For Immediate Release
Chicago, IL – April 30, 2020 – Zacks Equity Research Shares of Scotts Miracle-Gro SMG as the Bull of the Day, PVH Corporation PVH asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Apple AAPL, Amazon AMZN and Microsoft MSFT.
Here is a synopsis of all five stocks:
Bull of the Day:
Scotts Miracle-Gro shares have surged 20% in 2020, with its lawn care products seen as immune from the coronavirus economic downturn. SMG has also grown through its exposure to the growing legal marijuana business in North America.
Spring Projects & Marijuana Growth
Scotts Miracle-Gro is a consumer lawn and garden products powerhouse. As its name suggests, it operates under both Scotts and Miracle-Gro brands, as well as Ortho. Plus, SMG owns indoor and hydroponic leader The Hawthorne Gardening Company. This helps Scotts Miracle-Gro gain huge exposure to the growing marijuana industry, as well as indoor farming in general—which both have potential to boom over the next several decades.
Last quarter, SMG’s U.S. consumer segment sales popped 8%, while Hawthorne revenue jumped 41% to help lift overall Q1 fiscal 2020 revenue by 23%. “We continue to see outstanding performance across all product categories of our Hawthorne business in the United States, with double-digit growth in long-standing markets such as California and Colorado and even stronger performance in emerging markets like Michigan and Florida,” CEO Jim Hagedorn said in prepared remarks.
Scotts Miracle-Gro’s chief executive also said that “Hawthorne continues to distance itself from its largest competitors.” And investors should remember that the legalized marijuana business is still in its early days, which should give Hawthorne plenty of runway to expand as more states legalize.
Meanwhile, Scotts Miracle-Gro’s more consumer-facing gardening and lawn care business is in the midst of its busy spring and summer seasons. Importantly, the coronavirus could actually boost SMG sales as more people are stuck at home and doing home improvement projects. Let’s also not forget that marijuana sales have grown during the coronavirus as well.
The nearby chart shows that SMG stock has crushed its industry over the last five years, up roughly 98%. More recently, shares of Scotts Miracle-Gro have jumped 50% in the past 12 months and 50% since the market’s March 23 lows, which has it trading at new highs. This impressive recent performance helps SMG crush stay-at-home standouts such as Netflix and Amazon and blow by the S&P 500’s 25% climb.
Despite its climb, Scotts Miracle-Gro is trading below its three-year highs and not too far off its median in terms of forward 12-month sales estimates at 2.0X. This marks a discount against the S&P 500’s 3.2X and Home Depot’s 2.1X.
On April 27, the firm announced that its next quarterly dividend of $0.58 per share, will be payable on June 10, to shareholders of record as of May 27. SMG’s current yield rests at 1.82% to top its industry’s 0.86% average. More importantly, the yield isn’t artificially inflated since the stock is trading near new highs and its payout ratio sits at a stable 49%.
The Marysville, Ohio-based company is set to release its Q2 fiscal 2020 financial results on Wednesday, May 6. Our current Zacks estimates call for its Q2 sales to jump 16.8% to reach $1.39 billion. Overall, SMG’s full-year fiscal 2020 revenue is projected to pop 7%, with FY21 set to climb another 3.3%. These sales estimates would come on top of last year’s 18% revenue growth and easily top 2018’s roughly 1% expansion.
Scotts Miracle-Gro’s adjusted Q2 earnings are expected to jump 11% to hit $4.04 a share. Peeking further ahead, its full-year EPS figures are projected to climb by 16% and 10%, respectively in FY20 and FY21.
Scotts Miracle-Gro’s positive earnings revisions activity for Q2, fiscal 2020, and 2021 helps it earn a Zacks Rank #1 (Strong Buy) at the moment. SGM is also part of an industry that rests in the top 25% of our more than 250 Zacks industries.
Some investors might be worried about a near-term pullback if SMG fails to impress Wall Street next week. But Scotts Miracle-Gro stock appears to be a solid and safe longer-term play that might also be one of the best non-pure play investments in the growing marijuana industry.
Bear of the Day:
PVH Corporation is just trying to get through 2020 as retail shutdowns around the world hurt. This Zacks Rank #5 (Strong Sell) is expected to see a 63% decline in earnings this year.
PVH is a global apparel company which operates in the wholesale, retail, digital commerce and licensing channels. It's led by its two largest brands, Calvin Klein and Tommy Hilfiger, which represent 85% of the companies revenue.
It's a global business, with nearly 60% of its revenue generated outside of the United States, and includes a significant presence in China.
A Beat in the Fourth Quarter
On Apr 1, PVH reported its fourth quarter and fiscal 2020 full year results and beat on the Zacks Consensus by $0.08. Earnings were $1.88 versus the consensus of $1.80.
PVH had momentum across both of its brands during the holiday quarter but COVID-19 struck in China in January and then spread worldwide by March.
The company said it could not provide fiscal 2021 guidance given the uncertainty across the global economy.
On Apr 7, PVH announced it was taking steps to shore up its finances including furloughing employees in the United States.
The Board was foregoing compensation while the crisis continued.
Additionally, the CEO, Manny Chirico, who actually had COVID-19 himself, would forego his salary during the crisis and 250 top level executives would see salary cuts up to 50%.
PVH also announced that it drew down $750 million from its $1 billion revolving credit facility.
It sold its Speedo North American business for $170 million in cash.
And it also suspended share repurchases and its cash dividend, beginning with the second quarter of 2020.
Estimates Cut for Fiscal 2021 and 2022
There's no doubt that the apparel retailers are going to take it on the chin this year.
Over the last 90 days, the Zacks Consensus Estimate for fiscal 2021 has fallen off a cliff.
It fell to just $3.46 from $9.94 just 3 months ago.
PVH made $9.54 last year, so that's an earnings decline of 63.7%.
Are Shares Cheap?
PVH shares have fallen 51.8% year-to-date but are off their March lows.
They've actually rallied 33% in the last month on the belief that the worst is already priced into the shares.
Even with the estimate cuts, they're still trading with a value P/E of just 13.8.
How Will Coronavirus Affect Apple's (AAPL) Q1 iPhone Sales?
Apple was one of the first Wall Street giants to warn that the coronavirus was set to impact its sales, back on February 17. The iPhone maker’s near-term issues have grown far worse since then, after the virus turned into a global pandemic.
So let’s see what investors should expect from Apple’s Q2 fiscal 2020 financial results that are due out after the closing bell on Thursday, April 30.
Quick Earnings Outlook
Amazon, Microsoft and a ton of other big names join Apple this week, in what could prove to be a pivotal test of the market’s surge from its March 23 lows. Meanwhile, governments are deciding how to start reopening their economies as they deal with the coronavirus.
Investors should note that overall S&P 500 earnings are projected to fall 15.3% in Q1 and 31.5% in the second quarter, based on our Zacks estimates. However, some sectors are set to take far larger hits amid the economic downturn, such as energy and transportation. And tech sector S&P 500 earnings are expected to dip just 0.7% in the first quarter (also read: Previewing Tech Sector Earnings).
Q2 & Near-Term Outlook
Apple has helped drive the market for years and it will likely continue to be a safe longer-term investment, given its cash holdings, diverse portfolio, strong management team, and more. That said, the coronavirus looks set to hurt its near-term growth prospects.
AAPL in a February 17 statement said it didn’t expect to meet its previously announced revenue guidance, citing production and demand setbacks in China. The company has slowly tried to get back to something close to normal operations in the world’s second-largest economy, but its stores remained close throughout the U.S. and most other markets. And the Wall Street Journal on Monday reported that Apple was “pushing back the production ramp-up of its flagship iPhones coming later this year by about a month.”
Our current Zacks estimates call for Apple’s Q2 fiscal 2020 sales to sink 7.9% from the year-ago period to $53.44 billion. This estimate comes in 20% below the high-end of its initial guidance that called for between $63 to $67 billion in second quarter revenue. And AAPL’s Q2 estimate comes up against the year-ago period’s 5% decline in revenue to help highlight the projected decline.
Wall Street will also pay close attention to Apple’s iPhone sales, which still accounted for approximately 55% of 2019 revenue even though the company has expanded its portfolio. AAPL’s flagship smartphone revenue is projected to tumble roughly 16.5% in Q2, based on our Key Company Metrics. Luckily, its growing wearables and services units are expected to climb by 16% and 13%, respectively.
Peeking further ahead, Apple’s Q3 sales are expected to fall 7.1% to help push its full-year fiscal 2020 sales down by 1.3%. This would mark its second-straight year of declining sales after FY19 dipped 2% below a hard-to-compare 2018. But it is important to remember that Apple is still projected to pull in $256.67 billion in 2020 revenue.
At the bottom end of the income statement, Apple’s adjusted Q2 EPS is projected to fall 15.5% to $2.08 a share. This expected downturn looks even worse considering that Apple’s adjusted EPS also dipped 10% in the second quarter of fiscal 2019. The nearby chart also shows how far AAPL’s earnings estimates have fallen recently.
AAPL’s third-quarter earnings are then expected to sink 11.5%. But as of now, the tech powerhouse is projected to see its adjusted full-year fiscal 2020 earnings pop 1.3%, and it boasts a strong history of quarterly earnings beats.
Apple stock closed regular trading Tuesday 15% below its 52-week highs at $278.58 a share. And there will likely be a lot of pressure on AAPL shares Thursday afternoon, given its nearly 30% climb from its March 23 lows. Interested investors should pay close attention to its guidance and any coronavirus-focused updates.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>
Zacks Investment Research
800-767-3771 ext. 9339
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
Apple Inc. (AAPL) : Free Stock Analysis Report
PVH Corp. (PVH) : Free Stock Analysis Report
The Scotts Miracle-Gro Company (SMG) : Free Stock Analysis Report
To read this article on Zacks.com click here.