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Casey's, Polaris, Telenav, Applied Materials, Macy's, Zumiez and Abercrombie & Fitch highlighted as Zacks Bull and Bear of the Day

Zacks Equity Research
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For Immediate Release

Chicago, IL – February 20, 2019 – Zacks Equity Research Telenav TNAV as the Bull of the Day, Applied Materials AMAT as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Macy's, Inc. M, Zumiez ZUMZ and Abercrombie & Fitch ANF.

Here is a synopsis of all five stocks:

Bull of the Day:

Telenavcaught my eye as it is just the type of stock that I look for.  My search all starts with the Zacks Rank, and when I see a stock with the best Zacks Rank I am going to take a deeper look.  TNAV has a Zacks Rank #1 (Strong Buy) due to a good earnings history and solid earnings estimate revisions.

Earnings History

Lately, I when I look at an earnings history I key on just the last four quarters.  A lot has changed just in this calendar year, so I am putting less and less weight on earnings that are more than a year back.

For TNAV the earnings history over the last four quarters is really looking good.  They are four for four in beating the Zacks Consensus Estimate, which is also a good thing.  Drilling deeper I see something that I really like.

Let’s start with the report that came four quarters ago, a 1 cent beat for a 1.6% positive earnings surprise.  Then a 4 cent beat for a 6.8% positive earnings surprise.  That was followed by an 8 cent beat for a 36% positive earnings surprise and finally the most recent quarter saw a 6 cent beat for a 50% positive earnings surprise.

You can see that the size of positive earnings surprise just keeps getting bigger.  At the same time, the loss per share has moved from $0.60 to $0.06.  That tells me that profitability is right around the corner.

Estimate Revisions

When I see a Zacks Rank #1 (Strong Buy) I am confident that there will be some strong positive moves in the earnings estimates.  The Zacks Rank is heavily influenced by recent estimate changes, so let’s look at the number for TNAV.

I see the losses shrinking for this quarter as well as next, each by a penny or two.  The real move is the fiscal 2019 number that has moved from a loss of 48 cents to a loss of 43 cents.  That is the good news. 

There is the fiscal 2020 number that is a bit odd to me.  I see that loss increasing… and that isn’t the type of thing we like to see.  This could be a case of limited visibility on the part of analysts as we are a good year and a half out from that time frame.

Valuation

We tend to lean on the PE (trailing and forward) but in this instance we will not have that crutch.  Instead, we look at price to book to see a great multiple of 2.4x and then another reasonable price to sales multiple of 1.7x.  Both of those metrics are good… but then I look at margins.

While there has been some really big, positive move in margins, I see a -48% operating margin and -50% net margin.  So it is not a sure thing here at all.  Yes, those margin levels were in the -80 range not too long ago, so there is improvement, but still, those large numbers are enough to give me pause.

Bear of the Day:

Applied Materialsrecently reported earnings that beat the Zacks Consensus Estimate.  The problem is they guided next quarter below the consensus and when the consensus falls, so does the Zacks Rank.  Let's take a look at the details in this Bear of the Day article.

Description

Applied Materials offers a diverse array of flexible service solutions to increase equipment uptime and factory efficiency, enabling fabs to focus on chip production, while lowering cost per wafer. The Company's display service portfolio has been developed to address the customers' specific needs and offers a variety of services that provide support for every maintenance activity on an Applied Materials display tool. Applied Materials is committed to the success of the customers throughout the product and factory life cycle and their crystalline silicon solar (c-Si) services enable the customers to focus on increasing cell efficiency and meeting factory goals.

Recent Report

I see the company beating the Zacks Consensus Estimate of $0.79 by $0.02 for a 2.5% positive earnings surprise.  That is good to see, but Wall Street cares more about what you will do than what you have done. 

The company guided next quarter EPS of $0.62 to $0.70 and that was well below the $0.78 estimate at the time.  In fact, the number for this quarter was $0.82 60 days ago and came in by a penny as of 30 days ago.  A week ahead of earnings the number was $0.78 so you can see estimates were softening ahead of the report.

The next quarter has also seen a shift lower in estimates with the Zacks Consensus Estimate dropping from $0.90 to $0.78 over the last 90 days.

Implied Earnings Growth

The full year earnings estimate for fiscal 2019 has dropped from $3.64 to $3.23, and that will send you to the low end of the Zacks Rank.  

There is hope though, as fiscal 2020 is looking for $3.94 in EPS so there is some implied earnings growth ahead for AMAT.

Factors Likely to Decide Macy’s (M) Earnings Fate

 

Macy's, Inc.is scheduled to report fourth-quarter fiscal 2018 results on Feb 26, before the opening bell. In the last reported quarter, this department store retailer delivered a positive earnings surprise of 92.9%. The company’s bottom-line has also outperformed the Zacks Consensus Estimate by average of 37.9% in the trailing four quarters.

How Are Estimates Faring?

The Zacks Consensus Estimate for the to-be-reported quarter is pegged at $2.65, which reflects a sharp decline from $2.82 recorded in the year-ago quarter. We note that the Zacks Consensus Estimate has been stable in 30 days. The Zacks Consensus Estimate for revenues currently stands at $8,461 million, exhibiting year-over-year decline of roughly 2.4%. In the last reported quarter, the company’s net sales grew 2.3%.

For fiscal 2018, the consensus estimates for top and bottom lines are pegged at $24.9 billion and $4.01, respectively.

Factors at Play

Dismal Holiday Sales Numbers to Impact Q4 Performance

In spite of taking a slew of measures such as Backstage, Vendor Direct, Store Pickup, Loyalty Program and Growth50 stores, Macy’s posted weaker-than-expected sales figures for the holiday season, which coincides with the fourth quarter. Comparable sales on an owned plus licensed basis increased 1.1% during November and December period combined, while on an owned basis, comparable sales inched up 0.7%. However, digital business remained robust and recorded double-digit growth.

Management informed that Macy’s kick-started the season on a solid note primarily during Black Friday and the following Cyber Week but lost momentum in the mid-December period only to regain some pace during Christmas.

Trimmed Forecast Raises Concern

Following an unimpressive holiday sales report, Macy’s lowered fiscal 2018 view. The company now expects comparable sales on an owned plus licensed basis to increase about 2%, down from the prior expectation of 2.3-2.5% growth. Net sales are anticipated to remain flat year over year compared with earlier expectation of a 0.3-0.7% increase. The company now envisions earnings in the band of $3.95-$4.00 per share, down from its prior view of $4.10-$4.30.

Other Factors to Note

Certainly, Macy's has been focusing on price optimization, inventory management, merchandise planning and private label offering, and developing omni-channel capabilities and online order fulfillment centers. The company added a new feature to its mobile app called Mobile Checkout and also bought minority stake in b8ta, a technology retailer.

The aforementioned endeavors are viewed as steps to safeguard against industry challenges and stiff competition from online retailers. Management expects selling, general and administrative expenses to increase on account of strategic investments. However, any significant increase in the same may hurt margins and in turn the bottom line.

What the Zacks Model Unveils

Our proven model does not conclusively show that Macy’s is likely to beat estimates this quarter. A stock needs to have both — a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Macy’s has a Zacks Rank #4 (Sell) and an Earnings ESP of -7.37%, which makes surprise prediction difficult.

Stocks With Favorable Combination

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Zumiez has an Earnings ESP of +0.45% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Abercrombie & Fitch has an Earnings ESP of +0.94% and a Zacks Rank #2.

 

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Zumiez Inc. (ZUMZ) : Free Stock Analysis Report
 
Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report
 
Macy's, Inc. (M) : Free Stock Analysis Report
 
Telenav, Inc. (TNAV) : Free Stock Analysis Report
 
Applied Materials, Inc. (AMAT) : Free Stock Analysis Report
 
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