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For Immediate Release
Chicago, IL – August 24, 2019 – Zacks Equity Research Flagstar Bancorp, Inc. FBC as the Bull of the Day, J.Jill, Inc. JILL as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Wells Fargo WFC, JPMorgan Chase JPM, Foot Locker, Inc. FL and Boot Barn Holdings, Inc. BOOT.
Here is a synopsis of all six stocks:
Bull of the Day:
Flagstar Bancorp, Inc. is able to cash in on the hot housing and mortgage markets. This Zacks Rank #1 (Strong Buy) posted its best quarter in company history during the second quarter.
Flagstar is a savings and loan holding company in Michigan. It provides commercial, small business and consumer banking services through 160 branches in Michigan, Indiana, California, Wisconsin and Ohio.
It also provides home loans in all 50 states. It is a leading national originator and servicer of mortgage and other consumer loans, handling payments and record keeping for $214 billion of loans for nearly 1 million borrowers.
Huge Beat in the Second Quarter
On July 28, Flagstar reported its second quarter results and crushed the Zacks Consensus by 47.1%. It reported earnings of $2.03 versus the consensus of $1.38.
It was the best quarter in the company's history.
In banking, net interest margin was up 5 basis points, with a $20 million increase in net interest income.
Meanwhile, with mortgage rates dropping, and the home market heating up, it saw mortgage revenue of $295 million as the gain on sale margin jumped to 2.19% from 0.8% in the prior quarter.
Flagstar, like most banks in the quarter, set aside an additional $100 million in the quarter for future loan losses. This raised its credit reserves to $250 million.
It's coverage ratio rose to 1.69% overall.
It has a diverse business. Flagstar saw a big contribution from its warehouse business, in addition to the banking and mortgage business, in the quarter.
Estimates Shoot Higher
Analysts were taken by surprise with the big gains in the mortgage business as no one knew what to expect with the housing market during the lock down and once the country re-opened.
But housing demand has exploded. Low mortgage rates are also causing a rush to refinance.
Even with Freddie Mac and Fannie Mae putting on a new 50 basis points tax on refinancing, which begins on Sep 1, the mortgage market is expected to remain hot through the end of the year.
4 estimates have been raised for 2020 in the last month, which has pushed the Zacks Consensus Estimate up to $6.34 from $3.84 during that time.
That's earnings growth of 83.2% as Flagstar only made $3.84 last year.
Analysts are unsure how long the hot mortgage market will last so they're predicting some cooling in 2021.
But 3 estimates have been raised for that year, as well, pushing up the Zacks Consensus to $4.37 from $3.08 just 30 days before.
Shares are Dirt Cheap
Shares are up 6.6% over the last month, but are still down 22.3% year-to-date.
With those earnings estimates soaring, that gives Flagstar a forward P/E of just 4.7.
It also has a price-to-book ratio of just 0.9.
It's a dirt-cheap stock which also pays a dividend, currently yielding 0.7%.
With a market cap of just $1.7 billion, it pays for investors to look beyond the Big Cap banks like Wells Fargo and JPMorgan Chase to find a business model with earnings growth.
Wells Fargo is expected to see an earnings decline of 99% and JPMorgan Chase a decline of 44%.
For investors looking for a cheap bank, Flagstar is one to keep on the short list.
Bear of the Day:
J.Jill, Inc. is among the apparel retailers getting hit hard by the coronavirus lock down. This Zacks Rank #5 (Strong Buy) is now expected to see a big earnings loss this year.
J.Jill is a women's apparel retailer with 280 stores nationwide and an e-commerce website.
A Big Miss in the Fiscal First Quarter
On July 28, J.Jill reported its fiscal first quarter 2021 results and missed on the Zacks Consensus by 441%. Earnings were a loss of $0.65 compared to the Zacks Consensus of a loss of $0.12.
Its stores were closed due to the coronavirus lock down beginning in mid-March and started reopening in May. As of July 28, all of its stores had reopened.
Net sales fell $85.5 million to $91 million compare to $176.5 million in the year ago period.
However, due to the closure, it's not releasing same-store-sales comps for the quarter.
Like all other retailers, its online business jumped in the quarter, with direct to consumer representing 61.4% of total net sales, up from 41.9% in the first quarter of the prior year.
Gross margin fell to 55.1% from 65.9% a year ago. There was a $5.2 million charge related to potential future liability payments, which negatively impacted gross margin by 570 basis points.
Forbearance Extended Again
On June 15, 2020, J.Jill entered into two Forbearance Agreements with the lenders under its ABL and term loan credit facilities.
It's currently in negotiations with its lenders.
The time for that extension has now been extended until Aug 27, 2020. But it keeps getting extended 2 weeks as the negotiations continue.
Estimates Cut for Fiscal 2021
It's a tough time for most apparel retailers this year.
Zacks only has one estimate on J.Jill, but it's been cut over the last 30 days for the full year.
The Zacks Consensus Estimate is now calling for a loss of $1.13, which is down from a loss of $0.36 just a month ago.
It made $0.06 last year so that's a 1,983% earnings decline.
Shares Sink Further
J.Jill shares were already down big on the year but over the last month they've sunk further, losing another 45%.
They now trade well under $1 and have been since early June.
J.Jill could not give guidance given the uncertainty surrounding COVID-19.
For investors interested in buying a specialty retailer, look for opportunities in footwear.
Foot Locker, Inc. and Boot Barn Holdings, Inc. are two to keep on your short list. Both are Zacks Rank #3 (Hold) stocks.
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JPMorgan Chase Co. (JPM) : Free Stock Analysis Report
Foot Locker, Inc. (FL) : Free Stock Analysis Report
Wells Fargo Company (WFC) : Free Stock Analysis Report
Boot Barn Holdings, Inc. (BOOT) : Free Stock Analysis Report
Flagstar Bancorp, Inc. (FBC) : Free Stock Analysis Report
J.Jill, Inc. (JILL) : Free Stock Analysis Report
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