U.S. markets close in 6 hours 8 minutes
  • S&P 500

    4,392.68
    +34.95 (+0.80%)
     
  • Dow 30

    34,292.51
    +322.04 (+0.95%)
     
  • Nasdaq

    14,842.50
    +128.60 (+0.87%)
     
  • Russell 2000

    2,199.40
    +17.20 (+0.79%)
     
  • Crude Oil

    70.56
    +0.27 (+0.38%)
     
  • Gold

    1,774.30
    +10.50 (+0.60%)
     
  • Silver

    22.53
    +0.33 (+1.47%)
     
  • EUR/USD

    1.1737
    +0.0010 (+0.08%)
     
  • 10-Yr Bond

    1.3120
    +0.0030 (+0.23%)
     
  • GBP/USD

    1.3670
    +0.0011 (+0.08%)
     
  • USD/JPY

    109.3300
    -0.0900 (-0.08%)
     
  • BTC-USD

    43,292.93
    -532.59 (-1.22%)
     
  • CMC Crypto 200

    1,085.04
    +21.20 (+1.99%)
     
  • FTSE 100

    6,998.16
    +94.25 (+1.37%)
     
  • Nikkei 225

    29,839.71
    -660.34 (-2.17%)
     

Foot Locker, Boston Beer, Republic Services and Waste Management highlighted as Zacks Bull and Bear of the Day

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·12 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

For Immediate Release

Chicago, IL – July 15, 2021 – Zacks Equity Research Shares of Foot Locker, Inc. FL as the Bull of the Day, The Boston Beer Company, Inc. SAM as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Republic Services Inc. RSG and Waste Management, Inc. WM.

Here is a synopsis of all four stocks:

Bull of the Day:

Foot Locker is a Zacks #1 (Strong Buy) that is a popular retailer of athletic shoes and apparel. In addition to its traditional stores that span 27 countries, the company operates websites and mobile apps.

The company blew away expectations last quarter, but the stock has traded sideways in a volatile manner. Investors are waiting for the next catalyst and the approaching quarter could be just that.

About the Company       

Foot Locker operates almost 3000 stores and has over 15,000 full time employees. It is headquartered in New York, NY and the company's roots go all the way back to 1879.

The company has a market cap of about $6 Billion and has Zacks Style Scores of "B" in Momentum and "A" in Value. The stock pays a dividend of 1.3% and has Forward PE is 11.

Some of the Foot Locker brands include Lady Foot Locker, Kids Foot Locker, Champs Sports, Eastbay, Footaction, Runners Point, and Sidestep

Q2 Earnings

In late May, Foot Locker reported a 71% EPS surprise to the upside. The company also beat on the top line, seeing $2.15 billion v the 1.92 billion expected. Same Store Sales were up +80% year over year, but that number is skewed by the COVID lockdowns. Still, they saw a +2.4% in increase in SSS from 2019.

Foot Locker also announced that they opened 12 new stores, remodeled or relocated 15 and closed 58 stores. With that, the company had a small shift in strategy and will convert approximately one third of its Footaction stores into other existing banner concepts over the course of the year to focus growth on its iconic banners.The Company will also close the majority of the remaining Footaction stores as leases expire over the next two years. Management believes this strategy will better position the company to serve its consumers in a post-COVID marketplace. 

The earnings beat was the fourth straight and the seventh beat over the last eight quarters. The company next reports August 20th and estimates are ticking higher over most timeframes.

Estimates

Over the last 60 days, estimates have surged higher. For the current quarter, we have seen estimates raised by 56%, from $0.66 to $1.03. For the current year, we have seen a 20% move higher in that same time frame.

In addition to estimates, some analysts have taken their price targets higher since earnings. One being Telsey advisory, who lifted to $64 from $60. Jeffries was also recently out with an $80 target after the Nike earnings report.

The Nike Effect and Back to School

Nike recently reported a monster quarter, beating the bottom line by 82%. The beat and guide helped the stock to all-time highs, where it is currently trading. Investors should pay attention to NKE in relation to FL as Nike is Foot Locker's biggest brand partner. Foot Locker is also one of Nike's biggest wholesalers and actually mentioned FL as a premium preferred partner during their conference call.

Nike said that the EPS beat was driven due to strong consumer demand, an element Foot Locker will need if they want to impress this quarter.

Looking forward, the back-to-school season will be getting kick started just before the company reports. August into September is fully expected to be hot as schools get back to normal in person learning. With that, investors should expect some commentary after earnings on how the back-to-school season is going.

The Technicals

The stock has had a big run this year, up about 50% already in 2021. Since the last earnings report, the stock has traded in a 10-point range, breaking above and below the 50-day MA. This has created a choppy and frustrating environment for traders and investors alike.

The stock could continue to chop around until a catalyst, like earnings, comes out. Long-term bulls can look to the 200-day MA at $50.50 to buy. However, they may not get that if markets stay strong into the August earnings report.

Looking to the upside, 2021 highs of 66.85 are within reach and could bring the $70 level if breached. From there, all-time highs of $79.43 would be the ultimate goal for the bulls.

Bottom Line

Earnings momentum will continue for the sector as Nike showed a couple weeks ago. As we head into the big earnings report in August, expect more choppy action. However, if the company does impress on EPS, value investors might miss a great opportunity for a larger move to all-time highs.

Bear of the Day:

The Boston Beer Co. is a Zacks Rank #5 (Strong Sell) that is one of the largest craft brewers in the United States. The company produces beer, malt beverages, and cider products at company-owned breweries and under contract.

SAM products include popular brands such as Sam Adams Boston Lager, Dogfish Head, Truly, Twisted Tea, Angry Orchard and more.

The stock had a crazy run since COVID, moving from the $400 area to a high of $1349. This 200% plus move stemmed from people drinking more during the pandemic, for whatever reason. Additionally, the Truly brands took off, seeing triple digit volume growth in 2020.

However, the stock has run into valuation issues and the technicals have broken down. Despite a pullback from all-time highs, investors are questioning if the company can match the performance from last year.

More about SAM

Boston Beer was founded in 1984 and is headquartered in Boston, MA. The company markets and sells its products to a network of approximately 400 wholesalers in the U.S. and internationally. The company also employs over 2400 people and has a market cap of $11 billion.

The stock has a PE of 40, which when compared to others in the sector is a bit high. Valuation has become the issue here, which is why the stock has a Zacks Style Score of "D" in Value. However, the stock is rated "B" in Growth, which stems from the growth in Truly, Twisted Tea and some other brands.  

Q1 Earnings

In late April, Boston Beer reported a big EPS beat of 91%. They crushed the top line and raised their FY21 guide to $22-26.00 v the $22.32 expected. The company also affirmed gross margins at 45-47% and cut capex.

The company commented that they continue to release new hard seltzer products and believe the innovation in the market will lead to long-term sustainable growth.

It was a pretty good quarter, but the stock topped out after the report and has since fallen over 30%. Part of the reason was the good news was priced in, but the other reason is estimates are falling across the board.

Estimates

COVID was a tailwind for anyone selling alcohol and that is about to end as the pandemic fades. Looking at estimates, we see a drop over the last 7 days across all time frames. For the current quarter, we see a fall from $7.38 to $7.00, or 5%.

For the current year, estimates have dropped almost 4%. With the numbers falling, valuation has to come into play and investors have adjusted, by taking the stock below important technical levels.

The Technicals

The stock has bled lower since the earnings report. After trying to hold the 200-day at the $1000 level the bulls gave up and the stock dropped another 10%. Although the stock seems overdone, $815 is the halfway back mark from the COVID lows and $690 is the 61.8% Fibonacci retracement. Investors might want to be more patient and wait for these levels to come into play.

In Summary

Boston beer saw its business take off during the pandemic. Now with COVID fading away, sales might be slowing outside of the fast-growing brands. Investors have taken caution, selling on valuation concerns. However, there might be some room lower for the stock to go.

Additional content:

Which of These Waste Removal Stocks Should You Keep?

The coronavirus outbreak has necessitated the proper disposal of waste. In fact, waste management companies are at an advantage in situations such as the ongoing pandemic as healthcare officials have to dispose of used masks, gloves, suits, syringes and other medical equipment properly, in order to curb the spread of infection.

Government initiatives, as well as stringent rules and regulations to advance sustainable waste management mechanisms and put a check on illegal dumping, are also expected to aid the industry.

Growing adoption of recycling techniques, and development of technologies and advanced waste collection solutions are key trends within the industry. Recycling remains a major growth area, with most industry players undertaking municipal solid waste and non-hazardous industrial waste recycling measures.

Rising environmental concerns, rapid industrialization, increase in population and an expected increase in non-hazardous waste as a result of rapid economic growth should enhance business opportunities for waste management companies.

The Zacks Waste Removal Services industry currently carries a Zacks Industry Rank #78, which places it in the top 31% of more than 250 Zacks industries, and indicates solid near-term growth prospects.

Given this encouraging backdrop, it is not a bad idea to undertake a comparative analysis of two waste removal services industry stocks — Republic Services and Waste Management. Both stocks are part of the broader Zacks Business Services sector (one of the 16 Zacks sectors). While market capitalization of Republic Services is $35.94 billion, that of Waste Management is $60.41 billion.

As both stocks carry a Zacks Rank #3 (Hold), we are using certain other parameters to give investors a better insight. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Price Performance

Waste Management clearly scores over Republic Services in terms of price performance. So far this year, shares of Waste Management have gained 20.9%, outperforming the 17% rally of Republic Services and 16.4% growth of the industry.

Earnings Surprise History

Earnings surprise history helps investors get an idea of the company's performance in previous quarters.

Both Republic Services and Waste Management surpassed the Zacks Consensus Estimate in each of the previous four quarters. However, Republic Services delivered a higher average earnings surprise of 22.2% compared with Waste Management's 5.9%.

Earnings Expectations

Earnings growth and stock price gains often serve as indications of a company's prospects.

Waste Management's current-quarter earnings are projected to grow 34.1% while that of Republic Services are expected to grow 14.8%. 

Looking at the full-year 2021 picture, Waste Management's earnings are projected to grow 19.4% while that of Republic Services are expected to increase 7.3%. For 2022, Waste Management's earnings are expected to register 11.5% growth, while that of Republic Services are expected to grow 9.9%.

Thus, Waste Management has an edge over Republic Services in terms of quarterly and yearly projected earnings growth.

Earnings Estimate Revisions

The direction of estimate revisions serves as an important pointer when it comes to the price of a stock.

Over the past 90 days, the Zacks Consensus Estimate for Waste Management's current-quarter earnings has improved 3.5% while the same for Republic Services has remained flat.

For 2021, Waste Management's earnings estimates have improved 3.7% compared with an increase of 2.7% for Republic Services. For 2022, Waste Management's earnings estimates have surged 4.7% compared with an increase of 3.2% for Republic Services.

Based on quarterly and yearly earnings estimate revisions in the past 60 days, Waste Management is better placed than Republic Services.  

Valuation

EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation and amortization) ratio is the commonly used metric for valuing waste removal services stocks because of their high debt levels.

We observe that Waste Management and Republic Services have EV/EBITDA ratios of 16 and 14.3, respectively, compared with the industry's figure of 13. Although both companies compare unfavorably with the industry, Republic Services has an edge over Waste Management with a lower EV/EBITDA ratio. 

Bottom Line

Our comparative analysis shows that Waste Management scores over Republic Services in terms of price performance, earnings estimate revisions, and quarterly and yearly earnings growth projection. However, Republic Services enjoys an advantage in terms of earnings surprise history.

A faster share price rally over the past year has led to a rich valuation for Waste Management compared with Republic Services.

Media Contact

Zacks Investment Research

800-767-3771 ext. 9339

support@zacks.com

https://www.zacks.com

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/performance for 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
 
Waste Management, Inc. (WM) : Free Stock Analysis Report
 
Republic Services, Inc. (RSG) : Free Stock Analysis Report
 
Foot Locker, Inc. (FL) : Free Stock Analysis Report
 
The Boston Beer Company, Inc. (SAM) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research