For Immediate Release
Chicago, IL – September 13, 2016 – Zacks Equity Research highlights Nordstrom (JWN) as the Bull of the Day and Virgin America ( VA) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Broadcom ( AVGO) , Applied Materials (AMAT) and Ultrapar PA (UGP).
Here is a synopsis of all the five stocks:
Bull of the Day :
It has been a challenging environment for most mall-based retailers thanks to the rising trend for on-line shopping and increasing competition from off-price fashion chains. Most retail stocks were hammered earlier this year but some of them rebounded strongly after their second quarter results were not as bad as feared.
Headquartered in Seattle, Nordstrom (JWN) is an upscale fashion retailer offering clothing, shoes and accessories for men, women and children. Founded in 1901, they now operate 333 stores in 39 states and Canada, including 120 full-line stores, 205 Nordstrom Rack locations, five Trunk Club clubhouses, two Jeffrey boutiques and one clearance store.
Additionally, their merchandise is available through Nordstrom.com,nordstromrack.com and HauteLook.
During FY 2015, 71% of revenue came from their full-price operations and 29% from off-price. They have been gaining market share in their business, with 50% sales growth over last five years.
Strong Results and Raised Guidance
Nordstrom delivered a big earnings beat even though their sales were slightly shy of the Zacks Consensus Estimate. Earnings of $0.67 per share were substantially ahead of the Zacks Consensus Estimate of $0.55, but down 38.5% year over year. Outperformance was driven by efficient inventory and expense management, along with increased sales at the company’s grand anniversary sale event. Per management,their anniversary sale event this year was one of its biggest in a long time.
While sales at their full-price stores fell, sales at their discount stores, Nordstrom Rack and Hautelook surged. The company also raised its full-year earnings guidance to $2.60-$2.75 a share.
Analysts have raised their estimates after strong results. Zacks Consensus Estimates for the current and next year have surged to $2.71 and $3.00 per share, from $2.54 and $2.88 earlier.
Bear of the Day:
Low fuel prices had lifted airlines’ stocks last year but the outlook has turned negative this year thanks to overcapacity, terrorist attacks, currency headwinds and plunging fares. Most airlines have reported disappointing earnings for the recent quarter. Virgin America has seen a sharp plunge in analyst estimates after lackluster results, which sent the stock to a Zacks Rank #5 (Strong Sell).
About the Company
Launched in 2007, Virgin America ( VA) is a California-based airline. Richard Branson's Virgin Group is a minority share investor in Virgin America but the airline is an entirely separate company from the British airline Virgin Atlantic founded by Branson.
The airline is known for providing a quality flying experience, with mood-lit cabins, custom-designed leather seats and advanced entertainment system. They have won a number of awards for excellence.
Lackluster Second Quarter Results
Despite low fuel costs, the airline suffered about 40% decline in profit during the second quarter. Adjusted earnings per share of $0.93 per share missed the Zacks Consensus Estimate of $1.17 and were down 36% year over year.
Revenues of $426 million were also short of the Zacks Consensus Estimate of $447 million.
Zacks Consensus Estimates for the current and the next year have plunged to $3.06 per share and $2.90 per share, from $3.45 and $3.29 respectively before the report.
Confusion from the Crow’s Nest
I think globally to start each week. Do You? Follow me on Twitter @johnblank100
Secure the main decks on your trading ship to start this global week ahead. We are likely to see machine-traded, algorithmic momentum programs issuing sell orders. Fear was the initial driver. Selling is carrying over mechanically from last Friday.
As the global week ahead unfolds, an excellent metaphor for the current state of share markets hails from early sailors. They consistently faced off with sudden turbulence on high seas and unseen menaces.
These early explorers got into what was called the crow’s nest to gain a better, more long-term perspective of what lay over the horizon. The further ahead the lookout could see, the more time the captain and crew below had to position their precious ship.
In the early 19th century, the crow’s nest was simply a barrel or basket lashed to the tallest mast. Wiki says Arctic Explorer William Scoresby invented the barrel crow's nest in 1807.
According to a different popular naval legend, the term goes back much further. It derives from the practice of Viking sailors.
They carried crows or ravens in a cage secured to the top of the mast. In cases of poor visibility, a crow was released. The navigator plotted a course corresponding to the bird's flight path, because the crow invariably headed towards the nearest land.
After climbing into the crow’s nest, strategists looked ahead for this stock market’s menaces. Unfortunately, I share with traders a confused insight. When share markets get sleepy and trade sideways -- like they did in July and August -- well-placed advisors in the equity strategist crow’s nest take up one of 2 broad perspectives.
The safe idea is trading rooms were on a collective summer vacation. Volume was down seasonally. Dormant bulls will rise again into the fall.
The more menacing idea — this was an eerie calm before more intense bearish events arrive on the calendar.
I agree: that’s not much help. Only one good insight takes root. When market confusion reigns from the view of the crow’s nest, the safest thing below is to secure the decks.
On Monday, three U.S. Fed speakers tee off in various parts of the country. That many Fed voices speaking at one time has stoked up building fears -- the FOMC consensus after the coming Sept. 20 & 21 meeting will be hawkish.
The Fed may soon hit richly valued major USA stock indices with a 25 basis point rate hike. Then, this curiously played Presidential election picks up in its intensity. If you have stock profits on the table, why not get them off the table before that?
Conclusion #1: Sell stocks for profit now?
LPL Financial Equity Strategist Ryan Detrick tweeted us these grim facts. The last 2 times the S&P 500 index was down -2% on a Friday, the following Monday was down -3.9% (August 21, 2015) and -1.8% (June 24, 2016).
Conclusion #2: Buy the dip mid-week?
As for the end of this global week ahead, the Bank of England monetary policy committee meets on Thursday. Mario Draghi speaks in Italy. There is going to be a public discussion of Brexit at the EU parliament, led by its leaders.
That may seem a distant shore when stocks sell off hard to start a week.
Yet, keep your eyes on those external events too.
Top Zacks #1 Rank stocks to look into--
(1) Broadcom (AVGO) is a $64 billion market cap diverse semiconductor company. The stock gets a Zacks #1 Rank and a Zacks VGM score of B. Shares price in richly at $160 a share, after a recent sell-off. The PEG ratio is 1.10.
(2) Applied Materials (AMAT) is another semiconductor/wafer fabrication stock to look into. This $31 billion market cap stock has is a Zacks #1 Rank stock with a Zacks VGM score of B. Shares price more cheaply at $28 each. The PEG ratio is 1.05.
(3) Look into Ultrapar PA ADRs (UGP) for oil production and pipeline exposure, and petrochemical and chemical production. This $12 billion market cap stock has a Zacks #1 Rank and a Zacks VGM score of B.
Ultrapar is a major Brazilian industrial group. It is one of the largest distributors of liquefied petroleum gas in Brazil and a leading producer of petrochemicals and chemicals.
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About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
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NORDSTROM INC (JWN): Free Stock Analysis Report
VIRGIN AMERICA (VA): Free Stock Analysis Report
BROADCOM LTD (AVGO): Free Stock Analysis Report
APPLD MATLS INC (AMAT): Free Stock Analysis Report
ULTRAPAR PA-ADR (UGP): Free Stock Analysis Report
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