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Dillard's and Carrols Restaurant have been highlighted as Zacks Bull and Bear of the Day

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·11 min read
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  • SKX
  • M
  • FAST

For Immediate Release

Chicago, IL – November 17, 2021 – Zacks Equity Research shares Dillard’s DDS as the Bull of the Day, and Skechers SKX as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Macy’s, Inc. M, Costco Wholesale Corp. COST, and Fastenal Co. FAST.

Here is a synopsis of all five stocks:

Bull of the Day:

Dillard’s is a Zacks Rank #1 (Strong Buy) that is a large departmental store chain featuring fashion apparel and home furnishings. Dillard's primary product categories are women’s and children’s apparel, shoes, accessories and lingerie, men’s clothing and accessories, cosmetics, home, and children’s clothing.

The stock has surged in 2021, up over 400% on the year. While it might seem overstretched, investors are driving the price higher after a strong earnings report.

About the Company

Dillard’s is primarily located in the Southern and Midwestern areas of the United States. As of January 2021, the company had about 249 namesake outlets and 31 clearance centers spanning 29 states.

The company has about 40,000 employees and is headquartered in Little Rock, Arkansas. Dillard’s has a market cap of $7 Billion and has Zacks Style Scores of “A” in Growth and Momentum, as well as a “B” in Value. The stock has a Forward PE of 10 and pays a 0.25% dividend.

Q3 Earnings

Last week, Dillard’s posted a whopping 408% beat on the bottom line. Revenues also surged, as the company saw $1.48B v 1.02B last year. Same-store sales were up 48% and their retail gross margin came in at 46.7% vs 36.6% last year.  

Strength in sales came from the junior/children apparel, men’s and accessories categories. The bottom-line outperformance stems from the strong sales, margin expansion and SG&A leverage.

After years of volatile earnings and a sideways stock price, the company has found some consistency. The last two quarters prior to Q3 reported triple digit surprises to the upside on earnings. Q1 saw a 430% beat, while Q2 saw a 260% beat. Since that May earnings report, the stock is up over 250%

Dillard’s hasn’t missed on earnings since early 2020, making the Q3 beat the sixth straight. 

Estimates

Because of the big earnings beat, analysts are hiking estimates across most time frames.

Over the last 7 days, estimates for the current quarter have been raised by 110%, from $4.16 to $8.75. For the current year, we have seen a jump of 57% in that same time frame.

Estimates going higher is nothing new for the company as analysts have been raising estimates over the last 60 days. During that time frame, we have seen the current year head 89% higher.

The Technicals

Dillard’s is up massively from its COVID lows of $21 a share. Now trading over $350, investors are getting nervous about chasing the stock. Let’s go over some buyable levels on a pullback.

Since the stock has gone straight up since the beginning of October, its hard to simply jump in. We have not seen a retracement since and a patient investor should watch the halfway back mark at $270 for an entry. That is a far way down from current levels, so investors may also watch the 21-day MA. This momentum indicator is moving higher quickly, but currently resides at the same $270 mark.

If we did get a pull back, there would likely be buyers waiting there.

The 200-day is all the way down at $160, so don’t expect that anytime soon.

Bottom Line

Value players want in this stock because of its low PE. And now, with earnings surging and sales growth showing impressive consistency, Wall Street has found a new favorite stock.

While the stock might be overstretched, look to buy pullbacks to take advantage of the longer-term trend.

Bear of the Day:

Skechers is a Zacks Rank #5 (Strong Sell) that designs, develops, markets, and distributes footwear for men, women, and children in the United States and overseas. The company offers casual, casual athletic, sport athletic, trail, sandals, boots, and retro fashion footwear for men and women.

Skechers brands include Skechers USA, Skechers Sport, Skechers Active, Modern Comfort, Skechers Street, Twinkle Toes, Z-Strap, Skechers Stretch Fit, Skechers GOrun and many more.

The stock has had a pretty good year, moving up over 50% in the first seven months of the year. However, the stock sold off over the last few months and the company just reported an earnings miss.

Additionally, estimates are falling for next year. Investors should be cautious as the stock struggles to get back to all-time highs.

More About SKX

Skechers operated almost 4,000 company-and third party owned stores at the close of last year. The company sells its products through department and specialty stores, athletic and independent retailers, boutiques, and online retailers; and through its e-commerce sites, concept stores, and factory and warehouse outlet stores.

Skechers was founded in 1992, and is headquartered in Manhattan Beach, CA. The company is valued just over $7 billion and has a Forward PE of 19. SKX has Zacks Style Scores of “C” in both Momentum and Value, but an “F” in Growth.

Earnings History

The company has a decent track record of beating earnings more than not. Since the beginning of 2020, Skechers has reported six beats out of the last eight quarters. Unfortunately, this last quarter the company reported its biggest miss on EPS since 2018.

Q4 Earnings and Estimates

The company reported earnings back in October seeing a 12% miss on the bottom line. Revenues also came in below expectations and the company cut its FY21 guidance to $2.45-2.50 v the $2.58 expected. Their revenue outlook was also lowered.

There were some positives to the report. Direct to customer sales were up 44% year over year and margins came in higher y/y.

Management commented that supply chain constraints will remain a challenge. They are seeing progress in key global ports, but it remains a headwind at the moment.

Estimates have fallen along with the cut in guidance. Over the last month, we have seen a drop in the current year’s estimates to $2.48 from $2.62, or 5%. For next year, we see a 3% drop.

Argus recently dropped its rating to Hold from Buy based on these earnings. The firm cites supply-chain challenges and lowered their 2021 EPS forecast.

The Technicals

The stock is holding steady for now and is trading over its 50 and 200-day moving averages. However, the 50-day is still below that 200-day, which is a bearish sign. While the stock has rallied 20% off its recent lows, sellers are stepping in just under the $50 level. A break below $45 would mean the bears are in control and might look to break those October lows around $40.  

In Summary

Investors should be cautious of Skechers as the supply chain issues are hurting earnings. Above the $50 level, the bulls could be in the clear. However, a move under the $45 level could bring more selling.

Additional content:

What Awaits Macy's (M) on Q3 Earnings?

Macy’s, Inc.is likely to witness top- and bottom-line growth when it reports third-quarter fiscal 2021 numbers on Nov 18, before the opening bell. The Zacks Consensus Estimate for revenues is pegged at $5,291 million, which suggests an increase of 32.6% from the prior-year quarter’s reported figure.

The Zacks Consensus Estimate for earnings has improved by five cents in the past seven days and is currently pegged at 31 cents per share. In the year-ago quarter, the company reported a loss of 19 cents. Macy's bottom line surpassed the Zacks Consensus Estimate by 486.4% in the last reported quarter. The company has a trailing four-quarter earnings surprise of 269.8%, on average.

Key Aspects to Note

Macy’s third-quarter performance is likely to have gained from continued economic recovery, as pandemic-led restrictions ease. Such aspects are likely to have aided the company’s performance across merchandise categories and its three key brand lines — Macy’s, Bloomingdale’s and Bluemercury.  

Benefits from the execution of the Polaris growth strategy are likely to have aided the company’s performance during the quarter in review. The strategy is aimed at strengthening customer relationships, expanding assortments and optimizing store portfolio among others. Such measures along with focus on price optimization, inventory management, merchandise planning and boosting private label offerings, are likely to have been tailwinds.

Macy’s is undertaking prudent measures to boost online sales. It has been striving to bolster omni-channel capabilities, such as curbside pickup and same-day delivery as well as enhancing mobile and website features to deliver superior shopping experience. It has also been undertaking measures to boost customer engagement by expanding the loyalty programs.

However, adverse impacts stemming from supply chain disruptions, caused by the pandemic, cannot be ruled out. Such supply chain disruptions have been causing delays and shortages across some of the company’s product categories. Also, elevated delivery expenses are a concern.

What the Zacks Model Unveils

Our proven model predicts an earnings beat for Macy’s 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. 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 #1 and an Earnings ESP of +9.77%.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks With Favorable Combination

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

Costco Wholesale Corp.currently has an Earnings ESP of +1.00% and a Zacks Rank of 1. The company is expected to register bottom-line growth when it reports first-quarter fiscal 2022 results. The Zacks Consensus Estimate for quarterly earnings of $2.59 per share suggests an increase of 13.1% from the year-ago quarter’s reported figure

Costco’s top line is also expected to rise year over year. The consensus mark for revenues is pegged at $49.6 billion, indicating an increase of 14.8% from the figure reported in the year-ago quarter. COST has a trailing four-quarter earnings surprise of 7.7%, on average

Fastenal Co. currently has an Earnings ESP of +3.59% and a Zacks Rank of 2. The company is expected to register bottom-line growth when it reports fourth-quarter 2021 results. The Zacks Consensus Estimate for quarterly earnings of 36 cents per share indicates a rise of 5.9% from the year-ago quarter’s figure

Fastenal’s top line is also expected to rise year over year. The consensus mark for revenues is pegged at $1.48 billion, calling for an increase of 9% from the figure reported in the year-ago quarter. FAST has a trailing four-quarter earnings surprise of 2%, on average.

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Macy's, Inc. (M) : Free Stock Analysis Report
 
Dillard's, Inc. (DDS) : Free Stock Analysis Report
 
Fastenal Company (FAST) : Free Stock Analysis Report
 
Skechers U.S.A., Inc. (SKX) : Free Stock Analysis Report
 
Costco Wholesale Corporation (COST) : Free Stock Analysis Report
 
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