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Top Ten Trader
Discover the markets strongest stocks

Cabot Top Ten Trader Issue: November 21, 2022

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Mixed Bag

First off, a quick note: Due to our regular schedule (50 weeks a year), there won’t be a Movers & Shakers update this shortened week, or a Top Ten issue next Monday—but we will send out a Movers & Shakers update next Monday and will be around all next week if you have any questions. Have a fantastic Thanksgiving!

Nothing much changed with the market last week: The major indexes were down, but not severely, and frankly the digestion of late looks normal given the recent rally. All in all, the intermediate-term trend continues to point up, and while the broad market isn’t quite healthy (we’d like to see further improvement there), we’ll take it. That said, under the surface, it remains a very mixed bag—some areas (industrials especially; this week’s list is chock-full of them) look great, but there are as many (or more) wobbly names out there compared to names in solid uptrends, while growth-y stocks are still vastly underperforming most everything else (including defensive stocks like consumer staples). We’ll keep our Market Monitor at a level 5 this week, though we’d like to individual stocks act better soon or else we might start dropping that back down.

This week’s list is heavy on old world companies, though there are a few great-looking growth names, too. Our Top Pick is Emcor (EME), which is riding widespread construction strength and whose stock is showing terrific power—the next dip should be buyable.

Stock NamePriceBuy RangeLoss Limit
Emcor (EME) ★ TOP PICK ★155147-152131-133
Fluor (FLR)3432-3428.5-29.5
Frontline (FRO)1413.5-14.511.7-12.2
Goldman Sachs (GS)380363-375335-339
Neurocrine Biosciences (NBIX)118115-119104-106
Paccar (PCAR)10499-10290-91
Schlumberger (SLB)5249.5-51.544-45.5
Shift4 (FOUR)4644-4639.5-40.5
Shoals (SHLS)3128.5-30.524-25
United Rentals (URI)349330-342300-306

Stock 1

Emcor (EME) ★ Top Pick ★

Price

Buy Range

Loss Limit

155

147-152

131-133

Why the Strength

Despite a tepid residential real estate market, nonresidential and industrial construction projects in the U.S. are proceeding at a torrid pace thanks in part to recently passed federal legislation supporting infrastructure development. Emcor is a leading global engineering and specialty contractor with a focus on electrical and mechanical construction along with building, industrial and facilities services. The firm is comprised of more than 80 companies with over 180 locations and stands to benefit from the burgeoning infrastructure development trend. A solid Q3, complete with record quarterly revenue and EPS, is the reason for strength, as Emcor delivered consensus-topping sales of $2.8 billion that rose 12% from a year ago and per-share earnings of $2.16 that beat estimates by eight cents and rose 17%. Emcor’s U.S. Construction segment accounts for about 60% of total sales and recorded revenue of $1.8 billion (up 14%), goosed by a strong showing in U.S. Electrical Construction sales that increased 19% due to buoyant activity in the commercial market sector and project demand involving both traditional and alternative energy solutions. U.S. Mechanical Construction revenue was 11% higher, driven by several projects in the semiconductor, pharmaceutical and life science industries. In addition to construction market strength, the company said it’s benefiting from supply chain delays as customers are choosing to extend the useful lives of existing HVAC equipment when replacement equipment isn’t available. Looking ahead, record remaining performance obligations (RPOs) for each of Emcor’s construction segments should keep the momentum going; Wall Street sees the bottom line growing 17% next year.

Technical Analysis

EME hit a record of 135 last November and then spent the next eight months on the skids. The stock was able to establish a bottom around 100 in July and rallied into August before etching a nice, tight consolidation well above its summer lows. And then came the lift-off, with EME powering ahead eight weeks in a row, the last four on giant volume. We advise aiming for pullbacks, though given the volume trends, we’re not expecting a big retreat.

Market Cap$4.74BEPS $ Annual (Dec)
Forward P/E20FY 2020-0.56
Current P/E55FY 20210.93
Annual Revenue $13.2BFY 2022e0.95
Profit Margin0.3%FY 2023e1.66

Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($B) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr2.8312%2.1617%
One qtr ago2.7111%1.9912%
Two qtrs ago2.5913%1.39-10%
Three qtrs ago2.6416%1.892%

Weekly Chart

CTTT_EME_Weekly_11-21-22.png

Daily Chart

CTTT_EME_Daily_11-21-22.png

Stock 2

Fluor (FLR)

Price

Buy Range

Loss Limit

34

32-34

28.5-29.5

Why the Strength

Fluor (covered in the October 10 report) is a leading engineering firm providing construction, maintenance and project management services for the oil/gas, industrial, infrastructure and power generation industries. Like a growing number of companies in the energy space, Fluor is diversifying into alternative energy, but also has footprints in the metals, life sciences, industrial chemicals and infrastructure industries (which the firm believes will protect it from energy sector cyclicality). Q3 was Fluor’s second-largest new awards quarter in its history (a reason for the strength), and the company said it’s working with a “robust” pipeline of study and feasibility packages that represent more than $130 billion in high-quality new award prospects (40% of which is related to energy transition). The firm’s life sciences segment received a boost in Q3 when it was selected by a leading biologics company for a contract (in the hundreds of millions of dollars) to perform procurement and construction management for a large-scale biologics manufacturing facility in Scandinavia, which the firm said would drive growth across its entire portfolio. The company also received a contract to install automation equipment in mega-distribution centers for some of the largest retailers in North America and said semiconductor opportunities continue to grow, along with several near-term prospects in metals mining. On the alternative energy front, meanwhile, Fluor was recently awarded a contract from Imperial Oil to help the company develop a renewable diesel complex in Canada. Going forward, Fluor sees road-and-bridge infrastructure spending as a key growth driver along with energy transition projects; analyst see earnings taking off next year.

Technical Analysis

FLR hit a two-and-a-half-year peak at 31 in mid-April, then spent six months bobbing and weaving in an eight-point range, making little net progress. Buyers returned from the hiatus in early October, eventually pushing the stock above resistance at 31 after the Q3 report. Shares have tightened nicely in the last two weeks, so we’re not opposed taking a swing here or on dips.

Market Cap$4.74BEPS $ Annual (Dec)
Forward P/E20FY 2020-0.56
Current P/E55FY 20210.93
Annual Revenue $13.2BFY 2022e0.95
Profit Margin0.3%FY 2023e1.66

Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($B) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr3.6116%0.07-70%
One qtr ago3.30-10%0.13-59%
Two qtrs ago3.12-7%0.1157%
Three qtrs ago3.16-3%0.31N/A

Weekly Chart

CTTT_FLR_Weekly_11-21-22.png

Daily Chart

CTTT_FLR_Daily_11-21-22.png

Stock 3

Frontline (FRO)

Price

Buy Range

Loss Limit

14

13.5-14.5

11.7-12.2

Why the Strength

Frontline is the largest transporter of crude oil in the world, and appears set to thrive as the availability for very large tanker ships across the industry is shrinking. Weak pandemic demand cut crude oil sea transport in recent years, a situation that suddenly began shifting in late summer with significant orders placed in the market by oil producing majors for three- and five-year charter commitments (a long duration in this sector). The dynamics of the market implies crude shipping may still end up below past peaks, but the shortfall is being made up for by the increased transit of refined oil products – mainly gasoline and diesel, called ‘clean’ product in shipping parlance. It’s a shift in the market that appears to be structural rather than just temporary, with COVID shutdowns permanently removing refining capacity worldwide. That should help earnings per share hit 95 cents in the third quarter (earnings are due November 30) compared to a loss a year ago. The longer term appears even more bullish: Frontline has one of the youngest fleets in the world, with an average age of five years. It has 50 tankers (Suzemax and the larger VLCC ships) that transport crude and 18 LR2s that move clean product, and this quarter, Frontline will close an all-stock acquisition of Cyprus-based shipper Euronav that will put the company’s fleet at 150 vessels. The age of the fleet is important – crude product tankers are scrapped after around 20 years of service and a net 270 tankers will make their final sailings to the graveyard over the next three years – about 15% of worldwide capacity, which is expected to keep charter rates elevated. While 2022 sales will still be below past years revenue-wise (though up 67% on 2021), management say years beyond could be the tightest shipping market in decades; analysts see earnings approaching $3 per share in 2023.

Technical Analysis

Weak pandemic demand left FRO to drift between 5.5 and 10.5 for much of the past two years, influenced by hopes for renewed demand. The summer appearance of fundamental demand gains broke shares out in August, and they’ve since worked to an eight-year high in the low 14s this past week. It’s a volatile and lower-priced name for sure, but we’re OK nabbing a few shares here or (preferably) on a little weakness.

Market Cap$3.03BEPS $ Annual (Dec)
Forward P/E8FY 20202.13
Current P/EN/AFY 2021-0.28
Annual Revenue $903MFY 2022e1.72
Profit Margin14.1%FY 2023e2.64

Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($M) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr30077%0.21N/A
One qtr ago21712%-0.01N/A
Two qtrs ago21422%-0.02N/A
Three qtrs ago172-31%-0.18N/A

Weekly Chart

CTTT_FRO_Weekly_11-21-22.png

Daily Chart

CTTT_FRO_Daily_11-21-22.png

Stock 4

Goldman Sachs (GS)

Price

Buy Range

Loss Limit

380

363-375

335-339

Why the Strength

Brokerage and wealth manager Goldman Sachs shares have been in what CEO David Solomon says is a ‘frustrating’ period of not being valued as highly as he believes they should. That has the firm restructuring its business units – combining investment banking and trading into one division and forming a Platform Solutions division that will focus on consumer fintech efforts – in hopes investors will more clearly see the strength of Goldman’s overall earnings power. Part of the problem for investment banks is that the pandemic years were spent gathering low hanging fruit, as the flood of money into the economy helped power Goldman to a peak of $59.45 in earnings per share in 2021. As liquidity is drained, and the threat of recession looms, investment banking seems less appealing now. That doesn’t mean it’s a bad business: Goldman Sachs has been the leading firm among peers the past two years in global market and investment banking gains. Now the company is pivoting to emphasize managing wealth and consumer banking, two areas it bets will be ascendant. This includes offering its Apple credit card customers the option to sweep cash back into high yield accounts, part of what Goldman says is a tighter relationship with the tech giant. Marcus, its disappointing direct-to-consumer banking division, will now be inside a new arm focused on acquiring customers through employers and other lower-cost means compared to scattershot efforts like direct mail. As for perception, the attraction is that most of the expected earnings correction has likely been discounted—Q3 beat by 50 cents, shares trade at 10x next year’s earnings and the yield is 2.6% even after the recent rally.

Technical Analysis

The great pandemic results put GS at all-time highs a year-ago, cresting over 415 before the bearish first six months of 2022 clipped shares by a third. But the stock etched a higher low in October even as the market retested its spring bottom, and the recent run has been both powerful and persistent. There’s some resistance up toward 400, so we think dips are likely, and should be buyable.

Market Cap$129BEPS $ Annual (Dec)
Forward P/E10FY 202032.84
Current P/E10FY 202159.45
Annual Revenue $61.7BFY 2022e34.18
Profit Margin16.6%FY 2023e37.95

Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($B) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr18.522%8.25-45%
One qtr ago15.0-10%7.73-49%
Two qtrs ago14.3-26%10.76-42%
Three qtrs ago13.94%10.81-11%

Weekly Chart

CTTT_GS_Weekly_11-21-22.png

Daily Chart

CTTT_GS_Daily_11-21-22.png

Stock 5

Neurocrine Biosciences (NBIX)

Price

Buy Range

Loss Limit

118

115-119

104-106

Why the Strength

Biotechs have been in a three-steps-forward, two-steps-back uptrend since early summer, and Neurocrine Biosciences continues to look like a leader in the space, both technically and fundamentally. The story here is mostly about Ingrezza, which is a treatment for a rare side effect of anti-psychotic drugs that causes involuntary movements in the face and body that obviously have a negative psychological impact (being self-conscious) and sometimes can become permanent without treatment. While rare, the drug is a big seller, with an expected $1.4 billion of revenue this year, up 30%-ish from last year, and more important, management sees a ton of opportunity just in its core area, with more than a half million undiagnosed patients in the U.S. alone (it thinks only 15% of all sufferers are both diagnosed and on treatment), so the potential is there for Ingrezza sales to easily more than double over time. Neurocrine also has another niche product likely to hit the market soon—it’s applied for approval of valbenazine (likely approval early next year), which treats another disease that causes involuntary movements (side effect of Huntington’s) that affects maybe 25,000 people. Those two should keep the numbers kiting higher, with analysts seeing the top line rising 20% next year while earnings reach nearly $4 per share—all while the firm’s excellent pipeline (12 mid- to late-stage programs in trials; a key Phase II readout for a child epilepsy treatment due by year-end, with two more Phase II results in other drugs next year) continues to progress.

Technical Analysis

NBIX isn’t setting the world on fire, but it’s one of the few stocks that’s acted “properly” in recent months. The stock broke out from a bottoming base in early August, held the breakout level (100) in the weeks after despite a soft market, and then rallied strongly before and after earnings into early November. Granted, the retreat off the top wasn’t ideal, with some big volume showing up, but NBIX again acted as it should, holding the 50-day line and bouncing nicely. Hold on if you own some, and if not, buying here or on modest weakness with a reasonable stop seems like a solid risk-return situation.

Market Cap$11.5BEPS $ Annual (Dec)
Forward P/E30FY 20202.95
Current P/E51FY 20211.90
Annual Revenue $1.39BFY 2022e2.11
Profit Margin27.5%FY 2023e3.95

Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($M) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr38831%1.0869%
One qtr ago37831%0.8417%
Two qtrs ago31131%0.30-40%
Three qtrs ago31226%0.04-96%

Weekly Chart

CTTT_NBIX_Weekly_11-21-22.png

Daily Chart

Screenshot 2022-11-21 at 2.12.32 PM.png

Stock 6

Paccar (PCAR)

Price

Buy Range

Loss Limit

104

99-102

90-91

Why the Strength

There’s a rather hefty backlog for heavy-duty trucks used for moving freight in North America (about 17 months), thanks largely to continued supply-chain backups. Paccar is stepping up production to meet this shortfall and expects business across its main business categories to remain robust in coming year. The company is one of the world’s largest makers of light-, medium- and heavy-duty premium trucks under the Kenworth, Peterbilt and DAF nameplates, also providing financial services and truck parts related to its main business. Paccar reported a record top line of $7.0 billion in Q3, up a whopping 37% from a year ago, on global truck deliveries of 44,000 units (up 34%). Profits also set a record with per-share earnings of $2.21 (more than double that of a year ago) that beat estimates by 22 cents, thanks to “strong industry truck utilization” and increased freight tonnage which boosted truck demand. The company reported that customers are replacing older vehicles with new fuel-efficient Kenworth and Peterbilt trucks, and its truck parts segment also had an “outstanding” quarter that saw revenue of $1.47 billion (up 17%), while the financial services unit posted “excellent” Q3 results due to a strong market for used trucks, as Paccar leveraged its 13 worldwide used truck centers to sell trucks at higher retail prices. (Kenworth and Peterbilt truck resale values command an average 15% premium over competitors’ trucks.) Going forward, management sees a big opportunity to grow the new truck and parts businesses as fleet ages are “elevated” worldwide, and the firm is also investing in clean diesel, connected vehicles services and autonomous driving systems. As for the numbers, earnings took a step-function leap higher this year and should hold near $8 per share next.

Technical Analysis

PCAR spent the better part of the last two years locked in a lateral range between roughly 80 and 100, making no net progress. The dynamic changed in mid-July when the stock bounced off the lower range to reach 95 in a month’s time. A pullback followed with PCAR making a higher low in September (at 82), and the breakout came last month, resulting in an impressive, persistent advance. As with most names, we favor aiming for a hiccup if you want in.

Market Cap$36.1BEPS $ Annual (Dec)
Forward P/E13FY 20203.74
Current P/E14FY 20215.33
Annual Revenue $21.4BFY 2022e8.13
Profit Margin10.9%FY 2023e8.00

Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($B) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr1.0637%2.21103%
One qtr ago7.1622%2.0746%
Two qtrs ago6.4711%1.7227%
Three qtrs ago6.6920%1.4726%

Weekly Chart

CTTT_PCAR_Weekly_11-21-22.png

Daily Chart

CTTT_PCAR_Daily_11-21-22.png

Stock 7

Schlumberger (SLB)

Price

Buy Range

Loss Limit

52

49.5-51.5

44-45.5

Why the Strength

Oil and gas are still in high demand, but there’s obviously huge opportunities in all things clean energy, too. SLB is widely known as a big player in the oilfield service space, offering technology and project management solutions for petroleum producers. But SLB is also doing good business as more of a global technology company to position itself for the “green” revolution with a focus on creating technologies that make the exploration and development of oil and gas assets cleaner and more efficient (changing its name from Schlumberger to reflect the shift). SLB said reducing emissions will be a big part of its plans going forward and just announced plans to develop a digital sustainability platform to measure methane emissions and carbon capture/storage while providing solutions for hard-to-abate industries (mainly oil/gas, chemicals and metals). SLB also sees its New Energy segment, which includes the Celsius Energy heating and cooling outfit and the Genvia clean hydrogen tech provider, becoming a “strategic driver” for the company going forward. SLB’s directional shift was seen last week when it announced a partnership with the government of Oman to develop the country’s geothermal resources (which the firm called “one of the world’s most promising clean energy sources”). But the long-term trend in the old oil services is still a big deal near-term, with years of underinvestment, combined with renewable energy, will create a “super cycle” for its offerings demand for many years. On the financial front, the numbers are great, and analysts see 2023 being another very strong year.

Technical Analysis

When we last covered SLB in early October, we noted the stock’s action looked noteworthy, with a big pickup in volume and with SLB hitting multi-month price highs. Nothing has happened since then to change our mind, with buyers still in charge, and we’re encouraged that the stock has found support near its 25-day line, with a big shakeout today following morning news that Saudi might boost production (later refuted). We’ll set our buy range down a bit, but there’s little doubt the stock looks like a leader in the space.

Market Cap$74.7BEPS $ Annual (Dec)
Forward P/E18FY 20200.68
Current P/E28FY 20211.28
Annual Revenue $26.4BFY 2022e2.14
Profit Margin12.1%FY 2023e2.98

Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($B) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr7.4828%0.6375%
One qtr ago6.7720%0.5067%
Two qtrs ago5.9614%0.3462%
Three qtrs ago6.2313%0.4186%

Weekly Chart

CTTT_SLB_Weekly_11-21-22.png

Daily Chart

CTTT_SLB_Daily_11-21-22.png.png

Stock 8

Shift4 (FOUR)

Price

Buy Range

Loss Limit

46

44-46

39.5-40.5

Why the Strength

We’ve actually been keeping an eye on FOUR for over a year, though we’ve held off buying as the stock entered a post-IPO droop … and kept right on drooping as the bear market gathered steam. But, frankly, the story in our view has only improved: While not a household name, the firm’s end-to-end network, technology and point-of-sale systems process tons of volume ($20.6 billion in Q3, up 53% from a year ago; $70 billion-plus for the full year 2022), especially in what it calls its high growth core (restaurants and hospitality areas; Applebees, Outback, Cold Stone, TGI Friday’s, Choice Hotels, Hilton, Radisson, Hyatt and many casino resorts are on the client list), but it’s been inking tons of deals among sports and entertainment properties and stadiums (Iowa State, U of Colorado, U of Califorinia at Berkeley, Villanova, and it just inked a deal with Chckasaw Nation, which includes the world’s largest casino), non-profits (St. Jude Children’s Hospital), travel (Allegiant) and what it calls “sexy tech” (Starlink)—and many of those new areas are just starting to ramp up, which should goose growth in the quarters to come. Of course, the overall opportunity is massive (in the trillions of dollars), and while there is competition, Shift4 seems to have a unique offering (a powerful new point-of-sale offering released recently should help) for big clients that want to track spending and rewards across big campuses or many locations. Growth has slowed a touch but is still very solid (sales up 45% in Q3), and it’s also very profitable (earnings up 69%, free cash flow is suring, too), with analysts seeing the bottom line up 53% next year as sales advance 38%. Overall consumer spending will obviously impact business, but there’s little doubt the firm will get much bigger over time. It’s a good story.

Technical Analysis

FOUR bottomed in July, and the action since then has been generally constructive, albeit volatile: Shares popped on earnings in the summer, then basically went sideways while the market retested its lows. Two weeks ago saw a big shakeout (with support) after Q3 earnings, with FOUR briefly tagging multi-month highs last week before pulling back on lower volume into its base. If you’re aggressive, you could nibble here and add if the stock kicks into gear.

Market Cap$3.80BEPS $ Annual (Dec)
Forward P/E22FY 2020-0.58
Current P/E47FY 20210.45
Annual Revenue $1.86BFY 2022e1.39
Profit Margin6.7%FY 2023e2.13

Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($M) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr54745%0.4469%
One qtr ago50744%0.3343%
Two qtrs ago40268%0.15N/A
Three qtrs ago39989%0.08N/A

Weekly Chart

CTTT_FOUR_Weekly_11-21-22.png.png

Daily Chart

CTTT_FOUR_Daily_11-21-22.png.png

Stock 9

Shoals (SHLS)

Price

Buy Range

Loss Limit

31

28.5-30.5

24-25

Why the Strength

Shoals looks like an emerging arms supplier in the solar wars: It’s the leading provider (more than twice the size of its nearest competitor) of what are called electrical balance of system (EBOS) products, which are the endless boxes, cable assemblies, fuses, monitors and more that are needed to gather, regulate and transfer the energy collected from the actual solar panels—it’s needed on every single solar project, so it’s obviously a big deal. The products themselves aren’t anything special, which is the one worry here, whether this is basically a commodity-like business that will see margins tank and competition soar. But Shoals has a couple of advantages beyond its size, the most important of which is its installation methods—installation costs are a big factor (can be 6% of the overall project cost), but Shoals has developed a better way with more above-ground activity, far less wire runs and doesn’t require licensed electricians, slashing costs by 20% to 40%, and leading to more custom solutions (which include some proprietary products) for clients. Plus, EBOS is a key factor is EV charging stations (more than half the cost of an EV station is EBOS!) and battery storage systems, too. Shoals’ numbers were a bit lumpy as the sector had some early-year uncertainty, but the future is clearly bright: Q3 saw sales (up 52%, a big acceleration from recent quarters) and earnings (up 42%) top expectations, while EBITDA rose 57% and, more important, the backlog actually grew by 74%--analysts see sales up north of 50% next year while earnings more than double, and even that’s likely to prove conservative as the green energy bill gave the sector a lot of certainty. We like it.

Technical Analysis

SHLS was crushed early in the year, but had a very nice run in the summer after Congress threw a lot of money at the sector. The correction after that was sharp but not unreasonable (34% deep), and the real action came late last week, when the stock catapulted ahead after the quarterly report—SHLS ended up tagging its highest level since last November on its heaviest weekly volume since the second week it was public (February 2021). It’s going to be super volatile, but we’re not opposed to a nibble here or (preferably) on dips with a loose leash.

Market Cap$5.00BEPS $ Annual (Dec)
Forward P/E46FY 20200.28
Current P/E135FY 20210.22
Annual Revenue $280MFY 2022e0.31
Profit Margin18.2%FY 2023e0.65

Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($M) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr90.852%0.1043%
One qtr ago73.523%0.07-22%
Two qtrs ago68.049%0.050%
Three qtrs ago48.124%0.01-80%

Weekly Chart

CTTT_SHLS_Weekly_11-21-22.png

Daily Chart

CTTT_SHLS_Daily_11-21-22.png

Stock 10

United Rentals (URI)

Price

Buy Range

Loss Limit

349

330-342

300-306

Why the Strength

A big bump in infrastructure and energy sector spending has lifted demand for construction equipment, in turn boosting the outlook for United Rentals. The company is the market share leader in North American equipment rentals, with a $17 billion fleet of over 660,000 units that are rented out via approximately 1,400 sales outlets. While the broader economy is showing signs of slowing, United said customer activity is still on the upswing and equipment rental demand continues to be “very strong.” The company believes it has five-to-10 years of opportunity ahead thanks to the federal tax incentives in the recently passed infrastructure spending bills and also sees “multiple tailwinds” in the manufacturing sector, thanks to hundreds of billions in new investment in auto electrification and on-shoring of semiconductor production. United pointed to the strong market for non-residential construction as being a big contributor to a 18% increase in Q3 revenue of over $3 billion and a 41% jump in per-share earnings of $9.27. The solid results were led by non-residential construction, which saw sales rise 24% from a year ago, along with strength in the firm’s Industrial and Infrastructure segments, up 13% and 11%, respectively, with meaningful contributions from Mobile Storage and Fluid Solutions, too. The company guided for the strength to continue, as many of its Q3 rentals were tied into big multi-year projects like data centers, distribution centers and renewables, which shouldn’t be affected by any near-term economic headwinds. Management also announced a new share repurchase program that will return over $1.2 billion to investors over the next year (about 5% of the market cap) and said the balance sheet is at its strongest level in 25 years. Analysts see solid growth ahead.

Technical Analysis

URI peaked at 415 just over a year ago and then entered a grueling correction that ended in late June when shares found support at 240. Like most of the better-looking stocks out there, shares then rallied nicely in the summer before pulling back again in the fall … but formed a higher low (~255). And now URI is on the upside, briefly nosing to seven-month highs before pulling in some. A bit more weakness would be tempting.

Market Cap$23.8BEPS $ Annual (Dec)
Forward P/E9FY 202017.45
Current P/E11FY 202122.07
Annual Revenue $11.1BFY 2022e32.62
Profit Margin21.3%FY 2023e36.52

Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($B) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr3.0518%9.2741%
One qtr ago2.7721%7.8669%
Two qtrs ago2.5223%5.7366%
Three qtrs ago2.7822%7.3947%

Weekly Chart

CTTT_URI_Weekly_11-21-22.png

Daily Chart

CTTT_URI_Daily_11-21-22.png

Previously Recommended Stocks

DateStockSymbolTop PickOriginal Buy Range11/21/22
HOLD
9/12/22Academy SportsASO48.5-51.549
11/14/22Affiliated MgrsAMG148-153155
11/14/22AlbermaleALB308-318283
10/24/22Amylyx PharmAMLX31.5-3335
10/31/22Arch ResourcesARCH150-155154
11/7/22Arista NetworksANET125-129135
10/24/22Axon EnterprisesAXON133-136187
10/3/22BiogenBIIB255-262302
11/14/22Catalyst PharmaCPRX15.0-15.716
11/7/22Charles SchwabSCHW77-8080
7/25/22Chesapeake EnergyCHK89-9298
10/17/22DexcomDXCM94.5-97.5113
10/31/22Enphase EnergyENPH290-297308
11/7/22Five BelowFIVE145-150155
10/10/22FluorFLR26.5-2834
10/31/22Gilead SciencesGILD75.5-77.584
10/31/22GlobalFoundriesGFS60-6266
11/14/22HalozymeHALO52-5553
11/7/22InpinjPI101-104112
11/7/22InsuletPODD292-303291

11/7/22

Marathon OilMRO30.5-3231
10/10/22Matador ResourcesMTDR58-6066
10/31/22MedPace HoldingsMEDP215-223219
10/10/22Neurocrine BioNBIX104-108118
11/14/22Noble Corp.NE38.5-40.537
10/31/22NucorNUE141-144149
11/14/22OnsemiON70.5-7371
11/7/22Patterson-UTIPTEN17.5-18.518
9/12/22Regeneron PharmREGN700-720739
10/10/22SchlumbergerSLB40-41.552
10/24/22Steel DynamicsSTLD90-93103
10/24/22United AirlinesUAL40-4243
11/14/22Vulcan MaterialsVMC174-178179
11/14/22WillScotWSC45-4747
8/22/22WingstopWING115-120157
WAIT
11/14/22Array TechARRY18.3-19.321
11/14/22CrocsCROX86-9093
SELL RECOMMENDATIONS
10/31/22Calix NetworksCALX70-7367
8/29/22Chord EnergyCHRD141-146150
10/24/22Diamondback EnergyFANG145-150150
10/31/22Lockheed MartinLMT467-480481
DROPPED
11/7/22First SolarFSLR141-145165
DROPPED
None this week


The next Cabot Top Ten Trader issue will be published on December 5, 2022.

A growth stock and market timing expert, Michael Cintolo is Chief Investment Strategist of Cabot Wealth Network and Chief Analyst of Cabot Growth Investor and Cabot Top Ten Trader. Since joining Cabot in 1999, Mike has uncovered exceptional growth stocks and helped to create new tools and rules for buying and selling stocks. Perhaps most notable was his development of the proprietary trend-following market timing system, Cabot Tides, which has helped Cabot place among the top handful of market-timing newsletters numerous times.