For Immediate Release
Chicago, IL – December 13, 2019 – Zacks Equity Research PulteGroup, Inc. PHM as the Bull of the Day, The Container Store Group, Inc. TCS as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Oracle ORCL, Adobe Inc. ADBE and Broadcom AVGO.
Here is a synopsis of all five stocks:
Bull of the Day:
PulteGroup, Inc. is taking advantage of strong consumer confidence and a tight job market. This Zacks Rank #1 (Strong Buy) is expected to see double digit earnings growth in 2020.
PulteGroup is one of America's largest homebuilders with operations in more than 40 markets around the country.
Its brands include Centex, Pulte Homes, Del Webb, DiVosta Homes, American West and John Wieland Homes and Neighborhoods.
PulteGroup segments include 30% entry-level and first-time buyers, 30% move-up buyers, 15% luxury and 25% active adult.
Another Beat in the Third Quarter
On Oct 22, PulteGroup reported its third quarter results and beat the Zacks Consensus Estimate by $0.09. Earnings were $1.01 versus the consensus of $0.92.
The company has an outstanding earnings surprise track record, with the last miss all the way back in 2015.
Revenue rose 3% to $2.6 billion as closings rose 3% to 6,186 homes. The average sales price remained the same as the prior year, at $426,000.
Gross margin, a key metric for the homebuilders, was 23.1%.
Net new orders for the quarter rose 13% over the year ago period to 6,031 homes. Unit backlog also rose by 4% to 11,638 homes with a value of $5 billion, up 2% from the third quarter of 2018.
Estimates on the Rise
Analysts liked what they heard in the quarter, as 8 estimates were revised for both 2019 and 2020 since the report.
The 2019 Zacks Consensus Estimate has jumped to $3.54 from $3.42 in the last 60 days.
Additionally, the 2020 Zacks Consensus Estimate also rose to $3.90 from $3.72 during that same time. That's earnings growth of 10.1% over 2019.
Shares Soar in 2019 But Remain Cheap
The homebuilders were hot in 2019.
PulteGroup shares were up 51% year-to-date, easily beating the S&P 500 during that time.
But they're still cheap, with a forward P/E of just 11.5.
PulteGroup is also shareholder friendly. In the third quarter, the company repurchased 4.1 million shares for $136 million.
On Dec 5, it also raised the quarterly dividend another 9% to $0.12 a share. With the strong market conditions, Pulte has been able to raise its quarterly dividend 33% over the past year.
Bear of the Day:
The Container Store Group, Inc.is seeing improvement but this Zacks Rank #5 (Strong Sell) still guided to the low end of its full year EPS guidance.
The Container Store operates 93 retail stores specializing in organization and storage solutions and products. It also offers a full suite of custom closets designed to accommodate all sizes and budgets.
An Earnings Miss in the Second Quarter
On Oct 29, The Container Store reported its fiscal second quarter results and missed on the Zacks Consensus Estimate by 2 cents. Earnings were $0.08 versus the consensus of $0.10.
Net sales were up 5.3% to $236.4 million.
Comparable stores sales rose 5.4% with Custom Closets up 9.3%. Custom Closets added 420 basis points to the comparable results with other product categories up 2.2% and contributing 120 basis points.
Gross margin declined 30 basis points to 57.9% year-over-year.
The company has a new distribution center which is proceeding on plan and budget, and is ready to stock it with inventory.
Lowers Full Year EPS Guidance
In its fiscal 2019 outlook, the company confirmed that its comparable store sales for the year are expected to be at or slightly above the prior guidance range of up 2% to 3%.
But it guided earnings towards the low end of the previous range of $0.41 to $0.51.
It's not a surprise that analysts lowered their estimates. The Zacks Consensus Estimate for fiscal 2019 dropped to $0.42 from $0.49. That would indicate no year-over-year earnings growth as The Container Store made $0.42 in fiscal 2018.
But the fiscal 2020 Zacks Consensus was also cut, falling to $0.44 from $0.51 in the last 2 months. However, that's earnings growth of 4.8%.
Shares Fall on the Year
The Container Store is cheap. It's trading with a forward P/E of 9.9.
But shares are also down 16% in the last year.
Tech Earnings Beat After Hours: ORCL, ADBE, AVGO
A burst of earnings report activity has hit the tape after Thursday's closing bell, existing on something of an island between calendar Q3 and Q4 reports. These are companies whose fiscal calendars fall on different months and represent differing quarters, even among themselves.
Oracle has outpaced estimates on its bottom line in the company's fiscal Q2 2020 report: 90 cents per share is 2 cents higher than the Zacks consensus and up more than 10% year over year. However, revenues in the quarter of $9.62 billion was a tad beneath expectations. Cloud revenues came in at $6.8 billion for the quarter, On-Premise Licenses bringing in $1.3 billion and Services revenue at $741 million. The Enterprise business was a little weaker than expected, which may explain why shares are dipping 2% in late trading. Oracle shares had been up 25% year to date.
Adobe Inc. beat expectations on both its top and bottom lines for its fiscal Q4 2019, with $2.29 per share up by 3 cents from estimates on quarterly sales of $2.99 billion, which beat the $2.97 billion analysts were looking for, as well as posting a new all-time high in quarterly revenues. Digital Media rose 22% year over year to $2.08 billion. Cash Flow from Operations came in at $1.38 billion -- also a new record. Shares of Adobe are in in the after-market to the tune of 3%.
Sticking with the broader tech theme.Broadcom also surpassed expectations in its Q4 2019 with $5.39 per share, also a 3-cent beat from the Zacks consensus, on $5.78 billion in sales -- up from the 45.75 billion anticipated and +6% year over year. Broadcom also raised its dividend 23% to $3.25 per share, and the stock is up marginally at this hour in late trading. The company has not missed on earnings since the recalibration of stock-based compensation, back in the company's Q2 of 2016.
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