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Powell Industries, and Charles Schwab have been highlighted as Zacks Bull and Bear of the Day
Read MoreHide Full Article
For Immediate Release
Chicago, IL –August 28, 2024 – Zacks Equity Research shares Powell Industries (POWL - Free Report) , as the Bull of the Day and Charles Schwab (SCHW - Free Report) , as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Steve Madden (SHOO - Free Report) , Birkenstock (BIRK - Free Report) and Deckers Outdoor (DECK - Free Report) .
Powell Industries is a Zacks Rank #1 (Strong Buy) that provides custom-engineered equipment and systems for the management, distribution, and control of electrical energy.
After breaking out earlier this year, POWL has seen some volatility but mostly traded sideways. More recently, the stock has made another push higher after a strong quarter and now looks to take out all-time highs.
About the Company
Powell Industries was founded in 1947 and is headquartered in Houston, Texas. The company’s primary focus is on serving the energy, utilities, transportation, and industrial markets.
Powell designs and manufactures a range of products, including power control rooms, electrical enclosures, switchgear, and motor control centers, which are used in applications like power generation, distribution, and automation. The company serves customers globally, offering solutions that help ensure electrical systems are reliable, safe, and efficient, particularly for mission-critical infrastructure in industries such as oil and gas, utilities, and transportation.
The stock has Zacks Style Scores of “B” in both Growth and Value. The company has a market cap has a market cap of $2.3 billion and a Forward PE of 16. The stock also pays a small dividend of half a percent.
Q3 Earnings Beat
In late July, Powell posted a strong quarter, beating estimates by 79%. EPS came in at $3.79, which was up from $1.52 last year. Revenues came in at $255.1M v the $171.4M last year.
Net new orders were $235M, which was higher by 19%. The company had a backlog of $1.3B in the prior quarter and was able to keep that number at $1.3B after expanding its capacity. Management commented that excellent project execution improved gross margins by 510 basis points.
Investors loved the numbers and took the stock higher by over 25%. The stock did give most of the gains back during the early August market sell-off but has since made post-earnings highs.
Powell Industries, Inc. price-eps-surprise | Powell Industries, Inc. Quote
Estimates Spike Higher
After the earnings report, analysts were quick to lift numbers.
For the current quarter, estimates have gone from $2.19 to $3.49. This is a 60% jump in just the last month. For the current year, estimates have been taken 33% higher, going from $9.04 to $12.01.
Looking longer term, estimates are pointing strongly higher. Over the last 90 days, numbers have been taken from $2.26 to $2.30, or 38%.
The Technicals
The stock broke higher, moving from $75 to $100, after reporting earnings in late January. It never looked back, powering its way up to the $200 level before pulling back to the $125 level.
That $125 spot happened to be the 61.8% retracement, which started a rally into another strong quarter that took the stock to new highs at $209.
Once again, the stock pulled back in July to that $125 level, which happened to be the 200-day MA this time around.
The latest quarter brought the buyers back and the stock looks to take out the $209 high.
For those looking at Fibonacci levels, the 161.8% extension drawn from all-time highs to recent lows is $258. That target is another 40% higher than current trading levels.
Those looking for a pullback can focus on the 21-day moving average at $168 or the 50-day MA at $154.
Bottom Line
Powell Industries is an under-the-radar small-cap stock that is just getting started.
The company is hitting on all cylinders on the fundamental side and the chart looks great after the bulls took out the post-earnings highs.
While waiting for a pullback makes sense for some investors, the bulls seem to have strong momentum. POWL should hit all-time highs before its next earnings report and if they can repeat this quarter's performance, we should see a very strong finish into the end of the year.
Charles Schwab is a Zacks Rank #5 (Strong Sell) that is a savings and loan holding company, providing wealth management, securities brokerage, banking, asset management, custody, and financial advisory services.
The stock was up over 10% on the year until reporting disappointing earnings in July. Since then, the stock dropped over 15% and is now red for the year.
Investors might be tempted to buy the dip, but with the stock challenging 2024 lows, any market weakness could force another leg down.
About the Company
Charles Schwab was founded in 1971 and is headquartered in Westlake, Texas. The company's main subsidiaries include Charles Schwab & Co. (securities broker-dealer), Charles Schwab Investment Management (an investment advisor for Schwab's proprietary mutual funds and Schwab’s exchange-traded funds or ETFs), and Charles Schwab Bank (a federal savings bank).
The company has nearly 400 branches across 48 states and the District of Columbia, as well as locations in Puerto Rico, the United Kingdom, Hong Kong and Singapore.As of Jun 30, 2024, Schwab had 35.6 million active brokerage accounts, 1.9 million banking accounts, and 5.4 million workplace plan participant accounts.
The stock has a market cap of $115 billion and a Forward PE of 21. The stock holds Zacks Style Scores of “F” in Value, and “D” in Growth.
Q2 Earnings
On July 16th, Schwab reported earnings in line but missed on revenues. The company guided revenue flat to 2% y/y and said FY24 expenses would grow 2% y/y. The company pointed to certain uncontrollable items such as the increase in the exchange processing fee rate, incremental FDIC special assessment, and accrual related to the industry-wide regulatory review of off-channel communications.
Schwab also reported that its net interest margin (NIM), which is a key measure of profitability for financial firms, was under pressure. This happened because higher interest rates caused clients to move funds from low-interest cash sweep accounts to higher-yielding investment products, reducing Schwab’s ability to earn interest on client cash balances.
With that, the company saw a reduction in cash balances and said it would pause its share buyback program to pay off debt.
Estimates Trending Lower
Since the earnings report, analysts have started to cut their estimates and price targets.
For the current quarter, the estimates have dropped over the last 90 days, going from $0.87 to $0.75, or 14%.
The next quarter has seen a similar drop, with numbers falling from $0.93 to $0.83, or 10% over that same time frame.
Looking at next year over the last 90 days, analysts have dropped estimates by 9%, falling from $4.44 to $4.01.
With the drop in estimates, there have been analyst price target cuts as well.
Piper/Sandler was the most recent, cutting its target to $64 from $80.
Technical Take
After earnings stock is traded near the 2024 lows at $59.67, which came in late January. For now, investors have defended that low after the earnings drop. However, any market weakness would likely take stops out below the $60 area.
To show some progress, the bulls would need to back the 200-day MA at $68. The 50-day is attempting to breach that $68 level which would signal a “Death Cross”, which is extremely bearish.
If it starts to trend lower, the stock could fall to the $50-55 level, which was the support in late 2023.
In Summary
Charles Schwab is facing significant headwinds following its disappointing July earnings report. Despite being a strong player in the financial services industry, challenges like pressure on its net interest margin, declining cash balances, and pausing its share buyback program have caused analysts to cut estimates and price targets.
While some investors may be tempted to buy the dip, the stock's struggle to hold support at key technical levels, coupled with the possibility of a death cross, suggests caution. Any broader market weakness could lead to further downside, making it a risky bet in the near term.
Additional content:
Consumer Demand Melts Higher for These 3 Companies: DECK, SHOO, BIRK
We’ve seen somewhat mixed reads on the state of the consumer this year, with big-ticket discretionary items continuing to face a demand cooldown while other general merchandise categories, such as apparel, have primarily remained intact for a fair share of companies.
Specifically, several footwear-centric apparel companies have enjoyed strong gains over the past year, a list that includes Steve Madden, Birkenstock and Deckers Outdoor. Below is a chart illustrating the performance of each over the last year, with the Zacks Consumer Discretionary sector blended in as a benchmark.
Let’s take a closer look at what’s been driving the positivity.
Birkenstock Posts Record Sales
Birkenstock has undergone significant changes in recent years, expanding its product catalog nicely. It recently enjoyed a notably strong period, posting record Q2 sales that grew more than 20% year-over-year.
As a result of the robust demand, BIRK upped its full-year revenue guidance to 20%, with investors also raising their expectations accordingly post-earnings. The stock currently sports a favorable Zacks Rank #2 (Buy).
As shown below, the sales revisions trend for its FY24 has been positive since the beginning of 2024, up a staggering 25% since. The company has overall been witnessing a demand snowball, reporting strong consumer demand across all its categories, channels, and segments throughout the above-mentioned period.
It’s worth noting that the company’s earnings outlook also shot higher alongside sales expectations, with the $1.40 Zacks Consensus EPS estimate up nearly 6% over the last year and seeing a big boost starting back in May.
Steve Madden Reports Robust Sales Growth
Steve Madden, a current Zacks Rank #2 (Buy), also recently delivered a favorable quarterly release, posting an 11% beat relative to the Zacks Consensus EPS estimate and reporting sales nearly 4% ahead of the consensus. EPS saw a 21% increase, whereas sales shot nearly 20% higher from the year-ago period.
The company’s top line has recovered nicely over recent periods, with SHOO posting double-digit percentage year-over-year sales growth rates in each of its last three quarters. The sales outlook for its current fiscal year has remained bullish over the last year, with the $2.2 billion expected up nearly 9% across the period.
In addition, Steve Madden’s margins have been consistently stable over recent years, as shown in the trailing twelve-month chart below. Operational efficiencies have aided its profitability picture, with key strategic initiatives also providing tailwinds.
The company maintained its current year outlook following the results, still expecting annual sales growth in a band of 11% - 13% relative to FY23. Shares could also interest income-focused investors, currently yielding 1.9% annually compared to the Zacks Consumer Discretionary average of 0.9%.
Deckers Outdoor Brand Momentum Continues
Deckers Outdoor, a current Zacks Rank #2 (Buy), recently enjoyed a strong quarter, beating both earnings and revenue expectations handily. Big growth was delivered, with EPS growing a staggering 90% year-over-year alongside a 22% increase in sales.
Continued brand momentum among UGG and Hoka shoes aided the favorable quarter, leading the company to up its current fiscal year outlook. Analysts have updated their outlook for the company’s current fiscal year accordingly following the print, with the $31.58 Zacks Consensus EPS estimate suggesting 8% growth year-over-year.
The company has also been enjoying margin expansion, brightening its profitability picture nicely. It enjoyed the same throughout its latest release, with its gross margin expanding to 56.9% vs 51.3% in the year-ago period.
Bottom Line
While we’ve seen pockets of consumer weakness, it certainly hasn’t been broad-based, reflected by results we’ve gotten from several consumer-facing companies, including those listed above.
Still, other big names, such as Nike, haven’t experienced the same positivity among consumers, raising some questions among investors. All in all, the Cons. Discretionary names that have been truly firing on all cylinders, enjoying robust consumer demand, have been aided by remarkable management teams.
On the flip side, those struggling have failed to meet consumers’ ever-changing needs and wants, reflected by slowing sales.
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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/performance for information about the performance numbers displayed in this press release.
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Powell Industries, and Charles Schwab have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL –August 28, 2024 – Zacks Equity Research shares Powell Industries (POWL - Free Report) , as the Bull of the Day and Charles Schwab (SCHW - Free Report) , as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Steve Madden (SHOO - Free Report) , Birkenstock (BIRK - Free Report) and Deckers Outdoor (DECK - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Powell Industries is a Zacks Rank #1 (Strong Buy) that provides custom-engineered equipment and systems for the management, distribution, and control of electrical energy.
After breaking out earlier this year, POWL has seen some volatility but mostly traded sideways. More recently, the stock has made another push higher after a strong quarter and now looks to take out all-time highs.
About the Company
Powell Industries was founded in 1947 and is headquartered in Houston, Texas. The company’s primary focus is on serving the energy, utilities, transportation, and industrial markets.
Powell designs and manufactures a range of products, including power control rooms, electrical enclosures, switchgear, and motor control centers, which are used in applications like power generation, distribution, and automation. The company serves customers globally, offering solutions that help ensure electrical systems are reliable, safe, and efficient, particularly for mission-critical infrastructure in industries such as oil and gas, utilities, and transportation.
The stock has Zacks Style Scores of “B” in both Growth and Value. The company has a market cap has a market cap of $2.3 billion and a Forward PE of 16. The stock also pays a small dividend of half a percent.
Q3 Earnings Beat
In late July, Powell posted a strong quarter, beating estimates by 79%. EPS came in at $3.79, which was up from $1.52 last year. Revenues came in at $255.1M v the $171.4M last year.
Net new orders were $235M, which was higher by 19%. The company had a backlog of $1.3B in the prior quarter and was able to keep that number at $1.3B after expanding its capacity. Management commented that excellent project execution improved gross margins by 510 basis points.
Investors loved the numbers and took the stock higher by over 25%. The stock did give most of the gains back during the early August market sell-off but has since made post-earnings highs.
Powell Industries, Inc. price-eps-surprise | Powell Industries, Inc. Quote
Estimates Spike Higher
After the earnings report, analysts were quick to lift numbers.
For the current quarter, estimates have gone from $2.19 to $3.49. This is a 60% jump in just the last month. For the current year, estimates have been taken 33% higher, going from $9.04 to $12.01.
Looking longer term, estimates are pointing strongly higher. Over the last 90 days, numbers have been taken from $2.26 to $2.30, or 38%.
The Technicals
The stock broke higher, moving from $75 to $100, after reporting earnings in late January. It never looked back, powering its way up to the $200 level before pulling back to the $125 level.
That $125 spot happened to be the 61.8% retracement, which started a rally into another strong quarter that took the stock to new highs at $209.
Once again, the stock pulled back in July to that $125 level, which happened to be the 200-day MA this time around.
The latest quarter brought the buyers back and the stock looks to take out the $209 high.
For those looking at Fibonacci levels, the 161.8% extension drawn from all-time highs to recent lows is $258. That target is another 40% higher than current trading levels.
Those looking for a pullback can focus on the 21-day moving average at $168 or the 50-day MA at $154.
Bottom Line
Powell Industries is an under-the-radar small-cap stock that is just getting started.
The company is hitting on all cylinders on the fundamental side and the chart looks great after the bulls took out the post-earnings highs.
While waiting for a pullback makes sense for some investors, the bulls seem to have strong momentum. POWL should hit all-time highs before its next earnings report and if they can repeat this quarter's performance, we should see a very strong finish into the end of the year.
Bear of the Day:
Charles Schwab is a Zacks Rank #5 (Strong Sell) that is a savings and loan holding company, providing wealth management, securities brokerage, banking, asset management, custody, and financial advisory services.
The stock was up over 10% on the year until reporting disappointing earnings in July. Since then, the stock dropped over 15% and is now red for the year.
Investors might be tempted to buy the dip, but with the stock challenging 2024 lows, any market weakness could force another leg down.
About the Company
Charles Schwab was founded in 1971 and is headquartered in Westlake, Texas. The company's main subsidiaries include Charles Schwab & Co. (securities broker-dealer), Charles Schwab Investment Management (an investment advisor for Schwab's proprietary mutual funds and Schwab’s exchange-traded funds or ETFs), and Charles Schwab Bank (a federal savings bank).
The company has nearly 400 branches across 48 states and the District of Columbia, as well as locations in Puerto Rico, the United Kingdom, Hong Kong and Singapore.As of Jun 30, 2024, Schwab had 35.6 million active brokerage accounts, 1.9 million banking accounts, and 5.4 million workplace plan participant accounts.
The stock has a market cap of $115 billion and a Forward PE of 21. The stock holds Zacks Style Scores of “F” in Value, and “D” in Growth.
Q2 Earnings
On July 16th, Schwab reported earnings in line but missed on revenues. The company guided revenue flat to 2% y/y and said FY24 expenses would grow 2% y/y. The company pointed to certain uncontrollable items such as the increase in the exchange processing fee rate, incremental FDIC special assessment, and accrual related to the industry-wide regulatory review of off-channel communications.
Schwab also reported that its net interest margin (NIM), which is a key measure of profitability for financial firms, was under pressure. This happened because higher interest rates caused clients to move funds from low-interest cash sweep accounts to higher-yielding investment products, reducing Schwab’s ability to earn interest on client cash balances.
With that, the company saw a reduction in cash balances and said it would pause its share buyback program to pay off debt.
Estimates Trending Lower
Since the earnings report, analysts have started to cut their estimates and price targets.
For the current quarter, the estimates have dropped over the last 90 days, going from $0.87 to $0.75, or 14%.
The next quarter has seen a similar drop, with numbers falling from $0.93 to $0.83, or 10% over that same time frame.
Looking at next year over the last 90 days, analysts have dropped estimates by 9%, falling from $4.44 to $4.01.
With the drop in estimates, there have been analyst price target cuts as well.
Piper/Sandler was the most recent, cutting its target to $64 from $80.
Technical Take
After earnings stock is traded near the 2024 lows at $59.67, which came in late January. For now, investors have defended that low after the earnings drop. However, any market weakness would likely take stops out below the $60 area.
To show some progress, the bulls would need to back the 200-day MA at $68. The 50-day is attempting to breach that $68 level which would signal a “Death Cross”, which is extremely bearish.
If it starts to trend lower, the stock could fall to the $50-55 level, which was the support in late 2023.
In Summary
Charles Schwab is facing significant headwinds following its disappointing July earnings report. Despite being a strong player in the financial services industry, challenges like pressure on its net interest margin, declining cash balances, and pausing its share buyback program have caused analysts to cut estimates and price targets.
While some investors may be tempted to buy the dip, the stock's struggle to hold support at key technical levels, coupled with the possibility of a death cross, suggests caution. Any broader market weakness could lead to further downside, making it a risky bet in the near term.
Additional content:
Consumer Demand Melts Higher for These 3 Companies: DECK, SHOO, BIRK
We’ve seen somewhat mixed reads on the state of the consumer this year, with big-ticket discretionary items continuing to face a demand cooldown while other general merchandise categories, such as apparel, have primarily remained intact for a fair share of companies.
Specifically, several footwear-centric apparel companies have enjoyed strong gains over the past year, a list that includes Steve Madden, Birkenstock and Deckers Outdoor. Below is a chart illustrating the performance of each over the last year, with the Zacks Consumer Discretionary sector blended in as a benchmark.
Let’s take a closer look at what’s been driving the positivity.
Birkenstock Posts Record Sales
Birkenstock has undergone significant changes in recent years, expanding its product catalog nicely. It recently enjoyed a notably strong period, posting record Q2 sales that grew more than 20% year-over-year.
As a result of the robust demand, BIRK upped its full-year revenue guidance to 20%, with investors also raising their expectations accordingly post-earnings. The stock currently sports a favorable Zacks Rank #2 (Buy).
As shown below, the sales revisions trend for its FY24 has been positive since the beginning of 2024, up a staggering 25% since. The company has overall been witnessing a demand snowball, reporting strong consumer demand across all its categories, channels, and segments throughout the above-mentioned period.
It’s worth noting that the company’s earnings outlook also shot higher alongside sales expectations, with the $1.40 Zacks Consensus EPS estimate up nearly 6% over the last year and seeing a big boost starting back in May.
Steve Madden Reports Robust Sales Growth
Steve Madden, a current Zacks Rank #2 (Buy), also recently delivered a favorable quarterly release, posting an 11% beat relative to the Zacks Consensus EPS estimate and reporting sales nearly 4% ahead of the consensus. EPS saw a 21% increase, whereas sales shot nearly 20% higher from the year-ago period.
The company’s top line has recovered nicely over recent periods, with SHOO posting double-digit percentage year-over-year sales growth rates in each of its last three quarters. The sales outlook for its current fiscal year has remained bullish over the last year, with the $2.2 billion expected up nearly 9% across the period.
In addition, Steve Madden’s margins have been consistently stable over recent years, as shown in the trailing twelve-month chart below. Operational efficiencies have aided its profitability picture, with key strategic initiatives also providing tailwinds.
The company maintained its current year outlook following the results, still expecting annual sales growth in a band of 11% - 13% relative to FY23. Shares could also interest income-focused investors, currently yielding 1.9% annually compared to the Zacks Consumer Discretionary average of 0.9%.
Deckers Outdoor Brand Momentum Continues
Deckers Outdoor, a current Zacks Rank #2 (Buy), recently enjoyed a strong quarter, beating both earnings and revenue expectations handily. Big growth was delivered, with EPS growing a staggering 90% year-over-year alongside a 22% increase in sales.
Continued brand momentum among UGG and Hoka shoes aided the favorable quarter, leading the company to up its current fiscal year outlook. Analysts have updated their outlook for the company’s current fiscal year accordingly following the print, with the $31.58 Zacks Consensus EPS estimate suggesting 8% growth year-over-year.
The company has also been enjoying margin expansion, brightening its profitability picture nicely. It enjoyed the same throughout its latest release, with its gross margin expanding to 56.9% vs 51.3% in the year-ago period.
Bottom Line
While we’ve seen pockets of consumer weakness, it certainly hasn’t been broad-based, reflected by results we’ve gotten from several consumer-facing companies, including those listed above.
Still, other big names, such as Nike, haven’t experienced the same positivity among consumers, raising some questions among investors. All in all, the Cons. Discretionary names that have been truly firing on all cylinders, enjoying robust consumer demand, have been aided by remarkable management teams.
On the flip side, those struggling have failed to meet consumers’ ever-changing needs and wants, reflected by slowing sales.
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/performance for information about the performance numbers displayed in this press release.