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Haverty Furniture, Sunstone Hotel Investors, Clean Harbors, Republic Services and Waste Management highlighted as Zacks Bull and Bear of the Day

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Zacks Equity Research
·14 min read
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For Immediate Release

Chicago, IL – December 17, 2020 – Zacks Equity Research Shares of Haverty Furniture Companies, Inc. HVT as the Bull of the Day, Sunstone Hotel Investors, Inc. SHO as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Clean Harbors, Inc. CLH, Republic Services, Inc. RSG and Waste Management, Inc. WM.

Here is a synopsis of all five stocks:

Bull of the Day:

HAVERTYS is cashing in on the big push to "nest" during the pandemic. This Zacks Rank #1 (Strong Buy) recently paid out a special dividend and also raised its regular quarterly dividend.

HAVERTYS is a furniture retailer with 120 showrooms in 16 states in the South and Midwest. Established in 1885, this small cap company with a market cap of $495 million, specializes in the middle to upper-middle price ranges.

Special Dividend and an Increase in the Quarterly Dividend

On Nov 6, HAVERTYS announced that it would pay out a special dividend of $2.00 per share to those holding the common stock.

But, additionally, it raised its quarterly cash dividend to $0.22 per share.

That is currently yielding 3.2%.

The special and quarterly dividend were paid to shareholders on Dec 9, 2020.

HAVERTYS has paid a cash dividend every year since 1935.

Big Beat in the Third Quarter

On Oct 28, HAVERTYS reported its third quarter results and blew by the Zacks Consensus Estimate by 61.7%. Earnings were $0.97 compared to the consensus of $0.60.

Furniture has been one of the strongest retail categories in 2020.

Sales rose 3.9% to $217.5 million, up from $209.3 million in the third quarter of 2019.

Comparable store sales increased 4%.

Total written sales were up 22.8% while written comparable store sales rose 22.6%.

Gross profit margins also increased by 270 basis points to 56.2% from 53.5% in the year ago quarter.

The company has seen record business since reopening in May.

In the third quarter, it saw increases in all sales and key financial metrics over 2019 even while the coronavirus continued to impact production and they had supply chain impacts.

Hot Furniture Market Expected to Continue

The focus on the home isn't going away.

HAVERTYS noted that customer deposits were up 193.5% from Dec 31, 2019, as of the end of October, and they weren't experiencing any appreciable increase in cancelled sales.

The analysts are convinced of the trend as well.

The 2020 Zacks Consensus Estimate has moved up to $1.42 from $0.96 over the last 2 months. That's earnings growth of 21.4% over 2019 as the company only made $1.17 last year.

The story is expected to be much the same for 2021.

The 2021 Zacks Consensus Estimate has jumped to $1.70 from $1.20 in the last 60 days. That's another 19.7% earnings growth.

Shares at 5-Year Highs

After trading in a narrow trading range for years, HAVERTYS shares have finally broken out to new 5-year highs.

Shares are up 37% year-to-date.

They're no longer as cheap as they once were. They now trade with a forward P/E of 19.1.

But they're still paying out that generous dividend and they bought back $12.9 million in shares in the quarter with another $16.8 million authorized in the stock repurchase program.

Furniture retailers are negotiating the supply and demand metrics of the global pandemic well. The industry is in the top 13% of Zacks Ranked Industries.

Bear of the Day:

Sunstone Hotel Investors is trying to make it out of the pandemic and to the other side in 2021. This Zacks Rank #5 (Strong Sell) is still expected to see negative earnings in 2021 even as its hotels reopen

Sunstone Hotel Investors is a lodging REIT that has interests in 18 hotels across the United States consisting of 9,495 rooms.

The hotels are operated under nationally recognized brands such as Marriott, Hilton and Hyatt.

Sale of the Renaissance Los Angeles Airport for $91.5 Million

On Dec 8, Sunstone announced the sale of the 502-room Renaissance Los Angeles Airport for a gross sale price of $91.5 million.

This was one of the company's 4 hotels which were never shut during the pandemic.

The sale of the hotel is in line with the company's strategy of concentrating its portfolio into Long-Term Relevant Real Estate.

It also provides further liquidity.

Big Miss in the Third Quarter

On Nov 5, Sunstone reported its third quarter earnings and missed on the Zacks Consensus Estimate by 36.8%.

Sunstone reported earnings of a loss of $0.26 versus the Zacks Consensus of a loss of $0.19.

It has missed 3 quarters in a row.

By the end of the quarter, 16 of the company's 19 hotels were open.

6 of the company's hotels were in operation for the entire quarter. 6 additional hotels opened during the third quarter, mostly in July and August.

4 other hotels resumed operations in the fourth quarter.

For the 6 hotels open for the entirety of the third quarter, RevPAR fell 80.5% to $37.37.

But there has been sequential monthly improvement since the summer, mostly in leisure travel.

A majority of the company's group business for 2020 has canceled. Of that group business which has canceled, approximately 23% has rebooked into future periods.

Liquidity Position

Combined with more hotels now being open, and continued aggressive cost containment, Sunstone has been able to reduce its cash burn rate.

"Assuming no change to current operating fundamentals, our cash burn rate has been reduced to between $16 million and $20 million per month before capital investment," said John Arabia, President and Chief Executive Officer.

"We expect this figure to decline further, and eventually return to profitability, as recently reopened hotels ramp up and as portfolio occupancy and profits gradually increase."

As of Sep 30, 2020, Sunstone had $503.6 million of cash and cash equivalents, including restricted cash of $42.3 million, total assets of $3.2 billion, including $2.6 billion of net investments in hotel properties, total consolidated debt of $934.7 million and stockholders’ equity of $2.1 billion.

Additionally, it will soon have the cash from the sale of the Renaissance.

Analysts Cut 2020 and 2021 Estimates

Over the last 30 days, analysts have gotten more bearish.

3 estimates were cut for 2020 during that time which pushed the Zacks Consensus down to a loss of $0.78 from a loss of $0.73.

3 estimates were also cut, and 1 raised, for 2021 in the last month which pushed down the Zacks Consensus to a loss of $0.13 from a loss of $0.10.

That's a big improvement on 2020, with an earnings rebound of 82.8%.

Shares Rally on Vaccine Hopes

Sunstone's shares are up 51% since Nov 1 as the news on viable vaccines started hitting the headlines.

The hotel companies are part of the 2021 reopen trade.

Many investors have been diving into hotels, restaurants, airlines and cruise stocks on the belief that the worst of the pandemic downturn is over and that days will be brighter in 2021.

Has the reopen trade already been priced into these shares?

It suspended its dividend earlier this year and has not resumed it.

Sunstone also didn't provide any forward guidance due to COVID uncertainties.

If you're an investor who buys companies based on rising earnings estimates, you might want to stay on the sidelines in this hotel REIT.

Additional content:

Coronavirus-Proof Waste Management Stocks to Keep an Eye On

The waste management industry has been in good shape. Amid the coronavirus-led lockdowns, there was a relative shift of waste production from industry and commercial centers to medical centers and residential areas. Now, with gradual resumption of business activities, industrial waste is likely to increase in the days to come.

The pandemic has strongly necessitated the proper disposal of trash. In fact, waste management companies are at an advantage as there has been a substantial increase in residential waste with the rise in the work-from-home trend and travel restrictions. Proper disposal of medical waste such as used masks, gloves, suits, syringes and other medical equipment has become a major concern for countries across the globe.

Government initiatives as well as stringent rules and regulations to advance sustainable waste management mechanisms and put a check on illegal dumping have also been aiding the industry. Rising environmental concerns, rapid industrialization, economic growth and increase in population are expected to increase non-hazardous waste. This should enhance business opportunities for waste management companies.

Further, technology adoption and use of advanced collection and recycling solutions are picking up pace. New technologies in containers are helping companies enhance operational efficiency and save costs. High-tech containers now include odor reduction systems and capacity sensors.

According to a Allied Market Research report, the global waste management market is expected to reach $2,339.8 billion by 2027 from $2,080 billion in 2019, witnessing a CAGR of 5.5% from 2020 to 2027.

Clean-up companies generate stable revenues and cash flows from customers across diverse industries and pay out stable dividends. This makes waste management stocks robust defensive players.

3 Waste Management Stocks That Warrant a Look

Adding stocks from the industry looks like a smart move to enhance your portfolio as the pandemic rages on. The buoyancy in the industry is further confirmed by its Zacks Industry Rank #96, which places it in the top 38% of more than 250 Zacks industries. Additionally, the industry has gained 10.3% in the past six months.

Here we present three promising waste management stocks, which have witnessed upward estimate revisions in the past 90 days and had an impressive run on the bourses in the past six months. These stocks also have a solid four-quarter average earnings surprise history. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Clean Harbors: This Zacks Rank #1 Massachusetts-based company provides environmental, energy, and industrial services in North America.

Acquisitions have been helping the company expand its business across multiple lines of services. Consistency in rewarding its shareholders through share buybacks boosts investor confidence and earnings per share. Notably, cost-reduction efforts, productivity improvements, healthy mix of higher margin work and the two government-assistance programs have been aiding the company’s bottom line amid the COVID-19 pandemic.

Further, the company has raised its 2020 adjusted EBITDA guidance to the range of $530-$550 million from the previous guidance of $470-$500 million. Net income is anticipated to be $104-$130 million (previous guidance: $53-$84 million). Adjusted free cash flow is expected between $250 million and $270 million (previous guidance: $200 million and $230 million). Net cash from operating activities is projected between $405 million and $445 million (previous guidance: $355 million and $405 million).

The Zacks Consensus Estimate for the company’s 2020 EPS has moved up 52.2% in the past 90 days. The company’s expected earnings growth rate for the year is 11.11%. The company has a trailing four-quarter earnings surprise of more than 100%, on average. The stock has rallied 17.8% in the past six months.

Republic Services: This Arizona-based Zacks Rank #2 (Buy) company provides non-hazardous solid waste collection, transfer, disposal, recycling, and environmental services in the United States.

The positive impact of acquisitions and average yield has been aiding the company’s top-line growth. The company is focused on increasing its operational efficiency by shifting to compressed natural gas collection vehicles and converting rear-loading trucks to automated-side loaders to reduce costs and improve profitability. The company continues to grow internally with the help of long-term contracts for the collection, recycling and disposal of solid waste materials. Consistency in dividend payments and share buybacks not only boost investor confidence but also positively impact earnings per share.

The Zacks Consensus Estimate for the company’s 2020 EPS has moved up 7.9% in the past 90 days. The company’s expected earnings growth rate for the year is 1.2%. Additionally, it has a long-term (three to five years) expected earnings growth rate of 9.4%. The company has a trailing four-quarter earnings surprise of 15.1%, on average. The stock has rallied 16.2% in the past six months.

Waste Management: This Texas-based Zacks Rank #3 company provides waste management environmental services to residential, commercial, industrial, and municipal customers in North America.

The company continues to execute its core operating initiatives of focused differentiation and continuous improvement and instill price and cost discipline to achieve better margins. Strength across traditional solid waste businesses boost the company's cash and earnings. Successful cost-reduction initiatives have helped it achieve EBITDA growth. Shareholder-friendly moves boost investors' confidence and positively impact earnings per share.

Further, the company has hiked its quarterly dividend by 5.5%, from 54.5 cents per share to 57.5 cents per share. The company’s board has also approved a share repurchase authorization of up to $1.35 billion.

The Zacks Consensus Estimate for the company’s 2020 EPS has moved up 3.4% in the past 90 days. It has a long-term (three to five years) expected earnings growth rate of 7.35%. The company has a trailing four-quarter earnings surprise of 3.4%, on average. The stock has rallied 10.5% in the past six months.

Zacks Names “Single Best Pick to Double”

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.

Free: See Our Top Stock and 4 Runners Up >>

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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.


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Waste Management, Inc. (WM) : Free Stock Analysis Report
 
Republic Services, Inc. (RSG) : Free Stock Analysis Report
 
Sunstone Hotel Investors, Inc. (SHO) : Free Stock Analysis Report
 
Clean Harbors, Inc. (CLH) : Free Stock Analysis Report
 
Haverty Furniture Companies, Inc. (HVT) : Free Stock Analysis Report
 
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