Tag: stocks to buy

3 Homebuilder Stocks to Buy When Inflation Eases

Posted on by The MarketClub Team

According to Bankrate’s national survey of large lenders, the average rate on 30-year mortgages is 6.59%, up 12 basis points compared to this time last week.

Mortgage Interest Rates

Source: Bankrate National Survey

As the cumulative effects of a protracted campaign of interest rate hikes by the Fed are yet to be felt, economic growth, or lack thereof, is expected to replace inflation as the topmost concern.

Amid such a downturn, softening demand from home buyers could end up exerting downward pressure on mortgage rates, thereby restoring equilibrium.

According to Nadia Evangelou, senior economist & director of forecasting at the National Association of Realtors, “If inflation continues to decelerate over the next several months, mortgage rates will likely stabilize below 7%.”

Is the Fed’s target of a 2% inflation rate realistic in the current economic scenario?

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In addition to high margin backlogs to help weather a potential slowdown, moderation of inflation, and consequently mortgage rates, would bode well for home-building stocks D.R. Horton, Inc. (DHI), Toll Brothers, Inc. (TOL), and KB Home (KBH) as some technical indicators point to sustained upsides with adequate downside protection. Continue reading "3 Homebuilder Stocks to Buy When Inflation Eases" →

ADT Hit a New 52-Week High

Posted on by The MarketClub Team

Provider of security, interactive, and smart home solutions ADT Inc. (ADT) hit a new 52-week high of $9.82 on December 2, 2022. ADT’s stock has gained 15.9% in price year-to-date and 16.9% over the past year to close the last trading session at $9.64.

ADT’s EPS and revenue surpassed the consensus estimates in the last quarter. Its EPS came 52.1% higher than analyst estimates, while its revenue beat the consensus estimate by 0.6%. Higher revenues from the CSB, Commercial, and ADT Solar segments drove revenues higher.

Total CSB revenue increased 7% year-over-year to $1.11 billion in the third quarter, while its total Commercial revenue rose 12% year-over-year to $314 million. Furthermore, ADT’s Solar segment contributed $179 million to its total revenue.

ADT’s President and CEO, Jim DeVries, said, “ADT’s strong third-quarter results demonstrate our continued momentum – setting records in customer retention, RMR balance, and revenue payback. Our performance to date validates our progress on key initiatives, outlined earlier this year during our Investor Day, to meaningfully grow revenue, earnings, and cash flows, as well as reduce debt.”

On September 6, 2022, ADT announced that State Farm would make an equity investment of $1.20 billion in ADT, resulting in State Farm owning approximately 15% of ADT. ADT also announced a new partnership with State Farm to expand opportunities to combine next-generation security, innovative smart home technology, and reimagined risk-mitigation capabilities to monitor, detect, prevent, and minimize homeownership risks.

Post the announcement, the stock had a gap-up opening and has not looked back since.

ADT Chart

Source: TradingView

State Farm will also invest up to $300 million in an opportunity fund to support product innovation, technology, and marketing that seeks to differentiate and improve the customer experience for homeowners. Continue reading "ADT Hit a New 52-Week High" →

This Industrial Stock is Well-Positioned for 2023

Posted on by The MarketClub Team

The world’s largest manufacturer of agricultural equipment, Deere & Company (DE), beat analysts’ EPS and revenue estimates for the fiscal fourth quarter that ended October 30, 2022, despite the uncertain macroeconomic environment, higher raw material prices, and supply chain challenges.

DE’s EPS came 9% above the consensus EPS estimate, while its revenue surpassed the analyst estimates by 6.6%. The company’s Production & Precision Agriculture segment sales rose 59% year-over-year to $7.43 billion. Its operating margins came in at 23.4%, compared to 16.7% in the prior-year period.

Small Agriculture & Turf segment saw similar growth. Net sales rose 26% year-over-year to $3.54 billion, and its operating margin came in at 14.3%, compared to 12.3% in the year-ago period.

Its Construction & Forestry segment’s net sales witnessed a 20% year-over-year increase to $3.37 billion, with its operating profit rising 53% year-over-year to $414 million.

The company’s Financial Services segment’s net income rose 2% year-over-year to $232 million. Despite the challenges, DE’s strong pricing power was on display, as price realization was positive by about 19 percentage points which helped offset a three-point headwind from a higher U.S. dollar.

During a conference call with analysts, DE’s manager of investor communications, Rachel Bach, said, “Across our businesses, performance was driven by continued strong demand, higher production rates, and progress on reducing our inventory in partially completed machines.”

The Moline, Illinois-based company has provided strong guidance for 2023 based on its strong pricing, higher infrastructure spending, and healthy industry outlook. For 2023, its net income expectation is between $8 billion to $8.50 billion, which is 5% higher than consensus estimates.

DE’s Chairman and CEO, John C. May, said, “Deere is looking forward to another strong year in 2023 based on positive farm fundamentals and fleet dynamics as well as an increased investment in infrastructure.”

DE has gained 28.6% in price year-to-date and 26.7% over the past year to close the last trading session at $440.97. Credit Suisse analyst Jamie Cook has reiterated an outperform rating on the stock and has raised the target price from $447 to $582.

Despite the possibility of a recession, do you think DE will be able to meet its guidance in 2023?

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Continue reading "This Industrial Stock is Well-Positioned for 2023" →

1 Solar Stock to Brighten Your Portfolio

Posted on by The MarketClub Team

Solar tracking systems and related products manufacturer and supplier Array Technologies, Inc. (ARRY) surpassed the consensus revenue and EPS estimates for the third quarter of fiscal 2022 by 29.8% and 77.4%, respectively.

The company reported revenue of $515 million, compared to $188.70 million in the prior-year period. The revenue growth was driven by the acquisition of STI Norland and strong organic growth within its legacy Array business.

The company’s net income came in at $28 million compared to an adjusted net loss of $11.80 million in the year-ago quarter. Net income per share came in at $0.18 versus an adjusted net loss per share of $0.09 a year ago.

Additionally, ARRY produced $102 million of free cash flow during the quarter, allowing the company to pay down its revolving credit facility fully. At quarter-end, the company had access to $166.6 million of the revolving facility and $62.8 million of cash for total liquidity of $229 million, excluding the additional preferred share availability of $100 million.

“Overall, our performance in the third quarter demonstrates not only the strength of customer demand for our product and service offerings but also the continued effects of our focused efforts to improve our operational execution in all aspects of the business,” said ARRY’s CEO, Kevin Hostetler.

On August 16, 2022, the Inflation Reduction Act was passed by Congress and signed into law by President Joe Biden. It represents a significant investment by the federal government in renewable energy and related technologies. It includes tax incentives that will spur domestic solar manufacturing.

The IRA is expected to allow the U.S. solar market to grow 40% through 2027, equal to 62 gigawatts (GW) of additional solar capacity, according to forecasts in the U.S. Solar Market Insight Q3 2022 report released by the Solar Energy Industries Association (SEIA) and Wood Mackenzie, a Verisk business.

“This report provides an early look at how the Inflation Reduction Act will transform America’s energy economy, and the forecasts show a wave of clean energy and manufacturing investments that will uplift communities nationwide,” said SEIA President and CEO Abigail Ross Hopper.

Do you think the Inflation Reduction Act will impact America's energy economy anytime soon?

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Shares of ARRY have gained 23.6% over the past month and 94.9% over the past six months to close the last trading session at $21.61. The stock is currently trading above its 50-day and 200-day moving averages of $17.74 and $13.97, respectively. Continue reading "1 Solar Stock to Brighten Your Portfolio" →

3 Stocks That Won't Go Out Of Style

Posted on by The MarketClub Team

The global economic recovery may be in potential jeopardy with China caught in an unenviable dilemma between strong politics and good economics with respect to covid lockdowns.

In the world’s second-largest economy and a nation not used to dealing with widespread dissent, economic hardship may seamlessly turn into political instability, thereby risking yet another disruption in the global supply chain. Markets have also reflected the nervousness with a decline in stock futures and Brent crude at the lowest level since January.

Amid such uncertainty, consumption-driven businesses that enjoy inelastic demand and resilient margins for the essential products and services they offer can act as ideal ballast for the choppy waters we can’t find a way out of.

According to you, which sector would outperform in 2023?

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Hence, it could be wise to add Johnson & Johnson (JNJ), PepsiCo, Inc. (PEP), and Archer-Daniels-Midland Company (ADM) as some technical indicators point to sustained upsides with adequate downside protection.

Johnson & Johnson (JNJ)

JNJ is a worldwide researcher, developer, manufacturer, and seller of various healthcare products. The company operates through three segments: Consumer Health; Pharmaceuticals; and MedTech.

Over the last three years, JNJ’s revenues have grown at a 5.5% CAGR, while its EBITDA has grown at 4.6%. During the same period, the company’s net income has grown at 10.6% CAGR.

JNJ’s sales increased 1.9% year-over-year to $23.79 billion in the fiscal 2022 third quarter ended October 2, 2022. The company’s gross profit stood at $15.98 billion during the same period.

Analysts expect JNJ’s revenue for the fiscal year 2022 to increase by 1.4% year-over-year to $95.04 billion. The company’s EPS for the current year is expected to increase 2.5% year-over-year to $10.04. Moreover, JNJ has topped the consensus EPS estimates in each of the trailing four quarters. Continue reading "3 Stocks That Won't Go Out Of Style" →