For Immediate Release

Chicago, IL – October 16, 2024 – Zacks Equity Research shares Workday WDAY as the Bull of the Day and Vail Resorts MTN as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Baker Hughes Co. BKR, Devon Energy Corp DVN and Diamondback Energy FANG.

Here is a synopsis of all five stocks:

Bull of the Day:

Workday is a Zack Rank #1 (Strong Buy) that is a cloud-based software company that provides enterprise-level solutions for managing financial and human resources operations.

The stock has seen some volatility this year, hitting all-time highs in February, but falling 35% from those highs as recently as August.

However, a recent earnings report helped the stock higher. After a pullback from the earnings move higher and some consolidation, the stock is looking ripe to buy. Additionally, earnings estimates are moving higher into the earnings report next month.

About the Company

Workday was incorporated in 2005 and is headquartered in Pleasanton, California. The stock is valued at $64 billion, and the company employs around 19,000.

Workday provides cloud-based solutions for managing key business functions. Its Human Capital Management (HCM) system helps companies handle employee data, payroll, hiring, and workforce planning. The Financial Management software covers accounting, procurement, and financial analysis to streamline financial operations.

Workday also offers planning and analytics tools for budgeting and forecasting, enabling data-driven decision-making. Additionally, it supports educational institutions with student management and organizations with employee learning programs.

The stock has a Zacks Style Score of "B" in Momentum, and "C" in Growth. However, the stock has a "F" in Value, with a Forward PE at 35.

Q2 Earnings

In late August, Workday reported strong Q2 results, with EPS beating expectations by 7% and revenues surpassing estimates. The company reaffirmed its FY25 subscription revenue guidance of $7.70-$7.73 billion and raised its non-GAAP operating margin target to 25.3%. Subscription revenue grew 17.2% year-over-year to $1.90 billion, while the 12-month subscription backlog climbed 16.1% to $6.80 billion.

The company also approved a new $1 billion share repurchase program.

CEO Carl Eschenbach emphasized AI innovation and a unified platform as key growth drivers.

Looking ahead, Workday targets a 30% operating margin by 2027, up from the previous 25%, while maintaining a 15% annual subscription growth rate. The company sees the current macro environment as the new norm, influencing its medium-term outlook, but continues to expand in higher education, healthcare, and international markets, particularly in APAC and Europe, further strengthening its market position.

The stock reaction was very positive, with the stock jumping 12%, moving from $231 to $260

Estimates Headed Higher

Since reporting earnings, analyst estimates have been slowly trending higher

For the current quarter, estimates went from $1.67 to $1.72 since EPS, or 3% higher. For the current year, the last 60 days has seen a tick higher from $6.77 to $6.97, again 3%.

Estimates for next year have seen a bigger jump. Analysts now see $8.21 v $7.73, a move of 6% higher.

The stock has seen multiple price target upgrades since earnings. Canaccord Genuity, Needham, BMO Capital, Goldman Sachs, and JMP Securities all have price targets at $300 or greater. The $300 level is 22% above the current trading price.

The Technical Take

The excitement after earnings did not last long and the stock ended up filling the earnings gap. It has since traded sideways, consolodation around the 50-day MA.

If the bulls can take control over the 200-day MA at $253, the stock should get some momentum higher. A break over the $255 area would be significant, as it would break the 61.8% Fibonacci level found drawing the post-earnings highs to recent lows. From there, the bulls could target the 161.8% extension at $288.

While that potential setup is very tempting, the company's next earnings report is in the back half of November. We could see continued consolidation into that next catalyst.

In Summary

Workday presents a compelling bullish opportunity as it continues to demonstrate strong fundamentals, consistent subscription revenue growth, and increasing adoption of its AI-powered platform.

Despite recent volatility, the stock's positive reaction to Q2 earnings and upward-trending estimates suggest renewed investor confidence. With multiple analysts setting price targets above $300 and a promising technical setup, Workday appears poised for a breakout.

As the company targets a 30% operating margin by 2027 and sustains double-digit subscription growth, long-term investors should consider Workday's potential as it navigates the evolving macro environment and continues expanding its market leadership.

Bear of the Day:

Vail Resorts is a Zacks Rank #5 (Strong Sell) that operates forty-one mountain resorts and regional ski areas. Some of the notable ones include Vail, Breckenridge, Park City, and Whistler Blackcomb. The company continues to expand its portfolio through acquisitions and investments in various ski destinations.

Unfortunately for investors, the stock continues to slide down an icy slope. Earnings are continually disappointing, which has taken the stock over 50% lower from its 2021 highs. After another poor quarter, the stock is trading near 2024 lows and down 20% on the year.

Is it time to hang up the skis, or is there a relief coming as the winter season starts?

About the Company

Vail Resorts was founded in 1962 and is based in Broomfield, CO. The company employs over 7,600people and operates through three segments: Mountain, Lodging, and Real Estate.

The Mountain segment was 88% of 2024 revenue, while Lodging was close to 12% and Real Estate was 0.2%.

MTN is valued at $6.5 billion and has a Forward PE of 24. The stock holds Zacks Style Scores of "F" in Growth, and "D" in both Momentum and Value. The stock pays a dividend yield of 5%.

Q2 Earnings

The company reported in late September, seeing a 9% EPS miss. Revenues beat and the board authorized a stock buyback, but this was the eight straight miss of earnings expectations.

RevPAR was lower by 3% from last year and total skiers were down 19.4% from last year. This led to a Total Reported EBITDA of -$115.87M, up from a -$87.9M last year.

The company announced a two-year resource efficiency transformation plan including scaled operations, global shared services, and expanded workforce management to create organizational effectiveness and scale for operating leverage as the Company expands and grows globally. Vail expects to achieve $100 million in annualized savings by the end of fiscal 2026 before one-time costs, with approximately $27 million realized in fiscal 2025 before $15 million of one-time costs.

While cost efficiency always helps the bottom line, demand seems to be an issue. While renewing passholders showed growth, skiers visitation declined 9.5% due to unfavorable conditions. Snowfall at Western resorts decreased, while Eastern U.S. resorts faced limited natural snow and variable temperatures.

Earnings Estimates

Looking at estimates, analysts have been cutting numbers across the board.

For next quarter, there has been a drop of 6.5% over the last 30 days, with estimates falling from $7.01 to $6.60.

For the current year, estimates have dropped from $8.57 to $7.31, or 15% over that same time frame.

Next year shows that the trend lower will continue. Since EPS, earnings estimates have dropped from $9.25 to $8.42, a move lower of 9%.

As analysts drop estimates, their price targets are starting to fall. Stifel took their targets to $223 from $259 and Morgan Stanely cut to $179 from $229.

Technical Take

Some investors might remember MTN as one of the biggest victims of COVID, with the stock crashing during the pandemic. However, once everything started to open, a ski trip was on the checklist of many as a way to live their lives again.

The stock made a high of $376.24 in late 2021, but then started missing earnings expectations. Since then, the stock has fallen off a cliff, down over 50%.

The 5% dividend is likely supporting the stock at $170, but if the winter season looks warm again, there could be more pressure on the stock. A move down to $160 area would test the pre-breakout consolation area that we saw way back in 2016.

If we get serious selling, bargain hunters could look at the COVID low was $125, which would be an extreme place of interest for long-term investors.

Looking at moving averages, there is upside resistance that can be found at the 50-day MA at $178. The 200-day resides at $198.

In Summary

Vail Resorts faces significant challenges as it currently holds a Zacks Rank #5 (Strong Sell). With the stock down over 50% from its 2021 highs and near 2024 lows, concerns over disappointing earnings and declining skier visitation loom large.

While the company is implementing a resource efficiency plan to achieve cost savings, demand remains a critical issue, leading analysts to cut earnings estimates. The 5% dividend yield may provide some support, but warmer winter weather could increase selling pressure, potentially testing the $160 level.

Additional content:

U.S. Rig Count Rises: Time to Keep an Eye on DVN and FANG Stocks?

In its last weekly release, Baker Hughes Co. stated that the U.S. rig count was higher than the prior week's figure. The rotary rig count, issued by BKR, is usually published in major newspapers and trade publications.

Baker Hughes' data, issued at the end of every week since 1944, helps energy service providers gauge the overall business environment of the oil and gas industry. The number of active rigs and its comparison with the week-ago figure indicates the demand trajectory for the company's oilfield services from exploration and production companies.

With the weekly rig count rising, should investors keep an eye on leading oil and gas exploration companies like Devon Energy Corp and Diamondback Energy? Before diving into that, let's explore the latest rig count data details.

Baker Hughes' Data: Rig Count in Detail

Total U.S. Rig Count Rises: The number of rigs engaged in the exploration and production of oil and natural gas in the United States was 586 in the week ended Oct. 11, higher than the week-ago count of 585. However, the current national rig count declined from the year-ago level of 622, reflecting the fact that there has been a slowdown in drilling activities. Some analysts see this downside as a sign of increased efficiency among shale producers, who may need fewer rigs. However, there are doubts among a few about whether certain producers have sufficient promising land for drilling.

Onshore rigs in the week that ended on Oct. 11 totaled 567, higher than the prior week's count of 566. In offshore resources, 18 rigs were operating, in line with the week-ago count.

U.S. Oil Rig Count Rises: The oil rig count was 481 in the week ending Oct. 11, higher than the week-ago figure of 479. The current number of oil rigs — far from the peak of 1,609 attained in October 2014 — was down from the year-ago figure of 501.

U.S. Natural Gas Rig Count Declines: The natural gas rig count of 101 declined from the week-ago figure of 102. Moreover, the count of rigs exploring the commodity was below the year-ago week's tally of 117. Per the latest report, the number of natural gas-directed rigs is 94% lower than the all-time high of 1,606 recorded in 2008.

Rig Count by Type: The number of vertical drilling rigs totaled 12 units, which declined from the week-ago count of 14. The horizontal/directional rig count (encompassing new drilling technology with the ability to drill and extract gas from dense rock formations, also known as shale formations) of 574 was, however, higher than the prior-week level of 571.

Rig Tally in the Most Prolific Basin

Permian — the most prolific basin in the United States — recorded a weekly oil and gas rig count of 304, flat with the week-ago figure. The count was, however, below the prior-year level of 311.

Handsome Oil Prices to Remain Favorable: DVN, FANG to Gain

West Texas Intermediate (WTI) crude is currently hovering around $70 per barrel, presenting a favorable landscape for exploration and production. Despite moderation in drilling activity as upstream companies prioritize stockholder returns over production growth, the strong pricing environment remains advantageous for energy producers. U.S. oil and gas companies benefit from significantly lower breakeven WTI prices across all shale plays, particularly for existing wells. Furthermore, the average breakeven price for most new wells remains below current market levels, positioning upstream players for continued profitability in the current environment.

Amid the backdrop, investors seeking medium to long-term gains may keep an eye on energy stocks like Devon Energy and Diamondback Energy.

In the United States, Devon Energy is one of the foremost explorers and producers of oil and gas, with its acres spanning across the prolific Delaware Basin. The upstream energy player recently completed a $5 billion acquisition of Grayson Mill Energy's Williston Basin business, which has helped the company increase its oil production and expand its inventory of key drilling locations. This expansion in the Williston Basin footprint will enable Devon Energy, with a Zacks Rank of 3 (Hold), to immediately enhance its key financial metrics.

Diamondback Energy, a leading pure-play Permian operator, has reported ongoing enhancements in the average productivity per well in the Midland Basin. Thus, the exploration and production company, carrying a Zacks Rank #3, is likely to continue witnessing increased production volumes. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

The recent Endeavor merger has expanded FANG's presence in the Permian Basin, bringing its total pro forma footprint to about 838,000 net acres. As a result, the company now has a larger inventory of prime drilling locations, with a breakeven oil price below $40 per barrel.

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