Capri Holdings, Post Holdings, D.R. Horton, Lennar Corp and Weyerhaeuser highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – January 19, 2021 – Zacks Equity Research Shares of Capri Holdings Limited CPRI as the Bull of the Day, Post Holdings, Inc. POST as the Bear of the Day. In addition, Zacks Equity Research provides analysis on D.R. Horton, Inc. DHI, Lennar Corporation LEN and Weyerhaeuser Company WY.
Here is a synopsis of all five stocks:
Bull of the Day:
Capri Holdings is a luxury retail holding company that specializes in men’s and women’s ready-to-wear apparel, accessories, and footwear. Its brand portfolio includes Michael Kors, Jimmy Choo, and Versace, each making up 75%, 10%, and 15% of total revenue, respectively.
Q2 Earnings Impress
Shares of Capri rose over 8% after the retailer reported better-than-expected second quarter results.
Revenue fell 23% to $1.11 billion but handily beat estimates of $924.9 million. The company’s top line benefited from e-commerce growth, which solidly increased quarter-over-quarter, and positive sales growth in China.
Jimmy Choo was the best performing brand, with revenue down only 2.4%.
Additionally, Capri succeeded in controlling costs in Q2 thanks to initiatives like limiting advertising spending; adjusted operating margin rose 240 basis points to 16.4%.
Because of this, the company reported a strong profit of $0.90 per share compared to estimates of $0.04 per share.
As the world continues to emerge from this crisis, we are increasingly optimistic about the outlook for the fashion luxury industry and Capri Holdings,” said CEO John Idol.
CPRI is Surging
In the past one year, shares of Capri have climbed about 16.5%, and over the past six months, the stock gained 162% compared to the S&P 500’s 17.7% increase. Estimates have been rising too, and CPRI is a Zacks Rank #1 (Strong Buy) right now.
For the current fiscal year, one analyst has revised their bottom-line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has held steady at $1.21 per share. Earnings are expected to decline for the current fiscal year, but in 2021, CPRI’s bottom line is expected to see triple-digit year-over-year growth.
CPRI does report fiscal 2021 third-quarter earnings in a few weeks, so these estimate figures could change. Additionally, the retailer didn’t provide guidance for Q3 or the rest of the fiscal year due to the pandemic and related uncertainty.
But Capri is well-positioned as the coronavirus pandemic continues. Q2’s results showed that it can generate much-needed profits in trying times, utilizing all three of its brands’ popularity in China (where the economy has bounced back and consumers are shopping at pre-pandemic levels) as well as its overall digital strength.
If you’re an investor searching for a luxury retail stock to add to your portfolio, make sure to keep CPRI on your shortlist.
Bear of the Day:
Based in Missouri, Post Holdings is a consumer-packaged goods giant, with many popular ready-to-eat cereal brands like Honey Bunches of Oats, Pebbles, Raisin Bran, Shredded Wheat, and Oreo O’s under its umbrella.
Q4 Earnings Recap
Last November, Post reported fourth quarter results that came in weaker-than-expected.
Earnings of $0.58 per share missed the Zacks Consensus Estimate; revenue of $1.4 billion fell 2.2% year-over-year and also missed our consensus estimate.
The company’s Foodservice and Post Consumer Brands operating segments saw notable declines over the prior year period, while BellRing Brands, Weetabix, and Refrigerated Retail grew year-over-year.
Looking ahead, Post’s management team expects adjusted EBITDA for the first half of 2021 to be in the range of $520 million and $550 million.
Bottom Line
POST is now a Zacks Rank #5 (Strong Sell).
Four analysts have cut their full year earnings outlook over the past 60 days, and the consensus estimate has fallen 58 cents to $3.73 per share; earnings are expected to experience a double-digit decline for fiscal 2020. Post reports Q1 results in a few weeks, so investors should be aware that these figures could change.
Shares are down 11.8% in the past one-year period, lagging the S&P 500’s 14% rebound during the same time frame.
Post faces some tough headwinds going forward.
Competition from fellow cereal makers Kellogg and General Mills has only grown, and Post will likely have a hard time gaining significant market share as the demand for cereal by consumers remains at a stand still.
Long-term debt has also ballooned over the past ten years to $6.9 billion due to high acquisition activity, and with stagnant revenues and an unclear path to growing future earnings, it may be best for potential investors to stay on the sidelines for now.
Additional content:
Earnings Season Shifts to Higher Gear: Global Week Ahead
In the Global Week Ahead, the latest U.S. earnings season shifts to a higher gear.
Q4 and full-year results come out — from over 40 S&P 500 companies, and more than 90 companies in total.
Key U.S. large cap stocks: Morgan Stanley, Goldman Sachs, BofA, State Street, Netflix, P&G, CSX Corp., Kinder Morgan and Intel.
Forward guidance, as usual, should best inform each stock’s price momentum in 2021.
Next?
Reuters’ five world market themes, reordered for equity traders.
(1) On Wednesday, Biden Is Inaugurated
On Wednesday, Joe Biden will be inaugurated as the 46th president of the United States, taking over the leadership of a country racked by COVID-19, deep socio-economic divisions and facing challenges to its global leadership role.
Biden has proposed $1.9 trillion in stimulus with a commitment for $1,400 stimulus checks. Markets have cheered his win but are watching for clarity on spending and tackling the pandemic.
The S&P 500 has risen in the first 100 calendar days of eight out of the last 10 presidential terms, but Biden’s first 100 days may be more fraught than those of his predecessors. He needs to stimulate the economy quickly, but the slender Democrat majority in Congress means the size and timing of the package remain uncertain.
(2) Europe Will Show Us Some IPOs This Week
In late 2020, New York bustled with initial public offerings from the likes of Airbnb and Doordash in eye-popping valuations and soaring values on their first trading day.
Now Europe is playing catch-up, with several IPOs already off the blocks in January. Bootmaker Dr. Martens kicked off proceedings, followed by online card retailer Moonpig, Poland’s InPost and Germany’s Auto1.
And as 2020 earnings emerge and the equity rally continues, more companies are seen making a bid for listings; among them are Deliveroo, pet care firm IVC Evidensia and German online fashion retailer About You.
(3) On Thursday, the European Central Bank (ECB) Meets
The European Central Bank meets on Thursday. It unleashed extra stimulus a month ago but the new COVID-19 strain and a relatively slow vaccination pace are again clouding the economic outlook.
Cause for concern? Not so, comments from Christine Lagarde suggest. The ECB chief predicts recovery as COVID subsides, seeing the glass as half-full, not half-empty. Germany’s economy too is cause for optimism, shrinking by a less-than-expected 5% in 2020.
But prolonged lockdowns will hurt. Against this backdrop, markets will want the ECB to signal its commitment to using the full firepower of its 1.85 trillion-euro ($2.24 trillion) emergency bond-buying scheme — something on which policymakers appear to be split.
(4) On Friday, January Manufacturing PMIs May Be Somber
Economies were meant to be turning the corner in January but when “flash” business activity readings from the Eurozone, the United States, Japan and Britain emerge on Friday — the first PMIs of 2021 — they may be more somber than anticipated.
While economic rebound bets still stand, activity curbs and a surging COVID-19 caseload are casting doubt over forecasts.
Having bounced off March troughs, global PMIs have seesawed of late just above 50. Economists expect IHS Markit’s flash Purchasing Managers’ Index (PMI) to show Eurozone activity shrinking further after December’s contraction. PMI readings above 50 indicate growth and U.S. and U.K. surveys showed strong expansion last month, but the big question is whether that continues.
We get a snapshot from China, too. Data shows +2.3% economic expansion last year while December industrial and retail figures provide a more up-to-date picture of growth.
(5) Germany Will Pick Merkel’s Successor
After 15 years at the helm of Europe’s largest economy, German Chancellor Angela Merkel bows out this year. On Saturday, the Christian Democratic Union picked a new leader [centrist Armin Laschet] who will likely become chancellor after September elections.
Battling it out was centrist Armin Laschet, arch-conservative Friedrich Merz and foreign policy expert Norbert Roettgen. But Markus Soeder of the CDU’s Bavarian sister party, the Christian Social Union, might well upset the race [they didn’t!].
For markets, the candidates’ attitudes to fiscal policy is key. Merkel, known affectionately as ‘Mutti,’ or mother, jettisoned her party’s antagonism to deficits. She spent more and accepted moving toward joint debt to save the Eurozone.
Merkel’s successor probably won’t backtrack completely, but concerns linger nonetheless about how quickly Germany might pull back to fiscal orthodoxy under a new leader.
Top Zacks #1 Rank (STRONG BUY) Stocks
With COVID, the economic indicators for future homebuilding, and remodeling, became rosy in 2020.
The industry is bullish on 2021, too.
The Chief Economist of housing data expert Zonda is calling for a +12.6% increase in single-family U.S. home starts in 2021 over 2020, hitting a 1,075,000 at a seasonally adjusted, annualized rate.
Outperformance of starts over sales should be partly due to the backlog builders are entering 2021 with.
(1) D.R. Horton: Based in Texas, this is a U.S. single-family homebuilder, for both entry-level and move-up markets. Shares price at $69 now, making for a $25.5B market cap stock. I see a Zacks Value score of B, a Zacks Growth score of B, and a Zacks Momentum score of B.
(2) Lennar Corp.: Based in Miami, this is another U.S. single-family attached and detached homebuilder. Shares price at $77 each now, making for a $23.9B market cap stock. I see a Zacks Value score of A, a Zacks Growth score of A, and a Zacks Momentum score of D.
(3) Weyerhauser: Based in Washington state, this is the veteran Wood Building Products stock. Shares price at $32.50 each, making for a market cap of $24.2B. I see a Zacks Value score of F, a Zacks Growth score of C, and a Zacks Momentum score of C.
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Weyerhaeuser Company (WY) : Free Stock Analysis Report
Lennar Corporation (LEN) : Free Stock Analysis Report
D.R. Horton, Inc. (DHI) : Free Stock Analysis Report
Post Holdings, Inc. (POST) : Free Stock Analysis Report
Capri Holdings Limited (CPRI) : Free Stock Analysis Report
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