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For Immediate Release
Chicago, IL – May 18, 2021 – Zacks Equity Research Shares of Haverty Furniture Companies, Inc. HVT as the Bull of the Day, CrowdStrike Holdings, Inc. CRWD as the Bear of the Day. In addition, Zacks Equity Research provides analysis on General Mills, Inc. GIS and Tyson Foods, Inc. TSN.
Here is a synopsis of all four stocks:
Bull of the Day:
HAVERTYS is going from a pandemic winner to a recovery winner as "nesting" remains in vogue in 2021 even as the vaccine rolls out. This Zacks Rank #1 (Strong Buy) saw double digit store comparables again in the first quarter.
HAVERTYS is a furniture retailer with 121 showrooms in 16 states in the South and Midwest. Established in 1885, this small cap company with a market cap of $846 million, specializes in the middle to upper-middle price ranges.
Another Big Beat in the First Quarter
On Apr 27, HAVERTYS reported its first quarter results and beat the Zacks Consensus by $0.61. It reported earnings of $1.04 versus the Zacks Consensus of just $0.43 for a beat of 141%.
It was the third big beat in a row as the furniture demand took off last summer.
Comparable store sales rose 11.5% year-over-year, however, it was the quarter when the first impacts of COVID-19 hit the company. Last year stores closed on Mar 19, 2020 and deliveries were halted on Mar 21, 2020.
The pace of demand has not slowed since the second quarter of 2020.
Written business was up 10.8% over the fourth quarter.
However, it's still facing challenges on the supply chain as it works to reduce its backlog and provide updated delivery estimates.
HAVERTYS has also worked with vendors on price increases, which has impacted its retail prices and product mix.
Up until this point, it's been able to push through the price increases, however, and the gross profit margins have remained elevated.
Bullish Outlook for 2021
Analysts have been behind the curve with the furniture retailers, thinking it was just a pandemic play.
But HAVERTYS has seen strong demand, boosted by the strong housing market, continue into 2021 although it does expect the nesting trends to moderate.
It expects gross profit margins to be between 56.5% and 57% in 2021. Gross profit margin was 57.1% in the first quarter.
2021 and 2022 Estimates Jump
Zacks only has one analyst estimate for this small-cap retailer.
But after this earnings report, the Zacks Consensus for 2021 jumped to $4.02 from $2.12. That's earnings growth of 113% from 2020 as the company made just $1.88.
The analyst is also bullish on 2022, with it revised higher as well. The Zacks Consensus rose to $4.30 from $2.24 in the last month.
Raised the Dividend
On May 14, HAVERTYS raised its quarterly dividend by 13.6% to $0.25 from $0.22 per share.
It's currently yielding 2%.
"Our operating results since the last half of 2020 have been outstanding. We have a long history of providing returns to stockholders and the board's decision to increase the dividend reflects our results and outlook," said Clarence H. Smith, chairman and chief executive officer.
Shares Rally but Remain Dirt Cheap
HAVERTYS shares have taken off in 2021, jumping 68.2% year-to-date.
But with the big increase in earnings per share expected, they are still dirt cheap with a forward dividend of just 11.2.
With the housing market in a strong bull market boosted by Millennial demand, could the furniture makers also be in a multi-year growth cycle?
Most of the furniture retailers are attractively priced in 2021.
For investors looking for a cheap retail stock, which is also shareholder friendly, HAVERTYS is one to keep on the short list.
[In full disclosure, author Tracey Ryniec owns shares of WSM in her personal portfolio.]
Bear of the Day:
CrowdStrike Holdings has fallen to a Zacks Rank #5 (Strong Sell) as the Zacks Consensus Estimate for Fiscal 2022 has slid. Revenue is still expected to jump 51% in Fiscal 2022.
CrowdStrike provides cloud-delivered endpoint and cloud workload protection. The CrowdStrike Falcon platform, which uses AI technology, protects customers against cyberattacks on endpoints on or off the network by offering visibility and protection across the enterprise.
Record Fiscal Fourth Quarter
On Mar 16, CrowdStrike reported its fourth quarter fiscal 2021 results and beat the Zacks Consensus by $0.04. Earnings were $0.13 versus the Zacks Consensus of $0.09.
It was a strong fourth quarter for the company with 70% net new subscription customer growth year-over-year and 77% year-over-year subscription revenue growth.
Annual Recurring Revenue (ARR) rose 75% year-over-year and grew to $1.05 billion as of Jan 31, 2021. Of that, $142.7 million was net new ARR added in the quarter, a new record.
CrowdStrike also ended the fiscal year with record subscription gross margin and record operating and free cash flow.
Non-GAAP subscription gross margin was 80%, compared to 77% in the fourth quarter of the prior year.
Cash and cash equivalents were $1.92 billion as of Jan 31, 2021.
Why Is CrowdStrike a Strong Sell?
With all this good news, and further bullishness at an April Investor's Day, why is CrowdStrike a Zacks Rank #5 (Strong Sell)?
The Zacks Rank is a short-term recommendation of 1 to 3 months that is based on revisions to analyst earnings estimates.
For fiscal 2022, 7 analysts have cut, and just 3 have raised estimates, in the last 60 days.
The Zacks Consensus Estimate for fiscal 2022 fell to $0.30, from $0.37, during that time.
That's still earnings growth of 11% as the company made $0.27 in fiscal 2021.
The Zacks Consensus Estimate for fiscal 2023 has also come down to $0.64 from the previous consensus of $0.80 in the last 2 months.
But it is the agreement among the analysts, with 7 of them cutting, which is what has pushed CrowdStrike to a Strong Sell.
Shares Fall Over 20%
CrowdStrike was one of the big winning stocks in 2020.
Shares are up 144% in the last year but have weakened in the last 3 months, falling 22.2% during that period.
There has been a reset in the stocks in the entire sector even though growth trajectories remain intact.
Investors might want to keep CrowdStrike on their wish list, especially if the shares weaken further.
General Mills (GIS) to Buy Tyson Foods' Pet Treats Business
General Mills is on track to undertake growth initiatives as part of the Accelerate strategy. Progressing along these lines, the company signed a definitive agreement with Tyson Foods to acquire the latter's pet treats business.
The to-be-acquired business is well known for natural meat treats for pets and includes brands like Nudges, Top Chews and True Chews. Per the deal, General Mills will also take over Tyson Foods' production unit located in Independence, Iowa. Management anticipates concluding the deal in the first quarter of fiscal 2022.
We note that the deal is priced at $1.2 billion in cash, which will provide a projected tax benefit of $225 million. Incidentally, the effective purchase price is pegged at $975 million.
General Mills expects to fund the buyout using cash on hand and short-term borrowing. Further, management expects the buyout to be modestly accretive to the company's earnings in the first 12 months after the deal is concluded, excluding transaction and integration costs.
General Mills noted that the acquisition bodes well amid growing pet-food category treads stemming from humanization of pets especially in the pandemic. Certainly, the deal reshapes the company's portfolio to add another leaf to its impressive Pet platform that includes BLUE — a leader in natural pet food.
Accelerate Strategy Aids Growth
General Mills is focused on its Accelerate strategy, which was unveiled earlier this year. The strategy is outlined to help the company make choices of how to win and where to play with an aim to boost profitability, while enhancing shareholders' returns in the long run. As a part of the strategy General Mills is prioritizing investment, investing in five Global Platforms, driving growth in Local Gem brands and reshaping the portfolio.
Notably, General Mills' venture capital arm — 301 INC — in partnership with other investors recently unveiled plans of a multistage investment of up to $20 million in London-based food company — Pots & Co. We note that Pots & Co is popular for its assortment of hand-crafted potted desserts, which are available in U.K. supermarkets. Through this investment, Pots & Co expects to accelerate its growth strategy and expand its product range as well as distribution in the United States.
In March, the company had entered into a memorandum of understanding to offload 51% controlling interest in Yoplait S.A.S. to a renowned French dairy cooperative — Sodiaal. Management expects to conclude the deal by the end of calendar 2021. Well, General Mills anticipates the deal to enhance its growth, improve margins and boost shareholders' value.
Also, it will increase the company's focus on the brand platforms that have more growth potential. Management also expects to witness enhanced growth in its Europe and Australia segments once the transaction is complete.
Sales in General Mills' Convenience Stores & Foodservice segment have been declining for a while now. During third-quarter fiscal 2021, revenues in the segment declined 10% year over year due to lower demand for away-from-home food amid the coronavirus outbreak.
Reduced consumer traffic and other pandemic-induced restrictions have adversely impacted the segment's major away-from-home channels like restaurants, lodging and schools. Additionally, this Zacks Rank #4 (Sell) company is seeing elevated input costs, which affected its adjusted gross margin during the quarter.
Nevertheless, we believe that the aforementioned transaction will help the company achieve its objectives in the Accelerate strategy. Notably, shares of General Mills have moved up 7.9% so far this year compared with the industry's 10.3% growth.
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