MGM Resorts and Bloomin' Brands Have Been Highlighted as Zacks Bull and Bear of the Day

For Immediate Release

Chicago, IL – June 5, 2024 – Zacks Equity Research shares MGM Resorts International MGM as the Bull of the Day and Bloomin' Brands BLMN as the Bear of the Day. In addition, Zacks Equity Research provides analysis on The Western Union Co. WU, The Bank of N.T. Butterfield & Son Ltd. NTB and NewtekOne, Inc. NEWT.

Here is a synopsis of all five stocks:

Bull of the Day:

MGM Resorts International is a Zack Rank #1 (Strong Buy) that owns and operates casino, hotel, and entertainment resorts in the United States and internationally.

The company's resort portfolio incorporates 31 unique hotel and gaming offerings, including some of the most familiar resort brands in the industry, such as Bellagio, MGM Grand, Mandalay Bay and The Mirage.

The stock continues to struggle in 2024, but investors might be overlooking the value opportunity that exists.

About the Company

MGM was incorporated in 1986, has a market cap of $12 billion, and employs over 58,000.

The company operates through three segments: Las Vegas Strip Resorts, Regional Operations, and MGM China.

The stock has a Zacks Style Score of "A" in Value and "C" in both Growth and Momentum. The stock has a Forward PE of 14, making it attractive for value investors.

Q1 Earnings

In early May, MGM reported a 23% EPS beat and a beat on revenues. Las Vegas Strip RevPar and occupancy were both up year over year and consolidated adjusted EBITDAR was $1.23B v $1.19B last quarter.

China impressed, seeing Net Revenues up to $1.1B v the $618M last year, while EBITDAR came in at $301M v the $169M last year.

The company bought 12M shares in Q1, which is part of its strategic growth plan to utilize free cash flow.

The stock reacted with volatility both up and down and the MGM currently sits around the same levels as when the company reported.

Since earnings, Nevada has reported casino gaming revenue +7%, which is a positive for the sector. Additionally, analyst have been taking their estimates higher since the earnings report.

Estimates Rising

Over the last 60 days, estimates for the current quarter have gone up by 23%, from $0.55 to $0.68.

For the current year, numbers have been taken from $2.48 to $2.82. This is a 13% move higher since EPS.

The trend continues for next year, with estimates going up 16% for that timeframe, moving from $2.70 to $3.11.

The stock has seen some upgrades since earnings, with JPMorgan reiterating their Overweight and $57 price target.

Susquehanna went to Net Positive from Net Neutral and took its target to $54 from $46.

The Technical Take

Looking at the chart, you can see the stock is at the same level that it was back in November of 2023. Since then, the overall stock market has been up over 20%, so this stock is being overlooked despite the solid earnings reports.

The bulls have some work to do, and investors should be watching the stock closely to see if a rally might be coming.

The first sign would be a move over the 200-day moving average resistance at $41.50. Right behind that is the 50-day MA $42.30.

There has been a lot of support in the $38.50-$40 area. This is the 61.8% Fibonacci zone that can be found by drawing from October lows to 2024 highs.

A continued defense of this area would signal long-term buying and a chance to return to those recent highs and beyond.

In Summary

MGM is generating free cash flow and buying its stock back. Earnings have been positive and earnings estimates have been going higher.

Yet despite these positives, the stock is teasing 2024 lows, clinging to long-term support.

The current situation in MGM is creating a long-term opportunity for value investors and this stock should be watched closely for a rally into the end of the year.

Bear of the Day:

Bloomin' Brands is a Zacks Rank #5 (Strong Sell) that is a casual dining restaurant company with a portfolio of differentiated restaurant concepts.

The company has been underperforming as it struggles to meet market expectations and faces several strategic and operational challenges. Despite some positive signals in recent performance, the outlook remains clouded with uncertainties.

About the Company

Bloomin' Brands was founded in 1988, employs 87,000, and is headquartered in Tampa, Florida.

Its restaurant portfolio has four concepts, including Outback Steakhouse, a casual steakhouse restaurant; Carrabba's Italian Grill, a casual Italian restaurant; Bonefish Grill; and Fleming's Prime Steakhouse & Wine Bar, a contemporary steakhouse.

BLMN is valued at almost $2 billion and has a Forward PE of 9. The stock holds Zacks Style Scores of "A" in Growth and Value and pays a 4.5% dividend.

Q1 Earnings

In its most recent earnings report, BLMN missed earnings by 7%. Revenue came in at $1.20 billion, matching estimates, but this alone isn't enough to instill confidence in investors. The company's guidance for Q2 is particularly concerning, with an expected EPS range of $0.55 to $0.60, significantly below the consensus estimate of $0.69. Comparable restaurant sales are projected to be flat to up just 1.5% year-over-year, indicating minimal growth in the near term.

Margins and sales struggled, with the company's restaurant-level operating margin declining to 16.0% from 17.9% last year. U.S. combined same-store sales were down 1.6% year-over-year, further highlighting the struggles in maintaining growth.

While BLMN's marketing and operations initiatives have shown some success, particularly at Outback Steakhouse, these gains are not substantial enough to counteract the broader issues faced by the company.

Adding to the uncertainty is BLMN's announcement that it is exploring strategic alternatives for its Brazil operations. This move, while potentially beneficial in the long run, introduces short-term uncertainty and potential disruption.

Earnings Estimates Trending Lower

Over the last 30 days, earnings estimates for the current quarter have fallen from $0.69 to $0.59, or 14%.

For the current year, estimates have dropped from $2.55 to $2.44, or 4% over the last 30 days. And for next year, estimates have fallen 3% over that same time frame.

Analysts have reflected mixed sentiments about BLMN's future. JPMorgan Chase and Co. have reiterated a Neutral rating, with a reduced-price target of $24 from $26. UBS also maintains a Neutral rating but has cut the price target more drastically from $30 to $26. These ratings suggest a cautious stance on BLMN's ability to navigate its current challenges and achieve growth targets.

Technical Take

BLMN is trading at 2024 lows and is threatening to take out the 2023 lows set lats January. Below there, some investors might be beyond their pain threshold and start to sell. The 2022 July lows would then be in plat around the $16 level.

Those interested in the stock should be patient. The 50-day moving average gas just crossed the 200-day MA siganling a death cross. This is typically a bearish symbol and a sign to stay away until technical conditions improve.

In Summary

While Bloomin' Brands has demonstrated some resilience in a challenging market, the numerous headwinds it faces cannot be overlooked. The earnings miss, disappointing guidance, declining margins, and strategic uncertainties in Brazil collectively paint a bearish picture for the stock.

Investors should approach BLMN with caution, as the company needs to prove its ability to overcome these hurdles and deliver sustained growth.

Additional content:

3 Best High-Yield Stocks to Sail Through Uncertainties in June

U.S. stocks are coming off a solid May, with all the major indexes ending in the green. However, the rally lost steam at the end of the month, with the broader S&P 500 closing more than 1% below its record high, while tumbling chip stocks dragged the tech-laden Nasdaq down 1.1% last week.

The 30-stock Dow, on the other hand, started June's trading with a decline, with all the major cyclical sectors, including industrials, materials, and energy, closing in the red on Jun 3. Things aren't looking hunky-dory for the stock market. At the moment investors are grappling with weak economic data.

The manufacturing side of the economy contracted for the second successive month in May. The manufacturing index of the Institute of Supply Management came in at 48.7% in May, down from April's reading of 49.2%. Notably, any reading below the 50 mark signifies signs of contraction.

Economic growth, by the way, already slowed down in the first quarter, while price pressures continued to run hot. For the first three months of the year, the U.S. economy expanded at a lackluster annual pace of 1.3% as consumer outlays slowed down due to lower spending on cars and durable goods.

Meanwhile, as inflation remains elevated, consumer spending is unlikely to jack up for the rest of the year. The Federal Reserve's favored inflation measure, the personal consumption expenditure (PCE) index, was up 2.7% in April from a year earlier and remained higher than the central bank's annual inflation target of 2%.

With the economy cooling down, the stock market is expected to wobble. Also, the stock market may face bouts of volatility heading into the presidential election later this year. Hence, judicious investors should place their bets on high-yield stocks such as The Western Union Co., The Bank of N.T. Butterfield & Son Ltd. and NewtekOne, Inc. for a steady income. This is because dividend payers have a solid financial structure that helps them remain unfazed by market gyrations.

These stocks have a Zacks Rank #1 (Strong Buy) and 2 (Buy).

Western Union is a leader in global money transfer. Western Union has a Zacks Rank #1. Western Union has a dividend yield of 7.3%, while its five-year average dividend yield is 5.3%.

In the past 5-year period, WU has increased its dividend 2 times. WU's payout ratio presently sits at 53% of earnings.

The Zacks Consensus Estimate for its current-year earnings has moved up 4.8% over the past 60 days. WU's expected earnings growth rate for the next year is 5.1%.

The Bank of N.T. Butterfield & Son Limited offers bank and wealth management services. Bank of N.T. Butterfield & Son has a Zacks Rank #2. The company has a dividend yield of 5.2%, while its five-year average dividend yield is 5.1%.

In the past 5-year period, NTB has increased its dividend once. NTB's payout ratio presently sits at 38% of earnings.

The Zacks Consensus Estimate for its current-year earnings has moved up 6.8% over the past 60 days. NTB's expected earnings growth rate for the next year is 7.1%.

NewtekOne is a financial holding company. NewtekOne has a Zacks Rank #1. NewtekOne has a dividend yield of 5.5%, while its five-year average dividend yield is 10.6%.

In the past 5-year period, NEWT has increased its dividend 12 times. NEWT's payout ratio presently sits at 49% of earnings.

The Zacks Consensus Estimate for its current-year earnings has moved up 4.9% over the past 60 days. NEWT's expected earnings growth rate for the current year is 12.9%.

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