While the market is currently in correction mode due to concerns surrounding the rising Treasury yield, continued spread of the Delta coronavirus, and several other lingering issues, the economy is expected to keep recovering with the Fed’s monetary policy support. The potential infrastructure spending should boost the economy further.
The Federal Reserve raised its growth forecast for 2022 to 3.8% in its September projections. Solid corporate earnings should also provide some support. Analysts estimate the S&P 500 members’ earnings to grow 27.6% in the third quarter of 2021.
Sanderson Farms, Inc. (SAFM)
SAFM is a poultry processing company that produces, processes, markets, and distributes fresh and frozen chickens under its brand name to retailers and other distributors. The company also sells other processed foods.
For the third fiscal quarter that ended July 31, SAFM’s net sales increased 41.4% year-over-year to $1.35 billion while operating income went up 439.8% year-over-year to $215.22 million. Net income and EPS stood at $164.76 million and $7.38, up 402.2% and 398.6% from the same period last year, respectively.
The consensus EPS estimate of $17.88 for the current year (fiscal 2021) indicates an increase of 1,307.9% year-over-year. Likewise, the consensus revenue estimate of $4.67 billion for the ongoing year reflects an improvement of 31.1% from the prior year. Moreover, SAFM has an impressive earnings surprise history as it has topped consensus EPS estimates in each of the trailing four quarters. Moreover, its EPS is expected to grow 112.7% per annum over the next five years.
The stock has gained 59.5% over the past year and 42.4% year-to-date to close yesterday’s trading session at $188.20
SAFM’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall grade of A which equates to a Strong Buy rating in our proprietary ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
SAFM has a Growth grade of A, and a Value and Quality grade of B. In the 83-stock Food Makers industry, it is ranked #7.
Click here to see additional grades for SAFM (Momentum, Stability, and Sentiment).
MarineMax, Inc. (HZO)
HZO is a boat and yacht retailer. The company sells new and used boats and yachts, and other related products and services to customers. It also provides yacht brokerage and charter services.
On July 3, HZO expanded the term of its credit facility, with the new term expiring in July 2024. The facility now provides $500 million of borrowing capacity and is endowed with long-term partner lenders. The extension is expected to improve the company’s liquidity and financial flexibility to cater to the growing demand for boating.
On July 1, HZO acquired Nisswa Marine, a Minnesota-based boat dealing company. The acquisition should strengthen HZO’s position in the Minnesota region and allow the company to leverage Nisswa Marine’s capabilities for enhanced growth.
For the three months that ended June 30, HZO’s revenue increased 33.7% year-over-year to $666.33 million. Gross profit came in at $204.67 million, up 65.8% from the same period last year. Net income rose 70.7% from the prior-year quarter to $59.62 million, while net income per common share improved 63.9% year-over-year to $2.59.
Analysts expect HZO’s EPS to increase 90.9% year-over-year to $6.53 in the ongoing year (fiscal 2021), while Street revenue estimate of $2.13 billion for the current year reflects a rise of 41.2% from the last year. In addition, HZO has topped consensus EPS estimates in each of the trailing four quarters, which is impressive. The company’s EPS is expected to grow 30% per annum over the next five years.
HZO’s stock has gained 89% over the past year and 38.5% year-to-date to close yesterday’s trading session at $48.52.
HZO’s POWR Ratings reflect this promising outlook. The stock has an overall grade of B, which translates to a Buy rating in our POWR Ratings system.
HZO has an A grade for Quality, and a B grade for Value and Momentum. It is ranked #15 out of 36 stocks in the Athletics & Recreation industry. This industry is rated A.
In addition to the grades we’ve stated above, one can see the rest of HZO’s grades for Growth, Stability, and Sentiment here.
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SAFM shares were trading at $187.76 per share on Friday afternoon, down $0.44 (-0.23%). Year-to-date, SAFM has gained 43.21%, versus a 17.18% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...
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