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Caterpillar and Foot Locker have been highlighted as Zacks Bull and Bear of the Day
Read MoreHide Full Article
For Immediate Release
Chicago, IL – August 31, 2023 – Zacks Equity Research shares Caterpillar Inc. (CAT - Free Report) as the Bull of the Day and Foot Locker, Inc. (FL - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on NVIDIA Corporation (NVDA - Free Report) , Amazon.com, Inc. (AMZN - Free Report) and Adobe Inc. (ADBE - Free Report) .
Caterpillar Inc. stock has crushed the market and the Zacks Industrial Products sector over the trailing 12 months and the last decade.
The construction and mining equipment superpower is benefitting from the ongoing U.S. construction boom and CAT is prepared to ride various megatrends, such as infrastructure and energy spending higher over the next decade-plus.
Caterpillar is trading near fresh highs after climbing 37% in the last three months alone. Yet CAT's valuation levels make the $146 billion market cap stock look flat-out cheap.
Entrenched in Ground Up Economic Growth
Caterpillar is a true giant in the U.S. and global economy, with its array of construction and mining equipment helping fuel wider economic expansion of nearly every kind. Caterpillar's portfolio also includes technology products, alongside services such as rental and finance.
CAT officially breaks up its segments into Construction Industries, Resource Industries, Energy & Transportation, and the very-tiny All Other Segment.
Every major economic undertaking, even in fast-growing technology areas such as data center expansion and semiconductor production, involve various major pieces of equipment Caterpillar makes.
Caterpillar is currently benefiting from the ongoing surge in construction spending in the U.S. from residential to commercial buildings and other areas such as energy and transportation.
Caterpillar is impacted by wider economic cycles. But CAT is prepared to profit from trillions of dollars of U.S. government spending on infrastructure, reshoring, and beyond in both the short term and over the next five to 10 to even 20 years.
For instance, the ongoing energy transition in both the U.S. and beyond "will support increased commodity demand, expanding our total addressable market and providing further opportunities for profitable growth," CEO Jim Umpleby said on its Q2 earnings call.
Recent Performance and Outlook
CAT topped our Q2 estimates at the start of August on the back of 22% sales growth (10th straight period of top-line expansion), driven by gains across all three major segments. Caterpillar also posted record adjusted earnings and boosted its guidance.
CAT's adjusted Q3 consensus earnings estimate has jumped 14% since its release, with its fiscal 2023 and 2024 outlooks improved by 11% and 15%, respectively over this same stretch. Caterpillar's bottom-line positivity helps it land a Zacks Rank #1 (Strong Buy) right now.
Zacks estimates call for Caterpillar's revenue to climb 12% in 2023 and another 3% in 2024, which comes on top of 17% sales growth last year and 22% top-line expansion in FY21. Better yet, CAT's adjusted earnings are projected to soar by 43% this year and then jump another 7% next year.
Price and Valuation
Caterpillar stock has more than doubled the S&P 500 over the last 25 years, up roughly 1,200% vs. 465%. CAT's total return over this period stands at a whopping 2,500% compared to the S&P 500's 860% and the Zacks Industrial Product sector's 460%.
More recently, CAT has climbed 240% over the last 10 years to outpace the benchmark's 170% and its sector's 60%.
CAT shares have surged over 50% in the last year and nearly 40% in the last three months. The stock dipped after hitting fresh records following its earnings release, but CAT has started to march back up toward those levels.
Caterpillar completed the golden cross, where the shorted-dated moving average moves back above the long-term trend, in mid-July. And CAT found upward support at its 50-week average in early June.
Despite CAT's near-term and long-term outperformance and the fact that it is trading near fresh highs, its valuation levels might leave investors salivating. Caterpillar is trading 60% below its 10-year highs, nearly 20% below its median, and 15% beneath the Zacks Industrial sector at 13.5X forward 12-month earnings.
Bottom Line
Caterpillar is part of the Zacks Manufacturing - Construction and Mining industry, currently in the top 1% of over 250 Zacks industries. And its 1.9% dividend yield tops its highly-ranked industry's 1.6% average. Plus, CAT's payout ratio sits at a very comfortable 26%.
Caterpillar is synonymous with every corner of construction, mining, oil and energy, agriculture, and beyond, and its iconic yellow machines are prepared to keep helping drive economic growth in the coming decades.
Foot Locker, Inc. stock tumbled again after its earnings and guidance disappointed Wall Street on August 23.
The footwear retailer is facing near-term headwinds as consumers pull back on spending on goods such as expensive sneakers, alongside other issues. Foot Locker's current troubles even caused the company to pause its dividend beyond its recently approved October payout.
What's Going On?
Foot Locker is a shoe retailer that aims to 'unlock the "inner sneakerhead" in all of us.' The company currently has roughly 2,600 stores across 26 countries under the Foot Locker brand as well as Kids Foot Locker, Champs Sports, atmos, and WSS.
Foot Locker has grown within the broader sneaker revolution that's developed alongside the rise of Nike, its Jordan Brand, and other popular and trendy shoemakers.
Foot Locker is actively reshaping its business to move away from its huge dependence on Nike as the footwear and apparel titan moves toward its own direct-to-consumer businesses. Nike is still very important to Foot Locker and it is doing all it can to have the best relationship possible with NKE.
Foot Locker is also attempting to navigate the changing retail landscape that's seen malls fade and e-commerce rise. FL currently faces many direct competitors in the sneaker space that were born and raised in the digital commerce age.
Foot Locker's 2022 revenue dipped 2% against a tough-to-compete-against year. Meanwhile, its adjusted earnings fell by around 30%. The company fell short of our Q1 EPS estimates and it missed by 20% on the bottom line when it reported its second quarter results on August 23. FL's Q2 comparable-store sales fell by 9.4%, "driven by ongoing consumer softness, changing vendor mix, and the repositioning of Champs Sports."
Foot Lock's downbeat guidance has pushed its FY23 earnings consensus down by 28% and its FY24 outlook 20% lower. FL's most accurate/most recent EPS estimates also came in below the newly downbeat consensus. Zacks estimates call for the company's adjusted earnings to fall another 70% this year on 9% lower sales.
Bottom Line
Foot Locker's overall downbeat earnings outlook helps it land a Zacks Rank #5 (Strong Sell) right now. The company also said when it reported its results that it is pausing its quarterly cash dividend beyond its recently approved October payout to "ensure that we have the flexibility to continue to fund our strategic investments appropriately."
Foot Locker stock is down 50% YTD and 40% over the past decade. The sharp downturn has its trading way below its 50-week and 200-week moving averages. All that said, investors might want to stay away from FL and avoid possibly attempting to catch a falling knife.
Additional content:
Want to Capitalize on the A.I. Boom? Buy These 3 Stocks Right Away
Since the unveiling of OpenAI's ChatGPT last November, the interest of investors in artificial intelligence (AI) skyrocketed. Countless players are now getting attracted to the space as people are rethinking possibilities for disruptive changes that AI could bring. In its second-quarter earnings release,NVIDIA Corporation mentioned that globally companies are transitioning to accelerated computing and generative AI from general purpose.
These trends are reflected in soaring AI stocks, indicating investors' expectations that a lot will change in the coming years with the advancement in AI. Considering the backdrop, three stocks that are well-poised to gain in the long run are NVIDIA, Amazon.com, Inc. and Adobe Inc.
Huge demand for NVIDIA's data center graphics processing units (GPUs) that power AI servers is accumulating terrific growth for the stock. From selling data center chips, the company generated 76% of its revenue in the second quarter of fiscal 2024. NVDA has guided revenues for the third quarter of fiscal 2024 at $16 billion, calling for a massive growth from just $5.9 billion in the year-ago comparable quarter. This is a good reflection of the continuation of NVIDIA's AI-driven growth.
Amazon is making a considerable effort to integrate AI into its services. This has created opportunities for Amazon's Amazon Web Services (AWS) to rejuvenate its cloud business. For training and running AI systems, Amazon over the years has been developing its own AI chips, which can be a substitute for Nvidia's chips.
Adobe is introducing generative AI tools for extending its services. Recently, ADBE rolled out Firefly, a generative AI platform for users to generate and edit images. The technology can also be implemented for animations and editing videos, creating more opportunities.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
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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Caterpillar and Foot Locker have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – August 31, 2023 – Zacks Equity Research shares Caterpillar Inc. (CAT - Free Report) as the Bull of the Day and Foot Locker, Inc. (FL - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on NVIDIA Corporation (NVDA - Free Report) , Amazon.com, Inc. (AMZN - Free Report) and Adobe Inc. (ADBE - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Caterpillar Inc. stock has crushed the market and the Zacks Industrial Products sector over the trailing 12 months and the last decade.
The construction and mining equipment superpower is benefitting from the ongoing U.S. construction boom and CAT is prepared to ride various megatrends, such as infrastructure and energy spending higher over the next decade-plus.
Caterpillar is trading near fresh highs after climbing 37% in the last three months alone. Yet CAT's valuation levels make the $146 billion market cap stock look flat-out cheap.
Entrenched in Ground Up Economic Growth
Caterpillar is a true giant in the U.S. and global economy, with its array of construction and mining equipment helping fuel wider economic expansion of nearly every kind. Caterpillar's portfolio also includes technology products, alongside services such as rental and finance.
CAT officially breaks up its segments into Construction Industries, Resource Industries, Energy & Transportation, and the very-tiny All Other Segment.
Every major economic undertaking, even in fast-growing technology areas such as data center expansion and semiconductor production, involve various major pieces of equipment Caterpillar makes.
Caterpillar is currently benefiting from the ongoing surge in construction spending in the U.S. from residential to commercial buildings and other areas such as energy and transportation.
Caterpillar is impacted by wider economic cycles. But CAT is prepared to profit from trillions of dollars of U.S. government spending on infrastructure, reshoring, and beyond in both the short term and over the next five to 10 to even 20 years.
For instance, the ongoing energy transition in both the U.S. and beyond "will support increased commodity demand, expanding our total addressable market and providing further opportunities for profitable growth," CEO Jim Umpleby said on its Q2 earnings call.
Recent Performance and Outlook
CAT topped our Q2 estimates at the start of August on the back of 22% sales growth (10th straight period of top-line expansion), driven by gains across all three major segments. Caterpillar also posted record adjusted earnings and boosted its guidance.
CAT's adjusted Q3 consensus earnings estimate has jumped 14% since its release, with its fiscal 2023 and 2024 outlooks improved by 11% and 15%, respectively over this same stretch. Caterpillar's bottom-line positivity helps it land a Zacks Rank #1 (Strong Buy) right now.
Zacks estimates call for Caterpillar's revenue to climb 12% in 2023 and another 3% in 2024, which comes on top of 17% sales growth last year and 22% top-line expansion in FY21. Better yet, CAT's adjusted earnings are projected to soar by 43% this year and then jump another 7% next year.
Price and Valuation
Caterpillar stock has more than doubled the S&P 500 over the last 25 years, up roughly 1,200% vs. 465%. CAT's total return over this period stands at a whopping 2,500% compared to the S&P 500's 860% and the Zacks Industrial Product sector's 460%.
More recently, CAT has climbed 240% over the last 10 years to outpace the benchmark's 170% and its sector's 60%.
CAT shares have surged over 50% in the last year and nearly 40% in the last three months. The stock dipped after hitting fresh records following its earnings release, but CAT has started to march back up toward those levels.
Caterpillar completed the golden cross, where the shorted-dated moving average moves back above the long-term trend, in mid-July. And CAT found upward support at its 50-week average in early June.
Despite CAT's near-term and long-term outperformance and the fact that it is trading near fresh highs, its valuation levels might leave investors salivating. Caterpillar is trading 60% below its 10-year highs, nearly 20% below its median, and 15% beneath the Zacks Industrial sector at 13.5X forward 12-month earnings.
Bottom Line
Caterpillar is part of the Zacks Manufacturing - Construction and Mining industry, currently in the top 1% of over 250 Zacks industries. And its 1.9% dividend yield tops its highly-ranked industry's 1.6% average. Plus, CAT's payout ratio sits at a very comfortable 26%.
Caterpillar is synonymous with every corner of construction, mining, oil and energy, agriculture, and beyond, and its iconic yellow machines are prepared to keep helping drive economic growth in the coming decades.
Bear of the Day:
Foot Locker, Inc. stock tumbled again after its earnings and guidance disappointed Wall Street on August 23.
The footwear retailer is facing near-term headwinds as consumers pull back on spending on goods such as expensive sneakers, alongside other issues. Foot Locker's current troubles even caused the company to pause its dividend beyond its recently approved October payout.
What's Going On?
Foot Locker is a shoe retailer that aims to 'unlock the "inner sneakerhead" in all of us.' The company currently has roughly 2,600 stores across 26 countries under the Foot Locker brand as well as Kids Foot Locker, Champs Sports, atmos, and WSS.
Foot Locker has grown within the broader sneaker revolution that's developed alongside the rise of Nike, its Jordan Brand, and other popular and trendy shoemakers.
Foot Locker is actively reshaping its business to move away from its huge dependence on Nike as the footwear and apparel titan moves toward its own direct-to-consumer businesses. Nike is still very important to Foot Locker and it is doing all it can to have the best relationship possible with NKE.
Foot Locker is also attempting to navigate the changing retail landscape that's seen malls fade and e-commerce rise. FL currently faces many direct competitors in the sneaker space that were born and raised in the digital commerce age.
Foot Locker's 2022 revenue dipped 2% against a tough-to-compete-against year. Meanwhile, its adjusted earnings fell by around 30%. The company fell short of our Q1 EPS estimates and it missed by 20% on the bottom line when it reported its second quarter results on August 23. FL's Q2 comparable-store sales fell by 9.4%, "driven by ongoing consumer softness, changing vendor mix, and the repositioning of Champs Sports."
Foot Lock's downbeat guidance has pushed its FY23 earnings consensus down by 28% and its FY24 outlook 20% lower. FL's most accurate/most recent EPS estimates also came in below the newly downbeat consensus. Zacks estimates call for the company's adjusted earnings to fall another 70% this year on 9% lower sales.
Bottom Line
Foot Locker's overall downbeat earnings outlook helps it land a Zacks Rank #5 (Strong Sell) right now. The company also said when it reported its results that it is pausing its quarterly cash dividend beyond its recently approved October payout to "ensure that we have the flexibility to continue to fund our strategic investments appropriately."
Foot Locker stock is down 50% YTD and 40% over the past decade. The sharp downturn has its trading way below its 50-week and 200-week moving averages. All that said, investors might want to stay away from FL and avoid possibly attempting to catch a falling knife.
Additional content:
Want to Capitalize on the A.I. Boom? Buy These 3 Stocks Right Away
Since the unveiling of OpenAI's ChatGPT last November, the interest of investors in artificial intelligence (AI) skyrocketed. Countless players are now getting attracted to the space as people are rethinking possibilities for disruptive changes that AI could bring. In its second-quarter earnings release,NVIDIA Corporation mentioned that globally companies are transitioning to accelerated computing and generative AI from general purpose.
These trends are reflected in soaring AI stocks, indicating investors' expectations that a lot will change in the coming years with the advancement in AI. Considering the backdrop, three stocks that are well-poised to gain in the long run are NVIDIA, Amazon.com, Inc. and Adobe Inc.
We have employed our proprietary stock screener to zero down these three stocks. NVIDIA and Amazon sport a Zacks Rank #1 (Strong Buy), while Adobe carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
3 Stocks in the Spotlight
Huge demand for NVIDIA's data center graphics processing units (GPUs) that power AI servers is accumulating terrific growth for the stock. From selling data center chips, the company generated 76% of its revenue in the second quarter of fiscal 2024. NVDA has guided revenues for the third quarter of fiscal 2024 at $16 billion, calling for a massive growth from just $5.9 billion in the year-ago comparable quarter. This is a good reflection of the continuation of NVIDIA's AI-driven growth.
Amazon is making a considerable effort to integrate AI into its services. This has created opportunities for Amazon's Amazon Web Services (AWS) to rejuvenate its cloud business. For training and running AI systems, Amazon over the years has been developing its own AI chips, which can be a substitute for Nvidia's chips.
Adobe is introducing generative AI tools for extending its services. Recently, ADBE rolled out Firefly, a generative AI platform for users to generate and edit images. The technology can also be implemented for animations and editing videos, creating more opportunities.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
See Stocks Free >>
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
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.