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Futu Holdings and Southwest Airlines have been highlighted as Zacks Bull and Bear of the Day
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For Immediate Release
Chicago, IL – September 20, 2023 – Zacks Equity Research shares Futu Holdings Limited (FUTU - Free Report) as the Bull of the Day and Southwest Airlines (LUV - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on General Motors Co. (GM - Free Report) , Ford Motor Co. (F - Free Report) and Stellantis N.V. (STLA - Free Report) .
Zacks Rank #1 (Strong Buy) stock Futu Holdings Limited is a Chinese financial technology (fintech) company that primarily operates in the online brokerage and wealth management industry. Futu Holdings has five main segments, including:
Online Brokerage Services
FUTU allows clients to trade various financial assets including stocks, options, and other securities.
Wealth management
The company offers research reports, portfolio management options, and advisory services to help users make informed investment decisions.
Mobile Apps
FUTU clients can conveniently trade Through the "Futu NiuNiu" and "Futubull" mobile apps
International Brokerage
Futu allows its Chinese customers to diversify to global markets.
Thriving Despite China's Economic Woes
If you have been paying attention to global markets, it's no secret that the Chinese economy is struggling. Over the past five years, the Chinese government caused uncertainty and turmoil in its economy by cracking down on big tech stocks and employing strict "zero COVID" lockdown policies, which crushed the economy. To make matters worse, exports have slowed dramatically while an overbuild of infrastructure has caused a massive housing bubble. With more than half of Chinese household wealth stuck in real estate, the collapsed housing market has caused an economic meltdown to spread through the Chinese economy like wildfire. Unfortunately, for investors, equities markets have not escaped. In fact, the iShares China ETF, a proxy for large-cap Chinese equities, is still well off of its climactic highs from late 2007!
With the nasty economic backdrop, most investors would likely expect a company like Futu to underperform. However, the company is firing on all cylinders. Despite a weak equity market, FUTU's quarterly EPS has grown consistently.
Looking ahead, Zacks Consensus Estimates suggest that earnings will grow at a healthy 39.08% clip for full-year 2023.
Bullish Chart Pattern
Futu's price and volume action aligns with its strong fundamental foundation. The stock is drastically outperforming the Chinese equity market and is carving out a bullish cup with handle base structure on the weekly chart.
Finding Opportunity Amidst Crisis
When it comes to investing, crisis often equates to opportunity. Though struggles remain in Chinese equities, investors may want to consider FUTU because it provides international diversification, a contrarian investment, and large reversion to the mean potential.
Based in Dallas, TX, Southwest Airlines is a low-cost airline provider mainly servicing the United States and "ten near-international" markets. Southwest provides short-haul, high-frequency, point-to-point, low-fare services. The company's point-to-point route structure includes services to and from many secondary or downtown airports such as Dallas Love Field, Houston Hobby, Chicago Midway, Baltimore-Washington International, and Ft-Lauderdale-Hollywood.
Low Cost = Low Performance
Low-cost carriers like Spirit Airlines and Southwest Airlines have been dramatically underperforming their larger peers such as United Airlines.
What is Behind the Underperformance?
Unprofitable and moving in the wrong direction
In Q4, Southwest Airlines swung to a loss for the first time in three quarters. The 38-cent loss was wider than the Zacks Consensus Estimate of 3 cents. Adding to the disappointment, Southwest earned has seen three straight quarters of negative EPS growth.
Operational Disruptions
Massive flight cancellations due to extreme winter weather conditions adversely impacted Southwest's operations. Because Southwest is more focused on one part of the globe when compared to its larger counterparts, the company suffered more. Nearly 17,000 flights were cancelled in the last ten days of 2022 – equating to a pre-tax negative impact of approximately $800 million.
In Fighting & Bad Publicity
Southwest is known and loved by its customers because of the laid-back nature of its flight attendants and employees. This laissez faire attitude is that Southwest management has found that many customers appreciate a less stuffy environment. However, that may change soon. Southwest pilots and employees are seeing little progress in trying to reach a new contract deal. If a strike is to take place, it will lead to even higher costs – especially since competitors like United and American Airlineshave already reached deals with their respective unions.
Margins are Being Squeezed
Rising fuel and labor costs are causing Southwest's financial efficiency to take a significant hit. In fact, LUV's return-on-equity of 5.81% pales in comparison to the S&P 500 Index's 26.2%.
Relative Weakness: When it comes to the stock market, price action = truth. Over the past six months, the S&P 500 Index is up 15.90%, while Southwest is down 14.1%
Negative Earnings ESP Score
Zacks Earnings ESP (Expected Surprise Prediction) measures the chances a company will beat or miss on earnings. LUV has the unfortunate mix of a Zacks Rank #5 (Strong Sell) and a negative ESP – suggesting the company is likely to miss earnings when it reports October 26th.
Conclusion
Prospective airline investors should avoid low-cost carriers, such as Southwest and instead opt for larger players such as United Airlines. Southwest has slower growth, shrinking margins, and notable reputational damage to contend with. Furthermore, the price action is disheartening when compared to the market and the airline group.
Additional content:
"Detroit 3" Auto Stocks Slide as UAW Strike Continues
The United Auto Workers' ("UAW") strike continues to make headlines as the impasse enters its fourth day. This coordinated strike, a historic event with the union simultaneously striking against the Big Three automakers, General Motors Co., Ford Motor Co. and Stellantis N.V., comes at a time when labor unions in the United States are experiencing increased approval among the public, notwithstanding declining membership in recent years.
Around 12,700 UAW workers have taken part in the strike and have targeted three plants — GM's Wentzville, MO, plant, Stellantis' Toledo Assembly and Ford's Michigan Assembly Plant in Wayne. The number of people participating in the strike is less than 10% of the total UAW membership, but in choosing these strategic plants, UAW president Shawn Fain has insisted that they are going to hit where they "need to hit".
Support has also come in from the upper echelons of the government, with no less than President Biden supporting what he sees as the UAW's effort to secure fair wages for the workers. Insisting that the industry needed labor agreements for the future, Biden has also sent senior government personnel to act as a negotiator between the striking labor force and the Big Three.
There has been some headway made with Stellantis, which has improved its offer to the UAW over the weekend in the order of an immediate 10% increase in pay and a 21% wage increase over the course of the contract. Ford and General Motors, however, have remained unrelenting and insisted that the strike would push them to lay off workers in the upcoming week. It remains to be seen whether further inroads are made as talks continue.
While Stellantis and Ford have been having a good year, with stock prices increasing 45.5% and 15.4%, respectively, General Motors has remained flat, falling a mere 0.1%. However, Ford, GM and Stellantis fell 2.1%, 1.8% and 1.6%, respectively, on Monday, as it became clear that the strike will be a longer ordeal than previously thought. This rot might continue.
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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Futu Holdings and Southwest Airlines have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – September 20, 2023 – Zacks Equity Research shares Futu Holdings Limited (FUTU - Free Report) as the Bull of the Day and Southwest Airlines (LUV - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on General Motors Co. (GM - Free Report) , Ford Motor Co. (F - Free Report) and Stellantis N.V. (STLA - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Zacks Rank #1 (Strong Buy) stock Futu Holdings Limited is a Chinese financial technology (fintech) company that primarily operates in the online brokerage and wealth management industry. Futu Holdings has five main segments, including:
Online Brokerage Services
FUTU allows clients to trade various financial assets including stocks, options, and other securities.
Wealth management
The company offers research reports, portfolio management options, and advisory services to help users make informed investment decisions.
Mobile Apps
FUTU clients can conveniently trade Through the "Futu NiuNiu" and "Futubull" mobile apps
International Brokerage
Futu allows its Chinese customers to diversify to global markets.
Thriving Despite China's Economic Woes
If you have been paying attention to global markets, it's no secret that the Chinese economy is struggling. Over the past five years, the Chinese government caused uncertainty and turmoil in its economy by cracking down on big tech stocks and employing strict "zero COVID" lockdown policies, which crushed the economy. To make matters worse, exports have slowed dramatically while an overbuild of infrastructure has caused a massive housing bubble. With more than half of Chinese household wealth stuck in real estate, the collapsed housing market has caused an economic meltdown to spread through the Chinese economy like wildfire. Unfortunately, for investors, equities markets have not escaped. In fact, the iShares China ETF, a proxy for large-cap Chinese equities, is still well off of its climactic highs from late 2007!
With the nasty economic backdrop, most investors would likely expect a company like Futu to underperform. However, the company is firing on all cylinders. Despite a weak equity market, FUTU's quarterly EPS has grown consistently.
Looking ahead, Zacks Consensus Estimates suggest that earnings will grow at a healthy 39.08% clip for full-year 2023.
Bullish Chart Pattern
Futu's price and volume action aligns with its strong fundamental foundation. The stock is drastically outperforming the Chinese equity market and is carving out a bullish cup with handle base structure on the weekly chart.
Finding Opportunity Amidst Crisis
When it comes to investing, crisis often equates to opportunity. Though struggles remain in Chinese equities, investors may want to consider FUTU because it provides international diversification, a contrarian investment, and large reversion to the mean potential.
Bear of the Day:
Based in Dallas, TX, Southwest Airlines is a low-cost airline provider mainly servicing the United States and "ten near-international" markets. Southwest provides short-haul, high-frequency, point-to-point, low-fare services. The company's point-to-point route structure includes services to and from many secondary or downtown airports such as Dallas Love Field, Houston Hobby, Chicago Midway, Baltimore-Washington International, and Ft-Lauderdale-Hollywood.
Low Cost = Low Performance
Low-cost carriers like Spirit Airlines and Southwest Airlines have been dramatically underperforming their larger peers such as United Airlines.
What is Behind the Underperformance?
Unprofitable and moving in the wrong direction
In Q4, Southwest Airlines swung to a loss for the first time in three quarters. The 38-cent loss was wider than the Zacks Consensus Estimate of 3 cents. Adding to the disappointment, Southwest earned has seen three straight quarters of negative EPS growth.
Operational Disruptions
Massive flight cancellations due to extreme winter weather conditions adversely impacted Southwest's operations. Because Southwest is more focused on one part of the globe when compared to its larger counterparts, the company suffered more. Nearly 17,000 flights were cancelled in the last ten days of 2022 – equating to a pre-tax negative impact of approximately $800 million.
In Fighting & Bad Publicity
Southwest is known and loved by its customers because of the laid-back nature of its flight attendants and employees. This laissez faire attitude is that Southwest management has found that many customers appreciate a less stuffy environment. However, that may change soon. Southwest pilots and employees are seeing little progress in trying to reach a new contract deal. If a strike is to take place, it will lead to even higher costs – especially since competitors like United and American Airlineshave already reached deals with their respective unions.
Margins are Being Squeezed
Rising fuel and labor costs are causing Southwest's financial efficiency to take a significant hit. In fact, LUV's return-on-equity of 5.81% pales in comparison to the S&P 500 Index's 26.2%.
Relative Weakness: When it comes to the stock market, price action = truth. Over the past six months, the S&P 500 Index is up 15.90%, while Southwest is down 14.1%
Negative Earnings ESP Score
Zacks Earnings ESP (Expected Surprise Prediction) measures the chances a company will beat or miss on earnings. LUV has the unfortunate mix of a Zacks Rank #5 (Strong Sell) and a negative ESP – suggesting the company is likely to miss earnings when it reports October 26th.
Conclusion
Prospective airline investors should avoid low-cost carriers, such as Southwest and instead opt for larger players such as United Airlines. Southwest has slower growth, shrinking margins, and notable reputational damage to contend with. Furthermore, the price action is disheartening when compared to the market and the airline group.
Additional content:
"Detroit 3" Auto Stocks Slide as UAW Strike Continues
The United Auto Workers' ("UAW") strike continues to make headlines as the impasse enters its fourth day. This coordinated strike, a historic event with the union simultaneously striking against the Big Three automakers, General Motors Co., Ford Motor Co. and Stellantis N.V., comes at a time when labor unions in the United States are experiencing increased approval among the public, notwithstanding declining membership in recent years.
Around 12,700 UAW workers have taken part in the strike and have targeted three plants — GM's Wentzville, MO, plant, Stellantis' Toledo Assembly and Ford's Michigan Assembly Plant in Wayne. The number of people participating in the strike is less than 10% of the total UAW membership, but in choosing these strategic plants, UAW president Shawn Fain has insisted that they are going to hit where they "need to hit".
Support has also come in from the upper echelons of the government, with no less than President Biden supporting what he sees as the UAW's effort to secure fair wages for the workers. Insisting that the industry needed labor agreements for the future, Biden has also sent senior government personnel to act as a negotiator between the striking labor force and the Big Three.
There has been some headway made with Stellantis, which has improved its offer to the UAW over the weekend in the order of an immediate 10% increase in pay and a 21% wage increase over the course of the contract. Ford and General Motors, however, have remained unrelenting and insisted that the strike would push them to lay off workers in the upcoming week. It remains to be seen whether further inroads are made as talks continue.
While Stellantis and Ford have been having a good year, with stock prices increasing 45.5% and 15.4%, respectively, General Motors has remained flat, falling a mere 0.1%. However, Ford, GM and Stellantis fell 2.1%, 1.8% and 1.6%, respectively, on Monday, as it became clear that the strike will be a longer ordeal than previously thought. This rot might continue.
All three stocks currently carry a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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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.
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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.