MillerKnoll and Winnebago have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – October 26, 2023 – Zacks Equity Research shares MillerKnoll, Inc. MLKN as the Bull of the Day and Winnebago Industries, Inc. WGO as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Royal Caribbean Group RCL, MGM Resorts International MGM and Hilton Worldwide Holdings Inc. HLT.
Here is a synopsis of all five stocks.
Bull of the Day:
MillerKnoll, Inc. is not expecting a recession in North America as its business improves. This Zacks Rank #1 (Strong Buy) is forecast to grow fiscal 2024 earnings by the double digits.
MillerKnoll owns iconic brands in both office and residential furniture including Herman Miller, Knoll, Colebrook Bosson Saunders, Design Within Reach, Edelman, HAY, Maharam, Muuto, NaughtOne, and many others.
On the residential furniture side, it operates retail stores globally and sells online.
A Big Beat in Fiscal Q1
On Sep 26, MillerKnoll reported its fiscal first quarter 2024 results and beat the Zacks Consensus by $0.16, or 76.2%. Earnings were $0.37 versus the consensus of $0.21. It was the third beat in a row.
Sales declined 14.9% on a reported basis and 6.9% organically, to $917.7 million. Orders in the quarter were 9.8% lower on a reported basis and 1.3% lower on an organic basis to $913.7 million. The relative decline in organic orders was an improvement compared to the 7.8% year-over-year organic decline posted in the fourth quarter of fiscal 2023.
Gross margin improved, however, by 450 basis points year-over-year to 39%. It was mainly driven by the realization of price optimization strategies, moderating input costs and benefit from our ongoing integration efforts.
In the Americas Contract segment, net sales were down 8.7% year-over-year on a reported basis and down 1.7% organically to $490.4 million. While new orders were down 4.7% year-over-year on a reported basis and up 2.1% organically to $487.3 million.
The growth in organic orders was also a sequential improvement when compared to the prior quarter, which was the fourth quarter of fiscal 2023. MillerKnoll said that month-to-month trends aren't consistent, but the general trend over the past three quarters has been positive.
It remains confident of the improving macro-economic conditions. Additionally, companies continue to shift back to return-to-office practices.
The residential side of the business remains challenged, however, due to the weak housing market. Global retail sales were down 26% on a reported basis to $199 million, and down 13.6% organically.
"While the specter of economic recession in North America appears to be fading, the housing market remains under pressure," said Andi Owen, CEO.
"Additionally, we are facing difficult macroeconomic conditions in both China and Europe," she added.
Raised Full Year EPS Guidance
The trend is MillerKnoll's friend. It raised full year earnings guidance to a range of $1.85 to $2.15. That was above the Zacks Consensus.
Not surprisingly, the Zacks Consensus has jumped to $2.07 from $1.80 in the last 30 days. That is earnings growth of 11.9% as the company made $1.85 in fiscal 2023. It is also on the higher end of the new guidance.
Shares Turn Around
Shares of MillerKnoll have been on quite the ride the last 5 years as they got hit in the pandemic due to work-from-home, rallied on the reopening, and then sold off into 2023.
Image Source: Zacks Investment Research
But over the last 6 months, share are up 31.3%.
Shares are still cheap, however, on a P/E basis, trading at just 11.1x forward earnings.
Given the growth expected, it has a PEG ratio of just 0.9. A PEG under 1.0 usually indicates a company has both growth and value. That's a rare combination.
MillerKnoll generated $130.9 million in free cash flow in the quarter. It repaid $66 million of debt and also repurchased 1.7 million shares for $31.7 million.
It also pays a dividend, currently yielding 3.3%.
For investors looking for a company that is seeing brighter days ahead for its business, MillerKnoll should be on your short list.
Bear of the Day:
Winnebago Industries, Inc. is adjusting to the post-pandemic market for outdoor recreation. This Zacks Rank #5 (Strong Sell) is expected to see a double digit earnings decline this year.
Winnebago is a North American manufacturer of motorhomes, travel trailers, fifth-wheel products, pontoons, inboard/outboard and sterndrive powerboats and commercial community outreach vehicles. Its brands including Winnebago, Grand Design, Chris-Craft, Newmar and Barletta.
It has multiple facilities in Iowa, Indiana, Minnesota and Florida.
Another Earnings Beat in the Fiscal Fourth Quarter
On Oct 18, 2023, Winnebago reported its fiscal fourth quarter 2023 results and beat the Zacks Consensus again. It reported earnings of $1.59 versus the consensus of $1.32.
Winnebago has only missed once in the last 5 years and that was in early 2020, when the COVID pandemic broke out.
Revenue fell 34.6% to $771 million from $1.2 billion in the year ago period due to lower unit sales related to current market conditions and dealer efforts to reduce inventories, and higher discounts and allowances compared to prior years. It was partially offset by carryover price increases.
Gross profit was $127.5 million, a decrease of 39.4% compared to $210.4 million a year ago. Gross profit margin fell 130 basis points to 16.5% due to volume deleverage and higher discounts and allowances.
The consumer market continues to be challenged but they have focused on inventory levels, optimizing the supply chain and managing capacity, output and cost.
Winnebago also finished the acquisition of Lithionics Battery in fiscal 2023, positioning itself as a leader in electrification.
All three of its segments saw falling sales in the quarter, with Motorhome falling 42.8% to $317.7 million, Towables declining 30.9% to $341.4 million and Marine was down 21% to $96.4 million.
Analysts Cut Full Year Fiscal 2024 Estimates
Even though Winnebago put together yet another earnings beat, the analysts are bearish for fiscal 2024. 5 estimates have been cut in the last week.
The Zacks Consensus has dropped to $6.58 from $6.94 in the last week. That's an earnings decline of 14.2% as Winnebago made $7.67 last year.
Shares Sink
Winnebago was a big pandemic winner as consumers bought RVs and towables to take to the open road. But that demand has ended. Over the last 3 months, the shares have sunk 15.9%. They're still up 8.9% year-to-date, however.
Winnebago is a cheap stock with a forward P/E of 8.8.
It's also shareholder friendly with a dividend and share repurchases. In the fourth quarter it saw share repurchases of $30 million. The stock is currently yielding a 2.1% dividend.
However, with earnings still sliding, investors might want to wait on the sidelines for stabilization before jumping in.
Additional content:
What's in Store for Royal Caribbean's (RCL) Q3 Earnings Results?
Royal Caribbean Group is scheduled to report third-quarter 2023 results on Oct 26 before the opening bell. In the last reported quarter, the company delivered an earnings surprise of 15.2%.
Q3 Estimates
The Zacks Consensus Estimate for the third-quarter bottom line is pegged at $3.43 per share. In the prior-year quarter, RCL reported adjusted earnings per share of 26 cents. The consensus mark for revenues is pegged at $4.02 billion, suggesting a whopping 34.5% jump from a year ago.
Factors to Note
Royal Caribbean’s third-quarter performance is likely to have benefited from solid bookings with respect to North American and European sailings. Also, strong pricing (on closer-in-demand) and solid onboard spending bode well. An increase in ticket revenues, and onboard and other revenues are likely to have aided the top line.
Our model predicts passenger ticket revenues, and onboard and other revenues to improve 44.1% and 2% year over year to $2,911.4 million and $991.8 million, respectively. In 2023, the company anticipates solid guest generation from the North America region.
An improvement in load factors (thanks to a rise in close-in bookings at higher prices) is likely to have paved a path for yield improvements in the third quarter. Our model predicts third-quarter net yields to be $265.6 million (on a reported basis) and $267.2 million (constant-currency basis), up 34.2% and 33.7% year over year, respectively.
However, high inflationary and supply-chain challenges (related to fuel and food costs), and transitory costs related to health and safety protocols are likely to have negatively impacted the bottom line. Our model suggests total cruise operating expenses to increase 1.3% year over year to $1,980.8 million.
Royal Caribbean Cruises Ltd. price-eps-surprise | Royal Caribbean Cruises Ltd. Quote
What the Zacks Model Unveils
Our proven model predicts an earnings beat for Royal Caribbean this time around. 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.
Earnings ESP: Royal Caribbean has an Earnings ESP of +1.42%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Zacks Rank: Royal Caribbean has a Zacks Rank #3.
Other Stocks With the Favorable Combination
Here are some other stocks from the Zacks Consumer Discretionary space that investors may consider as our model shows that these too have the right combination of elements to deliver an earnings beat this time around.
MGM Resorts International has an Earnings ESP of +3.03% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of MGM Resorts have improved 7.2% in the past year. MGM’s earnings surpassed the consensus mark in three of the four quarters and missed once, the average surprise being 105.7%.
Hilton Worldwide Holdings Inc. has an Earnings ESP of +5.35% and a Zacks Rank #2.
Shares of Hilton have climbed 13.2% in the past year. HLT’s earnings outshined the consensus mark thrice in the trailing four quarters and missed once, the average surprise being 12.5%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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Royal Caribbean Cruises Ltd. (RCL) : Free Stock Analysis Report
MGM Resorts International (MGM) : Free Stock Analysis Report
Winnebago Industries, Inc. (WGO) : Free Stock Analysis Report
Hilton Worldwide Holdings Inc. (HLT) : Free Stock Analysis Report
MillerKnoll, Inc. (MLKN) : Free Stock Analysis Report
