) — is likely to see earnings growth of 161.6% this year. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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NIKE, Inc. (NKE) : Free Stock Analysis Report
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Baker Hughes Company (BKR) : Free Stock Analysis Report
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