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For Immediate Release
Chicago, IL – July 22, 2021 – Zacks Equity Research Shares of Bassett Furniture Industries, Incorporated BSET as the Bull of the Day, Redfin Corporation RDFN as the Bear of the Day. In addition, Zacks Equity Research provides analysis on General Motors Company GM, Ford Motor Company F and Honda Motor Co., Ltd. HMC.
Here is a synopsis of all five stocks:
Bull of the Day:
Bassett Furniture Industries isn't seeing any slowdown in furniture demand. This Zacks Rank #1 (Strong Buy) just raised its dividend and increased its share repurchase plan.
Bassett Furniture makes custom built home furnishings. It operates 97 company- and licensee-owned stores.
In addition to the stores, it operates a traditional wholesale business with more than 700 accounts on the open market, across the United States and internationally.
Raised the Dividend 12%
On July 15, Bassett announced it was increasing its dividend by 12%, to $0.14 per share. It is payable on Aug 27, 2021 to shareholders of record at the close of business on Aug 13, 2021.
It's currently yielding 2.4%.
The Board of Directors also increased the company's existing share repurchase authorization by approximately $16 million.
That takes the share repurchase authorization back to the original limit of $20 million.
Hot Wholesale Orders
Bassett also provided an update on the wholesale orders for the fiscal month of June 2021. They increased by 25% over June 2020 and 39% over June 2019.
The wholesale shipments rose 55% over June 2020 and 21% over June 2019.
However, the company is expressing caution about how much longer this hot furniture market can continue.
"With the reopening of the country fully underway and with consumer spending moving in favor of travel, dining, and other discretionary pursuits, we do expect our incoming business to ultimately feel the effects of this shift," said Rob Spilman, CEO.
"Nevertheless, the underlying strength of the economy and of our sales programs continued to produce vigorous sales again in June. That aside, we are committed to decrease our current order backlogs and to improve service levels as soon as possible."
Another Beat in the Fiscal Second Quarter
On July 1, Bassett announced its fiscal second quarter results and blew by the Zacks Consensus Estimate for the sixth consecutive quarter.
Earnings were $0.60 versus the Zacks Consensus of $0.35 for a beat of $0.25, or 71%.
It was the third big beat in a row.
Revenue rose 94% to $124.1 million year-over-year, but the 2020 quarter was impacted by the pandemic. However, it was also 15% higher as compared to the same quarter in 2019.
Wholesale orders jumped 172% to $96 million year-over-year and were up 51% compared to the pre-pandemic 2019 second quarter.
However, it's backlog grew by $19 million over the three months as it faced a tight labor market and continued supply chain disruptions.
It also has had to raise prices three times since the fiscal year began in December due to a rise in raw materials.
The market continues to be complex.
But, despite the challenges, Bassett finished the end of the fiscal second quarter with $63.5 million in cash and short-term investments, and no debt.
Earnings Estimates Rise
The analysts liked what they heard, as 2 estimates have been raised in the last 30 days.
The fiscal 2021 Zacks Consensus Estimate has jumped to $2.11 from $1.77. That's earnings growth of 339% as the company made just $0.48 last year.
However, analysts are cautious on fiscal 2022. While 2 analysts have raised, it has pushed the Zacks Consensus up to $2.20 which is just a gain of 4.5% from this year.
Shares Weaken: Is It a Buying Opportunity?
The furniture retailers were big winners during the first year of COVID.
Shares of Bassett have soared 182% over the last year. However, they've weakened in the last 3 months, and have fallen 2.5% during that time, easing off the recent highs.
They're still cheap, with a forward P/E of just 11.6.
They also have a PEG of 0.7. A PEG under 1.0 usually indicates a company is both a value and has growth.
Bassett is the only Zacks Rank #1 (Strong Buy) in the furniture industry.
With the strong June results, will the hot furniture market continue?
If it does, investors might want to keep Bassett on their short list.
Bear of the Day:
Redfin Corp. is expected to see negative earnings in 2021 even though home buying demand is strong. This Zacks Rank #5 (Strong Sell) is still growing revenue at a fast clip, however.
Redfin is a real estate broker, instant home-buyer (iBuyer), lender, title insurer and renovations company. It operates the country's top real-estate brokerage site.
It charges half the industry fee to sell a home.
Customers selling a home can take an instant cash offer from Redfin or have their renovations crew fix up their home so they can get top dollar.
It operates in 95 markets across the United States and Canada.
A Miss on the First Quarter
On May 5, 2021, Redfin reported its first quarter results and missed on the Zacks Consensus Estimate by $0.04. It reported a loss of $0.37 versus the Zacks Consensus of a loss of $0.33.
Revenue, however, rose 40% year-over-year to $268 million. Gross profit was $42 million, up 229% from $13 million in the first quarter of last year.
The net loss was $36 million compared to the net loss of $60 million in the year ago quarter.
Redfin's mobile app and website reached 46 million average monthly users in the first quarter, an increase of 30% compared to the year ago period as the hot pandemic home buying market extended into 2021.
On Apr 2, it also completed the acquisition of RentPath. RentPath is a rental listings company which owns sites such as ApartmentGuide.com, Rent.com and Rentals.com.
Second Quarter Guidance
Redfin guided to second quarter revenue of between $446 million and $457 million, an increase of between 109% and 114% year-over-year. But don't forget that the second quarter was highly impacted by the pandemic last year.
Included in that total revenue number are properties segment revenue between $151 million and $156 million and RentPath revenue between $41 million and $42 million.
Analysts expect full year revenue to jump 91.7% to $1.76 billion from $886 million in 2020.
Earnings are a different picture though. 1 analyst lowered their estimate for 2021 in the last 60 days.
The Zacks Consensus Estimate has fallen to $0.69 over the last 60 days. That's a decline of 200% compared to 2020 when the company lost $0.23.
Shares Pull Back From 2021 Highs
Redfin was a big winner in 2020 during the pandemic but shares have cooled off in 2021.
Shares are down 22% over the last 6 months and are down 11.9% year-to-date.
Is this a buying opportunity?
Redfin reports second quarter on Aug 5. Investors interested in the housing stocks should tune in.
Auto Stocks to Watch as the Shift to EVs Intensifies
The year 2020 turned out to be stellar for electric vehicles ("EVs") despite the challenges faced by the automotive industry as a whole due to the outbreak of the COVID-19 pandemic. Per the Global EV Outlook 2021 issued by the International Energy Agency ("IEA"), the global electric car stock increased 43% over 2019 with global electric car sales shares rising 70% to close at a record 4.6% in 2020.
So, why have EVs become so popular? Well, one of the main reasons behind this is the rising focus on climate change. As we strive to ensure a sustainable future, EVs have taken center stage, at least when it comes to an eco-friendly form of transport. EVs have become the go-to option for reducing the carbon dioxide emission that is characteristic of internal combustion engine vehicles.
The major automotive manufacturers have been upping their EV game in recent times and the competition is no longer restricted to pure-play EV manufacturers. Several legacy automakers have entered the EV market with new offerings and are also planning more investments, to meet the ever-increasing demand for this eco-friendly alternative. Per a Reuters article, General Motors announced that it is going to increase its spending on EVs through 2025 to $35 billion, marking an increase of 75% from March 2020.
A reason that had primarily kept buyers away from EVs was their high price tag. The situation has been improving there too, with EV prices falling steadily through the years, closing the gap with their gas-powered counterparts. In fact, analysts at Morgan Stanley have predicted that EVs "will likely cost $3,000-$5,000 at some point in the future," as cited in a Business Insider article.
Long-term operating costs of EVs are also lower with Energysage.com stating in a report last year that in the United States, operating a gasoline-powered vehicle costs $1,117 per year on average compared to an average of $485 for EVs.
Governments have also been providing incentives to bolster demand for EVs. Toward that end, the IEA's Global EV Outlook 2021 stated that government spending around the world marked an increase of 25% year over year in 2020, with $14 billion expended toward "direct purchase incentives and tax deductions for electric cars."
In the United States, President Joe Biden has pledged to reduce greenhouse gas emissions by at least 50% by 2030. The President has also proposed an infrastructure deal and per a Detroit News article published on Jul 6, the framework agreed upon by the White House and the bipartisan group of lawmakers included $7.5 billion for building EV charging infrastructure and $7.5 billion for electric buses and other forms of transport.
President Biden has also pushed for recycling of EV batteries as another Reuters article published on Jun 4 stated that his strategy is set to include bolstering the domestic recycling of batteries for reusing lithium and other metals.
Reflective of the positive developments that EVs have been witnessing, it is no surprise that the EV market is expected to grow going forward. According to a report by Markets and Markets, the global EV market size is estimated to witness a CAGR of 26.8% from 2021 to 2030.
3 Stocks to Keep an Eye On
The demand for EVs looks set to increase in the near term as the world continues to search for a sustainable future. This seems then a good time to look at companies offering EVs that stand to benefit from this potential. We have selected three such stocks that carry a Zacks Rank #1 (Strong Buy) or 3 (Hold). You can see the complete list of today's Zacks #1 Rank stocks here.
Ford Motor has been benefiting from the rising demand of EVs and in June, the company saw its electric and hybrid vehicle sales increasing 117% in the United States. It sold 12,975 units of its Mustang Mach-E SUV till June this year. The company is also set to launch the electric version of its F-150 pickup in 2022.
Ford currently flaunts a Zacks Rank #1 and year to date its stock has risen 58.3%. The Zacks Consensus Estimate for its current-year earnings increased 30.5% over the past 60 days. The company's expected earnings growth rate for the current year is more than 100%.
General Motors saw its EV sales rising in second-quarter 2021 with its Chevrolet Bolt EV reporting record deliveries for the second quarter and the first half of the year.
The company currently has a Zacks Rank #1 and the stock is up 34.9% year to date. The Zacks Consensus Estimate for its current-year earnings increased 25.1% over the past 60 days. The company's expected earnings growth rate for the current year is 35.1%.
Honda Motor is also gearing up its EV offering and recently announced that it is targeting 100% EV sales in North America by 2040. It is also planning to make its own EV architecture after its two vehicles made in partnership with General Motors, namely Honda Prologue and an all-electric Acura SUV, go on sale in North America by 2024.
Honda currently has a Zacks Rank #3 and the stock has risen 11.6% year to date. The Zacks Consensus Estimate for its next-year earnings increased 4.3% over the past 60 days. The company's expected earnings growth rate for next year is 21.2%.
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