For Immediate Release
Chicago, IL – March 19, 2021 – Zacks Equity Research Shares of The Mosaic Company MOS as the Bull of the Day, La-Z-Boy Incorporated LZB as the Bear of the Day. In addition, Zacks Equity Research provides analysis on WisdomTree Investments, Inc. WETF and Global Net Lease, Inc. GNL.
Here is a synopsis of all four stocks:
Bull of the Day:
The Mosaic Company is a Zacks Rank #1 (Strong Buy) that is a leading producer and marketer of phosphate and potash. The company supplies the global agriculture industry, which has been thriving due to recent high prices in grains.
Because of the increasing demand for Mosaic products, the company is seeing a big surge in its business. For that reason, the stock is hitting highs not seen since 2018. Despite the big run in the stock, as long as grain prices remain elevated, investors should expect the MOS to grind higher into the end of the year.
About the Company
Mosaic is headquartered in Tampa, FL and has over 12,000 employees. The company accounts for roughly 13% of global annual phosphate production and around 11% of global annual potash production.
Mosaic sells its products to wholesale distributors, retail chains, farmers, cooperatives, independent retailers, and national accounts.
MOS is valued at about $13 billion and has a Forward PE of 14. The company holds a Zacks Style Score of “B” in Value, “C” in Growth, and “C” in Momentum.
Q4 Earnings and Update
Back in February Mosaic reported a big earnings beat, seeing a surprise to the upside of 137%. Q4 came in at $0.57 v the $0.24 expected, and revenues came in at $2.46B v the $2.30B expected.
The company had a big increase in potash sales volumes (millions of tonnes), seeing 2.7M v the 1.5M last year. Additionally, the company saw improvement in its cost structure by shifting potash production, which delivered $300M in transformation savings in 2020.
The quarter impressed analysts, who started lifting estimates and price targets. Since earnings, the company had an investor day that updated their targeted 2025 capex to $800M and guided their 2021 EBITDA to $440M, 2022 EBITDA to $600M and 2023 EBITDA to $700M. With that, the company also lifted the dividend 50%, which brought the dividend yield up to about 0.90%.
The stock has reacted well to EPS and the investor day, up over 10% since earnings release.
Estimates and Upgrades
Looking at estimates we see a big jump across the board over the last month. For the next quarter, estimates have gone 145% higher, from $0.31 to $0.76. For the current year, we see a 54% jump in estimates, going from $1.53 to $2.36 over that same timeframe.
The magnitude of these raises has price targets coming up. But for all of this to be maintained, the agriculture industry has to be strong, which means the higher grain prices the better.
Grain Prices
The global demand for agriculture products remains strong and we continue to expect this to be the trend as economies reopen after the pandemic. Additionally, multiple factors on the supply side have elevated grain prices to levels not seen since 2013.
Higher ag commodity prices push the demand for crop nutrient products higher. So as long as we have this tight supply/strong demand dynamic keeping grains elevated, we will see demand for potash and fertilizer remain strong.
The Technical Take
The stock is at 52-week highs and pressing the 2018 highs made at the $37 level. This will be a big spot for the bulls to take control and push for a larger run higher.
The stock is on a 45-degree angle march to the upside, with support at moving averages significantly below current levels. The 21-day MA is at $31.50, the 50-day is at $29.50 and for those of you praying for a massive pull back, the 200-day is at $20.50.
As far as Fibonacci levels, if we draw the 2018 highs to 2020 lows, we get a 161.8% target at $56. This is a big macro target, so while it might take a while to get there, but for longer-term investors that move over $50 is in the cards.
In Summary
The commodity space is hot. Most investors shy away from commodities as they don’t know how to get exposure outside a futures account. Mosaic is a great way to ride the commodity bull market as the price of the stock is very closely correlated with the grain markets.
Look for this bullish price momentum to continue into the end of the year and the stock to possibly break to the $50 level.
Bear of the Day:
La-Z-Boy is a Zacks Rank #5 (Strong Sell) that is one of the leading residential furniture producers and marketers. The company sells all types of furniture including sofa, recliners, chairs, loveseats and more.
The stock had a nice run higher after a series of earnings beats. However, estimates are falling, so investors should be on the lookout for a pullback as the stock breaks all-time highs.
More about LZB
La-Z-Boy is headquartered in Monroe, Michigan and employs over 9,000. The company is valued around $2 billion and has a PE of 18. LZB has Zacks Style Scores of “A” in Growth and “B” in Value. The company even pays a dividend of 1.34%.
Things have been clicking for the company during the pandemic as people looked to furnish their home. But did the recent quarter spook some analysts?
Q3 Earnings
LZB reported earnings back in February, seeing a 4% EPS beat. The company saw revenues of $241.3M v the $213.8M the year before. The company gave no guidance, but said that the consumer “nesting" continues, which is driving record demand for home furnishings. The store and internet traffic are rising and sales across all furniture categories have been strong.
This was great news to shareholders and after the stock gapped lower on the headline EPS number, it is since up over 25% from those lows.
However, analysts see something they don’t like and perhaps a reopening of the economy might affect future revenues. After all, how many sofas and recliners can one buy within a two- or three-year-time horizon.
Estimates
Over the last two months, we see evidence that analysts are starting to drop their expectations for the company. For the current quarter, estimates have fallen from $0.90 to $0.75, or 16%. And for the current year, we have see estimates fall from $2.73 to $2.50, or 8%
The issue may lie with supply chains problems. So as demand remains strong, the company might be missing out on a lot of revenues. And once we move past stimulus checks, investors will have to ask themselves if they believe demand will remain.
A Complacent Bull?
The capacity dynamic doesn’t benefit the company. Additionally, the company will see a CEO transition in April.
While the cLZB is growing, there is increasing competition and supply chain risk. Investors might be wise to avoid current levels and wait for larger pullbacks like we saw in the earnings number.
The Technicals
The moving averages are all rising, with the 50-day just under $42. A larger pullback could see a test of the 200-day MA at $35.50. Longer term support would be the $28-31 area, where Fibonacci levels reside, drawn from the March 2020 lows to January highs.
In Summary
La-Z-Boy is looking a little overbought despite being so close to all-time highs. The stock is due for another pullback if the risks mentioned above come to fruition. Current investors have to decide is the smaller upside is worth the larger downside that may come if estimates keep falling.
Additional content:
2 Dividends Under $20 to Buy Now as Yields Rise
The Dow and the S&P 500 both closed at new records Wednesday as investors appeared to celebrate Jerome Powell and the Fed’s commitment to doing all they can to support financial markets until the economy recovers completely. Stocks pulled back on Thursday from their highs and the Nasdaq was down 1.5% through late afternoon trading as Wall Street continues to monitor inflation worries.
The Biden administration’s new $1.9 trillion stimulus plan and the vaccine progress have added to inflation concerns as bond selling continues, with yields at their highest levels in over a year.
Despite the quick turn-around in Treasurys, they remain ultra-low by historical standards. Meanwhile, the U.S. economy is projected to grow by around 6% in 2021 and the earnings picture is strong (also read: Looking Ahead to Q1 2021 Earnings Season).
All of these factors help create a bull case for the rest of the year, even with inflation worries. The benchmark index and the Dow are at new highs, as investors rotate into more cyclical and reopening trades.
Let’s not forget that the Nasdaq has already recovered half of its losses from its recent correction, which was also based on profit-taking from stocks that have soared, in some cases, well over 200% in the last year.
Given the backdrop of rising bond yields and a likely economic boom, we dive into cheap stocks under $20 that sport Treasury-beating dividend yields and are set to grow…
WisdomTree Investments
Prior Close: $6.14 USD
WisdomTree launched its first ETF back in 2006 and today it has grown into a much larger global exchange-traded product, or ETP (ETP) sponsor. The New York-based ETF and ETP sponsor and asset manager has roughly $69 billion assets under management. The firm boasts an array of ways for people to invest and its business is poised to grow as more retail investors enter the market and ETP investing becomes more popular.
Zacks estimates call for its revenue to climb over 12% in FY21, with FY22 set to come in 5% higher to reach $298.9 million. WisdomTree’s adjusted earnings are expected to climb by 20% and 6%, respectively during this stretch. WETF has consistently topped our bottom-line estimates and its EPS outlook has improved to help it land a Zacks Rank #2 (Buy) right now.
WisdomTree also grabs a “B” grade for Momentum in our Style Scores system and it is part of the Financial- Investment Bank space that rests in the top 2% of our over 250 Zacks industries. WETF shares have skyrocketed 150% in the last year, amid the market’s comeback, to easily outpace its industry’s 100% average climb.
The stock is up 15% in 2021 to more than double the market and at $6.14 a share it trades just below its 52-week highs that it hit on March 15. And WisdomTree still trades 50% below its 2017 levels and even further beneath its 2015 records, which could give it plenty of runway.
WETF is trading near its Zacks Econ sector in terms of forward earnings. Plus, its dividend yield sits at 1.94% to top the rapidly-rising 10-year U.S. Treasury’s 1.73%.
Global Net Lease
Prior Close: $18.36 USD
Global Net Lease is a real estate investment trust that aims to acquire and manage strategically-located commercial real estate properties. The company’s portfolio spans from the U.S. to the U.K., Germany, and beyond. In fact, it now has properties in ten countries, after it expanded into Italy and Spain last year. The REIT is focused primarily on investment grade corporate tenants in mission-critical industrial, distribution, and office properties.
GNL has posted solid top-line growth for years and it’s coming off 8% revenue growth in 2020. The company’s sales are projected to jump by another 12.5% this year and 6.5% in FY22 to hit $395.4 million. And its adjusted funds from operations or AFFO, which are essentially earnings, are projected to climb 17% this year and another 10% next year.
Global Net Lease’s positive post-release EPS revisions help it grab a Zacks Rank #2 (Buy) right now. The stock also rocks an “A” grade for Momentum and a “B” for Value in our Style Scores system and two of the five broker recommendations Zacks has for the stock are “Strong Buys,” with none below a “Hold.”
GNL has doubled its industry in the past year, up 105% and it has popped 8% in 2021. Its shares are trading 5% below its late-February highs and over 30% off where they were when it entered the market in 2015.
The stock is trading at its own one-year median and at a 50% discount to the Real Estate market and the REIT industry at 9X forward earnings. Most importantly, Global Net Lease’s dividend yield sits at a whopping 8.7% to crush its industry’s 3.24% average.
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