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Wall Street JournalVertex and Oxford Industries have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – October 18, 2024 – Zacks Equity Research shares Vertex VERX as the Bull of the Day and Oxford Industries OXM as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Cool Company CLCO, Euroseas ESEA and ZIM Integrated Shipping Services ZIM.
Here is a synopsis of all five stocks:
Bull of the Day:
Vertex, a Zacks Rank #1 (Strong Buy), offers enterprise tax technology solutions for retail trade, wholesale trade, and manufacturing industries in the United States and internationally. Shares of the corporate tax provider are widely outperforming the market this year with the backing of a leading industry group. The stock is hitting a series of 52-week highs and displaying relative strength as buying pressure accumulates in this top-ranked company.
VERX stock is part of the Zacks Internet – Software industry group, which currently ranks in the top 31% out of more than 250 Zacks Ranked Industries. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform the market over the next 3 to 6 months, just as it has over the past several months.
Historical research studies suggest that approximately half of a stock's price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
It's no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
Company Description
Vertex provides tax compliance, reporting, data and document management, and determination solutions. In addition, the company's services include tax return preparation, filing and tax payment, and notice management.
In addition, Vertex offers workflow management tools, role-based security, event logging, and data analytics. Its pre-built integration platform includes mapping data fields, business logic and configurations, as well as SAP-specific tools.
Late last year, Vertex announced a plan to acquire e-invoicing leader Pagero, which is helping to accelerate the company's revenue growth. Other acquisitions throughout this year – including a tax-specific AI technology – bolster the case for a bullish outlook.
Vertex sells its products through software licenses and software as a service subscription. The company was founded in 1978 and is headquartered in King of Prussia, Pennsylvania.
Earnings Trends and Future Estimates
The top-ranked company has put together an impressive earnings history; Vertex hasn't missed the earnings mark since it became publicly traded back in 2020. Back in August, Vertex reported second-quarter earnings of $0.15/share, a 15.4% surprise over the $0.13/share consensus estimate.
The tax technology firm has delivered a trailing four-quarter average earnings surprise of 18.5%. Consistently beating earnings estimates is a recipe for success.
VERX shares received a boost as analysts covering the company have been increasing their 2025 earnings estimates lately. Next year's earnings estimates have risen 1.43% in the past 60 days. The 2025 Zacks Consensus EPS Estimate now stands at $0.71/share, reflecting a potential growth rate of 25.8% relative to this year.
Let's Get Technical
VERX stock has advanced nearly 60% this year alone. This is the kind of stock we want to include in our portfolio – one that is trending well and receiving positive earnings estimate revisions.
Only stocks that are in extremely powerful uptrends are able to witness this type of price move. VERX shares broke out to a series of all-time highs this year.
The stock has been widely outperforming the major indices, indicating a prolonged period of relative strength. With both strong fundamental and technical indicators, VERX stock is poised to continue its outperformance.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, Vertex has recently witnessed positive revisions. As long as this trend remains intact (and VERX continues to deliver earnings beats), the stock will likely continue its bullish run into the end of this year and beyond.
Bottom Line
Buying pressure continues to accumulate in VERX stock, with volume steadily increasing throughout the year. This indicates that institutions are beginning to load up, a signal that the stock's advance may be just getting started.
Backed by a top industry group and impressive history of earnings beats, it's not difficult to see why this company is a compelling investment. Robust fundamentals combined with an appealing technical trend certainly justify adding shares to the mix. The future looks bright for this highly-ranked, leading stock.
Bear of the Day:
Oxford Industries is an apparel company that designs, markets, and distributes products of lifestyle and other brands worldwide. The company offers men's and women's sportswear under the Tommy Bahama brand, and licenses this brand for various products including indoor and outdoor furniture, beach chairs, bedding and bath linens, toiletries, and sleepwear.
In addition, Oxford Industries sells jewelry, bags, scarves, belts, swimwear, and footwear under the Lilly Pulitzer brand. The company distributes its products through retail stores, department stores, specialty retailers, and e-commerce sites.
In its latest earnings report, CEO Tom Chubb attributed the weak second quarter to "a challenging consumer environment" after the company slashed its outlook. Shares of Oxford Industries sank to their lowest level in more than two years following the results.
The Zacks Rundown
Oxford Industries, a Zacks Rank #5 (Strong Sell) stock, is a component of the Zacks Textile – Apparel industry group, which currently ranks in the bottom 38% out of approximately 250 Zacks Ranked Industries. As such, we expect this industry group as a whole to underperform the market over the next 3 to 6 months, just as it has throughout the year.
Stocks in the bottom tiers of industries can often be intriguing short candidates. While individual stocks have the ability to outperform even when they're part of a lagging industry, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much more difficult.
Along with many other apparel stocks, OXM shares have been underperforming this year while the general market returned to new heights. The stock is hitting a series of lower lows and represents a compelling short opportunity as we head deeper into the fourth quarter.
Recent Earnings Misses & Deteriorating Outlook
Oxford Industries has fallen short of earnings estimates in three of the past four quarters. Back in September, the company reported second-quarter earnings of $2.77/share, missing the $3.05/share Zacks Consensus Estimate by -9.2%. Consistently falling short of earnings estimates is a recipe for underperformance, and OXM is no exception.
The Tommy Bahama parent reported revenues during the quarter of $419.9 million, which represented a -0.1% decline from the year-ago period. The company has topped revenue expectations just once over the past four quarters.
Oxford Industries has been on the receiving end of negative earnings estimate revisions as of late. Looking at the current quarter, analysts have slashed estimates by a whopping -90.18% in the past 60 days. The Q3 Zacks Consensus EPS Estimate is now $0.11/share, reflecting negative growth of -89.1% relative to the year-ago period.
Falling earnings estimates are a huge red flag and need to be respected. Negative growth year-over-year is the type of trend that bears like to see.
Technical Outlook
OXM stock is in a sustained downtrend. Notice how the stock has made a series of lower lows, widely underperforming the major indices.
OXM stock has experienced what is known as a "death cross," whereby the stock's 50-day moving average crosses below its 200-day moving average. The stock would have to make an outsized move to the upside and show increasing earnings estimate revisions to warrant taking any long positions. Shares have fallen nearly 20% this year alone.
Final Thoughts
A deteriorating fundamental and technical backdrop show that this stock is not set to make its way to new highs anytime soon. The fact that OXM is included in one of the worst-performing industry groups provides yet another headwind to a long list of concerns. A history of earnings misses and falling future earnings estimates will likely serve as a ceiling to any potential rallies, nurturing the stock's downtrend.
Potential investors may want to give this stock the cold shoulder, or perhaps include it as part of a short or hedge strategy. Bulls will want to steer clear of OXM until the situation shows major signs of improvement.
Additional content:
Time to Buy These Transportation-Shipping Stocks: CLCO, ESEA, ZIM
Quite a few shipping companies have seen their stocks added to the Zacks Rank #1 (Strong Buy) list and are standing out in terms of value.
Bolstering their valuations is that these Zacks transportation-shipping stocks are offering enticing dividends and have seen a positive trend of earnings estimate revisions which suggests more upside.
Cool Company - CLCO
Operating fuel-efficient liquified natural gas carriers, Cool Company is an up and coming shipping stock to watch after launching its IPO at the beginning of 2022.
Checking a "B" Zacks Style Scores grade for Value, CLCO trades at $11 and at a 5.6X forward P/E multiple despite fiscal 2024 EPS projected to dip to $2.03 following a tough-to-compete-against year that saw earnings at $3.25 per share. Still, FY25 EPS is expected to stabilize and rise 3%. Furthermore, FY24 and FY25 EPS estimates are nicely up over the last 60 days and Cool Company's annual dividend yield is currently at a whopping 14.42%.
Euroseas - ESEA
With a 5.56% annual dividend, Euroseas stock is very intriguing as a leader in the cargo, dry bulk, and container shipping markets. As one of the stock market's better performers, ESEA has soared +37% year to date. Plus, at $40 ESEA still trades at just 2.8X forward earnings checking an "A" Style Scores grade for Value.
While a dip is naturally expected on Euroseas robust bottom line, earnings estimate revisions for FY24 and FY25 have spiked 13% and 49% in the last 30 days respectively.
ZIM Integrated - ZIM
Last but not least is ZIM Integrated Shipping Services which operates a fleet and network of cargo shipping lines. Seeing a sharp rebound on its bottom line, ZIM trades at 1.8X forward earnings with FY24 EPS expected at $11.22 compared to an adjusted loss of -$5.07 a share last year.
At the moment, ZIM has an "A" Style Scores grade for Value even with FY25 EPS forecasted to drop to a loss -$0.75. That said, with ZIM's stock at a price tag of $20 the risk to reward looks favorable considering earnings estimates for FY24 and FY25 have skyrocketed in the last two months.
Although ZIM's operations are prone to the cyclicality of the broader shipping industry, the company is known to reward shareholders during times of increased profitability and reinstated its dividend with a current yield of 4.35%.
Bottom Line
Keeping in mind that the plausibility of a lower inflationary environment should further enhance the operating efficiency of many shipping companies, now appears to be an ideal time to buy Cool Company, Euroseas, and ZIM Integrated's stock.
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Oxford Industries, Inc. (OXM): Free Stock Analysis Report
Euroseas Ltd. (ESEA): Free Stock Analysis Report
Vertex, Inc. (VERX): Free Stock Analysis Report
ZIM Integrated Shipping Services Ltd. (ZIM): Free Stock Analysis Report
Cool Company Ltd. (CLCO): Free Stock Analysis Report