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For Immediate Release
Chicago, IL – May 20, 2021 – Zacks Equity Research Shares of Columbia Sportswear Company COLM as the Bull of the Day, Stamps.com Inc. STMP as the Bear of the Day. In addition, Zacks Equity Research provides analysis on RH RH, Ethan Allen Interiors Inc. ETH and Haverty Furniture Companies, Inc. HVT.
Here is a synopsis of all five stocks:
Bull of the Day:
The historic outdoor clothing company got crushed by the coronavirus, from early store closures and less people traveling to an overall cutback on some non-essential retail spending. Columbia's turnaround now appears underway after a strong first quarter that had analysts racing to raise their earnings guidance.
Quick COLM Overview
Founded back in the late 1930s, Columbia has remained at the forefront of outdoor clothing, apparel, and footwear ever since through innovation, brand building, as well as a few acquisitions. The Portland, Oregon-headquarter firm bought higher-end outdoor boot maker Sorel in 2000. The brand has since grown into a far more diverse footwear company over the years.
COLM went on to buy higher-end rival Mountain Hardwear in 2003. Most recently, it acquired prAna, which makes everything from rock climbing clothes to yoga gear in 2014. The diversification and portfolio expansion has helped, but its namesake brand is still by far the largest contributor, bringing in around 80% to 85% of total sales most quarters.
Columbia competes against The North Face, Patagonia, Canada Goose, Lululemon and others. Its offerings can be found at its own stand-alone stores, as well as at places such as Dick's Sporting Goods and other clothing and outdoor-focused retailers.
As we touched on at the outset, the outdoor apparel firm took a hit during the coronavirus on the back of store closures and a temporary change in shopping habits as consumers flocked to the likes of Target and cut back on some spending.
Columbia's fiscal 2020 revenue fell roughly 18% to $2.5 billion, which ended a nice run of YoY top-line growth. Luckily, things started to turn around in the second half of last year.
COLM topped our Q1 FY21 estimates on April 29, with sales up 10% and its adjusted earnings up from break-even a year ago to reach $0.84 a share and crush our projection by 155%. Plus, its direct-to-consumer e-commerce business grew by 35% to account for 20% of total sales.
More importantly in the forward-looking world of Wall Street, Columbia raised its 2021 guidance. Analysts have since lifted their bottom-line projections.
Zacks estimates currently call for Columbia's fiscal 2021 sales to jump 22% to reach $3.05 billion, with FY22 projected to climb another 9% higher to come in at $3.33 billion. Crucially, both of these figures come in above FY19's pre-pandemic total of $3.04 billion.
At the bottom-end, the company's adjusted earnings are projected to jump by 165% and 18%, respectively over this stretch. And COLM has a solid history of quarterly earnings beats, including huge beats in the trailing two periods.
Along with its growth outlook, the company's dividend yield sits at around 1% to top Nike's 0.81% and other apparel firms. Investors should know COLM repurchased over $11 million worth of stock last quarter. The company is also part of the Textile-Apparel space that rests in the top 22% of our over 250 Zacks industries.
Columbia's shares have outpaced its industry in the past five years, up 105% vs. 55%. In 2021, the stock is up 18%, extending its outperformance trend against its peers, with it also well above the benchmark index. COLM has pulled back after it hit new records following its first quarter release.
At around $103 a share, the stock is trading around 9% below its highs. The recent pullback has also sent it well below neutral RSI levels (50) at 39. Therefore, Columbia appears to have room to run.
On the valuation front, Columbia trades in line with its industry at 22.8X forward 12-month earnings, which also represents a 25% discount to its own year-long highs. The company also boasts an impressive balance sheet.
Columbia's post-release earnings revisions positivity helps it snag a Zacks Rank #1 (Strong Buy) right now, alongside an "A" grade for Growth in our Style Scores system. The company's growth outlook appears solid and it's prepared to benefit from pent-up demand and the continued economic reopening as people start vacationing again.
Bear of the Day:
Stamps.com helped shake up the shipping and postage industries for good and the stock has recovered nearly all of its losses after it tumbled in early 2019 when it announced it wouldn't renew an exclusive deal with the U.S. Postal Service. Despite its strengths, STMP's earnings revisions have trended in the wrong direction since its first quarter 2021 financial release on May 6. Meanwhile, its stock price has failed to regain momentum.
Stamps.com is a leading provider of e-commerce shipping solutions that enable customers to "ship faster for less money with automated shipping tools." The company offers options for small businesses, enterprises, and nearly anyone else in between. Its portfolio includes its namesake brand, as well as Endicia, ShipStation, ShippingEasy, ShipWorks, ShipEngine, and Metapack.
The goal is to provide "seamless access to mailing and shipping services through integrations with more than 500 unique partner applications." STMP allows customers to automatically import orders from nearly anywhere they might sell, including Amazon and countless others. Users then select the best shipping method for them, with automatic tracking information provided. Stamps.com also offers discounts from USPS and UPS.
Stamps.com is prepared to grow amid the ongoing e-commerce boom. The firm's 2020 revenue climbed 33%, after it dipped 3% in FY19.
Most recently, its Q1 FY21 revenue popped 25% to $189 million. "For the first quarter of 2021, we estimate that the gross merchandise value, or GMV, shipped by our collective customer base was over $50 billion, increasing by more than 50% year over year...In the U.S., we estimate that the total GMV shipped by our solutions was over 15% of all U.S. e-commerce," CEO Ken McBride said on the company' earnings call.
The long-term strength of its business remains firmly in place. And as we mentioned at the top, STMP shares already recovered from their massive early-2019 selloff, with the stock up 440% since June 2019. Yet the nearby chart shows Stamps.com shares have lagged the S&P 500 over the past year, down 7% vs. the benchmark index's 43% run.
STMP has tumbled over 30% since mid-February, when growth stocks started to get hammered. The stock fell once again after its Q1 earnings release on May 6 on the back of somewhat disappointing guidance, with its Q2, FY21, and FY22 consensus earnings estimates down since its report.
Zacks estimates call for the company's adjusted FY21 earnings to fall 36.5% on 4% higher revenue, as it comes up against a coronavirus-boosted 2020.
Stamps.com's recent downward earnings revisions help it land a Zacks Rank #5 (Strong Sell) at the moment, alongside a "D" grade for Momentum. Therefore, investors might want to stay away from STMP until its stock price starts to recover.
RH Surges 260% Over the Past Year: Will the Rally Continue?
RH has been gaining strength from its comprehensive and compelling collection of luxury home furnishings as well as solid momentum of housing and repair & remodeling markets. Shares of this leading luxury retailer in the home furnishing space have rallied 260.3% over the past year, outperforming the Zacks Retail - Home Furnishings industry's 158.8% gain.
This trend is expected to continue in the near term, courtesy of its solid performance for fiscal 2020 despite COVID-led disruptions. RH, after reporting stellar fiscal 2019 performance, posted stronger-than-expected results for fiscal 2020 supported by solid gross and operating margin expansion.
Moreover, fiscal 2021 earnings estimates of this Zacks Rank #3 (Hold) company have moved 0.6% upward over the past 30 days. This positive trend signifies bullish analysts' sentiments, indicating robust fundamentals and the expectation of outperformance in the near term. However, rising raw material prices and freight prices are concerns.
What's Working in Favor?
Solid Housing Market Momentum: Booming real estate activity in second home markets, an accelerated shift of families to larger suburban homes and an uptick in homebuilding should drive increased spending in the markets served by RH.
Declining mortgage rates, and demand for more space and amenities to accommodate work from home as well as at-home learning have led to a surge in homebuying and home improvement projects. This will definitely lead to higher demand for RH's products. RH Core demand increased 36% for fourth-quarter fiscal 2020.
Revival of housing demand has been a boon for Beacon and other companies like Ethan Allen Interiors and Haverty Furniture Companies, both which sport a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Given solid momentum in the business, RH expects revenue growth in the range of 15-20%, with adjusted operating margin expansion of 100-200 basis points and ROIC in excess of 60% for fiscal 2021. RH expects first-quarter fiscal 2021 revenues to grow at least 50% and adjusted operating margin to be 20%.
Growth Initiatives to Drive Profitability: The company's management emphasized on a number of strategic initiatives to evolve RH from a home furnishings retailer to a luxury lifestyle brand over time including:
1) a transformation of the website to "The World of RH," 2) expansion of interior design services to include architecture and landscape architecture; 3) the launch of RH Residences, or furnished homes and condos; 4) launch of RH3, a luxury yacht that customers can rent for travel to the Caribbean and Mediterranean; and 5) international expansion in Europe.
Solid Prospects: The company has solid prospects, as is evident from the Zacks Consensus Estimate for fiscal 2021 earnings of $20.92 per share, which indicates 17.3% year-over-year growth. RH is a great pick in terms of value investment, supported by a Growth Score of A.
Also, RH has a solid VGM Score of B. Our VGM Score identifies stocks that have the most attractive value, growth and momentum characteristics.
Higher Return on Equity (ROE): RH's trailing 12-month ROE is indicative of growth potential. ROE in the trailing 12 months is 207.7%, much higher than the industry's 22.1%, reflecting the company's efficient usage of shareholders' funds.
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Columbia Sportswear Company (COLM) : Free Stock Analysis Report
RH (RH) : Free Stock Analysis Report
Ethan Allen Interiors Inc. (ETH) : Free Stock Analysis Report
Haverty Furniture Companies, Inc. (HVT) : Free Stock Analysis Report
Stamps.com Inc. (STMP) : Free Stock Analysis Report
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