Chicago, IL – March 3, 2025 – Zacks Equity Research shares RingCentral RNG as the Bull of the Day and Arcosa ACA as the Bear of the Day. In addition, Zacks Equity Research provides analysis on NiSource Inc. NI, Atmos Energy Corp. ATO and Southwest Gas Holdings, Inc. SWX.
Here is a synopsis of all five stocks:
The optimum stock market theory of “Buy Low, Sell High” may be apparent with RingCentral shares, which are starting to glimmer at under $30. Amid recent market volatility, RNG has dropped further from its 52-week highs of over $40 but a sharp spike and an extended rebound looks likely.
Sporting a Zacks Rank #1 (Strong Buy), the bull case is starting to set in for RingCentral stock thanks to the company’s consistently effective operational performance, and AI initiatives.
As a leading provider of contact center software-as-a-service (SaaS) solutions, RingCentral has a robust product line that caters to various communication and collaboration needs for businesses.
RingCentral Analytics, for instance, provides insight into communication usage, performance, and trends that help businesses optimize their marketing strategies to improve productivity. Furthermore, RingCentral Integration is available to streamline workflows by offering over 330 integrations with popular business applications such as Microsoft Teams, Salesforce and Alphabet’s Google Workspace.
While there had been doubts that the company could succeed like other cloud-based communication platform providers such as Zoom Communications, RingCentral has tripled its operating profit since 2021. Astonishingly, RingCentral has reached or exceeded the Zacks EPS Consensus in every quarter since the company went public in 2013. Exceeding Q4 top and bottom line expectations in February, RingCentral’s full-year adjusted EPS increased 14% to $3.70 with total revenue rising 9% to $2.4 billion.
RingCentral's strong cash flow should also be highlighted as the company plans to supercharge its product portfolio with artificial intelligence. During Q4, RingCentral generated a quarterly record for free cash flow at $112 million. Full-year free cash flow spiked 20% to $403 million and has tripled since 2021. Notably, RingCentral expects to generate half a billion in free cash flow this year.
RingCentral expects total revenue to grow by 4-6% in fiscal 2025 with the Zacks Consensus currently at $2.52 billion or 5% growth. Based on Zacks estimates, RingCentral’s top line is projected to expand another 6% in FY26 to $2.68 billion.
RingCentral projects FY25 adjusted EPS at $4.13-$4.27, representing approximately 14% growth at the midpoint. Zacks projections call for RingCentral’s annual earnings to rise 13% in FY25 and climb another 12% next year to $4.71 per share.
Aforementioned, what further argues the bull case for RingCentral stock is its AI initiatives. Stating its vision is to power every business with an AI-first platform, RingCentral has announced an AI Receptionist or AIR, an innovative generative AI phone agent that is integrated into the phone system. AIR is incorporated to act like a digital employee that will enable RingCentral customers to do more with less.
It’s also noteworthy that RingCentral’s native contact center AI-product, RingCX, has been a strong underlying catalyst to its expansion. RingCX is designed to enhance customer satisfaction and streamline customer support operations, seeing a 40% increase in users last quarter, from 500 company's to 700.
The icing on top that may draw more investor interest in RingCentral stock is that RNG trades at just 6.8X forward earnings. As a more loose but intriguing comparison, Zoom Communications' stock trades over $70 and at 13.6X forward earnings. Trading at a very sharp discount to the benchmark S&P 500’s forward P/É multiple, RingCentral also trades beneath its Zacks Internet-Software and Services Industry average of 12.7X forward earnings.
Keeping in mind that RingCentral’s growth narrative has become more appealing than a popular stock like Zoom Communications, the smart money could certainly shift to RNG.
Plus, RingCentral trades well under the optimum level of less than 2X sales, with many tech companies often trading at a high premium in this regard.
The cat may not be out of the bag yet, but RingCentral is a company that could benefit immensely from AI. Wait for it…. The rush into RNG as a pure AI-play may be coming soon, as RingCentral is starting to generate the free cash flow to enhance its internal AI efforts.
Either way it goes, the upside narrative is there, and in addition to its strong buy rating RingCentral stock has an overall “A” VGM Zacks Style Scores grade for the combination of Value, Growth, and Momentum.
Bear of the Day:
The Zacks Building Products-Miscellaneous Industry is currently in the bottom 19% of 246 Zacks industries, and Arcosa may be a stock to avoid in particular. Having a Zacks Rank #5 (Strong Sell), Arcosa lands the Bear of the Day.
Compounding tougher market conditions, the manufacturer of infrastructure-related products and services is facing operational issues. Notably, the Indiana Department of Environmental Management (IDEM) has warned its aggregates division (Arcosa Lightweight) of potential emissions violations.
Reporting fourth-quarter results in early February, Arcosa’s Q4 sales rose 14% to $666.2 million but missed estimates of $694.2 million by 4%.
More concerning, Arcosa reported a net income loss of $7.7 million compared to a profit of $27.1 million in Q4 2023. Adjusted Q4 EPS was at $0.46, although this dropped from $0.68 a year ago and missed expectations of $0.79 by 42%.
Taking away from Arcosa’s appealing growth trajectory is that fiscal 2025 EPS estimates have dropped 13% over the last 30 days from $4.81 to $4.56. Unfortunately, a trend of declining earnings estimate revisions could continue following the company’s eye-catching earnings miss.
Furthermore, while Arcosa’s stock trades at a reasonable 20.1X forward earnings multiple, it's noteworthy that this is above the industry average of 16.8X with some of its notable peers in the space being CRH plc and TopBuild.
As of now, it's unclear if Arcosa can fulfill its lofty earnings expectations with double-digit EPS growth expected in FY25. Unless of course, earnings estimate revisions keep declining, which would signal more downside risk for ACA shares.
The confidence level of Americans has hit rock bottom triggered by soaring inflation and fears of a global trade war, following President Donald Trump’s announcement of hefty tariffs on a wide range of goods.
Also, a spike in inflation has forced the Federal Reserve to halt its rate cuts abruptly and it is unlikely to resume anytime soon. The uncertainty over the Federal Reserve’s next move and concerns over the nation’s economy have seen volatility return to markets this year after a stellar 2024.
Given this situation, it would be safe to invest in utility stocks, which are considered defensive. In this regard, NiSource Inc., Atmos Energy Corp. and Southwest Gas Holdings, Inc. are good picks. Each of these stocks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Moreover, the stocks are from the low-beta category (beta greater than 0 but less than 1). Hence, the recommended approach is to invest in low-beta stocks with a high-dividend yield and a favorable Zacks Rank.
The Conference Board’s consumer survey index fell to 98.3 in February, sharply below analysts’ expectations of 102.3, and the biggest drop since August 2021 and the lowest level since June 2024. This was the third consecutive month that consumer confidence showed a sharp drop.
The report came just a day after a separate report showed consumer sentiment hitting a 15-month low in February. The University of Michigan Consumer Sentiment Index fell to 64.7 in February from January's revised final reading of 71.7, hitting its lowest level since November 2023. Also, the reading came in lower than February’s initial reading of 67.8.
The consumer confidence reading follows a series of weak economic data released over the past week, raising concerns over the economy’s health. Several factors have been weighing on consumer’s confidence, with inflation being the biggest threat to the economy.
Inflation rose sharply over the past three months, compelling the Federal Reserve to halt its rate cuts. The Fed had already hinted at fewer rate cuts in 2025 after slashing interest rates by 100 basis points between September and December 2024.
The spike in inflation is likely to make the Federal Reserve take a more cautious approach and not rush for further cuts. Market participants were expecting the Fed to go for a rate cut in May but it is unlikely that the first rate cut will be done anytime before the second half of this year.
Further denting consumer confidence is Trump’s proposed tariffs. Trump has already announced 25% tariffs on Canadian and Mexican imports, which will now take effect from April 2. Meanwhile, he has already implemented a 10% tariff on various Chinese imports.
Besides, the President also announced 25% tariffs on goods imported from the European Union in the coming months. This has raised fears of a global trade war, which could further dent consumers’ confidence and make markets volatile.
NiSource Inc., together with its subsidiaries, provides natural gas, electricity, and other products and services in the United States. NI’s operating subsidiaries deliver energy to roughly 3.7 million customers in six states — Ohio, Pennsylvania, Virginia, Kentucky, Maryland and Indiana. NiSource has one of the nation’s largest natural gas distribution networks, as measured by the number of customers.
NiSource has an expected earnings growth rate of 9.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.7% over the past 60 days. NI presently has a Zacks Rank #2. NiSource has a beta of 0.54 and a current dividend yield of 2.80%.
Atmos Energy Corp., along with its subsidiaries, is engaged in the regulated natural gas distribution and storage business. ATO serves nearly 3.4 million customers in more than 1,400 communities in eight states, from the Blue Ridge Mountains in the East to the Rocky Mountains in the West. Atmos Energy operates more than 72,000 miles of transmission and distribution lines as well as 5,700 miles of interstate pipelines.
Atmos Energy has an expected earnings growth rate of 5.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last 60 days. ATO presently has a Zacks Rank #2. Atmos Energy has a beta of 0.72 and a current dividend yield of 2.32%.
Southwest Gas Holdings, Inc. is a regulated utility that provides natural gas services and has a wholly owned subsidiary, the Paiute Pipeline Company, through which it operates a pipeline transmission system.
Southwest Gas Holdings has an expected earnings growth rate of 16.8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the last 60 days. SWX presently has a Zacks Rank #2. Southwest Gas Holdings has a beta of 0.44 and a current dividend yield of 3.29%.
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