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BJ's Wholesale Club, Meritor, Starbucks, Papa John's and Cheesecake Factory highlighted as Zacks Bull and Bear of the Day

Zacks Equity Research
·8 min read

For Immediate Release

Chicago, IL – July 27, 2020 – Zacks Equity Research Shares of BJ's Wholesale Club Holdings, Inc. BJ as the Bull of the Day, Meritor, Inc. MTOR as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Starbucks Corporation SBUX, Papa John's International, Inc. PZZA and The Cheesecake Factory Incorporated CAKE

Here is a synopsis of all four stocks:

Bull of the Day:

Loading the boat and buying stocks on dips has always been a profitable long-term strategy. Looking back at generational bottoms like March 2009 or October 1987, along with the benefit of hindsight, you can see the opportunity. Since the last recent stock market bottom in March of this year, stocks are up an incredible amount. Many stocks have rallied 50% or more, including today’s Bull of the Day which has doubled.

Today’s Bull of the Day is Zacks Rank #1 (Strong Buy) BJs Wholesale Club. BJ's Wholesale Club Holdings, Inc. operates as a warehouse club on the East Coast of the United States. It offers perishable, edible grocery, general merchandise, and non-edible grocery products. The company also sells products through its website and mobile app. As of March 5, 2020, it operated 217 clubs and 145 BJ's Gas locations in 17 states. 

During the COVID-19 shutdown, folks across the county were stocking up. Warehouse clubs like BJ’s, Costco and Walmart’s Sam’s Club were full of masked shoppers grabbing non-perishables. The Consumer Services – Miscellaneous industry ranks in the Top 38% of our Zacks Industry Rank. Best Buy is a Zacks Rank #1 (Strong Buy) that also features a Zacks Value Style Score of A, Growth of A, Momentum of D, to help it round out with a VGM Composite Score of A.

BJs Wholesale Club Holdings, Inc. Price and Consensus

The reason for the great Zacks Rank is the flurry of recent earnings estimate increases coming from analysts. Over the sixty days, analysts have increased their earnings for the current year, and next year. The bullish moves have pushed up the Zacks Consensus Estimate for the current year from a low of $1.70 to $2.21, while next year’s number is up from $1.81 to $2.10. The $2.21 consensus for the current year would represent EPS growth of 51.37% year-over-year.

Bear of the Day:

The market has surged off the COVID lows. There are countless stocks up over 50% since then, with many doubling. In an environment like this, you may feel like stocks only go up. Well, while a broad market rally can bring several stocks along for the ride, when the music stops, stocks with the strongest earnings will be the ones that stand the test of time. One way to uncover stocks with strong earnings trends is to lean on the time-teste strength of the Zacks Rank. Stocks with negative Zacks Ranks have earnings trends that are moving in the wrong direction.

Today’s Bear of the Day is a stock that has seen earnings estimates cut recently. I’m talking about Zacks Rank #5 (Strong Sell) Meritor. Meritor, Inc. designs, develops, manufactures, markets, distributes, sells, services, and supports integrated systems, modules, and components to original equipment manufacturers (OEMs) and the aftermarket for the commercial vehicle, transportation, and industrial sectors. It operates through two segments, Commercial Truck; and Aftermarket, Industrial and Trailer. 

Analysts have been cutting earnings estimates for the current year and next year. The bearish moves have dropped the Zacks Consensus Estimate for the current year from $1.32 ninety days ago, to 86 cents today. Next year’s number has been slashed from ‘$2.38 to $1.71. That current year consensus number would represent an earnings contraction of 77.5%. Current quarter estimates are calling for a 52-cent loss, while next quarter the company is still forecast to lose another 6 cents.

The Automotive – Original Equipment industry sits in the Top 41% of our Zacks Industry Rank. There are a handful of stocks in this industry which are Zacks Rank #1 (Strong Buy) stocks. Among them are Garret Motion and LCI Industries.

Additional content:

Will America & China Comps Hurt Starbucks' (SBUX) Q3 Earnings Results?

Starbucks is scheduled to report third-quarter fiscal 2020 results on Jul 28, after the closing bell. In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate by 3.23%.

Q3 Estimates

The Zacks Consensus Estimate for third-quarter bottom line is pegged at a loss of 60 cents, against earnings of 78 cents reported in the prior-year quarter. Over the past 30 days, the company’s earnings estimates have been revised downwards by 21.7%. For quarterly revenues, the consensus mark is pegged at $4,126 million, suggesting growth of 39.5% from the year-ago reported figure.

China Comps Performance

The impact of the coronavirus pandemic is likely to get reflected in Starbucks’ fiscal third-quarter results. The company has been witnessing sales recovery in China from late February. In May, China comps declined 21%, compared with a decrease of 32%, 64% and 78% in April, March and February, respectively. Comps in the last week of May fell 14%. The company is anticipated to post China comps in the range of 20% to 25%, compared with a slump of 50% in the prior quarter.

Americas Segment Comps Fall

In May, U.S. comps declined 43%, compared with a decrease of 63% in April. In the final week of May, comps slumped nearly 32%. The company expects comparable store sales for the Americas and the U.S. to decrease 40% to 45% in the fiscal third quarter, and then improve to a decline of 10% to 20% in the fiscal fourth quarter. The Zacks Consensus Estimate for net revenues at Americas is pegged at $2,802 million, down 32.9% year over year.

Margin Decline

Margin decline has been a major concern for the company and the downtrend is likely to have persisted in the fiscal third-quarter. This was owing to sales deleverage and rise in costs due to the coronavirus pandemic, mostly catastrophe wages; heightened pay programs and additional benefits in support of retail store partners; inventory write-offs; and store safety items.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Starbucks this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that's not the case here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Starbucks has an Earnings ESP of +3.04%.

Zacks Rank: The company has a Zacks Rank #4 (Sell).

Stocks With Favorable Combination

Here are some stocks from the Restaurant space that investors may consider as our model shows that these have the right combination of elements to post an earnings beat in the upcoming releases:

Papa John's International has a Zacks Rank #1 and an Earnings ESP of +7.56%.  You can see the complete list of today’s Zacks #1 Rank  stocks here.

The Cheesecake Factory currently has a Zacks Rank #3 and an Earnings ESP of +30.07%.

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Zacks Investment Research

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.


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The Cheesecake Factory Incorporated (CAKE) : Free Stock Analysis Report
 
Starbucks Corporation (SBUX) : Free Stock Analysis Report
 
BJs Wholesale Club Holdings, Inc. (BJ) : Free Stock Analysis Report
 
Papa Johns International, Inc. (PZZA) : Free Stock Analysis Report
 
Meritor, Inc. (MTOR) : Free Stock Analysis Report
 
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