As we reach the end of the second quarter ’23 earnings season, it’s time to take stock of the current market landscape and gauge the resilience of stocks.
First of all, the pace of inflation is declining – but it remains above the 2% target. On the back of inflationary pressures and fears of a recession, second-quarter earnings stagnated — but while the benchmark was low, most companies cleared it, beating expectations.
In a recent note, Wei Li, global chief investment strategist at BlackRock, outlined the implications for investors, with a focus on boosting margins.
US profits are stagnant. The market outlook for profit margins rebounding over the next year looks rosy as worker shortages continue to pressure wages… We see inflation deteriorate while the employment shock recovers from the spending mismatch. If companies try to protect profit margins from these wage pressures in a stagnant economy, this could contribute to inflationary pressures and possibly lead to higher rates of central bank policy.
Against this background, BlackRock made the purchase distributed shares. These are classic defensive plays for a tough economic situation, and one purchase BlackRock made yields as much as 14%. We scoured the TipRanks database to see what Wall Street analysts had to say about whether these stocks make compelling investments. Let’s take a closer look.
DHT Holdings, Inc. (DHT)
We will start with DHT, a holding company in the global ocean transportation sector. The company is an independent crude oil carrier, with a modern fleet of 24 very large crude carriers (VLCCs), the largest oil tankers operating on trade routes today. Only 4 DHT vessels were built prior to 2011, all rated between 299,000 and 320,000 dwt.
On the operational side, DHT manages its fleet through integrated management companies based in Singapore, Norway and Monaco. DHT combines high market exposure with a fixed income business model based on fleet leases.
DHT’s business model generated steady income during its most recently reported quarter, Q2 ’23. The company’s performance was based on its time charter equivalent earnings averaging $56,300 per day. This average figure was in turn derived from a $36,200 daily rate for time charters and a $64,800 daily rate for VLCC operations in the spot market.
In the headline numbers, that resulted in total freight revenue of $152 million for the quarter, up from $99.2 million in the year-ago period. The company’s adjusted net revenue was $112.9 million, more than double from the $54.1 million in the second quarter of ’22, and beat expectations by $3.2 million. On the bottom line, DHT’s non-GAAP EPS came in at 35 cents, in line with Street’s forecast.
Turning to earnings, we find that DHT then pays our general dividend on August 30, at 35 cents per share. This works out annually to $1.40 per share, and gives an impressive yield of 14.5%.
BlackRock has been busy buying DHT shares, acquiring 1,731,800 shares in the second quarter. The investment and asset manager now owns a total of 9,579,402 shares in the shipping company worth more than $91 million.
DHT is also getting the support of 5-star Evercore analyst Jonathan Chappell, who writes: “This third-quarter increase is the only change in EPS or dividend through 2024 as DHT continues to hold costs at a manageable level and as our crude oil outlook Tanker markets remain unchanged from our bullish view for the next six months…Seasonal rise in crude oil tanker prices entering the winter season should act as a catalyst for stocks.”
Looking ahead, Chappell sees fit to place an outperform (i.e. Buy) rating on DHT stock, along with his $13 price target, indicating a 36% upside potential for one year. (To watch Chapel’s record, click here)
Overall, there are 4 recent analyst reviews on file for this DHT stock – and they all agreed this is one to buy, making our unanimous Strong Buy rating unanimous. The shares are trading for $9.53 and have an average price target of $13.43, pointing towards a potential 41% gain in the coming year. (be seen DHT stock forecast)
NewtekOne, Inc. (newt)
The next stock on Blackrock’s radar is NewTekOne. This financial services and technology company specializes in partnering with the business world, offering a range of financial solutions designed for businesses of all sizes – from small businesses to large corporations. The company offers business banking, financing options for lending, enhanced payment processing, seamless multi-channel point-of-sale systems for sales and operations, and even HR and payroll solutions for the workforce. In short, NewTekOne puts all the financing and technology needs of a modern business into one package.
From the perspective of enterprise customers, perhaps the most important attributes that NewTekOne offers are less tangible than the revenue-generating services. The company has a proven track record of helping its clients grow their businesses and can draw on more than 20 years of experience creating solutions to clients’ problems.
This company started 2023 on a high note, finalizing its acquisition of the National Bank of New York City in early January. The acquisition move was announced in August of 2021, and last December, NewTekOne became a bank holding company as part of the deal.
It worked with NewTekOne’s business world. In the company’s Q2 ’23 report, the latest financial results released, the company reported a combination of “record deposit growth and loan financing,” the twin cornerstones of its business. Deposits totaled $447.4 million on June 30, up 220.6% from December 31, while business loan closings in the second quarter totaled $251.2 million, up 6.4% year-on-year.
Company revenue was reported at $52.1 million, missing expectations by $1.1 million but increasing year-over-year by more than 170%. The bottom line, a GAAP EPS of 26 cents, was 2 cents lower than expected; However, non-GAAP earnings per share, 26 cents, came in 9 cents ahead of estimates. NewTekOne had $256.3 million in cash and liquid assets at the end of the second quarter, a total that included $66.7 million of restricted cash.
On the dividend front, NewTekOne last paid out on July 21 at a rate of 18 cents per common share. This converted to 72 cents per share annually, and gave a yield of 4%, twice the market average.
BlackRock clearly liked what it saw here in the second quarter, as the company opened a new position in NEWT, buying 1,631,088 shares of stock during the quarter. Those shares are now worth about $29 million.
This stock also caught the attention of five-star analyst Bryce Rowe of B. Reilly. Rowe likes the treatment of the National Bank in New York City, and sees it as a forward income source. He writes, “We continue to consider NEWT in the very early stages of its transition from a BDC to a financial/bank holding company that began with the closing of the acquisition of National Bank of New York City in early January. Q2 2013 was its first full quarter as a financial holding company, and included The most important reasons why transitioning from a BDC to a financial holding company makes sense for NEWT are the ability to fund its core loan product (SBA 7(a) loans) with deposits and the ability to integrate its payments and technology solutions functions into the bank’s operating structure.”
Looking ahead, Rowe adds his outlook for the near future: “We believe NEWT’s valuation has the potential to run higher given the asset-light nature of the operating model which is expected to generate an ROA of over 3.0% versus the expected 2023 average of approximately 1.09%. For banks ranging from 5 to 50 billion USD.
To that end, Rowe upped his price target on NEWT, from $20 to $21, which indicates the stock will rise nearly 19% in the coming months. Unsurprisingly, its rating here is a Buy. (to watch ru log, click here)
Some stocks fly under the radar, and NEWT is one of those. There are only 2 analyst reviews on file here, and they include 1 Buy and Hold, each of which all combine to a Moderate Buy consensus rating. Shares are priced at $17.71, with an average price target of $20.50, implying a runway to upside of approximately 16% over the next 12 months. (be seen NEWT stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.