For Immediate Release
Chicago, IL – August 09, 2017 – Zacks Equity Research highlights KB Home(NYSE:KBH – Free Report)as the Bull of the Day Fiesta Restaurant Group, Inc. (NASDAQ:FRGI – Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Netflix (NASDAQ:NFLX – Free Report) and Disney (NYSE:DIS – Free Report).
Here is a synopsis of all five stocks:
Bull of the Day:
KB Home(NYSE:KBH – Free Report) continues to see strong housing demand as 2017 shapes up to be the best year for the homebuilders in a decade. This Zacks Rank #1 (Strong Buy) is expected to see earnings jump 52% in 2017.
KB Home is one of the largest homebuilders in the United States with developments in 36 markets in 7 states. It specializes in first time buyers, move-up buyers and active adults. It is headquartered in Los Angeles.
Another Big Beat in the Second Quarter
On June 27, KB Home reported its second quarter results and blew by the Zacks Consensus by 7 cents. Earnings were $0.33 versus the consensus of $0.26.
It was the 6th consecutive earnings beat in a row.
Revenue jumped 24% to $1 billion as deliveries rose 11% to 2,580 homes. Three of the company's four regions saw double-digit increases.
The average selling price also continued to rise, as inventory remained low and demand remained high. It jumped 11% to $385,900.
The backlog continued to rise, adding 19% to $2.18 billion. The average selling price of the homes in the backlog rose 11%.
Cash and cash equivalents at the end of the quarter were $348.6 million with total liquidity of $591.2 million.
Estimates Jump Higher
Not surprisingly, the analysts liked the bullish report and raised estimates.
8 estimates were raised after the report which sent the Zacks Consensus Estimate higher to $1.70 versus $1.61. That's 52% earnings growth compared to fiscal 2016.
Analysts are also bullish about 2018. They expect another 28% earnings growth.
Shares Still Cheap
Despite the shares having gained 47% year-to-date, they're still cheap.
KB Home trades with a forward P/E of just 13.9. That makes it a rare value stock that also has strong growth.
For investors looking for a genuine value stock in this hot stock market, KB Home is one to keep on the short list.
Fiesta Restaurant Group, Inc. (NASDAQ:FRGI – Free Report) is in a full scale turnaround as its two brands struggle in a competitive restaurant market. This Zacks Rank #5 (Strong Sell) recently saw comparable store sales drop for the quarter for both of its brands.
Fiesta Restaurant Group is the parent of Pollo Tropical and Taco Cabana. Both brands offer fast-casual dining featuring made-from-scratch cooking.
As of July 2, 2017, there were 153 company-owned Pollo Tropical restaurants, 169 company-owned Taco Cabanas, 32 franchised Pollo Tropicals in the US, Puerto Rico, the Bahamas, Guyana, Panama, Honduras and Venezuela and 7 franchised Taco Cabanas in the US.
Another Miss in the Second Quarter
On Aug 7, Fiesta reported its second quarter results and missed on the Zacks Consensus by 3 cents. Earnings were $0.30 versus the consensus of $0.33.
Revenue fell 4.89% to $172.6 million.
But more importantly, for restaurants, was the comparable sales metrics. They weren't good.
Comparable sales at Pollo Tropical fell 7.7% while transactions decreased 10%. At Taco Cabana, they fell 4.7% while comparable transactions decreased 4.5%.
The company closed 30 company-owned Pollo Tropicals in Texas, Georgia and Tennessee as it attempts to get back to its core markets. It also closed 4 company-owned Taco Cabanas in Texas subsequent to the second quarter.
But Fiesta still has 6 Pollo Tropicals in southern Texas and 13 locations in Atlanta, Georgia.
The Strategic Renewal Plan
With the expansion plans a flop, the company has retrenched with a new "strategic renewal plan" to boost sales and get the brands back on track.
It has implemented major operational changes, cut back on its media ad buys and moderated promotions and discounts. It is looking at everything, including a new digital media program and even the music it plays in the restaurants.
It will roll out new video menu boards this year and is developing delivery, catering, online ordering and loyalty platforms for implementation in 2018.
The company has also hired a new advertising agency.
It will relaunch Pollo Tropical in October and Taco Cabana shortly thereafter once it has more pieces of the Plan in place.
Earnings to Decline in 2017
With all the changes taking place, and the negative comparable store sales, it's not surprising that earnings are expected to drop 13.4% in 2017.
Analysts are looking for $1.12 compared to $1.29 a year ago.
Netflix Tumbles After Disney Pulls Content
After dropping more than 1.6% during regular trading, shares of Netflix (NASDAQ:NFLX – Free Report) slumped another 3.5% in after-hours on Tuesday following the announcement that Disney (NYSE:DIS – Free Report) plans to pull its movies from the platform.
Alongside its third-quarter earnings report, media behemoth Disney detailed its plans to launch an ESPN streaming service next year and a direct-to-consumer offering in 2019. The company also said that it is upping its stake in BAMTech to a majority position for an additional $1.58 billion.
“Today we announced a strategic shift in the way we distribute our content. The media landscape is increasingly defined by direct relationships between content creators and consumers, and our control of BAMTech’s full array of innovative technology will give us the power to forge those connections, along with the flexibility to quickly adapt to shifts in the market,” said Disney CEO Bog Iger.
“This acquisition and the launch of our direct-to-consumer services mark an entirely new growth strategy for the Company, one that takes advantage of the incredible opportunity that changing technology provides us to leverage the strength of our great brands.”
Iger told CNBC’s Julia Boorstin that his company had a “good relationship” with Netflix, but ultimately Disney decided to exercise its option to remove its content from the platform. According to CNBC, the company will remove Marvel and Disney films. Initial reports are unclear on what will happen to Netflix’s original Marvel-branded shows.
The BAMTech acquisition will help power Disney’s new services, and Iger told CNBC that Disney plans to make a “significant investment” in exclusive movies and shows for the platforms.
Want more stock market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
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