For Immediate Release
Chicago, IL – October 18, 2017 – Zacks Equity Research Duluth Holdings Inc. (Nasdaq: DLTH – Free Report) as the Bull of the Day, Carrols Restaurant Group, Inc. (Nasdaq: TAST – Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on McCormick & Company (NYSE: MKC – Free Report), United Natural Foods, Inc. (Nasdaq: UNFI – Free Report) and Pinnacle Foods (NYSE: PF – Free Report).
Here is a synopsis of all five stocks:
Bull of the Day:
Duluth Holdings Inc. (Nasdaq: DLTH – Free Report) is bucking the gloomy retail trend by focusing on its Midwest roots. This Zacks Rank #1 (Strong Buy) is expected to see double digit earnings growth next year.
Duluth Holdings is a Belleville, Wisconsin-based men and women's lifestyle brand whose tag line is for the "Modern, Self-Reliant American." Operating as Duluth Trading, it offers casual wear, workwear and accessories.
It uses humor and storytelling to convey the uniqueness of its products which are sold exclusively through its website, catalogs and 26 retail locations. It's best known for its funny television commercials. It also stands by its "No Bull Guarantee."
A Beat in the Second Quarter
On Sept 5, Duluth reported its second quarter results and beat the Zacks Consensus by 3 cents. Earnings were $0.13 versus the consensus of $0.10.
Despite fears on Wall Street that Amazon is taking over the retail world, Duluth saw net sales increase 31% to $86.2 million from $65.8 million in the prior year.
It was the 30th consecutive quarter of increased year-over-year net sales. It saw a 35% increase in new customer acquisition thanks to a push in its direct marketing efforts and geographical expansion of its retail stores.
For instance, I recently got a Duluth catalog in the mail for the first time. And who hasn't seen its television commercials by now?
As of the end of the second quarter, it had opened 9 new stores this year, bucking the "brick and mortar is dying" theme and is on track to open six more stores for the remainder of the year. That would be a total of 15 new stores in fiscal 2017.
Reaffirmed Its Full Year Outlook
The company reaffirmed full year outlook. That includes earnings in the range of $0.66 to $0.71.
The analysts have fiscal 2017 estimates on the high end of the range.
The Zacks Consensus Estimate is $0.70 which is a gain of 5.6% over the $0.66 it made last year.
Next year, analysts are even more bullish. They see earnings jumping 20.3% to $0.84.
Shares Hit By Retail Malaise
Even though the news looks good out of Wisconsin, retail stocks have been out of favor with investors.
Duluth shares are down 24% year-to-date.
But even with the sell off, shares still aren't cheap. They trade with a forward P/E of 27.
For investors looking for a retailer that is growing, instead of contracting, then Duluth is one to keep on the short list.
Bear of the Day:
Carrols Restaurant Group, Inc. (Nasdaq: TAST – Free Report), a Burger King operator, is facing pressure from rising wages and commodity costs. This Zacks Rank #5 (Strong Sell) is expected to see a 68% drop in earnings this year.
Carrols is the largest Burger King franchisee in the United States with 799 restaurants as of July 2, 2017. It has operated Burger King restaurants since 1976.
Fourth Miss in a Row
On Aug 9, Carrols reported its second quarter results and missed the Zacks Consensus Estimate for the fourth quarter in a row.
Earnings were $0.14 versus the $0.19 estimate.
The good news is that comparable restaurant sales rose 4.6% compared to just a 0.7% comp in the prior year period due to a balance of premium products, value offerings and limited time offers.
However, the company was pressured by rising wage rates, commodity cost inflation, including a spike in beef costs in the quarter, and a higher level of promotional discounting.
Moderate Growth in the Second Half Expected
Carrols believes it can produce moderate growth in comparable store sales in the second half of the year thanks to Burger King promotions.
However, rising wage pressures aren't going anywhere as the job market remains tight. Additionally, the heavily promotional burger environment is unlikely to change either.
One bright spot is the price of beef, wherein the price increases have receded and should be moderate for the rest of the year.
Analysts Bearish for 2017 and 2018
Despite the comparable restaurant gains in the quarter, the analysts are bearish on this year and next.
The 2017 Zacks Consensus Estimate has fallen to $0.13 from $0.28 in the last 90 days.
That's a decline of 68% as the company made $0.40 last year.
Additionally, 2018 doesn't look so great either. The Zacks Consensus has fallen to $0.17 from $0.42 over the last 3 months.
Shares Fall But Are They Cheap?
Carrols shares have fallen 23% year-to-date as the restaurant stocks have fallen out of favor with investors.
But even with this year's sell-off, they're still not cheap.
Carrols trades with a forward P/E of 87.6.
Food Industry Staples: 3 Stocks to Buy Now
While some investors might want to look for the next hot sector or up-and-coming industry to dive into, sometimes investing in more everyday industries can prove just as beneficial and profitable.
With that said, we will look at three companies that hold unique positions in an industry close to many peoples’ hearts: food.
On top of their standing as big names in their respective food industry segments, these three firms also hold strong Zacks Ranks. Let’s take a look at some of their current fundamentals to see if investors might want to grab these food stocks from the grocery aisle.
McCormick & Company (NYSE: MKC – Free Report)
This maker of ubiquitous seasonings and spices is currently a Zacks Rank #1 (Strong Buy) and scored an “A” grade for Momentum in our Style Scores system.
McCormick’s 6.10% year-to-date price change is less than the S&P 500, but its 6.62% 12-week price change shows that it could be starting to heat up right now.
On top of this, McCormick is an interesting growth pick.
McCormick’s current cash flow growth of 6.61% is above its industry’s average, and along with its 0.95 current ratio and 26% return on equity—which both also top the industry average—this helps show that the spice maker is growing.
And based on our current Zacks Consensus Estimates, McCormick’s sales are expected to jump 20.31% this quarter to hit $1.5 billion. For the full-year, the company’s revenue is projected to grow 9.25% to touch an upward estimate of $4.84 billion.
McCormick’s quarterly earnings are set to pop 19.49% based on our current estimates, while the company’s full-year EPS is expected to gain 11.59% to reach $4.24 per share. This marks strong growth for such an established company in a niche seasoning sector that hasn’t changed much in years.
Shares of McCormick sit roughly 7% below their 52-week high, which means the flavor making power has room to climb, and the company has missed earnings expectations just twice since the start of 2013.
United Natural Foods, Inc. (Nasdaq: UNFI – Free Report)
United Natural Foods is one of the leading national distributors of grass-fed antibiotic and hormone-free natural protein, as well as natural deli meats, cheese, bakery goods, and prepared foods.
This massive natural food supplier is currently a Zacks Rank #2 (Buy) and also sports an “A” grade for both Value and Growth in our Style Scores system, which helped it earn an overall “A” VGM grade.
UNFI is currently trading at 15x earnings, which is well below the “Food – Miscellaneous” industry’s average P/E ratio of 21.53. The company’s P/B ratio of 1.22 marks a 58.6% discount to the industry average, while United Natural’s 0.22 P/S ratio also beats the industry’s 1.23 average. These metrics help to show that the natural food company could be a value play for investors at this time.
Furthermore, United Natural’s 3.19 sales to assets ratio crushes the industry’s average of 1.13. The company’s 7.58% current cash flow also tops the industry’s 5.84% average and helps show that the company is on a strong growth trajectory.
Based on our current Zacks Consensus Estimates, United Natural’s revenues are projected to pop 4.85% in its current quarter. On top of that, the company’s sales are expected to climb 4.52% for the year to hit an upward estimate of $9.72 billion. UNFI’s earnings are projected to gain 1.23% in the current quarter and jump over 5% for the year.
In the last 12 weeks, the company has seen its stock price climb 10.43% while the “Food – Miscellaneous” industry has been flat. This means shares of UNFI could continue to gain before they come close to breaking through a new threshold.
Pinnacle Foods (NYSE: PF – Free Report)
The maker of Duncan Hines, Hungry-Man, Vlasic, and many more packaged staples, has seen its stock price climb 14.59% over the last year. Today, Pinnacle Foods is a Zacks Rank #2 (Buy) and scored an overall VGM grade of a “C.”
Pinnacle Foods’ 14.97% current cash flow growth far outpaces the industry’s 5.84% average and helps show that the company is expanding. On top of that, the company’s earnings per share are projected to climb 8.49% in its current quarter, based on our current Zacks Consensus Estimates.
For the year the company’s revenues are only set to gain 0.93% to hit $3.20 billion. But for an established firm like Pinnacle Foods, those small gains represent somewhat solid growth. More than that, the packaged food giant’s earnings are expected to gain 18.76% for the year, which helps to show that the company has set its sights on drastically improving its bottom line.
In addition to this, Pinnacle offers a respectable 2.27% dividend and could be an attractive option for income-focused investors.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look. See the pot trades we're targeting>>
About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year. See these high-potential stocks free >>.
Get the full Report on DLTH - FREE
Get the full Report on TAST - FREE
Get the full Report on MKC - FREE
Get the full Report on UNFI - FREE
Get the full Report on PF - FREE
Follow us on Twitter: https://twitter.com/zacksresearch
Join us on Facebook: https://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks Investment Research
800-767-3771 ext. 9339
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
United Natural Foods, Inc. (UNFI) : Free Stock Analysis Report
McCormick & Company, Incorporated (MKC) : Free Stock Analysis Report
Pinnacle Foods, Inc. (PF) : Free Stock Analysis Report
Carrols Restaurant Group, Inc. (TAST) : Free Stock Analysis Report
Duluth Holdings Inc. (DLTH) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research