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Potlatch, Signet Jewelers and NVIDIA as Zacks Bull and Bear of the Day

Zacks Equity Research
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For Immediate Release

Chicago, IL – February 8, 2018 – Zacks Equity Research highlights Potlatch PCH as the Bull of the Day and Signet Jewelers SIG as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Nvidia NVDA.

Here is a synopsis of all three stocks:

Bull of the Day:

Structured as a REIT, Potlatch owns approximately 1.4 million acres of forestland in Alabama, Arkansas, Idaho, Minnesota and Mississippi. The company also operates five manufacturing facilities that produce lumber and panel products. They are among the top 10 lumber manufacturers in the US.

Additionally, the company conducts a real estate sales and development business through its subsidiary.

Solid Results

The timber REIT reported adjusted net income of $25.7 million, or $0.62 per share for Q4 2017, up from $14.4 million, or $0.35 per share for Q4 2016.

 “Higher lumber prices and solid execution by each of our three businesses led to very strong financial results in 2017,” said the CEO. “Operating income in both our Northern Resource business and Wood Products segments were at record levels.”

Merger with Deltic

Along with Q3 results, the company also announced a definitive agreement to combine with Deltic Timber in an in an all-stock transaction expected to close in first half 2018. The combined company will have diversified timberland base of ~2 million acres and 1.2 BBF lumber capacity.

Rising Estimates

Zacks Consensus Estimates for the current and next year have increased to $2.97 and $2.79 respectively, from $2.72 and $2.88, before the results. Rising estimates sent the stock to a Zacks Rank #1 (Strong Buy).

Bear of the Day:

Founded in 1949, and headquartered in Hamilton, Bermuda, Signet Jewelers is a retailer of diamond jewelry, watches as well as other products. The company operates in the U.S., Canada, U.K., Puerto Rico, the Republic of Ireland, and the Channel Islands.

The company operates through the following divisions: Sterling Jewelers, Zale and UK Jewelry.

Shares Plunge on Weak Holiday Sales

On January 10, the jewelry retailer announced its sales for the 9 weeks ended December 30, 2017 (Holiday Season).

Total sales fell 3.1% to $1,881.7 million from $1,940.9 million in the prior year, while same store sales fell 5.3%. On a constant currency basis, total sales declined 3.9%. However, e-commerce sales in the holiday season surged 48%.

Shares fell about 7% after the report.  

The company had reported lackluster results for Q3, with lower-than-expected revenues for the eighth time in last ten quarters.

The Bottom Line

The jewelry retailer has been facing headwinds due to the changing retail landscape. Aggressive promotions and low mall traffic have hurt sales, even though e-commerce sales have been rising.

Further, “Retail – Jewelry” industry is current ranked 236 out of 265 Zacks industries, suggesting weakness in the short-to-mid term.

Additional content:

3 Key Estimates Ahead of NVIDIA Earnings

Shares of Nvidia gained nearly 3% in morning trading Wednesday, just one day before the company is scheduled to release its fiscal 2018 fourth-quarter earnings report. The Wall Street darling was hit hard by the recent market-wide sell-off, but the stock is now almost fully recovered—and investors can be sure that the company’s report will attract significant attention.

Nvidia has quickly moved to the forefront of the global investing scene over the past two years, largely due to the company’s focus on innovative technology. The Santa Clara, California-based firm manufactures graphics processing units (GPU) and system on a chip units (SoCs) that are considered the top of the line in their respective industries.

Nvidia’s traditional business focuses on delivering GPUs to the gaming market and SoCs to the mobile computing market. But over the past few years, its technology has exploded in popularity throughout several budding new industries and is now used in “smart” vehicles, datacenters, cryptocurrency mining, artificial intelligence, and autonomous driving.

On the back of growth in these new markets and excitement for what these industries could bring in the future, Nvidia shares have skyrocketed more than 750% over the past two years, including a strong 90% climb over the past 52 weeks.

But this share price explosion has also ushered in ludicrous expectations for the company, so the pressure will be on Nvidia to deliver another solid quarterly report tomorrow. Based on our current consensus estimates, we expect management to report adjusted earnings of $1.16 per share and total revenues of $2.67 billion.

These results would represent year-over-year growth rates of 17.2% and 22.8%, respectively. That growth is a bit slower than we have grown to expect from Nvidia, but the company is starting to face tougher prior-year comparisons, which should force investors to adjust a bit.

With that said, it is entirely possible that Wall Street hones in on Nvidia’s performance in specific key businesses, as opposed to its overall results. This could be a more effective method for judging the company’s position right now.

To prepare for this, we can turn to our exclusive non-financial metrics consensus estimate file. The Zacks Consensus NFM file contains detailed estimate data for business segment metrics and non-financial metrics reported by companies. The data is acquired from digest and contributing broker models and includes the independent research of expert stock market analysts.

Investors will rightfully be interested in several of Nvidia’s exciting growth catalysts, but it is also important to track how the company’s core video gaming business is holding up. Our consensus estimate file is calling for Nvidia to report Gaming revenues of $1.581 billion, up about 17.3% from the year-ago period. However, Nvidia notched 25.5% growth in Gaming revenues last quarter, so investors will hope that the company’s holiday shopping season was stronger than analysts are expecting.

One division that will likely grow in magnitude over the next few years is the company’s Automotive segment. This is still a relatively small revenue driver, but as the demand for AI-powered autonomous driving grows, Nvidia should stand to benefit.

For the fourth quarter, our consensus estimates are calling for Nvidia to report Automotive revenues of $150 million, which would represent year-over-year growth of about 12.2%. Last quarter, Nvidia posted segment revenues of $144 million, up 13.4%, so it looks like growth rates are expected to pick up.

Finally, investors are going to want to pay special attention to Nvidia’s Datacenter business, which has been one of its fastest-growing units in recent months. Last quarter, Nvidia reported Datacenter revenues of $501 million, up 108.8% from the year-ago period.

Based on our consensus estimates, we expect to see Nvidia post Datacenter revenues of $549 million for Q4. That would represent year-over-year growth of 85.5% from the $296 million that was witnessed last year.

85% growth is certainly nothing to scoff at, but investors have grown accustom to triple-digit Datacenter growth over the past few quarters. This could be a key catalyst for the stock if Nvidia can beat expectations.

Make sure to check back here for our full analysis once Nvidia reports tomorrow!

Want more analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!

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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.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

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