For Immediate Release
Chicago, IL – November 9, 2018 – Zacks Equity Research highlights ANGI HomeServices ANGI as the Bull of the Day, National Oilwell Varco NOV as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Home Depot HD, Macy’s M and Lowe's LOW.
Here is a synopsis of all five stocks:
Bull of the Day:
Shares in ANGI HomeServices made significant gains early on Thursday after an impressive quarterly earnings report, though they sold off later with the broader markets.
Shares in ANGI are still up a whopping 75% in 2018 versus a gain 5% in the S&P 500.
Net earnings came in at $0.09/share, in-line with the Zacks Consensus Estimate, and total revenues were $303M, 2% higher than the consensus and 67% higher than the year-ago period.
ANGI HomeServices is a subsidiary of Interactive Corp. and includes the popular sites Angie’s List, HomeAdvisor and the recently acquired Handy which match consumers with qualified contractors, technicians and service professionals. They also operate eight other sites serving the US, Canada and Europe and have attracted over 15 million customers over the past 20 years.
Parent company IAC owns and operates approximately 150 brands - mostly in the internet space - and has been aggressively adding promising companies to its expanding portfolio. Most notably, IAC also operates the Match Group which specializes in dating apps – including the wildly popular Tinder Service.
At their core, home services and dating services are actually quite similar, using technology to introduce two parties who may not have had any opportunity to meet for a mutually beneficial relationship and also using experience in internet marketing to attract new users to their sites.
IAC and Match have successfully fought off a planned expansion into the dating space from social-media giant Facebook and they remain the most popular suite of dating apps on the market. IAC is applying that same market and media savvy approach to the HomeServices division.
Thanks to an aggressive strategy of acquisitions, ANGI is expected to more than double its revenues in 2018 to $1.15B and increase them further to $1.4B in 2019. The company is able to take advantage of significant economies of scale – using the same basic infrastructure as the backbone of the operation, while tailoring the individual user experience at its many sites to appeal to as wide an audience as possible.
Even going into the latest report, recent upward earnings revisions earn ANGI a Zacks Rank #1 (Strong Buy) and that trends looks likely to continue as the company continues to build market share in the $400B billion home services market in the US as well as abroad.
Bear of the Day:
Prices for US crude oil have recently declined more than 20% from their 4-year highs reached last month, officially entering bear market territory. A combination of increasing US domestic production, rising stockpiles and a lower-than-expected impact from sanctions on Iran have all contributed to a sharp drop in prices over the last five weeks.
Lower oil prices are often positive for the economy as a whole and for the pocketbooks of consumers who can expect to pay less for gasoline at the pump, but they tend to be bad for the companies who supply oil producers.
Shares in National Oilwell Varco have also been punished over the same period, also shedding 20% of their value since the beginning of October. Though the company does not drill for oil or market petroleum products itself, it supplies a wide range of technology, equipment and services to the oil industry for exploration, extraction and production.
The US is now producing more than 11.5 million barrels/day and is forecast to top 12M/day by early in 2019. Saudi Arabia and Russia have also stepped up production lately in anticipation of a sanction related falloff in output from Iran. The US granted eight major exceptions allowing other countries – most notably India – to continue purchasing from Iran and the result is a global supply glut.
During periods of depressed prices, oil producers are less likely to make the investments in capital that will allow them to increase volumes in the future. A major component of models for the expected return on future projects is a forecast for the price of oil - and lower sales prices make initiating those projects look less advantageous.
The most recent quarterly report at NOV was a significant disappointment with the company turning in a breakeven net profit, missing the Zacks Consensus Estimate of $0.12/share.
NOV noted that they saw lower-than expected performance in several units because of higher steel and labor costs – a trend that looks likely to continue.
Thanks to subsequent negative earnings revisions, NOV is a Zacks Rank #5 (Strong Sell).
NOV is also currently in the Zacks Short List Portfolio, an algorithmic trading service intended to spot companies that are expected to underperform based on deterioration in a pre-determined set of financial metrics.
Should You Buy Home Depot Stock Ahead of Next Week’s Earnings?
Home Depot helps kick off the retail-heavy portion of Q3 earnings season next Tuesday, ahead of reports from Macy’s and other giants later in the week.
The question is should investors consider buying Home Depot stock ahead of earnings? Let’s see what to expect and look at some of its current fundamentals to find out.
We can see in the chart below that Home Depot stock has crushed the S&P 500 over the last five years. Home Depot stock has climbed over 50% in the last three years, with much of that expansion coming in the last 24 months. With that said, the last year has not been as kind to the home improvement retail powerhouse.
Shares of HD are up roughly 14% in the last 12 months, but have slipped around 1% since the start of 2018. Plus, Home Depot stock is down nearly 6% during the past three months. Home Depot stock closed at $187.23 per share on Wednesday, down 13% from its 52-week high of $215.43 per share, which sets up what could prove to be a solid buying opportunity.
Moving on, HD is currently trading at 18.6X forward 12-month Zacks Consensus EPS estimates, which marks a significant discount compared to its industry’s 25.7X. Home Depot is trading slightly above its rival Lowe's at 17.3X and the S&P 500’s 16.8X.
But HD has traded as high as 23.7X over the last year, with a one-year median of 20X. The company is also trading not too far above its 52-week low of 17X. We can also see that Home Depot is trading below its five-year median of 19.9X. Therefore, HD’s valuation is picture hardly appears stretched at the moment.
Overview & Outlook
Now that we have covered Home Depot’s current valuation picture and its stock price movement, it’s time to take a quick look at its business and understand what we should expect from the company’s third-quarter financial results.
Home Depot is the world's largest home improvement retailer and boasts 2,286 locations. The firm did $100.9 billion in sales last year, up 6.7% from fiscal 2016.
Looking ahead, our current Zacks Consensus Estimate is calling for Home Depot’s third-quarter revenues to jump by 4.9% to reach $26.25 billion. Meanwhile, HD’s full-year revenues are projected to surge 7.3% to touch $108.23 billion.
At the other end of the income statement, Home Depot’s adjusted quarterly earnings are projected to pop 23.4% to land at $2.27 per share. Better yet, the home improvement giant’s fiscal 2018 earnings are expected to climb over 28%.
It is also worth noting that Home Depot’s comparable store sales are expected to climb 4.7% based on our current NFM estimates—total comps jumped 5.3% last quarter. Furthermore, Home Depot’s overall customer transactions are projected to climb by roughly 4%, with its average ticket expected to pop from $62.84 to $64.74.
Investors should note that Home Depot’s earnings estimate revision activity has trended downward over the last 30 days to help HD earn a Zacks Rank #3 (Hold). Yet, HD sports an “A” grade for Growth in our Style Scores system and its stock rests below where it has traded recently. Plus, Home Depot almost always tops our quarterly earnings estimates, with beats for over five straight years.
It is also worth remembering that Home Depot is a solid income stock. This helps it look more attractive, especially during market uncertainty. Better yet, Home Depot has significantly increased its quarterly dividend over the last few years. HD paid a cash dividend of $1.03 per share in the second quarter, which marked a nearly 50% jump from 2016’s $0.69 per share and a 16% climb from 2017’s $0.89.
Home Depot is scheduled to release its Q3 financial results before the opening bell on Tuesday, November 13. And it looks like Home Depot stock might be worth considering.
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About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
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Angie's List, Inc. (ANGI) : Free Stock Analysis Report
The Home Depot, Inc. (HD) : Free Stock Analysis Report
Lowe's Companies, Inc. (LOW) : Free Stock Analysis Report
National Oilwell Varco, Inc. (NOV) : Free Stock Analysis Report
Macy's, Inc. (M) : Free Stock Analysis Report
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