Yahoo Finance Wingstop and CF Industries have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – May 8, 2023 – Zacks Equity Research shares Wingstop WING as the Bull of the Day and CF Industries CF as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Palantir Technologies Inc. PLTR, Accenture plc ACN and Booz Allen Hamilton BAH.
Here is a synopsis of all five stocks:
Bull of the Day:
Wingstop is a Zacks Rank #1 (Strong Buy) that franchises and operates restaurants under the Wingstop brand name. Its restaurants offer cooked-to-order, hand-sauced, and tossed chicken wings.
The stock has been on a mission this year, already up 50% in 2023. The move stemmed from improving margins on deflation of its main product bone-in chicken wings. On top of that, sales growth has been accelerating, which has helped the company beat earnings expectations four quarters in a row.
Wingstop recently reported Q1 earnings, with the results impressing inventors enough to take the stock well beyond all-time highs.
About the Company
Wingstop was founded in 1994 and is headquartered in Addison, Texas. The company has 1,959 global locations in eight global markets, with 228 new additions in 2022.
Wingstop has a market cap of just over $6 Billion and has a Forward PE of 103. This high valuation has scared some investors away and gives the stock a Zacks Style Score of "F" in Value. However, the stock has a Zacks Style Score of "A" in Momentum.
Wingstop has seen 19 years of consecutive Same Store Sales (SSS) growth and continued to see robust SSS numbers in Q1.
Q1 Earnings Beat: "The Rise of the Chicken Wing"
In early May, the company reported an earnings beat of 28%. Revenues came in at $108.7M v the $101M expected. The company saw adjusted EBITDA at $34.6M, up 60% year over year.
Same Store Sales were up 20% y/y and Wingstop sees FY23 SSS at "high single-digit growth". The company affirmed 240 net new units globally and sees 37 new opening ins Q1, up 11% y/y.
CEO Michael Skipworth had the following comments on the quarter:
"Our strong first quarter results reflect the continued momentum and strength of the Wingstop brand as we delivered 20.1% domestic same store sales growth, driven by transaction growth. With this underlying strength, we believe that our strategies we are executing against can deliver our 20th consecutive year of same store sales growth and another record year of unit growth for Wingstop"
The stock took flight moving from below the $200 level to $223.77. WING did come back down from those levels, but investors are clearly excited about the company's growth prospects. Despite the high valuation, the market thinks Wingstop can grow fast enough to justify its stock price.
Much like Chipotle and the flying burrito stock move of 2019-20, WING has the potential to go much higher than many investors realize.
Analyst Estimates
The impressive quarter has forced analysts to take their numbers and price targets higher. Over the last 7 days, analysts' estimates have gone up in every time frame.
For the current quarter, estimates have spiked from $0.45 to $0.49 over the last month, or 9%.
For the current year, we see estimates trending higher as well. Analysts have taken their numbers from $1.91 to $2.00 or 5%.
Multiple firms have taken their price targets higher since earnings:
RBC reiterated with a Sector Perform but listed its target to $200 from $183.
TD Cowen maintained an Outperform and raised its target to $235 from $210.
Wedbush maintained its Outperform and lifted its price target to $240 from $200.
Barclays reiterated its Overweight with a new price target of $240, up from $200.
The Technicals
The stock is up about 50% on the year and many investors do not want to chase. So let us go over some buyable technical levels that bulls can look out for and enter on any pullbacks.
$193 is the 21-day moving average. This is a great spot for aggressive investors to enter looking to play the momentum.
$184 is the 50-day MA, a likely spot for the stock to find consolidation and a bounce.
$153 is the 200-day MA and is unlikely to test anytime soon unless we have a large market sell-off. If that scenario plays out, this area would be a great spot to enter for long-term investors.
For those looking to continue buying into all-time highs, look for a move to $255. This is the 161.8% Fibonacci extension found by drawing from 2021 highs to 2022 lows.
Bottom Line
While the valuation is scaring off some investors, Wingstop is hitting all-time highs and crushing earnings. Rather than focus on the valuation, investors should follow the price action as the market is trying to tell us something.
As long as Wingstop continues the SSS growth and margins remain favorable, this stock will be hotter than Wingstop's very own Atomic sauce.
Bear of the Day:
CF Industries is a Zacks Rank #5 (Strong Sell) that manufactures and sells hydrogen and nitrogen products for energy, fertilizer, emissions abatement, and other industrial activities
The stock did well in 2022 as grain and fertilizer prices took off. However, CF has slumped over the last six months as prices have fallen significantly.
Inconsistent earnings have not helped and the stock is trading at 2023 lows after a recent earnings report. With analyst estimates falling further, investors could be in a rough spot in the back half of the year.
About the Company
CF Industries is headquartered in Deerfield, IL. The company was founded in 1946 and employs 2,700 people. Its principal products include anhydrous ammonia, granular urea, urea ammonium nitrate, and ammonium nitrate products. It primarily serves cooperatives, independent fertilizer distributors, traders, wholesalers, and industrial users.
CF is valued at $13.5 billion and has a Forward PE of 8. The stock holds Zacks Style Scores of "A" in Value, but "D" in Momentum. The stock pays a dividend of 2.3%.
Q1 Earnings
The company reported Q1 earnings in early May, beating expectations by 8%. Revenues also came in above expected, but gross margins fell to 42.9% from 59.2% last year.
Management commented that despite the downward pressure in the global nitrogen market compared to last year, industry fundamentals remain positive.
The stock did spike on the headline number, but over the next few days, the stock made new monthly lows. This is not a good sign for investors and a reason for the drop is likely due to falling estimates.
Estimates
While the recent earnings report has seen a mix of revisions to estimates, the trend so far this year has been lower. Looking at analyst estimates over the last 90 days, we see a significant drop across the board.
For the current quarter, estimates have been taken down from $3.70 to $2.68, a drop of 27%. For the current year, they have fallen from $13.29 to $8.98, or 32%.
Next year's numbers have seen a drop of 14%, but we have seen a small tick higher over the last 7 days.
Investors looking to buy the dip might have to wait until next year until the fundamental situation improves.
Technical Take
CF has been on a downward trend since December of 2022. Since then, the stock has dropped about 35%.
The 50-day moving average has been resistance multiple times since the stock started trending lower. This level, which is at $75.50, needs to break or the bears will continue to be in control.
Investors are likely tempted to buy the dip, but there could be room lower. While there is value in the name, long-term support looks to be in the $55-60 range. That is over 15% lower than current prices, so investors should be patient.
Summary
The fertilizer names are great to be in when agriculture prices are going higher. Unfortunately, the trend is going the wrong way and until estimates start improving investors should hold off.
Additional content:
What's in the Offing for Palantir's (PLTR) Q1 Earnings Report?
Palantir Technologies Inc. is slated to report its first-quarter 2023 results on May 8, after the bell.
The company's earnings surprise history has not been impressive. Earnings lagged the Zacks Consensus Estimate in three of the trailing four quarters and surpassed once, delivering a negative earnings surprise of 50% on average.
Q1 Expectations
The Zacks Consensus Estimate for revenues is pegged at $504.8 million, indicating 13.1% year-over-year growth. The top line is expected to have benefited from strength in both the government and commercial segments. Both segments are likely to have benefited from increased contributions from existing as well as new customers.
The consensus mark for earnings is pegged at 4 cents per share, indicating year-over-year growth of 100%. Revenue growth and better operating performance are likely to have positively impacted the bottom line in the quarter.
What Our Model Says
Our proven model does not conclusively predict an earnings beat for Palantir this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that's not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Palantir has an Earnings ESP of 0.00% and a Zacks Rank #2.
You can see the complete list of today's Zacks #1 Rank stocks here.
Stocks That Warrant a Look
Here are a couple of stocks from the broader Zacks Business Services sector that investors may consider, as our model shows that these have the right combination of elements to beat on earnings this season:
Accenture plc has an Earnings ESP of +0.37% and a Zacks Rank of 2.
Accenture has an expected earnings growth rate of 8% for fiscal 2023. ACN has a trailing four-quarter earnings surprise of 3.3% on average.
Booz Allen Hamilton currently has an Earnings ESP of +2.85% and a Zacks Rank of 3.
Booz Allen has an expected earnings growth rate of 5.9% for fiscal 2023. BAH has a trailing four-quarter earnings surprise of 8.7% on average.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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Accenture PLC (ACN) : Free Stock Analysis Report
CF Industries Holdings, Inc. (CF) : Free Stock Analysis Report
Booz Allen Hamilton Holding Corporation (BAH) : Free Stock Analysis Report
Wingstop Inc. (WING) : Free Stock Analysis Report
Palantir Technologies Inc. (PLTR) : Free Stock Analysis Report
