For Immediate Release
Chicago, IL – November 23, 2022 – Zacks Equity Research shares Olympic Steel ZEUS as the Bull of the Day and Kinetik KNTK as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Disney DIS, Netflix NFLX and Apple AAPL.
Here is a synopsis of all five stocks:
Bull of the Day:
Markets are rejoicing as inflationary data finally cools. It has yet to cool enough to calm down the Fed, but at least they have stepped down some of their hawkish rhetoric. It can make it seem like the dartboard approach to picking stocks is going to work again into the end of the year. Let’s not get too excited out there folks. But you can be excited about the fact that stocks seem to have bottomed.
One way to make sure you don’t get caught on the wrong side when the market retreats a bit is by finding stocks with the strongest earnings trends. As easy way is by scrubbing names with the Zacks Rank. Stocks in the good graces of our Zacks Rank have the best earnings trends.
One such stock is today’s Bull of the Day, Olympic Steel. Olympic Steel, Inc. processes, distributes, and storage metal products in the United States and internationally. It operates in three segments: Carbon Flat Products; Specialty Metals Flat Products; and Tubular and Pipe Products.
The stock is currently a Zacks Rank #1 (Strong Buy) in the Steel – Producers industry. The current year has been an absolute monster of a year for the stock. Our Zacks Consensus Estimate is calling for $7.45 EPS for the stock for 2022. That’s up from $7.32 sixty days ago. It’s this recent upside move in estimates that has the stock in the good graces of our Zacks Rank. Next year’s number is up from $1.80 to $1.96. Note the large contraction year-over-year. That is less of a condemnation of next year than it is an incredible year this year.
Bear of the Day:
Energy markets have been insane this year. A huge spike in demand as the world crawled out of its COVID-induced lockdown, put tons of pressure on prices. Disruptions stemming from war in Europe did not help things along either. However, recently it seems like prices are coming back down to Earth. The expectations for the future have reeled in as well. This is helping normalize this sector which had been a runaway winner this year.
That’s a word to the wise for what might be on the horizon as the calendar turns over to 2023. The Zacks Rank, a system which sorts out stocks with the strongest earnings trends from those with the weakest, is flashing some warning signs. One stock flashing a warning sign is today’s Bear of the Day.
I’m talking about Zacks Rank #5 (Strong Sell) Kinetik. Kinetik Holdings Inc. operates as a midstream company in the Texas Delaware Basin. It provides gathering, transportation, compression, processing, and treating services for companies that produce natural gas, natural gas liquids, crude oil, and water. The company is headquartered in Midland, Texas.
The reason for the unfavorable rank is that earnings are moving in the wrong direction. Over the last 30 days, analysts have been cutting their earnings estimate numbers for both the current year and next year. The negative moves have dropped our Zacks Consensus Estimates for the current year from $3.25 to $2.04 while next year’s number is off from $3.09 to $2.61.
The Oil and Gas – Field Services industry is in the Top 10% of our Zacks Industry Rank. That being said, there are a handful of names in this industry which are in the good graces of our Zacks Rank.
Disney Brings Back CEO Bob Iger, Shares Soar
Disney recently announced the appointment of Robert A. Iger, popularly known as Bob Iger, as CEO, effective immediately.
Bob Iger replaces Bob Chapek, following the latter's two-year stint. The reappointment of Bob Iger as the CEO has bought a spree of excitement among investors as share prices have been surging ever since the news broke out on Nov 20 Shares jumped 6.3% to close at $97.58 on Nov 21.
The lingering impact of the COVID, raging inflation and rising interest rates do not bode well for Disney's consumer-oriented businesses. Shares have declined more than 37% year-to-date.
Disney has been struggling in its streaming division with the increased cost of production and delayed releases lately.
However, with Bob Iger taking charge once again, investors are expected to gain back their lost confidence in the company's prospects.
Bob Iger had actively been involved in launching the launch of Disney+ in 2019. His expertise and experience of more than four decades are likely to help the company create an efficient and cost-effective structure for the streaming platform.
Where's Disney's Streaming Division Heading?
Disney has been heavily investing in its streaming services to launch new movies and shows to gain traction. This has aided subscriber growth as Disney+ added more than 12 million global subscribers in the fourth quarter of fiscal 2022.
However, Disney's direct-to-consumer division reported an operating loss of nearly $1.5 billion in the fourth-quarter fiscal 2022, which doubled year-over-year. This has been attributed to macroeconomic factors like inflation, which have spiked up the cost of production for the company, as well as adverse foreign exchange impact that decreased Disney+'s ARPU by 5%.
Disney+ also faces significant competition from Netflix, which has a strong pipeline of content and has reached 223 million subscribers worldwide to date. A saturated streaming market with the presence of services from the likes of Apple is creating headwind for Disney+.
Streaming market leader, Netflix, reported better-than-expected third-quarter 2022 subscriber numbers. The streaming giant gained 2.41 million paid subscribers globally, higher than its estimate of gaining one million users. Netflix added 4.38 million paid subscribers in the year-ago quarter.
Apple's streaming service, Apple TV+, continues to gain recognition with its critically acclaimed and popular shows like Ted Lasso.
Nevertheless, Disney is focusing on the realignment of cost, including meaningful rationalization of marketing spending and optimization of content slate and distribution approach to deliver a steady state of high-impact releases that efficiently drive engagement.
The company expects Disney+ to reach profitability by 2024. It is also counting on releases such as Black Panther: Wakanda Forever, and Avatar: The Way of Water to fuel its subscriber acquisition.
The Zacks Rank #3 (Hold) company is also about to launch a cheaper, ad-supported subscription offering for Disney+ to attract even more viewers and diversify its revenue stream. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
The ad-supported version will launch on Dec 8 for $7.99 a month, while its basic ad-free subscription jumps to $10.99.
ESPN+, the sports streaming platform of Disney, has also been taking steps to boost its top line.
It renewed the Major League Baseball sports rights deal through 2028 and entered a long-term partnership with the National Football League, where it has agreed on a five-year rights deal with the NFL to broadcast the league's Monday night Wild Card playoff game through the 2025 season.
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Apple Inc. (AAPL): Free Stock Analysis Report
Netflix, Inc. (NFLX): Free Stock Analysis Report
The Walt Disney Company (DIS): Free Stock Analysis Report
Olympic Steel, Inc. (ZEUS): Free Stock Analysis Report
Kinetik Holdings Inc. (KNTK): Free Stock Analysis Report