Winnebago, Xerox, Babcock & Willcox, One Stop Systems and Flux Power highlighted as Zacks Bull and Bear of the Day
Winnebago, Xerox, Babcock & Willcox, One Stop Systems and Flux Power highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – December 27, 2021 – Zacks Equity Research Shares of Winnebago Industries, Inc. WGO as the Bull of the Day, Xerox Holdings Corporation XRX as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Babcock & Wilcox Enterprises, Inc. BW, One Stop Systems, Inc. OSS and Flux Power Holdings, Inc. FLUX.
Here is a synopsis of all five stocks:
Winnebago Industries soundly beat our first quarter fiscal 2022 earnings and revenue estimates on December 17, with both its top and bottom lines up huge compared to a year ago. The recreational vehicle maker is coming off two impressive years of growth and its outlook for FY22 remains strong as consumers continue to spend big on RVs, boats, and more.
Cruising the Roads & Making Waves
Winnebago is an iconic American company and a leading outdoor lifestyle product manufacturer. WGO builds motorhomes, travel trailers, fifth wheel products, and boats under multiple brands, including its namesake, Chris-Craft, Grand Design, Newmar, and Barletta. The company completed its acquisition of the industry’s fastest-growing, premium pontoon boat manufacture Barletta at the end of August—it bought Chris-Craft boats in 2018.
Winnebago’s business is somewhat cyclical given the nature of its high price points, as big-ticket items go out of style quickly in times of economic distress and uncertainty. With this in mind, it last posted big YoY sales declines back in 2008 and 2009. Since then, Winnebago is in the midst of a largely unstoppable run of big top-line expansion.
Winnebago posted strong double-digit sales growth in nine out of the past 12 years, with only two small dips of -1.5% in FY19 and -0.1% in FY16. The company posted 19% revenue growth in FY20. WGO then posted 54% expansion in fiscal 2021 (period ended August 28) to help its adjusted earnings skyrocket 230%.
Recent Results & Outlook
Winnebago benefitted over the last year-plus from the soaring stock market that saw people flush with cash, coupled with a desire to spend more time outdoors and away from crowded places. WGO posted 46% Q1 FY22 revenue growth on Dec. 17, alongside record first quarter gross margin of 19.8%%, up 2.5% from the year-ago quarter. This helped WGO post 97% adjusted earnings growth to blow away our EPS estimate by 53%.
Getting a bit more specific, WGO’s towable segment climbed 43% to account for just over half (54%) of total sales. Meanwhile, Winnebago’s motorhome unit popped 31% to make up roughly 35% of sales. The company also broke out its relatively new and recently beefed-up marine unit for the first time. It accounted for by far the smallest amount of total revenue, but it has plenty of runway left.
Winnebago’s share of the RV market also grew last quarter and WGO executives continued their bullish sentiment on the back of its ability to capitalize on the “secular demand shift of consumers embracing the outdoor lifestyle.” The most recent Zacks estimates call for Winnebago’s adjusted Q2 earnings to surge 43% on 31% higher revenue.
Longer-term, Winnebago’s fiscal 2022 earnings are projected to soar 44%. This looks far more impressive when taking into account the fact that its FY21 EPS skyrocketed 230%. Meanwhile, its revenue is expected to climb another 26% from $3.63 billion to $4.56 billion—up from just $2.36 billion in FY20.
Other Key Fundamentals
Winnebago has crushed our EPS estimates by an average of 40% in the last four quarters. Plus, its EPS outlook is greatly improved since its Q1 report, as analysts raced to lift their outlooks.
WGO’s current FY22 consensus earnings estimate has jumped 31% higher from $9.40 to $12.30 per share in the last seven days alone. Meanwhile, its FY23 EPS consensus popped 11%. This is part of a steadily improving longer-term earnings picture. And all of the recent post-release EPS positivity helps WGO land a Zacks Rank #1 (Strong Buy) right now.
Winnebago earns “A” grades for Value and Momentum in our Style Scores system at the moment. WGO executives also raised its stock buyback program in 2021 and lifted its dividend. Its current $0.18 per share dividend is 50% higher than its payout a year ago and will be payable on January 26 to stockholders of record as of January 12. WGO’s dividend currently yields 1%.
Investors should also know that its Building Products - Mobile Homes and RV Builders space is in the top 1% of over 250 Zacks industries. WGO has easily outperformed its peers and the S&P 500 over the last 10 years, up 830% vs. its industry’s 430% and the benchmark’s 300%. More recently, Winnebago stock has surged 220% in the past three years compared to the S&P 500’s 105% and its industry’s 180%.
Luckily for people who missed out on its big run, Winnebago stock has cooled off in the past year, up only 9% vs. its industry’s 29%. At around $71.50 a share, WGO trades roughly 17% below its records. Better yet, Winnebago’s current Zacks consensus price target represents 22% upside to its levels on Thursday, Dec. 23.
WGO has bounced around alongside the market over the last month. Yet, the stock looks to be regaining some momentum, up nearly 10% since December 20. Winnebago has plenty of near-term upside given that it still hovers right around neutral RSI levels at the moment. And it’s on the cusp of breaking above both its 50-day and 200-day moving averages.
The downturn has recalibrated WGO’s valuation. Winnebago trades at a 50% discount to its own year-long highs and 30% under its industry at 7.4X forward 12-month earnings. And unlike much of the market, Winnebago is trading well below where it was five and ten years ago, which helps make WGO even more enticing.
Xerox Holdings products have been a core component of countless offices, schools, and beyond for years. But the enterprise printer and copier company has struggled as the world turns more digital.
The Quick Story
Xerox Holdings sells printers, digital scanners, copiers and more with a focus on larger enterprise-level offerings. The company sells supplies to go along with its equipment. Xerox is also expanding its services unit amid the changing digital landscape.
Xerox revenue has fallen for the better part of a decade and the remote world has taken a huge toll on its operations. The company’s FY20 revenue fell 23% after it slipped 6% in 2019. In fact, last year marked its seventh straight year of declining YoY sales.
Xerox’s Q3 FY21 revenue dipped just 0.5%. Still, XRX executives lowered its sales guidance amid ongoing challenges that include a deteriorating global supply chain and a much slower-than-projected return to offices.
Xerox’s fourth quarter consensus earnings estimate is down 50% since its Q3 report, with its FY21 figure 16% lower, and FY22 down 9%. Zacks estimates do call for XRX to post 1% top-line expansion this year and 2% higher next year. Plus, its adjusted earnings are projected to climb 6.4% and 37%, respectively.
That said, Xerox lands a Zacks Rank #5 (Strong Sell) right now, based on its huge downward earnings revisions. Plus, its Office Supplies space is in the bottom 3% of over 250 Zacks industries.
Xerox’s dividend yield and share price might be attractive to some. But the stock is down 40% in the last five years vs. its industry’s 60% climb. This rough stretch includes a 40% drop in the past two years. Xerox stock has popped recently, yet it appears to be more of a trader’s stock since the digital world was already chipping away at its business long before Covid.
3 Under $10 Electronics Stocks Wall Street Analysts Recommend Buying
The electronics industry has been gaining from the coronavirus pandemic-led work-from-home and learn-from-home trends.
The trends, which are expected to prevail in 2022 as well, are leading to the growing proliferation of laptops, notebooks, office equipment, and network peripherals, which have turned out to be boons for electronics companies.
An uptick in demand for 5G test solutions, which are required for 5G deployment, remains another major positive. Moreover, the current coronavirus outbreak-triggered remote-working wave globally, which is bolstering the demand for high-speed Internet services, bodes well for electronic companies that are enhancing their 5G efforts.
The rapid adoption of cloud computing technology and the rising need for data centers to ensure an efficient remote-working environment are benefiting electronics companies offering supply-chain solutions.
The solid adoption of AI and industrial revolution 4.0, which focus on interconnectivity, automation, Machine Learning (ML) and real-time data, is another tailwind.
The growing proliferation of fitness trackers and smartwatches, high-end smartphones, smart speakers, and smart cars and autonomous vehicles is fuelling the demand for electronic components.
Additionally, the increasing use of medical devices such as electronic monitoring devices, infrared laser thermometers and thermal imaging cameras throughout the world has been boosting the demand for electrical equipment.
We note that all the above-mentioned facts are expected to continue shaping the growth trajectory of the electronic industry. Moreover, these are creating an extremely conducive growth environment for electronic stocks in the near term.
Considering the upbeat scenario, we believe fundamentally strong electronics stocks offer lucrative investment opportunities.
Here we have picked three electronics stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
To narrow down the list further, we have selected those with an average estimate of Wall Street analysts less than or equal to two.
Additionally, we have focused on the stocks that are trading under $10 a share. Low-priced stocks may not seem attractive to some because fewer people follow them and less has been said about them. But it is also true that the low-priced stocks could be greatly rewarding based on their strong fundamentals.
Babcock & Willcox is benefiting from its expanding clean and renewable energy business. The company’s acquisition of solar installation and services firm, Fosler Construction Co., is expected to boost its prospects in the solar installation and construction services space in the United States.
Apart from this, the company’s increasing number of booked renewable waste-to-energy projects is likely to continue contributing well to top-line growth. Further, its strengthening environmental business and growing momentum across the decarbonization platform, namely ClimateBright, remain major positives.
Babcock & Willcox, which is a provider of energy and environmental technologies and services for the power and industrial markets, is further gaining from its well-performing renewable segment. The recent acquisition of VODA, a multi-brand aftermarket parts and service provider for energy plants, positions Babcock & Willcox well to rapidly penetrate the renewable service market of Europe.
Currently, the company flaunts a Zacks Rank #1. Additionally, BW has an average broker rating of 1.
One Stop Systems is riding on the growing momentum across the media and entertainment markets on the back of improving sales of its ruggedized servers. Solid demand for the company’s differentiated military AI transportable data processing and storage products remains another tailwind.
It is continuously gaining traction among new applications within the key accounts, which remain other positives. Further, its well-performing European subsidiary, Bressner, will likely aid its financial performance in the days ahead.
The company, which designs and manufactures ultra-dense high-performance computing systems for learning, oil and gas exploration, financial trading, media and entertainment, defense, and traditional HPC applications, is expected to continue gaining from its expanding offerings in the edge computing systems market.
Notably, One Stop Systems sports a Zacks Rank #1 at present. Further, OSS has an average broker rating of 1.
Flux Power is benefiting from the rising uptake of its packs with a high selling price. The increasing demand for lithium-ion energy storage solutions worldwide remains another tailwind for the company. The growing momentum across its lithium-ion LiFT Pack solution on the back of environmental benefits that it provides over propane-based power solutions remains a major positive.
Flux Power, a developer of advanced lithium-ion battery packs for commercial and industrial equipment, remains well-poised to capitalize on the increasing demand for zero-emission GSE battery packs in the airline industry, which is recovering from the pandemic-led disruptions.
Currently, the company carries a Zacks Rank #2. Further, FLUX has an average broker rating of 1.
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Xerox Holdings Corporation (XRX): Free Stock Analysis Report
Winnebago Industries, Inc. (WGO): Free Stock Analysis Report
Babcock (BW): Free Stock Analysis Report
Flux Power Holdings, Inc. (FLUX): Free Stock Analysis Report
One Stop Systems, Inc. (OSS): Free Stock Analysis Report
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