Bear of the Day: Pier 1 (PIR)
Pier One (PIR) was the bear of the day a little over two months ago after they missed earnings and fell to a Zacks Rank #5 (Strong Sell). Tracey Ryniec wrote a great article at that time as she highlighted the lower guidance and general beating shares were taking. Since that time, the company reported and missed again. PIR is again a Zacks Rank #5 (Strong Sell), and it is the Bear of the Day.
Company Description
Pier 1 Imports is engaged in the retail sale of decorative home furnishings, furniture, gifts, and related products. As of March 1, 2014, it operated 1,072 stores, including 991 stores in the United States and 81 stores in Canada under the Pier 1 Imports name. Pier 1 Imports was founded in 1970 and is headquartered in Fort Worth, Texas.
Guiding Lower
The company guided lower for the second consecutive quarter, this time moving the expected range of EPS from $1.14- $1.22 down to $0.95-$1.05. Along with an earnings miss, guiding lower has a way of really crushing the stock. PIR traded lower by nearly 18% in the session following the most recent miss.
The Aftermath
Following the poor results and weak guidance, several brokerages lowered target prices and cut their respective ratings on the stock. Wells Fargo downgraded the stock from Outperform to Market Perform while BB&T cut their rating from Buy to Hold.
Telsey Advisory Group, a boutique shop that is led by the former Bear Stearns Managing Director Dana Telsey, specializes in retail stocks and they lowered their target price to $15 from $17. The firm believes that while the bar was lowered for a number of strategic initiatives as it completes its transition into a mature omnichannel retailer, there could be hope for the stock if management is able to stabilize gross margins.
Valuation
Back to back miss and guiding lower has a way of crushing your stock and that can give you a depressed valuation. PIR trades at 13x forward earnings, about half of the industry average. The price to book for PIR is 3.6x and that is well below the 5.5x industry average. Finally the price to sales multiple of 0.6x is half of the industry average and trading near its lows even as analysts see decent topline growth for next year.
PIR Chart
The price and consensus chart is a very helpful tool developed by Zacks. It shows how the earnings estimates help guide the stock, so as estimates move higher, the stock price generally follows along. PIR follows this pattern with a defined trend lower in the stock that moves in lock step with the 2015 Zacks Consensus Estimate. Investors would be wise to wait for estimates to start moving higher before investing in this stock.
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Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor in charge of the Zacks Home Run Investor service, a Buy and Hold service where he recommends the stocks in the portfolio.
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