The Zacks Analyst Blog Highlights: Home Depot, U.S. Home Systems, G III Apparel Group, Hain Celestial Group and Dillards

Zacks


For Immediate Release

Chicago, IL – September 27, 2012 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Home Depot Inc. (HD), U.S. Home Systems Inc. (USHS), G III Apparel Group Inc. (GIII), Hain Celestial Group Inc. (HAIN) and Dillards Inc. (DDS).

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Here are highlights from Wednesday’s Analyst Blog:

 

Home Depot Sets New High

 

Shares of Home Depot Inc. (HD) set a new 52-week high of $60.58 on Tuesday, September 25, 2012, beating its previous 52-week high of $60. The closing price of this home improvement retailer as of September 25, 2012 was $59.72, which represented a solid year-to-date return of41.7%. Average volume of shares traded over the last 3 months stands at approximately 8,720 thousand.

Growth Driver

An impressive record of beating the quarterly earnings expectations, robust top-line growth, upside in comparable store sales year-to-date, a raised fiscal 2012 outlook, a decent dividend yield, and acquisitions to enhance customer relations, – are the major contributors of growth for the shares of this company.

With respect to earnings surprise, Home Depot has topped the Zacks Consensus Estimates in three of the last four quarters, and met the estimates in one, with an average of 8.3%.

Home Depot witnessed sales growth of 5.9% in the first quarter of 2012 compared with the prior–year quarter, driven by comparable sales growth of 5.8%. In the second quarter of fiscal 2012, sales grew at the rate of 1.7% compared with the prior-year quarter, which was driven by comps growth of 2.1%. U.S. comps augmented 6.1% and 2.6% in the first quarter and second quarter of fiscal 2012, respectively.

Following the strong quarterly results, management raised its fiscal 2012 earnings guidance to $2.95 per share, escalating 19% from last year’s $2.47 and up from the earlier forecast of $2.90.

Home Depot rewards its shareholders through regular quarterly dividends and share repurchases. Recently, the company announced a quarterly dividend of 29 cents per share. This yields a solid 1.9%, while the company has a payout ratio of 40%.

In the previous quarter, the company bought back nearly 23.6 million shares, valued at approximately $1.5 billion. Through the rest of the fiscal year, the company intends to repurchase shares worth $1.4 billion.

On August 7, 2012, Home Depot announced a merger deal with a Texas based company, U.S. Home Systems Inc. (USHS) for a cash deal of $12.50 per share. Management believes that the merger will help to build a better relationship with the customers by providing them improved home services.

Earnings Estimate Revision

The Zacks Consensus Estimate for 2012 increased 1.7% to $2.95 per share over the last 60 days. The current year-over-year growth estimate for 2012 is 19.4%.

For 2013, the Zacks Consensus Estimate was raised by 1.5% to $3.36 per share over the same time frame. The current year-over-year growth estimate for 2013 is 13.9%.

Valuation

Valuation looks reasonable for Home Depot, with shares trading at 20.24x 12-month forward P/E, at par with its peer group average. However, on a price-to-book basis, shares are currently trading at 5.18x, a 37.4% premium to the peer group average of 3.77x.

Nevertheless, the stock looks attractive given a trailing 12-month ROE of 23.8%, which is higher than the peer group average of 13.3%. The company’s long-term estimated earnings per share growth rate also remain strong at 13.7%.

About the Company

Based in Atlanta, Georgia, Home Depot is the world’s largest home improvement specialty retailer with 2,250 retail stores across the globe, offering a diverse range of branded and proprietary home improvement items, building materials, lawn and garden products, and related services. The company has a market capitalization of $90.02 billion.

Zacks Rank & Recommendation

Based on the above analysis, Home Depot currently carries a Zacks #2 Rank, which translates into a short-term Buy rating for the next 1-3 months. However, we maintain our long-term ‘Neutral’ recommendation on the stock.

 

GIII Apparel: Strong Buy

 

Rising earnings estimates on the back of strong second quarter results – including an 85.7% earnings surprise – helped G III Apparel Group Inc. (GIII) achieve a Zacks #1 Rank (Strong Buy) on September 11, 2012. This apparel manufacturer has delivered positive earnings surprises in two of the last four quarters, and met the estimates in one, with an average beat of 24.3%.  

With a solid year-to-date return of 44.5% and a history of beating quarterly earnings estimates, this stock offers an attractive investment opportunity.

The Rank Driver

Better-than-expected second quarter earnings of fiscal 2013, robust sales growth year-to-date, acquisition of the leading luxury resort brand, Vilebrequin, and a raised fiscal 2013 outlook – are the primary rank drivers for this stock.

G III Apparel reported its second quarter 2013 results on September 5, 2012,  with earnings per share of 13 cents, beating the Zacks Consensus Estimate of 7 cents by 85.7% and year-ago earnings of 9 cents by 44.4%. Additionally, the quarterly earnings per share came ahead of the company’s guided range of 4 cents to 8 cents.

Net sales surged 16.5% and 9.4% year over year to $229.4 million and $251.5 million, in the first and second quarter of fiscal 2013, respectively. The increase in net sales is driven by significant comps growth of 6.3% and 12.7% in first and second quarter of 2013 in dresses, sportswear, suits, handbags, team sports and specialty retail operations.

On August 7, 2012, GIII Apparel acquired a leading luxury resort brand, Vilebrequin at a consideration of about $106.2 million. Management believes that this merger will prove to be accretive to the company’s top line as the brand operates a high operating margin business.

Based on strong second quarter results, the company raised its outlook for fiscal 2013. G-III now anticipates earnings per share between $2.68 and $2.78, up from the previously forecasted range of $2.62 to $2.72. Net sales are now expected to be $1.41 billion, versus the earlier projection of $1.35 billion. On an adjusted basis, the company expects earnings per share in the range of $2.74 – $2.84.

Earnings Estimate Revisions

The Zacks Consensus Estimate for fiscal 2013 increased 4.4% to $2.83 per share based on 5 out of 5 upward estimate revisions over the last 30 days. The current estimate implies a year-over-year growth of 14.9%.

For fiscal 2014, 5 out of 6 estimates were revised higher over the same time frame, lifting the Zacks Consensus Estimate by 4.5% to $3.22 per share.

Valuation

G-III Apparel currently trades at a forward P/E of 12.68x, reflecting a 31.3% discount to the peer group average of 18.45x. On a price-to-book basis, shares trade with a 12.1% discount at 1.97x. The company’s compelling fundamentals are well supported by its long-term estimated EPS growth rate of 20.0% versus 13.7% for the peer group.

The company has a trailing 12-month ROE of 14.0%, above the peer group average of 11.8%. This implies that the company reinvests its earnings more efficiently than its peer group.

About the Company

Based in New York, G-III Apparel Group is a leading designer and distributor of women’s and men’s apparel in the United States. The company deals in outerwear, dresses, sportswear, swimwear, beachwear and women's suits, as well as handbags and luggage. The company has a market capitalization of about $717.9 million.

Other Zacks #1 Rank retail stocks include Hain Celestial Group Inc. (HAIN) and Dillards Inc. (DDS).

 

 

 

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Read the analyst report on HD

Read the analyst report on USHS

Read the analyst report on GIII

Read the analyst report on HAIN

Read the analyst report on DDS

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