For Immediate Release
Chicago, IL – October 25, 2019 – Zacks Equity Research Shares of Callaway Golf Company ELY as the Bull of the Day, FedEx FDX asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Amazon AMZN, Intel Corp. INTC and Gilead GILD.
Here is a synopsis of all five stocks:
Bull of the Day:
Shares of Callaway Golf Company have climbed over 35% in 2019 and they might still have room to run heading into the company’s upcoming third quarter 2019 earnings release.
Callaway runs a relatively straight forward business. The Carlsbad, California-based company manufactures and sells high-end golf equipment and apparel from clubs and balls to shirts and hats. The firm went public back in 1992 and today boasts a portfolio of five brands, including its namesake, Odyssey, and upstart power TravisMathew.
The firm sponsors professional golfers from the PGA, LPGA, and other top tours around the world. Phil Mickelson, Sergio Garcia, Michelle Wie, and other giants of the game of golf are all part of Callaway’s team. Callaway also announced on October 21 a new multi-year partnership with NBA star Stephen Curry to help expand golf to reach “underserved and underrepresented youth.” Curry remains an Under Armour athlete on the court, but his passion for golf seems poised to help Callaway.
Callaway competes alongside Titleist owner Acushnet Holdings and other well-known brands. It is worth remembering that sportswear giants Nike and Adidas have both moved on from the golf equipment business in recent years.
On top of that, Callaway purchased Jack Wolfskin for roughly $476 million in early January 2019. The German-headquartered outdoor apparel brand competes against the likes of Columbia Sportswear, The North Face and others.
Jack Wolfskin helps Callaway diversify beyond golf, which is a good sign as the sport has dealt with popularity issues. Looking ahead, Callaway executives plan to make more “strategic investments in complementary areas.” The firm has also tried to expand further into digital video and audio entertainment to help gain exposure and build brand awareness.
Moving on, investors can see that shares of ELY have easily outpaced rival Acushnet Holdings over the last three years, up 103% against Acushnet’s 59%. Callaway stock has lagged behind its peer group, which includes Yeti, Vista Outdoor and other higher-end recreation-focused companies, in 2019 and over the last 12 months.
Still, ELY stock is up over 35% so far this year to blow by the S&P 500’s 19% movement and Nike’s 23%. Plus, Callaway stock closed regular trading Thursday at $20.90 per share, which marks a roughly 13% discount against its five-year highs of over $24 per share that it reached in September of 2018.
This could give Callaway shares room to run if the firm is able to impress Wall Street when it reports its Q3 fiscal 2019 financial results on Wednesday, October 30.
Despite its solid climb over the last three years, ELY stock is trading below its median during this strength in terms of forward earnings. Callaway currently rests at 17.9X forward 12-month Zacks Consensus Earnings Estimates, while its three-year median comes in at 22.8X, with a 42.5X high.
Callaway is trading below its one-year high of 20.2X and its industry’s 22.6X. Along with trading at a discount compared to its market and its own recent history, ELY’s forward price/sales ratio of 1.1 comes in below its industry’s 2.9 and its own three-year median of 1.2.
The company also pays a small dividend and announced a new share repurchase plan last quarter of up to $100 million. And ELY is part of our Leisure and Recreation Products industry that rests in the top 30% of our 255 Zacks industries.
Q3 Outlook & Beyond
Our current Zacks Consensus Estimates call for the company’s quarterly revenue to climb 60.2% to reach $420.79 million. The firm’s fourth quarter sales are then projected to surge 73.10%, with its full-year fiscal 2019 revenue expected to jump 36.5% to $1.70 billion. It is worth remembering that these figures are boosted somewhat by its Jack Wolfskin purchase.
With this in mind, Callaway’s 2020 sales are projected to climb 5% above our current year-projection to come in at $1.78 billion. This would come on top of 2018’s 18.5% full-year revenue expansion and 2017’s 20.4% growth.
At the bottom-end of the income statement, ELY’s adjusted Q3 earnings are projected to soar 130% from $0.10 per share in the year-ago period to reach $0.23. Overall, the golf power’s FY19 EPS figure is projected to climb 0.93% to hit $1.08 per share, with 2020 expected to come in 13% higher at $1.22.
Callaway is a Zacks Rank #1 (Strong Buy) at the moment that also sports a “B” grade for Value and an “A” for Momentum in our Style Scores system to help ELY earn a “B” VGM score. The company has also crushed our quarterly earnings estimates by an average of 224% in the trailing four periods, including a 48% beat last quarter.
Bear of the Day:
FedEx stock has tumbled nearly 30% in the last 12 months to fall far behind the S&P 500’s climb and rival United Parcel Service. Plus, shares of the shipping giant suffered one of their biggest one-day drops in years after it lowered its earnings guidance on September 17.
What’s Going on with FedEx?
FedEx shocked many on Wall Street when the firm in August essentially ended its relationship with Amazon . Some might contend that the global shipping powerhouse pulled the cord too early, even though company management noted that “Amazon contracts represented only a small proportion” of its revenues.
CEO Frederick Smith said on FedEx’s Q1 fiscal 2020 earnings call that his company’s decision not to renew its Amazon contract will hurt near-term profits. However, he went on to note that the company has started to land and onboard deals to help replace the lost traffic, while also removing “significant costs which were unique to Amazon's requirements.”
It seems that the Memphis, Tennessee-based firm didn’t want to be in business with a company that aims to take over the global shipping and logistics market. And FedEx hopes to do what Microsoft has done with cloud computing: attract Amazon’s direct rivals, including companies like Walmart .
FDX aims to improve its FedEx Express hub automation, modernize its FedEx Express air fleet, and much more going forward. Management also outlined how it plans to enhance its offerings to attract more e-commerce customers and business to consumer clients, while remaining a B2B-heavy operation. “To lead in e-commerce, we have launched or announced FedEx Extra Hours, an express service, which provides nightly pickup with delivery the next business day,” Smith went on to say on FDX’s earnings call.
FedEx has more plans to help improve and bolster its e-commerce business as it aims to better compete against its core competitors. Company management noted that FedEx competes against four other firms: UPS, DHL, the US Postal Service, and more recently Amazon.
Along with investors’ Amazon-related questions, FedEx continued to point to broader economic worries. Last quarter, the company significantly cut its fiscal 2020 profit forecast and noted that its “performance continues to be negatively impacted by a weakening global macro environment driven by increasing trade tensions and policy uncertainty.”
As we touched on at the outset, FDX stock has underperformed recently. FedEx shares have fallen 32% in the past 24 months, while its larger decline began at the start of 2018. Investors will also see that shares of FedEx are down roughly 10% in the last three years, with UPS up 6% over this stretch.
FDX stock closed regular trading Thursday down 1.2% at $154.05 per share on lower-than-average trading volume. This represented a 34% downturn compared to its 52-week high of $234.49 per share.
Q2 2020 Outlook & Beyond
Looking ahead, FDX’s second-quarter fiscal 2020 revenue is projected to slip 1.4% from the year-ago period to $17.58 billion, based on our current Zacks Consensus Estimate. This would mark a downturn compared to its recently-reported quarter that saw its sales come in essentially flat.
Meanwhile, full-year sales are projected to come in roughly flat at $69.72 billion, with fiscal 2021 revenue expected to come in 3.8% higher than our current-year estimate to hit $72.39 billion.
At the bottom end of the income statement, FedEx’s 2020 outlook appears far worse. The company’s adjusted second-quarter earnings are projected to tumble 29%, with FY20’s EPS figure projected to fall 22% against 2019.
Peeking further down the road, the shipping firm’s 2021 earnings are expected to climb 13.6% above our 2020 estimate. With that said, FDX has missed our quarterly earnings estimates in three out of the last four quarters and we can see just how rough FedEx’s earnings revisions picture has turned.
FedEx stock is a Zacks Rank #5 (Strong Sell) at the moment, based in large part, on its recent negative earnings trends. FDX also holds a “D” grade for Value and Momentum in our Style Scores system for an overall “D” VGM score.
And the Transportation - Air Freight and Cargo industry that FDX is part of currently rests in the bottom 33% of our 255 Zacks industries.
Q3 Earnings Frenzy: Amazon (AMZN), Intel (INTC) and More
Q3 earnings results for Amazon are out following today's closing bell, posting a mixed quarter and weaker-than-expected Q4 revenue guidance. Earnings of $4.23 per share came in well under the $4.46 expected (not to mention $5.75 per share reported in the year-ago quarter), but this was on better revenue results in the quarter: $69.98 billion versus $68.67 billion analysts were looking for. Guidance for Q4 earnings tightened to a range of $80-86 billion; the Zacks consensus had been for $86.88 billion.
It's the second-straight miss and third in the last 10 quarters for Amazon, though quarterly earnings is never the main story for investors in Amazon. Amazon Web Services (AWS), the money fuel for the company's vast array of services, brought in $9 billion for the quarter, up 35% year over year. But this has not kept late-traders from selling shares to the tune of 9% in after-hours. This is bringing Amazon shares down to levels not seen since March of this year.
Intel Corp., on the other hand, was its usual consistent self in its Q3 earnings report, posting a solid beat of $1.48 per share versus $1.24 expected ($1.28 per share reported in the previous-year quarter). Revenues of !19.19 billion easily surpassed the $18.03 billion analysts were expecting. Data Center revenues grew an impressive $6.4 billion in the quarter, up from the $5.6 billion anticipated. PC sales were also better than expected. Intel has not posted a negative earnings surprise since Q4 of 2013. Shares had initially spike 7% on the news, but have subdued down to 5.8% at this hour. For more on INTC's earnings, click here.
Biopharma giant Gilead came in mostly even on its Q3 report, posting earnings of $1.75 per share which missed the Zacks consensus by a penny, while $5.6 billion in sales was directly in-line with top-line forecasts. Guidance for the current fiscal year pulled back, however, to a range of $21-22.1 billion; our analysts had figured $22.29 billion. HIV treatment sales were also in-line at $4.2 billion, while Hep-C treatment missed expectations of $729 million, coming in at $674 million. For more on GILD's earnings, click here.
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Click to get this free report Amazon.com, Inc. (AMZN) : Free Stock Analysis Report Callaway Golf Company (ELY) : Free Stock Analysis Report Gilead Sciences, Inc. (GILD) : Free Stock Analysis Report FedEx Corporation (FDX) : Free Stock Analysis Report Intel Corporation (INTC) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research