For Immediate Release
Chicago, IL – November 30, 2021 – Zacks Equity Research Shares of Tyson Foods, Inc. TSN as the Bull of the Day, Cracker Barrel Old Country Store, Inc. CBRL as the Bear of the Day. In addition, Zacks Equity Research provides analysis on NIO Inc. NIO, Royal Dutch Shell plc (RDS.A) and Tesla, Inc. TSLA.
Here is a synopsis of all five stocks:
Bull of the Day:
Tyson Foods is a Zacks #1 (Strong Buy) that is the biggest U.S. chicken company. Tyson produces, distributes and markets chicken, beef, pork as well as prepared foods.
The company recently had a beat on EPS, which helped the stock hit 2021 highs. But the market pullback caused the stock to fall back to pre-earnings levels.
Investors should be watching this pullback closely for a buy. Not only are earnings looking up, but the company has introduced a new productivity program that could reap benefits for shareholders into 2022.
About the Company
Tyson’s products are marketed and sold primarily by sales staff to grocery retailers, grocery wholesalers, meat distributors, military commissaries, industrial food processing companies, chain restaurants, international export companies and domestic distributors.
The company has 137,000 full time employees, is headquartered in Springdale, Arkansas and was founded in 1935.
The company has a market cap of about $30 Billion and has Zacks Style Scores of “A” in Value but “D” in Growth. The Forward PE is just 11 and the company pays a 2.2% dividend.
Tyson reported EPS earlier this month seeing a surprise to the upside of 4.5%. Revenues also came in above expectations and they guided FY22 higher. Tyson also bumped up their dividend slightly and sees Capex at $2B.
The healthy quarter comes despite higher commodity prices which have brought year over year revenues lower. Chicken was off 6%, beef and pork were both off 15%, while prepared foods was lower by 12.5%. Tyson is raising meat prices as costs escalate and avenge beef prices have climbed by one-third in the most recent quarter.
On the call, the CEO commented that the worst of the labor shortfall is behind them. Their poultry plants are almost fully staffed as they head into the end of the year.
The EPS beat was the company’s sixth straight. While the magnitude this quarter was lower than the last five earnings, estimates are ticking higher into next year.
Over the last 60 days, estimates are trending upwards. For the current quarter, we have seen estimates raised by 17%, from $1.72 to $2.01. For the current year, we have seen a 9% move higher in that same time frame.
Analysts are citing adjusted pricing and credit management for a job well done in a tough environment.
While earnings and estimates look good, the market is looking forward to some cost savings efforts, which could help the bottom line through 2024.
$1 Billion Productively Program
Beginning next year, Tyson is launching a new productivity program that will target $1B in savings by the end of 2024. This program will be “designed to drive a better, faster and more agile organization that is supported by a culture of continuous improvement and faster decision making.”
The impact should be felt early next year as they are shooting for $300-$400 million in fiscal 2022.
The stock has done well in 2021, up about 25% year to date. However, it’s still off almost 15% from the pre-COVID levels seen in early 2020. Value investors see opportunity here, but let’s go over some levels to possibly step in on a pullback.
As of this writing, the 50-day moving average is $80.20 and the 200-day is just under $77. The stock has recently broken trendline support and looks to test that 50-day. If it holds, investors can step in and look for those all-time highs of $94.24 sometime next year.
If we get a broad market sell off and that 50-day support breaks, look for the 200-day to come into play. A buy zone of $77-79 should be a good long-term opportunity for value investors.
Tyson has proven itself in a tough environment and stockholders have been rewarded this year. As the stock comes off its recent highs new investors should watch the support levels for an opportunity to get long for continued momentum higher in 2022.
Bear of the Day:
Cracker Barrel is a Zacks Rank #5 (Strong Sell) stock that is engaged in the ownership and operation of full-service restaurants with a restaurant and a retail store in the same unit. The restaurants serve breakfast, lunch, and dinner, as well as dine-in, pick-up, and delivery services. The company’s gift shops comprise various decorative and functional items, such as rocking chairs, seasonal gifts, apparel, toys, cookware, and various other gift items, as well as various candies, preserves, and other food items.
Outside of the Covid crash, the stock has been steady over the years, trading around the same levels since 2015. However, recent earnings have put pressure on the stock that now threatens to break long lasting support levels.
Investors should be cautious with the CBRL as margin pressures might scare away long-term holders of the stock.
About the Company
Cracker Barrel is headquartered in Lebanon, TN and employs 70,000 people. The company was founded in 1969 and as of September 15, 2021, it operated 664 Cracker Barrel stores in 45 states.
CBRL is valued at $3 billion and has a Forward PE of 16. The company holds a Zacks Style Score of “A” in Growth and “B” in Value. The company also pays a 4% dividend.
Cracker Barrel reported last week, seeing 7% miss on EPS. While revenues came in above expectations, margins pressures are squeezing the bottom line. Increasing commodity costs and wage inflation are a double whammy and the company adjusted their operating margin to 5.5-6.0%.
Comparable restaurant sales were up 1.4% v 2019, while retail sales were up 17.16%.
The CEO commented that progress on staffing and efforts by their operating teams helped sales in the first quarter. Additional comments reiterated that their sales trends give them confidence into the second quarter.
However, margins issues are likely to weigh on the bottom line early next year. This will have additional pressure on the stock and analysts are cutting estimates and price targets.
The Q1 report showed margin problems, which was followed by a drop in estimates across all time frames. Over the last 7 days, the current quarters numbers have fallen from $2.68 to $2.05, or 24%. For the current year, estimates have fallen about 5% over that same time frame.
The company does have some long-term growth opportunity in their Maple Street Biscuit Company restaurants. They are looking to open 15 new restaurants in 2022, but news sales are not likely to overtake their margin problems in the first half of next year.
The long-term trading range is key here, so let’s focus on that by looking at the chart going back to 2014. If you take out the COVID crash, you have a clear support zone in the $120-130 range. At the same time, you have a clear resistance zone around $180.
The stock hit that resistance earlier this year, but has since fallen back into that support zone at $130, bouncing back and forth between $130-$150.
The earnings number has cracked that support, so investors need to be really cautious as 2021 lows are now in sight. I would be worried that those lows get taken out and we see a slow bleed below $120. From there the $100 level is in sight as it’s the 61.8% Fibonacci support level from the COVID crash lows to 2021 highs.
Cracker Barrel is on the verge of a technical breakdown due to margin pressure. As inflation persists, the stock will continue to struggle. While there is a long-term growth story in Maple Street, investors are likely to be dealing with dead money in the foreseeable future.
The 4% dividend will bring in buyers as the stock goes lower, but there are plenty of places to put money that offer more opportunity.
NIO and Shell (RDS.A) Strike Deal to Enhance EV Driver Experience
NIO recently announced a partnership with energy giant Royal Dutch Shell to enhance the charging experience for electric vehicle (EV) customers by jointly constructing and operating a network of co-branded battery swapping stations.
The agreement encompasses a plan to develop a network of 100 battery swapping stations in China by 2025, starting with two pilot sites. Further, additional battery swap stations will be installed at Shell EV charging hubs, while Shell Recharge fast chargers will be made available at NIO locations.
The agreement in Europe will commence with the construction and operation of pilot stations in 2022. Further, NIO users will have access to Shell’s charging infrastructure in Europe, one of Europe’s largest roaming EV charging networks.
The companies are highly optimistic about the partnership. The agreement between NIO and Shell will provide EV users with superior services and experiences.
For Shell, the deal offers the advantages of NIO’s already massive network of fast-charging stations, battery swapping stations and destination chargers in China. Further, amid the heightening climate change concerns, this collaboration highlights Shell’s commitment to expedite the transition to green vehicles globally and make a worthwhile contribution to sustainable energy development.
For NIO, the European leg of the deal is particularly enticing as it will enable it to expand its operations internationally. Through its partnership with Shell, the China startup will have an ally with whom it can work toward improving every aspect of the EV experience by offering Shell Recharge high-speed charging at attractive NIO locations and making battery swapping available at Shell locations.
Meanwhile, NIO and Shell will continue to search for further alliance opportunities in battery asset management, fleet management, home charging services, advanced battery charging and swapping technology development as well as construction of charging facilities in China.
NIO and Shell currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Key Auto Companies to Tap On
A better-ranked stock in the auto space includes Tesla, which flaunts a Zacks Rank of 1.
Tesla has an expected earnings growth rate of 166.96% for the current year. The Zacks Consensus Estimate for its current-year earnings has been revised upward by 6 cents over the last 30 days.
Tesla beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missing once. TSLA has a trailing four-quarter earnings surprise of 25.38%, on average. Its shares have also rallied 90.6% over the past year.
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