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Mattel, PLCE, Gilead, Vertex and Horizon as Zacks Bull and Bear of the Day

Zacks Equity Research
·11 min read

For Immediate Release             

Chicago, IL – October 26, 2020 – Zacks Equity Research highlights Mattel Inc. MAT as the Bull of the Day and The Children’s Place, Inc. PLCE as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Gilead Sciences Inc. GILD, Vertex Pharmaceuticals VRTX and Horizon HZNP.

Here is a synopsis of all five stocks:

Bull of the Day:                                                 

Mattel Inc.is one of the most well-known makers and manufacturers of toys around the world. Its brand portfolio includes Barbie, Hot Wheels, Fisher-Price, Thomas & Friends, and American Girl, among many others.

Q3 Earnings Recap

Shares of Mattel soared 9.5%, the most in five months, on Friday after the toy maker reported third-quarter earnings that trounced analyst expectations.

Both the top and bottom line beat our consensus estimate. Adjusted earnings nearly tripled year-over-year to $0.95, and revenue grew 10% to $1.63 billion.

Barbie sales were a big winner in Q3, surging 28% to roughly $532 million worldwide, while Hot Wheels sales jumped 6.6% to $312.8 million.

In order to boost both net income and earnings growth, the company said it’s focusing on margin expansion and cost savings in the final months of the year; Mattel also said it remains “focused on creating long-term shareholder value.”

"The toy industry, as a whole, grew significantly and continues to demonstrate its resilience in challenging economic times. Mattel’s growth outpaced the industry as we gained share in key markets around the world and achieved growth in each of our four regions,” said CEO Ynon Kreiz.

MAT Breaks Out

Since March 23, shares of Mattel have climbed over 97%. Estimates have been rising too, and MAT is a Zacks Rank #1 (Strong Buy) right now.

For the current fiscal year, two analysts have revised their bottom-line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up from a loss of $0.15 to a loss of $0.12 per share. Earnings are expected to grow 60% year-over-year, and in 2021, Mattel’s bottom line could see triple-digit earnings growth.

These estimate figures could change in the next few trading days as covering analysts take into account the company’s most recent quarterly performance.

Beyond the near-term setback that is Covid-19, Mattel is facing one of its biggest challenges head on: the rise of digital games. It’s currently partnering with NetEase, a Chinese game developer, to develop a Hot Wheels mobile game.

And, the stock could potentially have significant upside from its current levels, especially as management doubles down on expanding point-of-sales trends, gross margin, and other growth initiatives.

If you’re an investor searching for a consumer discretionary stock to add to your portfolio, make sure to keep MAT on your shortlist.

Bear of the Day:

The Children’s Place, Inc.is the largest pure-play children’s specialty apparel retailer in North America. Based in Secaucus, NJ, the company sells apparel, footwear, accessories and other items for children, and designs and sells merchandise under the brand names The Children’s Place, Place, Baby Place, and Gymboree.

Shares Sink on Disappointing Q2 Earnings

Back in August, The Children’s Place reported disappointing second quarter results, and shares fell as much as 19% as a result.

Net sales fell 12% to $368.9 million compared to the prior-year period, and are down 25% so far this year; the company’s sharp revenue decline led to a huge $47 million net loss, or a loss of $3.19 per share.

However, digital sales soared 118% in Q2, and the company anticipates online demand to remain strong in the near- and long-term.

Retailers, especially those based in malls, continue to struggle during Covid-19. Even though most of its store locations have reopened, business has struggled to return to pre-pandemic levels. On top of that, the back-to-school shopping season failed to provide any significant sales bump for PLCE this year.

CEO Jane Effers anticipates a “meaningful” negative impact on the company’s Q3 numbers as a result of the back-to-school season slump.

Bottom Line

PLCE is now a Zacks Rank #5 (Strong Sell).

Four analysts have cut their full year earnings outlook over the past 60 days, and the consensus estimate has fallen almost three dollars to a loss of $2.95 per share; earnings are expected to see a triple-digit decline for the current fiscal year.

Shares are actually up considerably since the March lows, rising about 50%, which is in line with the S&P 500’s rebound during the same time frame.

Even though shares have run up over the past few months, The Children’s Place will still have a hard road ahead of it. But, it’s an industry leader, with brands that remain popular with families.

Looking ahead, The Children’s Place is looking to optimize its real estate portfolio so that it will be less dependent on physical brick-and-mortar locations. By the end of 2020, it plans to close 100 locations and next year, 100 more.

Additional content:

How Will Coronavirus Affect Gilead's (GILD) Q3 Earnings?

Biotech major Gilead Sciences Inc. is slated to report third-quarter 2020 results on Oct 28, after market close.

Gilead has a disappointing track record, with earnings missing estimates in three of the last four quarters and beating in the remaining one, the average negative surprise being 10.21%. In the last reported quarter, the company missed expectations by 23.97%.

Let’s see how things have shaped up for this announcement.

Why a Likely Positive Surprise

Our proven model predicts an earnings beat for Gilead this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Earnings ESP: Earnings ESP for Gilead is +3.08% as the Zacks Consensus Estimate is pegged at $1.89, while the Most Accurate Estimate is pegged at $1.83.

Zacks Rank: It currently carries a Zacks Rank #3.

Factors at Play

Gilead did not provide any quarterly guidance. The company reported disappointing results for the second quarter of 2020, wherein it missed both earnings and sales estimates.  However, the company lifted its annual guidance probably to account for sales from its antiviral drug, remdesivir, for COVID-19.

HIV product sales were down in the second quarter due to lower sales volume of Truvada (emtricitabine [FTC] and tenofovir disoproxil fumarate [TDF])-based products. However, concurrent with the second-quarter results, the company stated that it is witnessing early signs of recovery from this impact. Consequently, sales must have stabilized in the third quarter. The negative impacts of the COVID-19 pandemic were most likely offset by continued momentum in Biktarvy sales and the uptake of Descovy for the pre-exposure prophylaxis (PrEP) setting.  The Zacks Consensus Estimate for sales of Biktarvy and Descovy is projected at $1.7 billion and $514 million, respectively.

HCV sales are likely to have declined in the third quarter, a trend continuing for many quarters.

CAR-T therapy, Yescarta (axicabtageneciloleucel), generated $156 million in sales during the second quarter of 2020 and third-quarter sales might have experienced a sequential increase, driven by a higher number of therapies provided to patients and its continued expansion in Europe.  The Zacks Consensus Estimate for Yescarta sales is projected at $166 million.

Updates on Remdesivir

Apart from the regular top and bottom-line numbers, we expect investors to focus on the company’s pipeline updates.  Gilead recently announced that the FDA has approved the antiviral drug, Veklury (remdesivir), for the treatment of patients with COVID-19 requiring hospitalization. The drug was previously authorized by the FDA for emergency use to treat COVID-19. Veklury is now the first and only approved COVID-19 treatment in the United States. Hence, an update on the guidance is expected from Gilead.

Other Pipeline & Regulatory Updates

In September, the European Commission (EC) granted marketing authorization to Jyseleca (filgotinib 200 mg and 100 mg tablets), a once-daily, oral, JAK1 inhibitor, for the treatment of adults with moderate to severe active rheumatoid arthritis (RA) who have responded inadequately to, or are intolerant to, one or more disease-modifying anti-rheumatic drugs (DMARDs). An update on the launch and uptake of the same is expected when the company releases its third-quarter results.

In September, Gilead announced that it will acquire Immunomedics for $88.00 per share in cash or approximately $21 billion. The acquisition is anticipated to close during the fourth quarter of 2020. The acquisition will add Trodelvy (sacituzumab govitecan-hziy), a first-in-class antibody-drug conjugate (ADC), to Gilead’s portfolio. Trodelvy was granted accelerated approval by the FDA in April for the treatment of adult patients with metastatic triple-negative breast cancer (mTNBC) who have received at least two prior therapies for metastatic disease. An update on the same is expected during the call.

Share Price Performance

Gilead’s stock has lost 6.6% in the year so far compared with the industry's decline of 2.9%.

Stocks to Consider

Here are some other drug/biotech stocks you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this season.

Vertex Pharmaceuticalshas an Earnings ESP of +0.88% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Horizonhas an Earnings ESP of +5.58% and a Zacks Rank #2.

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Mattel, Inc. (MAT) : Free Stock Analysis Report
 
Gilead Sciences, Inc. (GILD) : Free Stock Analysis Report
 
Vertex Pharmaceuticals Incorporated (VRTX) : Free Stock Analysis Report
 
Horizon Therapeutics Public Limited Company (HZNP) : Free Stock Analysis Report
 
The Childrens Place, Inc. (PLCE) : Free Stock Analysis Report
 
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