For Immediate Release
Chicago, IL – August 22, 2019 – Zacks Equity Research Alibaba BABA as the Bull of the Day, Dillard's DDS as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Coca-Cola KO, McDonald's MCD and Comcast CMCSA.
Here is a synopsis of all five stocks:
Bull of the Day:
Alibaba easily topped our quarterly estimates last week, with sales up 42% amid the ongoing U.S. and China trade war. The Chinese e-commerce powerhouse’s stock price has been volatile during the past two years. But Alibaba looks strong as it prepares to enter a new era, with billionaire founder Jack Ma set to step down as chairman soon.
Quick June Quarter Overview
Alibaba’s revenue surged 42% from the prior-year quarter to 114.9 billion yuan, or $16.58 billion, which topped our Zacks Consensus Estimate. Investors should note that Alibaba reports its metrics in Chinese RMB and then offers a comparable U.S. dollar equivalent for the “convenience of the reader.”
The company posted first-quarter fiscal 2020 earnings of $1.83 per share. This crushed our $1.50 estimate and marked a 56% climb from the year-ago period.
BABA’s annual active consumers on its retail marketplaces reached 674 million, up 20 million from Q4 2019 and 98 million from the year-ago period. On top of that, and perhaps more importantly, mobile MAUs on its China retail marketplaces reached 755 million in June 2019, an increase of 34 million over March 2019 and a whopping 121 million above Q1 2019.
Alibaba operates the two largest e-commerce platforms in China, Taobao and Tmall, which led to its core commerce business accounting for 87% of total Q1 sales. But like its U.S. counterpart Amazon, Alibaba has expanded its cloud computing business in recent years.
BABA’s cloud computing unit saw its sales soar 66% to make up 7% of total revenue. Plus, Executive Vice President Joseph Tsai last week said that Alibaba’s cloud segmented is set to profit from the 5G transition.
Along with cloud computing and e-commerce, Alibaba operates a digital media and entertainment business, which accounted for 5% of total quarterly revenue. Investors should also note that Alibaba and Salesforce in late July announced a partnership. “Alibaba will become the exclusive provider of Salesforce to customers in mainland China, Hong Kong, Macau, and Taiwan, and Salesforce will become the exclusive enterprise CRM product suite sold by Alibaba,” Salesforce wrote.
Alibaba reportedly holds about two-thirds of the e-commerce market share in the world’s second-largest economy. The company has also beefed up its logistics business as its core Chinese marketplaces, such as Beijing and Shanghai, become more saturated. The firm said that 70% of its new customers in the past quarter live in less-developed areas.
Alibaba’s ability to expand its reach to more of the country’s roughly 1.42 billion people will prove vital going forward. Clearly, U.S.-China trade war fears still linger over the firm. But Alibaba just proved that the fight hasn’t hurt the company as much as some on Wall Street might have assumed.
Outlook & Earnings Trends
Moving on, our current estimates call for Alibaba’s quarterly revenue to jump 35.7% to reach $16.82 billion. The company’s full-year fiscal 2020 revenue is then projected to climb 32% from roughly $56 billion to $73.46 billion. Peeking further ahead, the company’s 2021 sales are expected to climb 31% above our current-year estimate to reach $96.62 billion, in a sign of strong and stable top-line expansion.
At the bottom end of the income statement, BABA’s adjusted quarterly earnings are expected to climb 11.3% to $1.56 per share. Alibaba’s full-year fiscal 2020 EPS figure is then expected to surge nearly 26%, with 2021 projected to come in 25% higher than our current-year estimate.
Alibaba has easily topped our earnings estimates in the trailing four periods, by a 19% average. Furthermore, BABA’s earnings estimate revision activity has moved in the right direction following its recent earnings release, especially for the current quarter and fiscal year.
Alibaba is a Zacks Rank #1 (Strong Buy) at the moment that also holds a “B” grade for Momentum in our Style Scores system. The firm’s top-line growth is expected to slow down on a percentage basis, which is to be somewhat expected as its overall sales reach eye-popping totals.
The Chinese e-commerce power has, of course, diversified and cloud computing could help prove to be a catalyst for expansion into other areas, much like it has been for Amazon. We should also note that shares of BABA rest roughly 11% below their 52-week high, which could give them some room to run.
Bear of the Day:
Dillard's posted worse-than-projected second-quarter results on August 15 as the department store chain’s struggles to adapt to the e-commerce and delivery age remain. DDS shares are now down over 26% in the last 12 months and Dillard’s outlook doesn’t appear as though it will help boost investor confidence.
Dillard's posted an adjusted quarterly loss of $1.74 per share last week. This marked a massive downturn from the year-ago period’s loss and came in far below our Zacks Consensus Estimate that called for a loss of $0.66. Meanwhile, DDS Q2 revenues slipped roughly 3%, while comparable store sales dipped 2%.
Investors should also note that the company did not even provide any positive management updates or quotes in its latest quarterly press release. In fact, Dillard’s provided almost no guidance whatsoever, which is hardly a good sign. The Little Rock, Arkansas-based company’s rough second quarter is part of ongoing disappointment from fellow department stores.
We can see that Dillard’s sales have slipped in recent years amid a quickly changing retail landscape. DDS executives have focused on trying to reward shareholders with buybacks and dividends instead. The company bought back roughly 0.8 million shares during Q2 for a total $48.9 million, under its $500-million repurchase program.
As we mentioned at the top, DDS stock has tumbled recently. Shares of DDS are down roughly 6% in 2019. But this actually comes in far better than the broader department store market’s 38% average decline. The chart below, however, shows just how terrible the last five years have been for Dillard’s, especially against the larger retail market’s impressive climb.
Outlook & Earnings Trends
Moving on, the company’s third-quarter revenue is projected to fall approximately 4% to $1.40 billion, with full-year fiscal 2019 revenue expected to sink 2.5%. Peeking further down the road, the company’s 2020 revenue is projected to fall 0.50% below our current-year estimate.
Dillard’s earnings estimates appear even worse at the moment. The company’s adjusted Q3 earnings are projected to tumble from positive $0.27 a share in the year-ago period to a loss of $0.21 per share. The firm’s full-year EPS figure is also expected to sink 42%, with 2020 projected to come in 9.4% below our current-year estimate. Investors will also see just how much worse its earnings estimate picture has turned.
3 Blue-Chip Dividend Stocks to Buy as Bond Yields Fall, Global Worries Rise
Fears of a global economic slowdown have hung over markets recently. Growing worries about the trade war between the U.S. and China have also helped drag the S&P 500 down roughly 2.7% in the past month. And yields on the 10-year U.S. Treasury note have tumbled as investors pour into one of the world’s safest investments.
By now, many investors might have heard about last week’s yield curve inversion, which saw yields on the 10-year U.S. Treasury briefly slip below 2-year yields for the first time since 2007. Some fear the yield curve inversion could signal a recession, as it has in the past. But even if this proves not to be the case, investors do need to pay attention to the yields on 10-year U.S. Treasury notes because they could make dividend-paying stocks even more valuable.
Yields on 10-year U.S. Treasury notes rested at 1.57% through morning trading Wednesday, down from 2.05% on July 24 and 2.39% three months ago. These low yields could make Wall Street and investors look for higher returns elsewhere, in a phenomenon known as the Tina effect or “there is no alternative” to stocks.
With this in mind, we searched for strong companies that boast impressive, stable business models that wouldn’t likely be impacted too greatly by a possible U.S. economic slowdown. We then added a solid dividend yield to our criteria using the Zacks Stock Screener…
Coca-Cola topped estimates last quarter and raised its full-year organic revenue growth forecast. Coca-Cola Zero Sugar posted its seventh consecutive quarter of double-digit volume growth globally and the firm rolled out its first-ever Costa Coffee ready-to-drink product in Great Britain. KO purchased the British coffee chain for $5.1 billion earlier this year as part of its plan to expand beyond the soda (pop) market. This also includes investments in Gatorade rival BodyArmor, the introduction of its first energy drink under the Coca-Cola brand, and more.
KO’s organic revenue—excluding currency swings, acquisitions, and divestitures—jumped 6% in Q2 2019. The firm now expects its full-year organic revenues to pop 5%. Our Zacks Consensus Estimates call for the company’s fiscal 2019 revenue to jump 15.7%, including acquisitions and divestitures, with the company’s 2020 growth set to come in roughly 5% above our 2019 estimate in a sign of stabilized expansion.
Coca-Cola’s adjusted fiscal 2019 EPS figure is expected to climb 1%, with 2020 projected to come in 8% higher. Plus, KO currently pays an annualized dividend of $1.60 per share, with an impressive 2.97% yield. Coca-Cola is also a Zacks Rank #2 (Buy) that boats a “B” grade for Growth in our Style Scores system. And just so we don’t think KO’s yield is artificially inflated, shares of the beverage power have surged 18% over the last 12 months to outpace the S&P’s sideways movement.
Shares of MCD have soared over 37% over the last 52 weeks and are up 10% in the past three months. McDonald's stock has also destroyed the S&P 500 during a three-year stretch, up 91% against the S&P’s 32% expansion. In the second quarter, the global fast-food powerhouse’s same-store sales popped 6.5%, with U.S. comps up 5.7%. Company management noted that higher prices helped boost sales, along with increased delivery offerings and self-ordering kiosks.
The firm announced in mid-July that it added DoorDash as a delivery partner, which ended its exclusive relationship with UberEats. MCD’s delivery push has become the norm in the Amazon age as rivals such as Starbucks race to offer consumers more options. McDonald’s also expects to open roughly 1,200 restaurants this year and try to remodel and upgrade stores, while encouraging franchisees to do the same.
McDonald's longer-term earnings estimate revision activity has trended heavily in the right direction following its Q2 earnings release. Our estimates call for the company’s fiscal 2019 earnings to jump 1.4%, with 2020’s figure projected to come in 9.5% higher. MCD is a Zacks Rank #2 (Buy) at the moment, with an annualized dividend of $4.64 per share, up roughly 11% from the previous-year period. Meanwhile, the company’s yield rest at 2.12%.
Comcast stock is up 23% in the past year and 28% in 2019. The communication and entertainment giant’s booming internet business helped offset the industry-wide cord-cutting dilemma. Second-quarter high-speed internet revenue jumped 9.4%, while business services sales surged 9.8%. The company also saw its newer wireless business soar 21%. Xfinity Mobile, which launched in 2017, hopes to challenge the likes of AT&T.
Comcast’s Sky acquisition is also set to help the firm expand its reach. Plus, CMCSA said it plans to launch its own streaming service through its NBCUniversal unit in April 2020. The platform, which will be home to The Office and much more, expects to compete alongside Netflix, Amazon Prime, and others.
The firm’s full-year revenues are expected to jump 16.6% to reach $112.24 billion. Peeking further ahead, 2020 revenues are projected to climb a solid 5.3% above its Sky-boosted 2019 results. CMCSA’s full-year EPS figure is expected to climb 20%, with 2020’s earnings projected to jump roughly 10.3% above our current year estimate. Like its blue-chip peers, Comcast is a Zacks Rank #2 (Buy) right now that sports an “A” grade for Value. CMCSA currently pays a quarterly dividend of $0.21 per share, up from the prior fiscal year’s $0.19, with a 1.9% yield.
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