Are These Top-Ranked Stocks Bargains After Earnings?
Earnings season often gives a clearer picture that stocks tend to be undervalued, combined with the forecasts companies can offer in their outlook.
Here are two quality stocks that appear to be trading at a discount after their strong fourth-quarter reports.
Corebridge Financial (CRBG)
With a Zacks rank of #2 (Buy), Corebridge Financials stock makes the case for trading at a perceived bargain following its Q4 report last Friday.
Corebridge beat earnings expectations by 24% with earnings per share of $0.88 and revenue estimates by 1% with sales of $5.34 billion. The strong quarterly results are very intriguing given that Corebridge went public last September.
As a provider of retirement savings and insurance products in the US, Corebridge’s revisions to earnings estimates continued to trend higher over the last 60 days. More importantly, earnings estimates for fiscal 2023 have already increased following fourth-quarter results.
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Fiscal 2023 earnings are now expected to increase 31% to $3.77 per share, compared to earnings per share of $2.87 in 2022. Also, fiscal 2024 earnings are expected to increase up another 23% to $4.66 per share, based on Zacks estimates.
Overall, revenue is forecast to grow 6% in FY23 and another 7% in FY24 to $20.35 billion. Even more impressive, with sales of $13.21 billion in 2019, fiscal 2024 would represent growth of 54% from pre-pandemic levels.
For a stock currently trading at just $20 per share, CRBG’s earnings growth is very intriguing and suggests the stock is undervalued. Corebridge shares are trading at just 5.5 times forward earnings, well below its all-time high of 8.8 times since its IPO and 25% below the median of 7.3 times.
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Additionally, CRBG is trading well below the industry average of 10.4x and the S&P 500 of 18.6x. Corebridge shares have an “A” Style Score rating for Value and an overall “A” VGM rating for Value, Growth and Momentum combined.
Corebridge stock is down -2% since its IPO last year, slightly underperforming the S&P 500 at +2% and the Insurance Multi-Line Markets at +8% over the period. Year-to-date, shares of CRBG are up +1% to roughly match the Zacks sub-industry, but lag the benchmark’s +6%. That said, there could certainly be more upside in 2023 and beyond after Corebridge’s stellar fourth-quarter results and the company’s bottom line grew at an impressive pace.
Vale S.A. (VALLEY)
Vale South America shares, which also carry a Zacks rank of #2 (Buy), still look attractive after last Thursday’s strong fourth quarter results. The mining company beat bottom line expectations by an impressive 30% with fourth quarter EPS of $0.82, although this is down -42% year-on-year. Fourth-quarter revenue of $11.94 billion beat expectations by 4%, though it declined -9% year over year.
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Vale is one of the largest mining companies in the world, producing iron ore, iron ore pellets and nickel, as well as manganese ore, ferroalloys, metallurgical and thermal coal, copper, platinum group metals (PGMs), gold, silver and cobalt.
Additionally, the strong fourth quarter results make it quite plausible that earnings estimate revisions will continue to rise as Vale should continue to benefit from higher commodity prices correlated with high inflation.
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Zacks estimates Vale’s earnings are expected to decline -21% to $2.83 per share in fiscal 2023 after another impressive year. That aside, earnings estimates are up 13% over the quarter. Revenue for fiscal 2024 is expected to fall another -3%, but estimates are up 6% over the past 90 days.
Revenue is forecast to decline -7% in FY23 and another -5% in FY24 to $38.31 billion. Still, fiscal 2024 revenue would be 2% above pre-pandemic levels, with 2019 revenue coming in at $37.57 billion.
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In addition, Vale stock remains attractive from a valuation standpoint and has an “A” Style Score rating for Value. Shares of VALE trade at $17 per share and 6 times forward earnings, which is in line with the industry average and well below 18.6 times the S&P 500.
Even better, Vale stock is trading 93% below its decade-high of 87.6X and at a slight discount to the median of 7.4X. Even more impressively, Vale’s stock is up +49% over the past three years to comfortably outperform the S&P 500’s +22% and roughly match the strong performance of the mining iron markets.
bottom line
Both Corebride (CRBG) and Vale SA (VALE) shares appear to be bargains at their current levels based on their valuations from a price-earnings perspective, with earnings estimate revisions also rising. This confirms that their affordable share prices should appeal to investors and that there may very well be more upside for CRBG and VALE shares.
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