For Immediate Release
Chicago, IL – December 1, 2022 – Zacks Equity Research shares JinkoSolar JKS as the Bull of the Day and C.H. Robinson Worldwide CHRW as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Tesla Inc. TSLA, CarParts.com PRTS and Allison Transmission Holdings ALSN.
Here is a synopsis of all five stocks:
Bull of the Day:
JinkoSolar is one of the largest solar panel manufacturers on the planet and it stands to benefit from the massive expansion of renewable and alternative energy in the U.S. and beyond. The solar giant's earnings outlook for next year has soared since its Q3 release in late October.
JinkoSolar stock is trading well off its highs and its valuation levels are extremely enticing for a growth-focused company in a potentially game-changing industry. Plus, JKS stock soared above a key moving average on Wednesday.
JinkoSolar makes various types of solar panels geared toward different aspects of the market. The company sells its offerings to residential customers for their roofs, as well as high-performance systems for localized industrial and commercial energy production. JKS also sells its photovoltaic (PV) panels to larger energy and electricity producers.
JinkoSolar boasts that more than a million homes around the world have been fitted with JinkoSolar's PV panels. JKS has benefited from an internal push from the Chinese government to boost solar panel production in the country.
JinkoSolar's vertically integrated manufacturing process helps it lower the costs of producing complicated, high-tech PV panels. JinkoSolar operates out of 14 global production bases in China, U.S., Malaysia, and Vietnam. Production outside of China is key as tension rise between the U.S. and the world's second-largest economy.
Solar's Expansion & Upside
The nearby chart showcases JinkoSolar's impressive revenue growth. Yet all of this expansion is rather new. In fact, solar panels and solar energy didn't gain any real traction until the mid-2010s.
Solar is now a massive industry that's been spurred by a mixture of government forces and incentives, as well as public and private investment. The expansion of wind and solar helped renewables expand their share of the U.S. electricity generation mix from 10% in 2010—when it was mostly from hydroelectric—to 20% last year.
Overall, solar accounts for roughly 3% of total U.S. electricity generation. Meanwhile, renewables only make up about 12% of total U.S. primary energy consumption, with solar making up just 12% of that slice of the pie.
The mixture of rapid growth and massive upside is what makes the solar energy industry so intriguing. The U.S. Energy Information Administration projects that renewables will double their share of the U.S. electricity generation mix by 2050, with solar making up a large chunk of those gains. And alternative energy now accounts for 75% of the growth in overall global energy investment.
The Chinese solar firm's global module shipments doubled year-over-year in Q3. The company is also successfully boosting both its production efficiency and rolling our more efficient panels, which are both crucial to the long-term growth of the industry.
JinkoSolar's profitability improved sequentially in Q3, with its gross margin up 100 basis points to 15.7%. Analysts raced to boost their FY23 estimates following its Q3 release, which is no easy task amid the current economic environment.
Zacks estimates call for its revenue to skyrocket 84% in 2022 from $6.34 billion to $11.65 billion (on top of 19% growth last year). The firm is then projected to boost its sales by another 40% in FY23 all the way to $16.34 billion—a $10 billion expansion in just two years.
JinkoSolar's adjusted earnings are projected to soar 116% in FY22 to hit $3.67 per share and then climb 68% higher in FY23. Plus, its consensus EPS estimate for 2023 has jumped 39% since its release to help it land a Zacks Rank #1 (Strong Buy) right now.
Price Performance and Valuation
JinkoSolar stock has climbed 105% in the past five years to lag its industry, with JKS up 175% over the past three years vs. the Zacks Solar industry's 160% climb. More recently, JKS has managed to jump 10% in 2022.
Despite the showing in 2022, JinkoSolar stock has tumbled since the summer to trade around 33% below its highs. This pullback sets up a nice entry point. Plus, its current price target offers nearly 30% upside to Wednesday's closing price. And the stock jumped above its 50-day moving average on Wednesday after it soared during regular hours.
JinkoSolar trades at just 7.7X forward 12-month earnings vs. the Zacks Solar industry's 44.1X average. This group of companies includes other standouts such as First Solar (FSLR) and Sunrun (RUN).
Both First Solar and Sunrun are part of the solar PV space. First Solar trades at 37.1X forward earnings, while Sunrun trades at over 60X. These examples help highlight how much value JinkoSolar offers investors. JinkoSolar also trades well below the S&P 500's 17.5X, as well as a 40% discount to its own five-year median.
Investors should be aware that the U.S. government and the Biden administration are trying to curb imports of Chinese solar panels as the country tries to boost its own production, which is microscopic by comparison. That said, JinkoSolar now makes panels in various parts of the world and sells them in China, Europe, and beyond. And the U.S. simply needs the panels as it tries to reach its self-imposed emissions goals.
JinkoSolar's growth outlook is clearly impressive as the solar industry gains momentum in the U.S., China, Europe, and beyond. Solar accounts for only a tiny fraction of U.S. power generation right now, but its role is expected to soar in the coming decades.
Investors might want to consider adding exposure to at least a few solar stocks. JinkoSolar offers investors the chance to do just that through its ADR shares which are trading at a big discount to their highs. Plus, JKS currently presents an excellent mixture of near-term and long-term growth, coupled with impressive value.
As a note, I own JinkoSolar stock as part of Zacks newest trading service – Alternative Energy Innovators.
Bear of the Day:
C.H. Robinson Worldwide is one of the largest logistics platforms on the planet, and CHRW stock has outperformed the market over the last year.
But C.H. Robinson reported disappointing Q3 2022 results in early November. The company’s earnings outlook has slipped since then and CHRW shares have now lagged the market over the past three months.
C.H. Robinson is one of the world's largest logistics platforms, with nearly $30 billion in freight under management. The company provides freight transportation and logistics, as well as outsource solutions, information services, and beyond to roughly 100,000 global customers.
In general, the third-party logistics industry offers room for expansion in a globally-interconnected world, where streamlined shipping and transportation services are paramount. C.H. Robinson’s revenue climbed 6% in 2020 and 43% in 2021.
The firm was looking solid through the first half of 2022, but the slowing economy is finally catching up. “On our second quarter earnings call in late July, I talked about a deceleration in demand that we expected to see in the second half of 2022 in three large verticals for freight, including weakness in the retail market and further slowing in the housing market. We’re now seeing those expectations play out,” CEO Bob Biesterfeld said in prepared Q3 remarks in early November.
C.H. Robinson’s third quarter revenue fell 4% as did its adjusted earnings. Both figures came in below Zacks estimates, with the logistics firm missing our EPS estimate by 17%. The company’s operating expenses climbed 12%. Plus, CHRW said it believes it is “entering a time of slower economic growth where freight markets will continue to cool from their peak.”
Zacks estimates still call for its revenue to climb nearly 11% in 2022 to boost its adjusted earnings by 29%. These are rather impressive figures considering the big year it had in 2021. However, C.H. Robinson now faces economic headwinds and two strong years of growth to compare itself against.
Analysts lowered their earnings outlook for both 2022 and 2023 to help it land a Zacks Rank #5 (Strong Sell) right now. Zacks estimates call for its revenue to fall 14% YoY in 2023 and for its adjusted earnings to slide 28% to see it pull in less on both the top and bottom lines than it did in 2021.
C.H. Robinson does pay a solid dividend and it is rolling out efforts to cut costs. That said, investors might want to stay away from CHRW shares until the market gains more clarity on the economic outlook for 2023.
Tesla (TSLA) Recalls 80K EVs in China, Revamps Model 3
In two major distinct recalls, EV kingpin Tesla Inc. is recalling more than 80,000 EVs in China.
The automaker decided to recall a total of 67,698 imported Model S and Model X vehicles produced between Sep 25, 2013 and Nov 21, 2020, according to China's State Administration for Market Regulation. The recall is due to a software issue that hinders the battery management system of the cars. The software on these vehicles will be upgraded free of cost.
In the second recall, Tesla is recalling 2,736 imported Model 3 vehicles produced between Jan 12, 2019, and Nov 22, 2019, and 10,127 of the China-produced version of the car. The decision was arrived at due to malfunctioning seatbelts.
Even though Tesla is still the undisputed leader in the EV space, recalls have been quite frequent. A few days ago, Tesla announced two recall plans. In the first incident, it recalled nearly 30,000 Model X cars in the United States over an issue of the faulty deployment of airbags. Tesla announced its decision to recall another 321,628 vehicles over a software issue that caused the tail lights on some cars to malfunction.
The glitch may affect one or both tail lights on certain Model 3 and Model Y vehicles. Earlier in the month, the company recalled more than 40,000 Model S and Model X vehicles that ran the risk of experiencing a loss of power steering assist when driving on rough roads or after hitting a pothole. Recalls continue to hurt this auto giant amid its constant push for high-efficiency technology.
In other news, it has been reported that Tesla is working on a new version of its Model 3 sedan that was originally launched in 2017. The Model 3, with a starting price under $47,000 in the United States, has been Tesla's smallest and most affordable vehicle and has remained a popular choice among buyers. The model has not received much of an overhaul, unlike Model S, TSLA's premium EV sedan that was launched last year.
The EV magnate has recently come up with a redesign project codenamed Highland. Allegedly, the project has been planned to reduce cost as Tesla is contesting itself with other Model 3 contenders and legacy automakers amid an intensively competitive environment. In light of the situation, Tesla plans to do away with redundancies in the vehicle design and streamline the production process to not limit margins.
To cut down production costs, under the project, the manufacturer will make the vehicle shell out of large cast pieces, reducing the number of components. The new model will have fewer interior components and a slightly redesigned exterior.
The redesign for the Model 3 is based on the revamp of the Model S that added an airplane-style yoke instead of the conventional steering wheel and removed buttons and traditional air vents to have a minimalist interior. On similar lines, physical buttons will be eliminated as much as possible and there is a chance that the new model will have a yoke. The redesigned Model 3 may also have some powertrain performance adjustments.
Per sources, production of the new model will begin at Tesla's Shanghai Gigafactory in the third quarter of 2023 and is planned for Tesla's Fremont, CA, plant as well, although no definite date has been provided.
From the beginning, the Model 3 had a radically simplified interior compared to other vehicles in its class. Tesla's approach has always been to avoid complexity in production. The recent development will ensure that EV owners keep Tesla in mind despite the tough competition.
Shares of TSLA have lost 50.4% over a year compared with the industry's 51.8% decline.
Zacks Rank & Key Picks
TSLA currently carries a Zacks Rank #3 (Hold).
Here are some better-ranked players in the auto space – CarParts.com, sporting a Zacks Rank #1 (Strong Buy), and Allison Transmission Holdings carrying a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks Rank #1 stocks here.
CarParts has an expected earnings growth rate of 85% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised 72.7% upward over the past 30 days.
Allison has an expected earnings growth rate of 26.1% for the current year. The Zacks Consensus Estimate for ALSN's current-year earnings has been revised 0.6% upward in the past 30 days.
Genuine Parts has an expected earnings growth rate of 18.1% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised 0.2% downward in the past 30 days.
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