News

For Immediate Release

Chicago, IL – August 1, 2024 – Zacks Equity Research shares Taiwan Semiconductor Manufacturing Co. TSM as the Bull of the Day and Carter’s, Inc. CRI as the Bear of the Day. In addition, Zacks Equity Research provides analysis on CSX CSX, Teekay Tankers TNK and Expeditors International of Washington EXPD.

Here is a synopsis of all five stocks.

Taiwan Semiconductor Manufacturing Co. is one of the most straightforward buy-and-hold stocks.

Taiwan Semi is the semiconductor manufacturer, with Nvidia, Apple, and tons of other tech giants all depending on TSMC to physically build the most advanced, complicated, and microscopic components that the entire global economy runs on. The costs and institutional knowledge required to build the most cutting-edge semiconductors create an almost impenetrable moat around Taiwan Semi.

This backdrop is why Taiwan Semi stock has tripled the Zacks Technology sector over the past 20 years.

Taiwan Semi’s growth outlook is stellar since major technological innovations, including artificial intelligence, are fueled by chips Taiwan Semi makes.

TSMC is addressing geopolitical fears by expanding its manufacturing footprint outside of Taiwan. On top of that, TSMC’s valuation is solid, it pays a dividend, and its balance sheet is robust.

TSM shares are trading around 15% below their mid-July highs after finding support at a key long-term moving average mid-week.

TSMC 101

Taiwan Semiconductor Manufacturing Co is better known as Taiwan Semi or TSMC.

Taiwan Semi pioneered the dedicated semiconductor foundry business model that has helped TSM evolve into the most dominant player in the vital industry. TSMC reportedly earned 61% of the semiconductor foundry market share in the fourth quarter of 2023, blowing away second-place Samsung’s 14%.

Taiwan Semi is almost unrivaled, expanding its huge trench around the cutting-edge of chip manufacturing. TSMC is ramping up its industry-leading 3-nanometer technology. Taiwan Semi’s clients include Apple (AAPL), Nvidia (NVDA), and other tech giants, all of which come to Taiwan Semi to build their most advanced chips.

Shipments of its 3-nanometer chips accounted for 15% of TSMC’s total wafer revenue in the second quarter, while 5-nanometer accounted for 35%, and 7-nanometer grabbed 17%. TSMC said that advanced technologies (defined as 7-nanometer and more advanced) made up 67% of total quarterly wafer revenue.

TSMC is expanding its manufacturing footprint beyond Taiwan to help diversify amid growing geopolitical tensions. The firm opened a plant in Japan earlier this year. TSMC is also investing heavily to build semiconductor factories in the U.S., fueled by Federal government incentives.

TSMC Outlook

TSMC averaged 18% sales growth between FY18 and FY22, including 29% expansion in 2022, before suffering a cyclical downturn (-4%) in 2023. Taiwan Semi grew its Q2 FY24 sales by 33% YoY and 10% sequentially. Taiwan Semi’s gross margin came in at 53.2% last quarter, with an operating margin of 42.5%.

Taiwan Semi boosted its revenue and its earnings outlook when it reported on July 18. “Moving into third quarter 2024, we expect our business to be supported by strong smartphone and AI-related demand for our leading-edge process technologies,” CFO Wendell Huang said in prepared Q2 remarks.

TSMC is projected to grow its sales by roughly 23% in both FY24 and FY25 to soar from $69 billion in 2023 to $105 billion next year. Taiwan’s revenue growth is projected to help it boost its adjusted earnings by 23% and 28%, respectively.

TSMC’s upward EPS revisions earn the stock a Zacks Rank #1 (Strong Buy), with its FY25 outlook up around 6% since its release. Taiwan Semi has topped our ESP estimates by an average of 8% in the trailing four quarters.

Performance, Technical Levels, and Valuation

Taiwan Semi stock more than doubled the Zacks Tech sector over the last 10 years, up 720%, while tripling the sector the past two decades—TSM soared 2,300% during that stretch. TSM has climbed 300% in the past five years, and it broke out firmly above its previous highs in May.

TSM shares are up 60% YTD, yet they traded 15% below their mid-July highs and 33% below their average Zacks price target. Taiwan Semi found buyers at its 21-week moving average on Wednesday to help it close not too far below its 50-day.

The recent wave of selling helped cool off Taiwan Semi stock, and any more near-term pullbacks could be used as a chance for investors to scoop up the stock at even lower prices.

Taiwan Semi trades at a 40% discount to its 10-year highs at 20.9X forward 12-month earnings and 20% below the Zacks Tech sector. Meanwhile, Nvidia trades at 36.3X forward earnings, and AAPL trades at 30.2X.

TSM Bottom Line

Taiwan Semiconductor stock is one of the only pure-play chip manufacturers. TSMC is poised to grow for decades since it physically builds the bedrock of all technology, from data centers to AI.

Wall Street is upbeat about TSMC's ability to slowly raise prices since Nvidia and others have almost nowhere else to turn for their chip manufacturing needs, with eight of the 10 brokerage recommendations Zacks has at “Strong Buys.”

Carter’s, Inc. stock has fallen 19% in 2024 as the retailer’s earnings outlook fades amid a challenging retail environment, with customers stung by inflation. CRI shares are also down around 20% in the last 10 years compared to its industry’s 90% climb.

Carter’s Basics

Carter’s boasts that it is the largest branded marketer in North America of apparel exclusively for babies and young children. The company’s portfolio includes the Carter’s and OshKosh B’gosh brands, sold through over 1,000 company-operated stores across the U.S., Canada, and Mexico. Carter’s also operates e-commerce and wholesale businesses.

Carter’s revenue fell roughly 8% in FY23 and FY22, following a nice 2021 jump. Carter’s lowered its outlook when it reported its Q2 2024 financial results on July 26, citing rough headwinds that might not subside in the near term.

Carter’s is projected to see its revenue fall another 5% in FY24 and post a YoY adjusted earnings decline of 13%. CRI’s FY24 EPS estimate has dropped by 15% since its recent release, with its FY25 consensus 17% lower.

The company’s most accurate/recent EPS estimate came in 10% lower for both 2024 and 2025. “To date, inflation has not moderated to the extent previously expected, the costs of living remain elevated,” CEO Michael Casey said in prepared Q2 remarks.

“Our consolidated sales have been under pressure since inflation ramped up to historic levels in 2022 because we believe those we serve, families raising young children, have been under financial pressure and have reduced their discretionary spending where possible. Carter’s is working its way through a historic and challenging inflationary period.”

Bottom Line

Carter’s downward earnings revisions help it earn a Zacks Rank #5 (Strong Sell) right now. Carter’s stock might be one to avoid at least until the company proves that a turnaround is in sight.

Additional content:

What's in the Cards for CSX Stock This Earnings Season?

CSX is scheduled to report its second-quarter 2024 results on Aug 5 after market close.

CSX has an impressive earnings surprise history, having surpassed the Zacks Consensus Estimate in two of the preceding four quarters and meeting twice, the average beat being 1.12%.

CSX Corporation price-eps-surprise | CSX Corporation Quote

The Zacks Consensus Estimate for CSX’s soon-to-be-reported quarter’s earnings has remained flat in the past 60 days at 48 cents per share. Meanwhile,the Zacks Consensus Estimate for revenues is pegged at $3.7 billion, which indicates a marginal decline of 0.03% year over year.

CSX’s merchandise pricing, along with higher intermodal and coal volumes, are expected to have boosted the company's top line in the to-be-reported quarter.Our estimate for revenues from the merchandise and intermodal segment is pegged at $2.23 billion and $522.3 million, respectively, indicating an increase of 1.5% and 6.2% year over year.

Meanwhile, estimates for revenues from the coal, trucking and other segment are pegged at $590 million, $212 million and $139 million, respectively.

Rising operating expenses are hurting the company’s bottom line. This surge in operating expenses is primarily driven by the increase in salaries and benefits, exacerbating CSX’s prospects in the to-be-reported quarter. Our estimate for total second-quarter operating expenses has increased 3.6% year over year.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for CSX this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here.

CSX has an Earnings ESP of -1.58% and a Zacks Rank #3 at present. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Highlights of Q1

CSX's first-quarter 2024 earnings per share of 46 cents beat the Zacks Consensus Estimate by a penny. However, the bottom line declined 4% year over year.

Total revenues of $3.68 billion surpassed the Zacks Consensus Estimate of $3.64 billion. The top line decreased 1% year over year due to a lower fuel surcharge, a decline in other revenues, lower trucking revenues and reduced export coal prices.

Stocks to Consider

Here are a few stocks from the broader Zacks Transportation sector that investors might want to consider as well, as our model shows that these have the right combination of elements to beat second-quarter 2024 earnings.

Teekay Tankers has an Earnings ESP of +1.70% and a Zacks Rank #3. The company is scheduled to report second-quarter 2024 earnings on Aug 1.

TNK has a discouraging earnings surprise history, having surpassed the Zacks Consensus Estimate in two of the trailing four quarters and missing twice, the average miss being 6.3%.

Expeditors International of Washington has an Earnings ESP of +2.22% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.The company is scheduled to report second-quarter 2024 earnings on Aug 6.

EXPD has a discouraging earnings surprise history, having surpassed the Zacks Consensus Estimate only once in the preceding four quarters and missing thrice, the average miss being 3.44%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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