MasterCraft Boat, IHG Hotels & Resorts, Exxon Mobil, L Brands and Capital One Financial highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – March 12, 2021 – Zacks Equity Research Shares of MasterCraft Boat Holdings, Inc. MCFT as the Bull of the Day, IHG Hotels & Resorts IHG as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Exxon Mobil Corporation XOM, L Brands, Inc. LB and Capital One Financial Corporation COF.
Here is a synopsis of all five stocks:
Bull of the Day:
MasterCraft Boat Holdingsis seeing record quarters as everyone wants to vacation closer to home. This Zacks Rank #1 (Strong Buy) is still expected to see double digit sales growth into next fiscal year.
MasterCraft Boat Holdings is a designer and manufacturer of recreational powerboats through its 4 brands: MasterCraft, NauticStar, Crest and Aviara.
It has a leading market share in three of the fastest growing segments of the powerboat industry: performance sport boats, outboard saltwater fishing and pontoon boats.
MasterCraft has also entered the growing luxury day boat segment.
Third Beat in a Row in the Fiscal Second Quarter
On Feb 10, MasterCraft reported its second fiscal quarter and beat by 47%. Earnings were $0.75 versus the Zacks Consensus of $0.51.
It was the third straight big beat in a row.
Sales were up 19% to $118.7 million from $99.6 million in the year ago quarter.
Gross margin was up 340 basis points to 24.7%.
It was the most profitable second quarter in the company's history.
Raised Fiscal 2021 Full Year Guidance
The company continued to see strong consumer demand throughout the fiscal second quarter so that gave them confidence to raise full year guidance.
Net sales for the full year are expected to grow in the mid-to-high 30% range, year-over-year.
For the fiscal 2021 third quarter, it expected earnings per share growth to approach 60%.
Analysts Get Bullish
With the company raising guidance, so did the analysts.
5 estimates were raised for fiscal 2021 estimates in the last month, pushing the Zacks Consensus up to $2.65 from $2.47. That is earnings growth of 97.8% compared to the prior year when MasterCraft made just $1.34.
But is this just a pandemic play?
Will sales, and earnings, retreat in fiscal 2022, which begins in the second half of calendar 2021, as the global economy reopens?
The analysts don't think so.
5 estimates were also raised for next fiscal year, pushing the Zacks Consensus up to $3.09 from $2.83. That's further earnings growth of 16.5%.
Consumers have been saving money over the last year and are still looking to buy outdoor products.
Shares Soar Over the Last Year: Is it Too Late to Buy?
MasterCraft was a pandemic play. If you can't travel anywhere, why not buy a boat and vacation within your own bubble?
Shares are up 132% over the last year and have added 24.3% in 2021 alone.
Is it too hot to handle?
Shares are still cheap, on a P/E basis. They have a forward P/E of just 11.4.
It also has a P/S ratio of just 1.5.
For those looking for a way to invest in the coming economic recovery, MasterCraft is one to keep on the short list.
Bear of the Day:
IHG Hotels & Resorts made it through 2020 and is hoping for a global recovery in 2021. This Zacks Rank #5 (Strong Sell) is expected to see a triple digit earnings rebound this year.
IHG Hotels & Resorts operates 16 hotel brands and one of the world's largest hotel loyalty programs. Headquartered in Great Britain, it has nearly 6,000 hotels in 100 countries including brands such as Six Senses Hotels Resorts Spas, Kimpton Hotels, Hotel Indigo and Holiday Inn Hotels & Resorts.
It continues to expand, even during the global pandemic, and looks to open another 1,800 hotels over the next 5 years.
Preliminary Full Year Results Are Out
On Feb 23, IHG released its preliminary full year results for 2020.
Total gross revenue fell 52% to $13.5 billion as the coronavirus pandemic hit the travel and hospitality industry hard.
Full Year RevPAR fell 52.5% but it depended on where there were outbreaks and restrictions.
It saw the best recovery by the fourth quarter in Greater China, which had Q4 RevPar down "only" 18.2% while the Americas were still at 49.5% and EMEAA was down 70.5%.
Despite the pandemic, it opened 285 hotels during the year.
They are building avid and Atwell Suites to be future brands of scale, while also continuing to drive the growth of their established brands
It saw strong performances for Hotel Indigo and Kimpton, and the Holiday Inn Brand Family accounted for 60% of all openings and half of all signings in 2020.
For the year, the company managed to eke out free cash inflow of $29 million, with an inflow in the second half of the year.
Total available liquidity was $2.1 billion (on pro forma basis for repayment of £600m UK Government CCFF at March 2021 maturity).
It did not pay a dividend to shareholders in 2020.
Full Year Estimates Fall
Why is it a #5 (Strong Sell)?
The analysts are less confident about the earnings outlook for 2021.
One estimate has been revised higher for 2021 in the last week, but it wasn't enough to reverse the slide in the Zacks Consensus which fell to $1.07 from $1.36 over the last 60 days.
It seems the analysts got a little too optimistic about 2021 even though that is still earnings growth of 245% as IHG is expected to make just $0.31 in 2020.
For comparison purposes, in the pre-COVID world in 2019, IHG made $3.01 per share.
Further recovery is expected in 2022, with earnings expected to rise to $2.59, growth of 142%. But the Zacks Consensus for 2022 has also fallen over the last 7 days, from $2.70 to $2.59.
Is the Reopen Priced In?
Shares have rallied 40% in the last year and are close to pre-pandemic highs.
Given the drop in earnings, they now trade with a forward P/E of 67.
They aren't exactly cheap.
Has the Street already priced in the upcoming recovery in the travel sector?
Investors might want to wait on the sidelines in the hotel industry to see how the recovery shakes out later this year.
3 Zacks Rank #1s Making New Highs
With new stimulus on its way and the vaccine rollout picking up steam, we’ll be seeing a lot of stocks reaching new highs in the next few months. In fact, there are plenty of stocks making history right now!
The Zacks #1 Rank New Highs screen will help you find them. Remember, you shouldn’t be afraid of stocks reaching new heights, because a really smart guy once said that objects in motion tend to stay in motion. The same is true for stocks.
Despite the tech selloff and fears of inflation or overheating; investors are getting ready for an epic spike higher as we get closer to normal. This screen can help you get ready by finding stocks most likely to leap higher moving forward. Below are three names that recently made the list.
If we’re going to talk about energy, let’s just cut to the crude and go right to one of the biggest guys in the room. ExxonMobil is a leader in the oil & gas – integrated – international space, which is in the top 15% of the Zacks Industry Rank. The company’s size and stable track record make it a bellwether for all of energy and one of the lower risk plays in the field.
Shares of XOM are up approximately 54% so far in 2021 in anticipation of this pandemic running its course. Covid has reduced fuel demand significantly, while the government curtailed production. But the vaccine rollout and new stimulus suggests this unprecedented environment may be coming to an end.
But even through all these challenges, XOM managed to improve its cost structure and become more efficient. It has also beaten the Zacks Consensus Estimate in three of the past four quarters.
Most recently, XOM reported fourth-quarter earnings per share of 3 cents, easily surpassing the Zacks Consensus Estimate of a penny for a positive surprise of 200%. Increased margins for its chemicals segment was a big help to the bottom line.
Total revenue of $46.5 billion dropped year over year due to all the covid difficulties, but the result only missed the Zacks Consensus Estimate by about 4%.
But we’re all thinking about the future right now. Over the past 60 days, the Zacks Consensus Estimate for this year has soared 63.8% to $2.49. Expectations for 2022 are for growth of 12.3% to $3.11. Therefore, we currently expect earnings to jump nearly 25% for next year over this year
L Brands is an apparel-based specialty retailer that operates Bath & Body Works and Victoria’s Secret. It runs more than 2600 stores and is in the Top 37% of the Zacks Industry Rank as part of the retail – apparel & shoes space. Shares are up more than 48% so far this year and over 168% over the past 12 months.
In order to navigate through these unprecedented times, the company lowered its promotional activity, improved its merchandise assortment and grew its direct channel. The results speak for themselves as LB topped earnings expectations in the past three quarters.
Last month, the company reported fiscal fourth-quarter earnings per share of $3.03, which eclipsed the Zacks Consensus Estimate by 1.3% and improved upon last year’s $1.88. The results marked the fourth beat out of the past five quarters.
Net sales of $4.8 billion fell short of the Zacks Consensus Estimate, but still improved upon last year by 2%. The big star for LB continues to be its Bath & Body Works segment, where total sales surged 22% in the quarter year over year thanks in large part to growth for home fragrances, body care, soaps and sanitizers. The company is in the process of separating it’s Bath & Body Works and Victoria’s Secret businesses sometime around August.
LB didn’t offer guidance for the full year, but it did give a pretty encouraging range for its first quarter. Earnings per share are expected between 35 cents and 45 cents, which was way better than forecasts at the time.
Analysts have also raised annual expectations significantly over the past 60 days. The Zacks Consensus Estimate for this year (ending January 2022) is up more than 40% to $3.94, while next year (ending January 2023) has soared 38.4% in that time to $4.36. That suggests year-over-year growth of more than 10%.
Capital One Financial
Let’s turn the tables on Capital One Financial. Instead of this company intrusively demanding to know what’s in our wallets, let’s put the spotlight on them and find out what’s happening inside that company! Move over Samuel L. Jackson!
COF is a consumer and commercial lending staple. As you’d probably expect, its biggest operating segment is the Credit Card business (which made up 61.7% of total net revenues last year). Other segments include Consumer Banking (27%), Commercial Banking (10.4%) and Other (0.9%).
Shares are up more than 30% so far this year and have surged over 78% in the past 12 months. As part of the Financial – Consumer Loans space, COF is in the top 16% of the Zacks Industry Rank.
In late January, the company reported its second straight positive earnings surprise. COF reported $5.29 per share for the fourth quarter, which was more than 85% better than the Zacks Consensus Estimate. It also blew past the year-ago result of $2.49.
Total net revenues of $7.3 billion were down 1% year over year, but still exceeded our expectations of $6.9 billion. The company benefited from an improvement in non-interest income, a rise in its loan balance and lower expenses.
Over the past two months, the Zacks Consensus Estimates for this year and next have moved sharply higher. Expectations for 2021 have improved more than 25% in that time to $12.35, while 2022 is up 10% to $14.30.
Analysts currently expect year-over-year profit growth of more than 15%. But this is before the economy really starts opening again. As folks get back to work and return to a normal life, you can bet they’ll be using their credit cards and maybe even looking for a consumer loan.
Moving forward, future profits will be helped by its impressive credit card business, inorganic growth efforts and solid liquidity position.
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