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DaVita and Potlatch have been highlighted as Zacks Bull and Bear of the Day
Read MoreHide Full Article
For Immediate Release
Chicago, IL – September 6, 2024 – Zacks Equity Research shares DaVita (DVA - Free Report) as the Bull of the Day and Potlatch (PCH - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Oracle (ORCL - Free Report) , Microsoft (MSFT - Free Report) and Amazon (AMZN - Free Report) .
Known to be the most volatile month for stocks, September is when many investors rebalance their portfolios to include less risky assets such as equities that provide exposure to essential healthcare services.
One such candidate is DaVita, the leading provider of kidney care services in the United States. With its growth prospects cemented on critical dialysis and lab-related services, DaVita's stock covets a Zacks Rank #1 (Strong Buy) and lands the Bull of the Day.
DaVita Has Remnants of a Growth Stock
As a medical stock that can potentially provide defensive safety DaVita also has the remnants of a growth stock, on top of having the value and essential services investors seek amid heightened market volatility.
Over the last five years, DaVita's EPS growth rate of 15.5% has easily trumped its industry average of 4.2% and the S&P 500's 8.1% average. The impressive trend looks set to continue with DaVita's bottom line expected to expand roughly 18% in fiscal 2024 with FY25 EPS projected to increase another 14% to $11.42 per share.
Earnings Estimate Revisions
Suggesting more short-term upside in DaVita's stock is that earnings estimate revisions for FY24 and FY25 have remained noticeably higher over the last 30 days. Correlating with such, it's noteworthy that DaVita's Medical-Outpatient and Home Healthcare Industry is currently in the top 19% of over 250 Zacks industries.
Top Line Expansion
DaVita's top line has increased by a modest 6% in the last five years with sales at $12.14 billion in 2023 compared to $11.38 billion in 2019. Still, DaVita's sales have been on a steady ascension over the last two decades and are forecasted to increase more than 3% in FY24 and FY25 with projections edging north of $13 billion.
Defensive Safety & Value
Seeing as DaVita's growth is also crucial to societal health, its valuation is very intriguing. Trading just under $150, DVA is at a very reasonable 15.6X forward earnings multiple. This is a pleasant discount to its industry average of 23.3X forward earnings and the S&P 500's 23.2X.
Low Beta
With Beta being a measure of risk commonly used to compare the volatility of stocks among other securities, it's important to point out that DaVita's calculated beta value is at the preferred level of less than 1.0.
While low beta stocks may tend to have a tight nit 52-week range, DaVita's expansion has catapulted its price performance despite being a less volatile investment in regards to downside risk.
Hovering near its 52-week high, DVA has soared 108% from a low of $71 a share over the last year and is sitting on +40% gains year to date.
Bottom Line
DaVita's appealing growth prospects and attractive valuation suggests that now is an ideal time to invest considering its crucial healtchare services. Furthermore, DVA may be a viable defensive hedge regarding the unfavorable seasonality of the "September Effect" on the broader market.
While homebuilders in particular among other construction sector stocks are seeing expansive growth, Potlatch may be one to avoid.
To that point, Potlatch's Zacks Building Products-Wood Industry is currently in the bottom 6% of over 250 Zacks industries. Operating as both a real estate investment trust (REIT) and a wood products manufacturer with acres of timberland across several states, volatile lumber prices appear to be weighing on Potlatch's business operations.
Volatile Lumber Prices
Notably, the price per cubic meter of processed wood formally known as "Lumber Prices" has declined -11% year to date and has plummeted -30% over the last five years as shown in the chart below.
Unfortunately, Potlatch shares have followed a similar trend this year and are down -8% YTD. While PCH is up +9% in the last five years this is very subpar to the broader indexes and its industry's price return of +42%.
Profitability Concerns
Correlating with the decline in lumber prices, Potlatch's annual earnings per share are projected to drop to an adjusted loss of -$0.01 in fiscal 2024 compared to $0.43 a share in 2023.
Although Potlatch's EPS is projected to rebound to $0.71 next year, it's important to point out that earnings estimate revisions have sharply declined over the last 60 days for both FY24 and FY25.
The Market Tends to Sniff out Overvalued Stocks in September
With September known to be the most volatile month of the year, overvalued and more speculative stocks such as Potlatch tend to decline. As many investors return from summer vacations, this leads to increased trading and volatility in September where portfolios are often rebalanced to include more fundamentally valued stocks as opposed to riskier assets.
Seeing the implied risk to Potlatch's operations and probability, PCH trades at an extreme P/E multiple of over 1,000X forward earnings. Plus, PCH is at 3.1X sales which is above the optimum level of less than 1X and may be a stretch as the company's top line expansion is lackluster as well.
Bottom Line
For now, it's best to avoid Potlatch's stock, especially considering the unfavorable seasonality for the broader market in September. Potlatch shares may certainly have more downside risk ahead as lumber prices remain volatile.
Additional content:
Should You Buy, Sell or Hold Oracle Stock Ahead of Q1 Earnings?
For the first quarter of fiscal 2025, total revenues are expected to grow 6% to 8% at cc and 5% to 7% in dollar terms.
The Zacks Consensus Estimate for revenues is currently pegged at $13.22 billion, suggesting growth of 6.14% from the year-ago quarter's reported figure.
The company's non-GAAP EPS is expected to grow 10% to 14% and be in the range of $1.31-$1.35. The consensus mark for earnings is pegged at $1.32 per share, unchanged over the past 30 days. The figure indicates 10.9% growth from the year-ago period.
In the last reported quarter, Oracle delivered a negative earnings surprise of 0.61%. Markedly, the company's earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, while missing the same once, the average being 2.06%.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Oracle this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Accelerated digital transformation, along with the mainstream adoption of the hybrid/flexible work model, is likely to have driven demand for Oracle Cloud Infrastructure ("OCI") services and the company's other cloud-based applications in the to-be-reported quarter wherein Oracle OCI was selected by Hitachi Construction Machinery Co., Ltd. to migrate the latter's large-scale, mission-critical business systems.
In the quarter under review, Oracle announced a partnership with Google that gives customers the choice to combine OCI and Google Cloud technologies to help accelerate their application migrations and modernization.
The company's cloud-based applications, encompassing NetSuite Enterprise Resource Planning (ERP) and Fusion ERP, are witnessing strong adoption, bolstering Oracle's position in the rapidly evolving enterprise software landscape.
Furthermore, Oracle's Gen 2 Cloud architecture is delivering superior performance at a lower cost, leveraging high-bandwidth and low-latency RDMA networks, thereby offering a compelling value proposition to customers. With its continued investment in expanding its cloud infrastructure footprint, Oracle is strategically positioning itself for sustained growth in the dynamic and fiercely competitive software industry.
In the to-be-reported quarter, Ackermans successfully implemented the Oracle Retail Merchandise Financial Planning Cloud Service (MFP), replacing the former Enterprise Planning (EP) system.
The robust adoption of the company's generative artificial intelligence (AI) services holds promise. Oracle's collaboration with NVIDIA has been extended to provide sovereign AI solutions to customers worldwide. By combining NVIDIA's full-stack AI platform with Oracle's Enterprise AI, which is deployable across various OCI environments, customers gain greater control over operations, location and security, enabling them to meet data sovereignty requirements.
Price Performance & Valuation
Shares of ORCL have gained 33.5% year to date compared with the Zacks Computer and Technology sector's growth of 16%. While this performance may be encouraging for investors, it's important to consider whether the stock's current valuation accurately reflects the company's long-term growth potential and ability to navigate the competitive landscape.
Oracle operates in a highly competitive market, facing intense competition from established tech giants like Microsoft, Amazon and Google, as well as newer players like Snowflake and Databricks.
While Oracle has a strong foothold in the database management and ERP software markets, its competitors are making significant inroads in the cloud space. AWS, Google Cloud and Microsoft Azure combined accounted for a whopping 67% of the $76 billion global cloud services market in the first quarter of 2024, according to new data from IT market research firm Synergy.
It is also important to consider whether the stock's current valuation accurately reflects the company's long-term growth potential and ability to navigate the competitive landscape.
ORCL is trading at a premium with a price/book of 41.98X compared with the Zacks Computer-Software industry's 9.19X, reflecting a stretched valuation.
Investment Considerations: Balancing Risk and Reward
Oracle is a compelling investment opportunity due to its strong position in the enterprise software market, particularly in database management systems. The company's shift toward cloud-based solutions, including its OCI and cloud applications, positions it well for future growth. Oracle's acquisition strategy, notably its purchase of healthcare IT provider Cerner, expands its reach into new markets.
The company's consistent revenue growth, high profit margins and commitment to returning value to shareholders through dividends and share repurchases are attractive features. Oracle's strong partnerships with large enterprises and its focus on industry-specific solutions provide a competitive edge, making it a potentially rewarding long-term investment.
Conclusion
Oracle's cloud growth strategy, financial projections and technological advancements make it a compelling case for potential investors. The company's strategic partnerships, focus on AI and machine learning and expansion into key verticals demonstrate a forward-thinking approach, making the stock worth buying ahead of fiscal first-quarter 2025 results.
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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DaVita and Potlatch have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – September 6, 2024 – Zacks Equity Research shares DaVita (DVA - Free Report) as the Bull of the Day and Potlatch (PCH - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Oracle (ORCL - Free Report) , Microsoft (MSFT - Free Report) and Amazon (AMZN - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Known to be the most volatile month for stocks, September is when many investors rebalance their portfolios to include less risky assets such as equities that provide exposure to essential healthcare services.
One such candidate is DaVita, the leading provider of kidney care services in the United States. With its growth prospects cemented on critical dialysis and lab-related services, DaVita's stock covets a Zacks Rank #1 (Strong Buy) and lands the Bull of the Day.
DaVita Has Remnants of a Growth Stock
As a medical stock that can potentially provide defensive safety DaVita also has the remnants of a growth stock, on top of having the value and essential services investors seek amid heightened market volatility.
Over the last five years, DaVita's EPS growth rate of 15.5% has easily trumped its industry average of 4.2% and the S&P 500's 8.1% average. The impressive trend looks set to continue with DaVita's bottom line expected to expand roughly 18% in fiscal 2024 with FY25 EPS projected to increase another 14% to $11.42 per share.
Earnings Estimate Revisions
Suggesting more short-term upside in DaVita's stock is that earnings estimate revisions for FY24 and FY25 have remained noticeably higher over the last 30 days. Correlating with such, it's noteworthy that DaVita's Medical-Outpatient and Home Healthcare Industry is currently in the top 19% of over 250 Zacks industries.
Top Line Expansion
DaVita's top line has increased by a modest 6% in the last five years with sales at $12.14 billion in 2023 compared to $11.38 billion in 2019. Still, DaVita's sales have been on a steady ascension over the last two decades and are forecasted to increase more than 3% in FY24 and FY25 with projections edging north of $13 billion.
Defensive Safety & Value
Seeing as DaVita's growth is also crucial to societal health, its valuation is very intriguing. Trading just under $150, DVA is at a very reasonable 15.6X forward earnings multiple. This is a pleasant discount to its industry average of 23.3X forward earnings and the S&P 500's 23.2X.
Low Beta
With Beta being a measure of risk commonly used to compare the volatility of stocks among other securities, it's important to point out that DaVita's calculated beta value is at the preferred level of less than 1.0.
While low beta stocks may tend to have a tight nit 52-week range, DaVita's expansion has catapulted its price performance despite being a less volatile investment in regards to downside risk.
Hovering near its 52-week high, DVA has soared 108% from a low of $71 a share over the last year and is sitting on +40% gains year to date.
Bottom Line
DaVita's appealing growth prospects and attractive valuation suggests that now is an ideal time to invest considering its crucial healtchare services. Furthermore, DVA may be a viable defensive hedge regarding the unfavorable seasonality of the "September Effect" on the broader market.
Bear of the Day:
While homebuilders in particular among other construction sector stocks are seeing expansive growth, Potlatch may be one to avoid.
To that point, Potlatch's Zacks Building Products-Wood Industry is currently in the bottom 6% of over 250 Zacks industries. Operating as both a real estate investment trust (REIT) and a wood products manufacturer with acres of timberland across several states, volatile lumber prices appear to be weighing on Potlatch's business operations.
Volatile Lumber Prices
Notably, the price per cubic meter of processed wood formally known as "Lumber Prices" has declined -11% year to date and has plummeted -30% over the last five years as shown in the chart below.
Unfortunately, Potlatch shares have followed a similar trend this year and are down -8% YTD. While PCH is up +9% in the last five years this is very subpar to the broader indexes and its industry's price return of +42%.
Profitability Concerns
Correlating with the decline in lumber prices, Potlatch's annual earnings per share are projected to drop to an adjusted loss of -$0.01 in fiscal 2024 compared to $0.43 a share in 2023.
Although Potlatch's EPS is projected to rebound to $0.71 next year, it's important to point out that earnings estimate revisions have sharply declined over the last 60 days for both FY24 and FY25.
The Market Tends to Sniff out Overvalued Stocks in September
With September known to be the most volatile month of the year, overvalued and more speculative stocks such as Potlatch tend to decline. As many investors return from summer vacations, this leads to increased trading and volatility in September where portfolios are often rebalanced to include more fundamentally valued stocks as opposed to riskier assets.
Seeing the implied risk to Potlatch's operations and probability, PCH trades at an extreme P/E multiple of over 1,000X forward earnings. Plus, PCH is at 3.1X sales which is above the optimum level of less than 1X and may be a stretch as the company's top line expansion is lackluster as well.
Bottom Line
For now, it's best to avoid Potlatch's stock, especially considering the unfavorable seasonality for the broader market in September. Potlatch shares may certainly have more downside risk ahead as lumber prices remain volatile.
Additional content:
Should You Buy, Sell or Hold Oracle Stock Ahead of Q1 Earnings?
Oracle is scheduled to report its fiscal first-quarter 2025 results on Sept. 9.
For the first quarter of fiscal 2025, total revenues are expected to grow 6% to 8% at cc and 5% to 7% in dollar terms.
The Zacks Consensus Estimate for revenues is currently pegged at $13.22 billion, suggesting growth of 6.14% from the year-ago quarter's reported figure.
The company's non-GAAP EPS is expected to grow 10% to 14% and be in the range of $1.31-$1.35. The consensus mark for earnings is pegged at $1.32 per share, unchanged over the past 30 days. The figure indicates 10.9% growth from the year-ago period.
In the last reported quarter, Oracle delivered a negative earnings surprise of 0.61%. Markedly, the company's earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, while missing the same once, the average being 2.06%.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Oracle this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Oracle has an Earnings ESP of 0.00% and a Zacks Rank #2 at present. You can see the complete list of today's Zacks #1 Rank stocks here.
Factors Likely to Shape Oracle's Upcoming Results
Accelerated digital transformation, along with the mainstream adoption of the hybrid/flexible work model, is likely to have driven demand for Oracle Cloud Infrastructure ("OCI") services and the company's other cloud-based applications in the to-be-reported quarter wherein Oracle OCI was selected by Hitachi Construction Machinery Co., Ltd. to migrate the latter's large-scale, mission-critical business systems.
In the quarter under review, Oracle announced a partnership with Google that gives customers the choice to combine OCI and Google Cloud technologies to help accelerate their application migrations and modernization.
The company's cloud-based applications, encompassing NetSuite Enterprise Resource Planning (ERP) and Fusion ERP, are witnessing strong adoption, bolstering Oracle's position in the rapidly evolving enterprise software landscape.
Furthermore, Oracle's Gen 2 Cloud architecture is delivering superior performance at a lower cost, leveraging high-bandwidth and low-latency RDMA networks, thereby offering a compelling value proposition to customers. With its continued investment in expanding its cloud infrastructure footprint, Oracle is strategically positioning itself for sustained growth in the dynamic and fiercely competitive software industry.
In the to-be-reported quarter, Ackermans successfully implemented the Oracle Retail Merchandise Financial Planning Cloud Service (MFP), replacing the former Enterprise Planning (EP) system.
The robust adoption of the company's generative artificial intelligence (AI) services holds promise. Oracle's collaboration with NVIDIA has been extended to provide sovereign AI solutions to customers worldwide. By combining NVIDIA's full-stack AI platform with Oracle's Enterprise AI, which is deployable across various OCI environments, customers gain greater control over operations, location and security, enabling them to meet data sovereignty requirements.
Price Performance & Valuation
Shares of ORCL have gained 33.5% year to date compared with the Zacks Computer and Technology sector's growth of 16%. While this performance may be encouraging for investors, it's important to consider whether the stock's current valuation accurately reflects the company's long-term growth potential and ability to navigate the competitive landscape.
Oracle operates in a highly competitive market, facing intense competition from established tech giants like Microsoft, Amazon and Google, as well as newer players like Snowflake and Databricks.
While Oracle has a strong foothold in the database management and ERP software markets, its competitors are making significant inroads in the cloud space. AWS, Google Cloud and Microsoft Azure combined accounted for a whopping 67% of the $76 billion global cloud services market in the first quarter of 2024, according to new data from IT market research firm Synergy.
It is also important to consider whether the stock's current valuation accurately reflects the company's long-term growth potential and ability to navigate the competitive landscape.
ORCL is trading at a premium with a price/book of 41.98X compared with the Zacks Computer-Software industry's 9.19X, reflecting a stretched valuation.
Investment Considerations: Balancing Risk and Reward
Oracle is a compelling investment opportunity due to its strong position in the enterprise software market, particularly in database management systems. The company's shift toward cloud-based solutions, including its OCI and cloud applications, positions it well for future growth. Oracle's acquisition strategy, notably its purchase of healthcare IT provider Cerner, expands its reach into new markets.
The company's consistent revenue growth, high profit margins and commitment to returning value to shareholders through dividends and share repurchases are attractive features. Oracle's strong partnerships with large enterprises and its focus on industry-specific solutions provide a competitive edge, making it a potentially rewarding long-term investment.
Conclusion
Oracle's cloud growth strategy, financial projections and technological advancements make it a compelling case for potential investors. The company's strategic partnerships, focus on AI and machine learning and expansion into key verticals demonstrate a forward-thinking approach, making the stock worth buying ahead of fiscal first-quarter 2025 results.
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.