For Immediate Release
Chicago, IL – December 11, 2018 – Zacks Equity Research Columbia Sportswear Company COLM as the Bull of the Day, Seagate Technology STX asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Fujifilm FUJIY, The Mosaic Company MOS and KT Corp KT.
Here is a synopsis of all five stocks:
Bull of the Day:
Columbia Sportswear Company stock has outperformed the larger apparel market over the last year. The historic outdoor apparel and footwear company is also coming off a strong third quarter and its growth prospects appear impressive. Plus, we are in the midst of the holiday and winter shopping period that could help boost the outdoor-focused firm.
Columbia, which was founded in 1938, currently sells everything from trail running shoes to winter jackets. The company also owns fellow outdoor and sportswear brands Mountain Hardwear, Sorel, and PrAna. Together, the Columbia family of brands competes against V.F. Corporation’s The North Face, Canada Goose, Nike, REI, Patagonia, Lululemon and others.
Columbia is coming off a better-than-expected quarter that saw its revenues jump 6% to a record $795.8 million, driven by a 9% surge in U.S. sales an 15% expansion in Europe, the Middle East, and Africa. On top of that, the firm’s direct-to-consumer sales surged 23% to reach $251 million. Overall, the company’s namesake brand popped 7% to hit $640.9 million. Going forward, Columbia’s continued collaborations with upstart fashion brands and its ability to capitalize on the current retro trend are likely to help spur growth.
Now that we have covered some of Columbia’s recent performance and overall business, it’s time to dive into its stock price movement to help investors gain a better understanding of what is going on. Colombia, which closed Q3 with 135 U.S. retail locations, has seen its stock price soar roughly 97% over the last three years. This blew away its industry’s 4% climb and S&P 500’s 31% jump.
Year to date, shares of COLM are up 23%, which looks even more impressive considering that the S&P is down 1.5% on the year. Columbia saw its stock price dip marginally Monday to close regular trading at $88 a share, down approximately 8% from its 52-week high of $95.74 per share.
COLM stock is currently trading at 21.8X forward 12-month Zacks Consensus EPS estimates, which marks a premium compared to its industry’s 17.8X average. But we already know that Columbia stock has destroyed its industry recently to help justify this forward P/E.
Plus, the chart below helps us see that COLM’s valuation picture is not that stretched at the moment compared to where it has traded over the last five years. Columbia has traded as high as 29.6X during this stretch, with a five year-year median of 22X.
Bear of the Day:
Shares of Seagate Technology have tanked over the last six months despite solid top and bottom line results. Now, the data storage solution firm’s outlook might prolong STX’s current decline.
Seagate Technology’s portfolio includes both consumer and enterprise-level data storage products along with data protection and recovery solutions. The Cupertino, California-headquartered company saw its fiscal 2018 revenues pop roughly 4% to reach $11.18 billion. Plus, Seagate’s fiscal first quarter—which it reported in early November—revenue jumped 14% to $2.99 billion.
Stock Price Movement
Despite Seagate’s solid fiscal 2018 and impressive top-line growth last quarter, shares of STX are down roughly 5% in 2018. This falls below the S&P 500’s 1.5% dip, but comes in well above its industry’s 17% decline. Shares of Seagate closed regular trading Monday down slightly to $39.81 per share, which marked a 36% downturn from its 52-week high of $62.70 a share.
With that said, we can see that Seagate stock, on the whole, has performed very well over the last decade. Cleary though, shares of STX have experienced a ton of turbulence over the last five years.
Moving on, investors should note that Seagate’s current valuation picture appears relatively solid. STX stock is currently trading at 7.2X forward 12-month Zacks Consensus EPS estimates, which marks a discount compared to its industry’s 10.3X average and the S&P’s 15.7X. Over the last five years, shares of Seagate have traded as high as 15.2X, with a five-year median of 10.2X.
Outlook & Earnings Trends
Moving on from Seagate’s valuation picture, it’s time to see what to expect from the firm’s future earnings and revenues since a good forward P/E doesn’t count for that much if it’s not accompanied by growth.
The company’s current quarterly revenues are projected to fall by 6.2% from the year-ago period to hit $2.73 billion, based on our current Zacks Consensus Estimate. Meanwhile, the company’s full-year revenues are expected to sink by just over 3% to $10.85 billion.
At the bottom end of the income statement, Seagate’s adjusted current-quarter earnings are expected to dip 4.1% to reach $1.42 per share. Meanwhile, the data storage giant’s earnings are projected to plummet nearly 18% in the following quarter and slip 1.3% for the year.
Furthermore, Seagate has only experienced downward earnings estimate revision activity recently, on top of its projected top and bottom-line declines. This means that some analysts are even less optimistic about Seagate’s earnings picture than they were not too long ago.
Putting an End to Themes: Global Week Ahead
There are noted trading weeks — ones where we mark the beginnings of stock market themes such as the beginning in a multi-year series of interest rate hikes, the start of a new presidency, or an inexorable turn in stock index price trends.
Then, there are the opposite of such trading weeks. These are weeks where we mark — sometimes in hindsight — the end of long-term themes.
This Global Week Ahead is the latter.
This week, we likely mark the end of a two-year-long Brexit ordeal, as it collapses under a vote in the U.K. House of Commons. We will more surely see the end of multiple years of “QE” in Europe. On Thursday, the ECB winds down its scrap of monthly bond buying which remains in place.
Perhaps, traders also foresee the end of Fed rate hikes — sooner than expected a few short weeks ago — as the U.S. Treasury yield curve inverts. This series of 25 basis-point steps began three years ago, in December 2015. Stress from a self-created U.S.-China trade war clearly hit domestic earnings and stock markets.
Do we shortly mark the end to this very long and winding U.S. business cycle? That’s the next signpost traders’ and investors’ actionable thoughts have headed.
That call looks to this economist to be premature, by at least six to nine months. However, those logic systems coded for major momentum share price shifts usually trade in front of them, about that length of time.
The following are five big underlying Reuters world market themes. These are most likely to dominate the thinking of investors and traders alike in the Global Week Ahead.
(1) Where Does the U.S. Treasury Yield Curve Go from Here?
With major parts of the U.S. economy visibly slowing, the U.S. risk-free Treasury market has reacted in a striking manner.
The 10-year yield is close to falling below the two-year yield, which would mark the curve inversion that has preceded every recession in the last 40 years. Signs of slowdown have persuaded markets to bet the Fed will slow the pace of rate increases next year.
But wait. Inflation is running at a 9-month high, annual wage growth a 9-1/2 year high and unemployment at a near-50 year low. So November inflation, due on Dec. 12th, will play into how Fed Chair Jerome Powell frames the path of future tightening.
So it remains to be seen where the curve goes from here. There are reasons to believe it can steepen and reasons to believe it will invert. Depending on how the incoming data looks — stagflation, anyone? — the Fed’s view on where neutral is and what its policy response should be in the coming months is far from clear.
(2) On Tuesday, the House of Commons Votes on Brexit
Buckle up for another wild week of Brexit mayhem on sterling and other UK-focused markets.
Britain’s parliament is — at the time of this writing, at least — set to vote on Prime Minister Theresa May’s Brexit transition deal on Tuesday, but the chances of it being approved don’t look good.
What happens then is... well, that’s the thing: there are multiple possibilities, all with very different implications.
A really heavy defeat would make it difficult for May to carry on. She has staggered through the last couple of years, taking direct hits from all angles, but this could finally bring her down.
Could that then lead to a hard Brexiteer taking the reins and ripping up the deal? Perhaps, and sterling won’t like that one bit. But it’s equally possible that whomever takes over would press pause on the whole process by withdrawing the so-called Article 50 notice. That could even raise the chances of a second public Brexit vote and that could send sterling soaring.
(3) On Thursday, the ECB Wraps Up Its “QE” Program
Thursday marks the end of an era for the ECB, which is set to formally announce the end of its three-year long, 2.6 trillion-euro monetary stimulus scheme.
For markets, that’s a done deal. What matters now is what the ECB does in the face of a weakening economy, global trade tensions, Brexit and Italy.
Policymakers have already been floating ideas to support the economy when QE ends. One suggestion is for multi-year loans to banks.
What investors appear more certain about is that the ECB will struggle to bring interest rates back up to zero percent, especially if a U.S. slowdown encourages the Fed to pause its rate-hike cycle. Money market pricing suggests investors expect roughly a 75 percent chance of an ECB rate hike in 2019. But that’s down from 100 percent just a few weeks ago.
(4) What Happens with the Global Oil and Commodity Prices?
So much for the U.S.-China trade truce.
If financial markets are any guide, the detente between Washington and Beijing struck over a steak dinner at the G20 in Buenos Aires barely lasted 24 hours. Fears of global trade war and economic slowdown are again driving investor sentiment.
On oil markets, that signals that a 30% price slump since October has little hope of reversing.
Oil has also had to contend with OPEC, whose failure to agree on output cuts accelerated the slump in prices, pushing the Brent below $60/barrel and WTI futures close to breaking below $50. The possibility of small cuts by the likes of Russia and Kazakhstan are unlikely to save the day, given the magnitude of market oversupply.
Commodities overall are in some trouble. Copper is near three-week lows, having lost around 15 percent so far in 2018, while most base metals are down a similar amount. And the Australian dollar — a good proxy for commodities, Chinese demand and world trade — was the worst-performing major currency in the world all week.
Without good news on the trade front, a respite is unlikely.
(5) What of the Latest Chinese Trade Data?
The United States has just reported its trade deficit hit a 10-year high in October, and its politically sensitive deficit with China surged to a record $43 billion. So markets will watch to see how China hawks in the Trump administration react to China’s trade data due for release.
The data should show whether China is carrying out promises to import more from America. It could well provide more grist for the mill — both for U.S. officials pushing for more reasons to punish China and for investors skeptical of the trade ceasefire.
The prospect of a Chinese growth slowdown is keeping investors edgy. So while trade contributes far less to the country’s GDP than it used to, there are other data points coming up too — credit growth and retail sales among others — which should show how badly the economy is hurting from the trade war.
Top Zacks Stocks—
Fujifilm:This is a Zacks #1 Rank (STRONG BUY). It’s a $17B Japanese semiconductor equipment-photomask stock. It has a Zacks VGM score of A. Can the chip stocks get it going again, with the U.S.-China trade negotiation now underway?
The Mosaic Company: This is a $12.9B fertilizer stock. The Zacks VGM score is A. There is a boom going in in Fertilizer Land, globally. Keep an eye on this stock.
KT Corp: This is the big wireless company of South Korea. It’s a defensive stock. These are coming into higher demand lately. The market cap is $7.4B. For that reason, keep it on your radar screen, particularly when it is a Zacks #1 Rank (Strong Buy) like it is now.
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