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Encore Wire Corp, Tile Shop Holdings M&T Bank, First Interstate BancSystem And IBERIABANK Highlighted As Zacks Bull And Bear Of The Day

Published 02/27/2018, 08:21 PM
Updated 07/09/2023, 06:31 AM
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For Immediate Release

Chicago, IL – Feb 28, 2018 – Zacks Equity Research highlights Encore Wire Corp (NASDAQ:WIRE) as the Bull of the Day, Tile Shop Holdings, Inc. (NASDAQ:TTS) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on M&T Bank Corp. (NYSE:MTB) , First Interstate BancSystem, Inc. (NASDAQ:FIBK) and IBERIABANK Corp. (NASDAQ:IBKC) .

Here is a synopsis of all five stocks:

Bull of the Day:

Encore Wire Corp, a Zacks Rank #1 (Strong Buy) is a low-cost manufacturer of copper electrical building wire and cable. The Company is a significant supplier of both residential wire for interior electrical wiring in homes, apartments and manufactured housing, as well as building wire for electrical distribution in commercial and industrial buildings.

Recent Earnings Data

The company reported Q4, and FY 2017 results on February 20th where they beat the Zacks consensus earnings and revenue estimates for the second consecutive quarter. On a year over year basis, earnings grew by +38.2% while revenues rose by +25.9%.

There were several reasons for the impressive results; an increase in unit volumes (measured in copper pounds contained in wire sold) by +5.8%, a +22.8% rise in average selling price per copper pound, and a +30.1% increase in sales prices. Moreover, the company’s gross margins improved more than previously expected.

Management’s Take

According to Daniel L. Jones, Chairman, President, and CEO, “We are pleased to report a great fourth quarter and full year. Our unit sales were up in both copper and aluminum building wire for the year. One of the key metrics to our earnings is the spread between the price of copper wire sold and the cost of raw copper purchased in any given period. The copper wire spread increased 9.9% in 2017 versus 2016, as the average price of copper purchased increased 25.4% in 2017 versus 2016, and the average selling price of wire sold increased 19.8%.

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"We are also encouraged by the fact spreads improved during the fourth quarter of 2017 versus the third quarter of 2017.” Mr. Jones continued, “Our balance sheet is very strong. We have no long-term debt, and our revolving line of credit is paid down to zero. In addition, we had $123.4 million in cash at the end of the quarter. We also declared another cash dividend during the quarter.”

Looking Forward

The company is expected to see significant tax savings due to the new corporate tax rates; WIRE will see its effective tax rate fall from about 33% to approximately 22%. Also, the continued positive housing and permit data shows that the need for electric wiring will remain in place though 2018.

Bear of the Day:

Tile Shop Holdings, Inc., a Zacks Rank #5 (Strong Sell), is the parent company of The Tile Shop. The Tile Shop is a specialty retailer of manufactured and natural stone tiles, setting and maintenance materials, and related accessories in the United States. It offers floor, wall, natural stone, ceramic, porcelain, glass, and metal tile products; tile patterns; basins; fixtures; listellos/borders; and profiles. Tile Shop Holdings, Inc. is based in Plymouth, Minnesota.

Recent Earnings Results

On February 21st, the company announced Q4 17 results where they missed both the Zacks consensus earnings and revenue estimates. Earnings came in at -$0.05, well below the year ago EPS of $0.07, and revenues fell by -2.3%. But this was not the only downside of the report, comps dropped by 5%, and gross margins declined by 310 basis points.

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Issues Ahead

In December the company stopped its promotional pricing strategy as management believed that it was hurting traffic specifically with professional customers. Going into 2018, management has shifted its focus on product differentiation, and less on promotional pricing. While the shift seems appropriate, there is no true way to gauge the potential success of this move. Adding to the uncertainty surrounding future earnings, management has provided very limited guidance for 2018 with zero EPS, sales or gross margin expectations.

Management’s Take

According to Robert Rucker, interim CEO, “During the fourth quarter, we focused on improving our product assortment, identifying opportunities to better serve our professional customers, and de-emphasizing price promotions. We have acted swiftly and decisively and we are confident in our long-term strategy.

"Company performance in the second half of the year was not reflective of our position within the flooring industry as the preeminent place to romance your home with unique and premium tile. We are committed to providing the best product assortment, best service, and best presentation in the tile industry. We believe we are taking the right steps to deliver better financial results and best position the Company for long-term success.”

Additional content:

3 Bank Stocks Not Likely to Lose Momentum

Bank stocks have been in the spotlight since the announcement of U.S Presidential election results in November 2016. While the overall financial performance of banks has not been that impressive owing to a tough operating backdrop, the future looks bright.

Driven by investors’ interest, price performance of banks has been impressive. Since the Presidential election results, banks have outperformed the Zacks Finance sector.

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Notably, at the same time, this has made bank stocks a bit expensive. So, should one be betting on the stocks though these are expensive? Well, the answer is a yes.

Factors to Keep the Momentum Alive

Favorable rate hike scenario:If the Federal Reserve sticks to its plan of increasing rates three times in 2018, it will further help banks in expanding net interest margin. This along with rise in loan demand will eventually drive revenue growth.

With the inflation rate improving, there are chances of aggressive rate hikes by the Fed. In fact, the Fed minutes of the January FOMC meeting point in that direction. The report highlighted that improving economic growth, stimulus from the tax cuts and rise in inflation support a more aggressive stance by the Fed in hiking rates.

So, banks are anticipated to benefit further.

Lower tax rates:All sectors are likely to benefit from the lower tax rates with banks expected to gain the most as they are amongst the highest tax payers in the United States.

Also, driven by the tax legislation provisions related to repatriation of overseas cash, banks will be in a win-win situation. This is because, as overseas cash is brought back, it will likely provide an impetus to M&As activities, thereby giving a boost to investment banking. Also, as the act will lower tax rates for wealthy individuals, asset management units of these banks are projected to witness a rise in fund inflow.

Potential lesser regulation:Growing investor optimism related to lesser regulations is likely to boost bank stocks. While no time frame has been outlined for the execution, the announcement of a bipartisan agreement has helped investors regain confidence. This will help banks in reducing regulatory compliance costs and will likely to lead to a wave of M&As for the banking industry.

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Upbeat earnings expectations:Earnings for major banks and banks & thrifts are expected to accelerate in 2018 with growth of 22.8% and 27.9%, respectively, compared with 7.5% rise for the Finance sector.

Choosing the Winning Bank Stocks

The banking industry, as a whole, is likely to gain from the favorable factors. So, it is not an easy task to find the potential winners that will continue witnessing upward momentum.

Therefore, we have taken the help of the Zacks Stock Screener to shortlist stocks that have market capitalization of more than $1 billion and carry a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

To further cut short the list, we picked those stocks that have witnessed positive earnings estimate revisions of 1% or more for 2018 over the past four weeks. Further, these banks are expected to record earnings growth of 25% or more this year.

Also, the stocks have a Momentum Score of A or B. Our research shows that stocks with a Style Score of A or B when combined with a Zacks Rank #1 or 2 offer the best upside potential.

Here are the three banks stocks that met all the criteria:

Sporting a Zacks Rank #1, M&T Bank Corp.’s current-year earnings estimates moved 1% upward over the last four weeks. Further, with a Momentum Score of B and market cap of $25.4 billion, the company’s 2018 earnings are projected to grow at the rate of 30.5%.

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First Interstate BancSystem, Inc., with a Zacks Rank #2 and Momentum Score of A, has witnessed its current-year earnings estimates moving 4.9% upward over the last 30 days. Also, the bank, with a market cap of $2.2 billion, is projected to record 47.8% year-over-year earnings growth in 2018.

Current-year earnings estimates for IBERIABANK Corp., with a market cap of $4.1 billion, have moved 4.1% upward over the last 30 days. The bank, carrying a Zacks Rank #2 and Momentum Score of B, is expected to record earnings growth of 42.5% this year.

Zacks Top 10 Stocks for 2018

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2018?

Last year's 2017 Zacks Top 10 Stocks portfolio produced double-digit winners, including FMC Corp (NYSE:FMC). and VMware which racked up stellar gains of +67.9% and +61%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.

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Get today’s Zacks #1 Stock of the Day with your free subscription to Profit from the Pros newsletter:

About the Bull and Bear of the Day

Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

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Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Strong Stocks that Should Be in the News

Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year. See these high-potential stocks free >>.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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Encore Wire Corporation (WIRE): Free Stock Analysis Report

M&T Bank Corporation (MTB): Free Stock Analysis Report

First Interstate BancSystem, Inc. (FIBK): Free Stock Analysis Report

IBERIABANK Corporation (IBKC): Free Stock Analysis Report

Tile Shop Hldgs, Inc. (TTS): Free Stock Analysis Report

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