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We provide the latest news from the world of economics and finance
Chicago, IL – January 23, 2025 – Zacks Equity Research shares Alaska Air Group ALK as the Bull of the Day and Kohl’s Corp. KSS as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Alcoa Corp. AA, PACCAR Inc. PCAR and Deckers Outdoor Corp. DECK.
Here is a synopsis of all five stocks:
Alaska Air Group, a Zacks Rank #1 (Strong Buy), offers scheduled air transportation services for passengers and cargo across more than 120 cities. Through its mainline operations, Alaska covers the western United States, Canada, and Mexico. The company also operates Horizon Air, which serves nearly 7 million passengers annually under a capacity purchase agreement.
ALK stock is displaying relative strength, breaking out to the upside amid a bullish move that pushed the airline industry to fresh 52-week highs. The price movement is a sign of strength as we head further into the new year. Increasing volume has attracted investor attention as buying pressure accumulates in this top-ranked stock.
Alaska is part of the Zacks Transportation – Airline industry group, which currently ranks in the top 11% out of more than 250 industries. Because this group is ranked in the top half of all Zacks Ranked Industries, we expect it to outperform the market over the next 3 to 6 months, just as it has over the past month.
Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top industries, we can dramatically improve our stock-picking success.
Alaska Air Group recently laid out its 2025 guidance as well as a strategic, three-year initiative plan that included expanding the city of Seattle to what the company refers to as a “global gateway.”
Beginning in 2025, new services will include nonstop directives to Tokyo and Seoul as part of its combination with Hawaiian Airlines, which was completed in September of last year.
CEO Ben Minicucci stated that last year’s deal with Hawaiian Airlines will “transform our business and solidify our competitive advantage for years to come.” As a result, the carrier reported that it had raised its fourth-quarter adjusted EPS outlook to a range of $0.40-$0.50 (from $0.20-$0.40) due to “stronger revenue performance and lower non-operating expense.”
The airliner strives to deliver $1 billion in incremental profit under its newly-created “Alaska Accelerate” program. Management expects to drive double-digit margins of 11%-13% and achieve EPS of at least $10 by 2027. Alaska is also set to expand its domestic network this spring, in addition to enhancing existing airport lounges and introducing a new loyalty offering.
On a shareholder-friendly note, Alaska’s board of directors approved a new repurchase program back in December, authorizing the company to buy back up to $1 billion in common stock.
Alaska Air Group has built up an impressive reporting history, surpassing earnings estimates in each of the last four quarters. The company delivered an average surprise of 23.15% over that timeframe.
Back in October, Alaska reported third-quarter earnings of $2.25 per share, a 2.27% surprise over the $2.20/share consensus estimate. Revenues of $3.07 billion also exceeded projections by 2.8%.
Analysts are bullish on the stock and have raised fiscal 2025 earnings estimates by 10.43% in the past 60 days. The Zacks Consensus Estimate now stands at $5.93 per share, reflecting EPS growth of 35.7% this year on 24% revenue growth ($14.66 billion).
This market leader has seen its stock advance 75% over the past 6 months. Only stocks that are in extremely powerful uptrends are able to experience this type of outperformance. This is the kind of stock we want to include in our portfolio – one that is trending well and receiving positive earnings estimate revisions.
Notice how both the 50-day (blue line) and 200-day (red line) moving averages are sloping up. The stock has been making a series of higher highs throughout the past year. With both strong fundamental and technical indicators, ALK stock is poised to continue its outperformance.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, Alaska Air Group has recently witnessed positive revisions. As long as this trend remains intact (and ALK continues to deliver earnings beats), the stock will likely continue its bullish run.
Backed by a leading industry group and history of earnings beats, it’s not difficult to see why ALK stock is a compelling investment. Robust fundamentals combined with an appealing technical trend certainly justify adding shares to the mix.
The company also boasts top marks in our Zacks Value Style Category, indicating that shares are likely to outperform based on favorable valuation metrics.
Recent positive earnings estimate revisions should also serve to create a ‘floor’ in terms of any sudden or unexpected downside moves. If you haven’t already done so, be sure to put ALK on your shortlist.
Kohl’s Corp. operates as an omnichannel retailer in the United States. Headquartered in Menomonee Falls, Wisconsin, the department chain offers branded apparel, footwear, and accessories, in addition to beauty and home products through its stores and website.
The company provides its products under recognized brand names such as Croft & Barrow, Sonoma Goods for Life, SO, Food Network, LC Lauren Conrad, Nine West, and Simply Vera Vera Wang. Despite a presence of growth opportunities, Kohl’s continues to bear the brunt of a difficult macroeconomic backdrop and challenging retail landscape.
The stock was recently downgraded by analysts at Morgan Stanley, who stated that profitability expansion “will be harder to come by” in 2025. Significant pressure is being put on sales growth acceleration as Kohl’s faces heightened competition from major retailers and e-commerce giants. But as we’ll see, the consensus trend for both earnings estimates and revenues shows a clear negative tilt.
Kohl’s, a Zacks Rank #5 (Strong Sell) stock, is a component of the Zacks Retail – Regional Department Stores industry group, which currently ranks in the bottom 23% out of approximately 250 Zacks Ranked Industries. As such, we expect this industry group as a whole to underperform the market over the next 3 to 6 months, just as it has
Image Source: Zacks Investment Research
Stocks in the bottom tiers of industries can often be intriguing short candidates. While individual stocks have the ability to outperform even when they’re part of a lagging industry, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much more difficult.
KSS shares have been underperforming over the past year while the general market returned to new heights. The stock is hitting a series of lower lows and represents a compelling short opportunity as we head deeper into the new year.
The struggling retailer recently announced plans to close its San Bernardino, California-based e-commerce fulfillment center and 27 underperforming stores across more than a dozen states in 2025. Former CEO Tom Kingsbury stepped down earlier this month as the department store chain has had trouble adjusting to shifting consumer behavior.
Kohl’s has fallen short of earnings estimates in two of the past three quarters. Back in November, the retailer reported third-quarter earnings of $0.20 per share, missing the Zacks Consensus Estimate by -25.93%. Weak sales in the apparel and footwear segments caused management to lower its full-year outlook.
The company has posted a trailing four-quarter average earnings miss of -165.8%. Consistently falling short of earnings estimates is a recipe for underperformance, and Kohl’s is no exception.
Looking into its fiscal fourth quarter, the company has been on the receiving end of negative earnings estimate revisions lately. Analysts covering KSS stock have slashed Q4 EPS estimates by a whopping -33.63% in the past 60 days. The Zacks Consensus Estimate is now $0.75 per share, reflecting negative growth of -55.1% relative to the year-ago period.
Falling earnings estimates are a huge red flag and need to be respected. Negative growth year-over-year is the type of trend that bears like to see.
As illustrated below, KSS stock is in a sustained downtrend. Notice how the stock has made a series of lower lows, widely underperforming the major indices. Also note that shares are trading below a downward-sloping 50-day (blue line) and 200-day (red line) moving average – another good sign for the bears.
KSS stock has experienced what is known as a “death cross,” whereby the stock’s 50-day moving average crosses below its 200-day moving average. The stock would have to make an outsized move to the upside and show increasing earnings estimate revisions to warrant taking any long positions. Shares have fallen more than 40% over the past year alone.
A deteriorating fundamental and technical backdrop show that this stock is not set to make its way to new highs anytime soon. The fact that KSS stock is included in one of the worst-performing industry groups adds yet another headwind to a long list of concerns. A history of earnings misses and falling future earnings estimates will likely serve as a ceiling to any potential rallies, nurturing the stock’s downtrend.
Potential investors may want to give this stock the cold shoulder, or perhaps include it as part of a short or hedge strategy. Bulls will want to steer clear of Kohl’s until the situation shows major signs of improvement.
Fourth-quarter 2024 earnings results have come in line with expectations so far. Looking at the fourth quarter as a whole, total earnings for the S&P 500 Index are expected to be up 8.5% from the same period last year on 4.8% higher revenues. This follows 8.4% year-over-year EPS growth on 5.5% higher revenues in the previous quarter.
Meanwhile, three momentum stocks with a favorable Zacks Rank are set to beat on earnings this month. An earnings beat is likely to generate more momentum in these stock prices. These stocks are Alcoa Corp., PACCAR Inc. and Deckers Outdoor Corp.
Find the latest earnings estimates and surprises on Zacks Earnings Calendar.
We have narrowed our search to three momentum stocks set to report earnings results this month. These stocks carry a Zacks Momentum Score of either A or B. Moreover, each of these stocks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy) and has a positive Earnings ESP. You can see the complete list of today’s Zacks #1 Rank stocks here.
Our research shows that for stocks with the combination of a Zacks Rank #3 (Hold) or better (Rank #1 or 2) and a positive Earnings ESP, the chance of an earnings beat is as high as 70%. These stocks are anticipated to appreciate after their earnings release. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank #1 Alcoa produces and sells bauxite, alumina, and aluminum products in the United States, Spain, Australia, Iceland, Norway, Brazil, Canada, and internationally. AA operates through two segments — Alumina and Aluminum. AA is engaged in bauxite mining operations, processes bauxite into alumina and sells it to customers who process it into industrial chemical products, as well as aluminum smelting and casting businesses.
An increase in demand for aluminum in both Europe and North America is expected to have benefited AA’s Aluminum segment in the fourth quarter of 2024. Also, solid momentum in the building & construction markets and recovery in the packaging sector are likely to have aided the Aluminum segment’s sales.
Synergistic gains from the acquisitions made by the company are expected to have boosted revenues. In August 2024, Alcoa acquired Alumina Limited. This acquisition has enhanced AA’s position as a pure-play and upstream aluminum company worldwide. AA has an Earnings ESP of +2.76%. The company will report on Jan. 22, after the closing bell.
For fourth-quarter 2024, the Zacks Consensus Estimate currently shows revenues of $3.38 billion, suggesting an improvement of 30.1% year over year and earnings per share of $0.91, indicating an increase of 262.5% year over year. The company pulled off positive earnings surprises in three of the last four reported quarters and missed in the other, delivering an average beat of 51.5%.
Moreover, Alcoa has witnessed positive earnings estimate revisions for 2024 in the last seven days. At present, the Zacks Consensus Estimate indicates a year-over-year increase of 11.5% and more than 100%, respectively, for revenues and EPS in 2024. The current Zacks Consensus Estimate for 2025 revenues and EPS reflects an upside of 9.4% and more than 100%, respectively.
Zacks Rank #2 PACCAR is one of the leading names in the trucking business, with reputed brands like Kenworth, Peterbilt and DAF. Continued growth in PCAR’s aftermarket parts — a high margin and less cyclic business — bodes well. PCAR’s strong balance sheet adds to its strengths.
Accelerated efforts toward electrification, connected vehicle services and advanced driver-assistance system options are also praiseworthy. PCAR has an Earnings ESP of +1.19%. The company will report on Jan. 28, before the opening bell.
For fourth-quarter 2024, the Zacks Consensus Estimate currently shows revenues of $7.44 billion, suggesting a decline of 13.4% year over year and earnings per share of $1.68, indicating a decrease of 37.8% year over year. However, the Zacks Consensus Estimate for fourth-quarter earnings has improved 0.6% in the last 30 days.
The company pulled off positive earnings surprises in three of the last four reported quarters and missed in the other, delivering an average beat of 7%. PACCAR has witnessed positive earnings estimate revisions for 2024 in the last 30 days. The current Zacks Consensus Estimate for 2025 revenues and EPS reflects an upside of 2.7% and -1.6%, respectively.
Zacks Rank #1 Deckers Outdoor’s diverse brand portfolio, financial strength, and strategic growth initiatives make it a promising investment. Driven by DECK’s HOKA and UGG’s impressive growth, balanced channel performance, and successful global expansion, Deckers shows a well-executed strategy.
DECK’s focus on innovation, expansion of its consumer reach, and leveraging strong market trends positions it favorably for sustained success. DECK envisions a 12% increase in fiscal 2025 net sales. DECK has an Earnings ESP of +9.60%. The company will report on Jan. 30, after the closing bell.
For third-quarter fiscal 2025, the Zacks Consensus Estimate currently shows revenues of $1.70 billion, suggesting an improvement of 9.1% year over year and earnings per share of $2.50, indicating a decrease of 0.79% year over year. The company pulled off positive earnings surprises in the last four reported quarters delivering an average beat of 7%.
At present, the Zacks Consensus Estimate indicates a year-over-year increase of 14.1% and 14.4%, respectively, for revenues and EPS in fiscal 2025 (ending March 2025). The current Zacks Consensus Estimate for fiscal 2026 revenues and EPS reflects an upside of 10.4% and 14.4%, respectively.
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