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Reinsurance Group and Brown-Forman have been highlighted as Zacks Bull and Bear of the Day
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For Immediate Release
Chicago, IL – July 22, 2024 – Zacks Equity Research shares Reinsurance Group of America's (RGA - Free Report) as the Bull of the Day and Brown-Forman (BF.B - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on BJ's Restaurants, Inc. (BJRI - Free Report) , Wingstop Inc. (WING - Free Report) and Chipotle Mexican Grill, Inc. (CMG - Free Report) .
As one of the largest global life and health reinsurance companies, Reinsurance Group of America's stock has soared over +30% YTD and the rally could continue as its Q2 results approach on August 1st.
Boasting a Zacks Rank #1 (Strong Buy), RGA lands the Bull of the Day and has an overall "A" VGM Zacks Style Scores grade for the combination of Value, Growth, and Momentum.
Growth in Asia
Notably, the United States is the world's largest reinsurance market, which fosters RGA's robust top and bottom lines along with its presence as a market leader in the United Kingdom and Canada as well.
However, RGA's expansion in Asia has led to a record quantity of new business that should continue fueling the company's growth. Honk Kong, RGA's largest Asian market has seen increased volumes of Mainland Chinese visitors buying life insurance.
Outside of China, RGA secured a $4.7 billion deal in Japan during the first quarter, stating it launched one of its prominent Japanese insurance products to a major insurer in Korea as well.
Q2 Expectations for RGA
For the second quarter, RGA's sales are thought to have spiked 15% year over year to $4.92 billion with Q2 EPS projected to rise 12% to $4.94. More intriguing, The Zacks ESP (Expected Surprise Prediction) also indicates RGA could surpass earnings expectations with the Most Accurate Estimate having Q2 EPS slated at $5.08 and roughly 3% above the Zacks Consensus.
RGA has surpassed earnings expectations for five consecutive quarters posting an average earnings surprise of 19.48% in its last four quarterly reports. This comes as RGA posted record quarterly EPS of $6.02 in Q1.
Attractive Growth & Valuation
As shown in the EPS Before Non-Recurring Items (BNRI) chart below, RGA's profitability has continued to reach new heights following the pandemic.
Overall, RGA's annual earnings are now expected to be up 6% in fiscal 2024 and are forecasted to rise another 4% in FY25 to a whopping $22.02 per share. RGA's top line has been at record levels as well and total sales are expected to expand another 13% this year and projected to be slightly higher in FY25 with projections north of $21 billion.
Making RGA's growth more attractive is that its stock trades at 10.1X forward earnings which is a lucrative discount to the S&P 500's 23.2X, despite impressively outperforming the broader market in recent years.
Plus, RGA still trades 65% below its decade-long high of 29.1X forward earnings and offers a slight discount to the median of 11.2X.
Bottom Line
Reinsurance Group of America's dominance in various global markets has been very impressive and exhilarating to investors. Furthermore, the impeccable rally in RGA shares could very well continue considering its cheap P/E valuation and expansive EPS growth.
Nowadays it seems like every ultra-famous celebrity has their own whisky line, leading to increased competition for Brown-Forman and its iconic Jack Daniel's brand.
While Brown-Forman is one of the largest producers in the spirits and wine business, the company has grappled with supply chain disruptions along with the impact of higher inflation and interest rates.
Landing a Zacks Rank #5 (Strong Sell) and the Bear of the Day, it may be best to avoid Brown-Forman's stock at the moment.
Poor Price Performance
Attributed to the growing alternatives regarding whiskey brands and its choppy operating environment, Brown-Forman's stock has fallen -23% year to date and plummeted -37% over the last year.
Subpar Outlook
Although Brown-Forman believes its turnaround is ahead, the company still expects a volatile operating environment due to global macroeconomic and geopolitical uncertainties.
To that point, earnings for Brown-Forman's current fiscal 2025 are expected to decline -13% to $1.85 versus $2.14 per share in FY24. Brown-Forman's bottom line is expected to rebound and rise 5% in FY26 but it's noteworthy that earnings estimate revisions are noticeably lower over the last 60 days.
Furthermore, Brown-Forman's sales growth doesn't necessarily sway investors to think its future earnings potential will be lucrative once its higher operating costs and expenses normalize.
Valuation Concerns
Considering its mediocre top line expansion, Brown-Forman's stock trades at a high price-to-sales valuation of 4.9X compared to the Zacks Beverages-Alcohol Industry average of 1.6X which is closer to the optimum level of less than 1X.
More concerning is that amid its lowered profitability (and poor stock performance), BF. B still trades at a 23.7X forward earnings multiple which doesn't offer a discount to the S&P 500's 23.2X. Plus, this is a premium to the industry average of 17.3X forward earnings.
Bottom Line
Brown-Forman's stock has been on a slippery downward slope and a rebound doesn't look likely at this point, especially as there are competition issues to address on top of broader economic factors.
Additional content:
3 Restaurant Stocks Set to "Deliver" Q2 Earnings Beats
Restaurant companies' second-quarter 2024 results are likely to be bolstered by increased menu prices, higher average check sizes and expansion initiatives. Many restaurant companies benefited from partnerships with delivery services and digital platforms.
Restaurant operators have been focused on digital innovation, sales-building strategies and cost-saving measures. Digital innovation has become crucial, with partnerships with delivery services like DoorDash, Grubhub, Postmates and Uber Eats playing a significant role in boosting sales. The introduction of self-service kiosks and loyalty programs bodes well.
The industry players are likely to have benefited from the rise in off-premise sales, including delivery, takeout, drive-thru, catering, meal kits, and off-site options like kiosks and food trucks in the second quarter. Many operators also tested ghost or virtual kitchens, which have received positive customer feedback. The combination of off-premise offerings and connected curbside services has further driven customer satisfaction and industry growth.
The latest Earnings Trend report suggests that the Zacks Retail-Wholesale sector's second-quarter earnings are expected to increase 7.3% from the year-ago period's reported figure. The previous quarter recorded a 28.1% increase. The sector's revenues are projected to increase 4.4%, compared with 5% reported in the previous quarter. However, margins are expected to increase 0.2%. Companies from the restaurant industry, like BJ's Restaurants, Inc., Wingstop Inc. and Chipotle Mexican Grill, Inc. are expected to beat estimates in the ongoing reporting cycle.
However, high costs are likely to have negatively impacted the companies margin to some extent in second-quarter 2024. Intense competition, high wages and food cost inflation are concerning. The industry continues to bear increased expenses, which have been affecting margins. Higher pre-opening costs, marketing expenses and costs related to sales-boosting initiatives have been exerting pressure on the company's margins.
How to Make the Right Pick?
Given the wide range of companies in this space, the task is by no means easy. While it is impossible to be sure of the outperformers, our proprietary methodology — a positive Earnings ESP along with a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — makes it relatively simple. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Earnings ESP is our proprietary methodology for identifying stocks with high chances of delivering a surprise in their upcoming earnings announcements. It shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. Our research shows that for stocks with the abovementioned combination, chances of a positive earnings surprise are as high as 70%.
Our Choices
Here we discuss in detail the three above-mentioned restaurant companies that are likely to beat estimates this time around.
BJ's Restaurants is scheduled to report second-quarter 2024 results on Jul 25. BJRI currently sports a Zacks Rank #1 and has an Earnings ESP of +9.25%. You can see the complete list of today's Zacks #1 Rank stocks here.
BJ's Restaurants' second-quarter top line is likely to have been aided by productivity and margin enhancement initiatives and operational excellence across its restaurants. Also, the company's expansion and, remodeling and digital initiatives are encouraging.
The Zacks Consensus Estimate for second-quarter 2024 earnings is pegged at 49 cents per share, suggesting a decline of 2% from 50 cents reported in the prior-year quarter.
Wingstop is slated to report fiscal second-quarter fiscal 2024 results on Jul 31. WING currently has an Earnings ESP of +2.03% and a Zacks Rank #2.
The company's second-quarter results are likely to benefit from delivery channel expansion, menu innovation and digital marketing initiatives. Also, its supply-chain strategy and robust unit economics are adding to the positives. The Zacks Consensus Estimate for second-quarter fiscal 2024 earnings is pegged at 80 cents per share, suggesting growth of 40.4% from 57 cents reported in the prior-year quarter.
Chipotle is scheduled to report second-quarter 2024 results on Jul 24. CMG currently has an Earnings ESP of +0.72% and a Zacks Rank #3.
Chipotle's second-quarter performance is likely to have benefited from its digital efforts, Chipotlane add-ons and marketing initiatives. These, along with strength in digital sales and new restaurant openings, have been driving the company.
We expect food and beverage revenues to increase 16.2% year over year to $2,901.2 million. Moreover, delivery service revenues are expected to be $19.3 million, up 11.5% year over year.
The Zacks Consensus Estimate for second-quarter 2024 earnings is pegged at 31 cents per share, suggesting growth of 24% from 25 cents reported in the prior-year quarter.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% 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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Reinsurance Group and Brown-Forman have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – July 22, 2024 – Zacks Equity Research shares Reinsurance Group of America's (RGA - Free Report) as the Bull of the Day and Brown-Forman (BF.B - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on BJ's Restaurants, Inc. (BJRI - Free Report) , Wingstop Inc. (WING - Free Report) and Chipotle Mexican Grill, Inc. (CMG - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
As one of the largest global life and health reinsurance companies, Reinsurance Group of America's stock has soared over +30% YTD and the rally could continue as its Q2 results approach on August 1st.
Boasting a Zacks Rank #1 (Strong Buy), RGA lands the Bull of the Day and has an overall "A" VGM Zacks Style Scores grade for the combination of Value, Growth, and Momentum.
Growth in Asia
Notably, the United States is the world's largest reinsurance market, which fosters RGA's robust top and bottom lines along with its presence as a market leader in the United Kingdom and Canada as well.
However, RGA's expansion in Asia has led to a record quantity of new business that should continue fueling the company's growth. Honk Kong, RGA's largest Asian market has seen increased volumes of Mainland Chinese visitors buying life insurance.
Outside of China, RGA secured a $4.7 billion deal in Japan during the first quarter, stating it launched one of its prominent Japanese insurance products to a major insurer in Korea as well.
Q2 Expectations for RGA
For the second quarter, RGA's sales are thought to have spiked 15% year over year to $4.92 billion with Q2 EPS projected to rise 12% to $4.94. More intriguing, The Zacks ESP (Expected Surprise Prediction) also indicates RGA could surpass earnings expectations with the Most Accurate Estimate having Q2 EPS slated at $5.08 and roughly 3% above the Zacks Consensus.
RGA has surpassed earnings expectations for five consecutive quarters posting an average earnings surprise of 19.48% in its last four quarterly reports. This comes as RGA posted record quarterly EPS of $6.02 in Q1.
Attractive Growth & Valuation
As shown in the EPS Before Non-Recurring Items (BNRI) chart below, RGA's profitability has continued to reach new heights following the pandemic.
Overall, RGA's annual earnings are now expected to be up 6% in fiscal 2024 and are forecasted to rise another 4% in FY25 to a whopping $22.02 per share. RGA's top line has been at record levels as well and total sales are expected to expand another 13% this year and projected to be slightly higher in FY25 with projections north of $21 billion.
Making RGA's growth more attractive is that its stock trades at 10.1X forward earnings which is a lucrative discount to the S&P 500's 23.2X, despite impressively outperforming the broader market in recent years.
Plus, RGA still trades 65% below its decade-long high of 29.1X forward earnings and offers a slight discount to the median of 11.2X.
Bottom Line
Reinsurance Group of America's dominance in various global markets has been very impressive and exhilarating to investors. Furthermore, the impeccable rally in RGA shares could very well continue considering its cheap P/E valuation and expansive EPS growth.
Bear of the Day:
Nowadays it seems like every ultra-famous celebrity has their own whisky line, leading to increased competition for Brown-Forman and its iconic Jack Daniel's brand.
While Brown-Forman is one of the largest producers in the spirits and wine business, the company has grappled with supply chain disruptions along with the impact of higher inflation and interest rates.
Landing a Zacks Rank #5 (Strong Sell) and the Bear of the Day, it may be best to avoid Brown-Forman's stock at the moment.
Poor Price Performance
Attributed to the growing alternatives regarding whiskey brands and its choppy operating environment, Brown-Forman's stock has fallen -23% year to date and plummeted -37% over the last year.
Subpar Outlook
Although Brown-Forman believes its turnaround is ahead, the company still expects a volatile operating environment due to global macroeconomic and geopolitical uncertainties.
To that point, earnings for Brown-Forman's current fiscal 2025 are expected to decline -13% to $1.85 versus $2.14 per share in FY24. Brown-Forman's bottom line is expected to rebound and rise 5% in FY26 but it's noteworthy that earnings estimate revisions are noticeably lower over the last 60 days.
Furthermore, Brown-Forman's sales growth doesn't necessarily sway investors to think its future earnings potential will be lucrative once its higher operating costs and expenses normalize.
Valuation Concerns
Considering its mediocre top line expansion, Brown-Forman's stock trades at a high price-to-sales valuation of 4.9X compared to the Zacks Beverages-Alcohol Industry average of 1.6X which is closer to the optimum level of less than 1X.
More concerning is that amid its lowered profitability (and poor stock performance), BF. B still trades at a 23.7X forward earnings multiple which doesn't offer a discount to the S&P 500's 23.2X. Plus, this is a premium to the industry average of 17.3X forward earnings.
Bottom Line
Brown-Forman's stock has been on a slippery downward slope and a rebound doesn't look likely at this point, especially as there are competition issues to address on top of broader economic factors.
Additional content:
3 Restaurant Stocks Set to "Deliver" Q2 Earnings Beats
Restaurant companies' second-quarter 2024 results are likely to be bolstered by increased menu prices, higher average check sizes and expansion initiatives. Many restaurant companies benefited from partnerships with delivery services and digital platforms.
Restaurant operators have been focused on digital innovation, sales-building strategies and cost-saving measures. Digital innovation has become crucial, with partnerships with delivery services like DoorDash, Grubhub, Postmates and Uber Eats playing a significant role in boosting sales. The introduction of self-service kiosks and loyalty programs bodes well.
The industry players are likely to have benefited from the rise in off-premise sales, including delivery, takeout, drive-thru, catering, meal kits, and off-site options like kiosks and food trucks in the second quarter. Many operators also tested ghost or virtual kitchens, which have received positive customer feedback. The combination of off-premise offerings and connected curbside services has further driven customer satisfaction and industry growth.
The latest Earnings Trend report suggests that the Zacks Retail-Wholesale sector's second-quarter earnings are expected to increase 7.3% from the year-ago period's reported figure. The previous quarter recorded a 28.1% increase. The sector's revenues are projected to increase 4.4%, compared with 5% reported in the previous quarter. However, margins are expected to increase 0.2%. Companies from the restaurant industry, like BJ's Restaurants, Inc., Wingstop Inc. and Chipotle Mexican Grill, Inc. are expected to beat estimates in the ongoing reporting cycle.
However, high costs are likely to have negatively impacted the companies margin to some extent in second-quarter 2024. Intense competition, high wages and food cost inflation are concerning. The industry continues to bear increased expenses, which have been affecting margins. Higher pre-opening costs, marketing expenses and costs related to sales-boosting initiatives have been exerting pressure on the company's margins.
How to Make the Right Pick?
Given the wide range of companies in this space, the task is by no means easy. While it is impossible to be sure of the outperformers, our proprietary methodology — a positive Earnings ESP along with a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — makes it relatively simple. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Earnings ESP is our proprietary methodology for identifying stocks with high chances of delivering a surprise in their upcoming earnings announcements. It shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. Our research shows that for stocks with the abovementioned combination, chances of a positive earnings surprise are as high as 70%.
Our Choices
Here we discuss in detail the three above-mentioned restaurant companies that are likely to beat estimates this time around.
BJ's Restaurants is scheduled to report second-quarter 2024 results on Jul 25. BJRI currently sports a Zacks Rank #1 and has an Earnings ESP of +9.25%. You can see the complete list of today's Zacks #1 Rank stocks here.
BJ's Restaurants' second-quarter top line is likely to have been aided by productivity and margin enhancement initiatives and operational excellence across its restaurants. Also, the company's expansion and, remodeling and digital initiatives are encouraging.
The Zacks Consensus Estimate for second-quarter 2024 earnings is pegged at 49 cents per share, suggesting a decline of 2% from 50 cents reported in the prior-year quarter.
Wingstop is slated to report fiscal second-quarter fiscal 2024 results on Jul 31. WING currently has an Earnings ESP of +2.03% and a Zacks Rank #2.
The company's second-quarter results are likely to benefit from delivery channel expansion, menu innovation and digital marketing initiatives. Also, its supply-chain strategy and robust unit economics are adding to the positives.
The Zacks Consensus Estimate for second-quarter fiscal 2024 earnings is pegged at 80 cents per share, suggesting growth of 40.4% from 57 cents reported in the prior-year quarter.
Chipotle is scheduled to report second-quarter 2024 results on Jul 24. CMG currently has an Earnings ESP of +0.72% and a Zacks Rank #3.
Chipotle's second-quarter performance is likely to have benefited from its digital efforts, Chipotlane add-ons and marketing initiatives. These, along with strength in digital sales and new restaurant openings, have been driving the company.
We expect food and beverage revenues to increase 16.2% year over year to $2,901.2 million. Moreover, delivery service revenues are expected to be $19.3 million, up 11.5% year over year.
The Zacks Consensus Estimate for second-quarter 2024 earnings is pegged at 31 cents per share, suggesting growth of 24% from 25 cents reported in the prior-year quarter.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
See Stocks Free >>
Media Contact
Zacks Investment Research
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https://www.zacks.com
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.