3 Model Zacks Buys

James Giaquinto
·6 min read

If you have a goal in life, it’s a good idea to find a model of success to emulate. Someone who already achieved the results you want and can help you find similar results.

If one of your goals is a more profitable portfolio, then we’ve got a great tool for you. Check out the Model Zacks Strong Buys & Buy screen.

You’ll find Zacks Rank #1s (Strong Buys) and Zacks Rank #2s (Buys) that are in the Top 50% of the Zacks Industry Rank and have strong Zacks Style Scores.

It's a great place to start on your path toward greater profitability. Here are three names that recently made the screen and are worth watching:

Dow, Inc. (DOW)

Covid has yet to be defeated, but Dow, Inc. (DOW) has already reached “pre-pandemic levels across most businesses”. And we haven’t even opened up yet! It’s no wonder that earnings estimates are on the rise for this Zacks Rank #2 (Buy).

Now, we’re not talking about an index here. DOW is a material science company that offers a vast range of differentiated products and solutions across high-growth market segments like packaging, infrastructure and consumer care.

The company operates in three segments: Packaging & Specialty Plastics (47% of 2020 sales); Performance Materials & Coatings (22%); and Industrial Intermediates & Infrastructure (31%).

In late January, DOW reported fourth-quarter earnings per share of 81 cents, which beat the Zacks Consensus Estimate by more than 17%. It now has an average surprise of 21% over the past four quarters.

Sales of $10.7 billion improved 5% year-over-year and beat our expectations by approximately 8.2%. The company enjoyed increased local prices, currency and volume.

Looking forward, Dow should benefit from cost synergy savings, productivity initiatives and investment in high-return projects. Of course, the biggest factor for the future is this economic recovery gaining traction as the vaccine rollout picks up steam.

Analysts feel pretty good about DOW’s future, as earnings estimates have been on the rise over the past two months. The Zacks Consensus Estimate for this year is up 23.6% in that time to $3.51, while expectations for next year have grown 11.8% to $3.69.

For the moment, analysts expect profit growth of only 5.1% for 2022 over 2021, but that’s likely to change as the recovery takes off.

DOW is in the chemical – diversified space, which put it in the top 26% of the Zacks Industry Rank. Shares are up approximately 12% so far in 2021 and about 57% over the past year.

Mattel (MAT)

If you were a kid anytime after World War II, then you’ve probably played with something from Mattel (MAT). The company is one of the biggest names in toys and just reported its “best performance in years” during the fourth quarter.

Kids are still playing with old favorites like Barbie dolls and Hot Wheels cars. But that’s just part of Mattel’s extensive portfolio, which also includes Fisher-Price, Thomas & Friends, American Girl and dozens of others. The company has also been moving into apparel, fashion and accessories to further build its brands.

But Mattel isn’t resting on its plastic past. It’s transforming into an IP-driven company by pushing its popular brands into the digital world with gaming on apps and other platforms.

Its ongoing success was on full display in MAT’s recent numbers. Fourth-quarter earnings per share of 40 cents easily beat the previous year’s 11 cents, while also topping the Zacks Consensus Estimate by more than 66%. This result marked the third straight quarter that beat expectations.

Net sales of $1.63 billion jumped 10% year over year and bettered the Zacks Consensus Estimate by nearly 3%. MAT benefited from robust e-commerce growth, strong demand and its highly efficient supply chain.

Net sales in the North America segment increased 13%, while International rose 7% and American Girl jumped 12%.

The Zacks Consensus Estimate for this year jumped 53% over the past 60 days to 75 cents, while next year has climbed over 67% in that time to 97 cents. Therefore, analysts currently expected year-over-year growth of 29.3%.

As part of the Toys – Games – Hobbies space, it’s in the top 28% of the Zacks Industry Rank. Shares of MAT are up around 19% so far in 2021 and approximately 74% over the past year.

Magna International (MGA)

Auto sales have been improving since the darkest days of the pandemic approximately one year ago, which explains why a company like Magna International (MGA) saw shares surge 85% over the past 12 months.

The company is a manufacturer and supplier of complete automotive components. In fact, it’s one of the most diversified parts suppliers in the world, which gives it a competitive edge over its competition. The company’s four reportable segments are Body Exteriors & Structures (40.8% of total revenues in 2020); Power & Vision (29.4%); Complete Vehicles (16.4%) and Seating Systems (13.4%).

MGA was really showing off in its fourth-quarter report. Earnings per share of $2.83 improved 101% year over year! It also beat the Zacks Consensus Estimate by nearly 43% for its seventh straight positive surprise. The four-quarter average beat is now just under 30%.

Net sales of $10.6 billion improved 12% from last year and bettered our expectations of 9.93 billion. All four segments offered better-than-expected contributions. MGA attributed this performance to increased vehicle production, along with other factors.

But analysts were probably most impressed with its guidance for 2021, which forecasts full-year revenues between $40 billion and $41.6 billion. That would mark an impressive jump over last year’s $32.6 billion and even surpass the pre-pandemic total of $39.4 billion in 2019.

Earnings estimates for this year and next have been steadily rising for months. The Zacks Consensus Estimate for 2021 has climbed 27% in the past 60 days to $7.42, while 2022 advanced 20.8% in that time to $8.67. That suggests year-over-year profit growth at 16.8%.

Shares of MGA are up more than 21% this year, and a good amount of that has come since the quarterly report on February 19. The automotive – original equipment space is in the top 32% of the Zacks Industry Rank.

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