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Sony, Planet Fitness, Beyond Meat, McDonald's and Yum! Brands highlighted as Zacks Bull and Bear of the Day

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Zacks Equity Research
·9 min read
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For Immediate Release

Chicago, IL – March 1, 2021 – Zacks Equity Research Shares of Sony Corporation SNE as the Bull of the Day, Planet Fitness, Inc. PLNT as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Beyond Meat, Inc. BYND, McDonald's Corporation MCD and Yum! Brands, Inc. YUM.

Here is a synopsis of all four stocks:

Bull of the Day:

Headquartered in Tokyo, Sony designs and manufactures consumer and industrial electronic equipment. Its product roster comprises audio and video equipment, televisions, displays, semiconductors, electronic components, gaming consoles, computers, and computer peripherals and telecommunication equipment. Additionally, Sony is active in the production, acquisition and distribution of movies and television, as well as in the music industry.

Q3 Earnings Recap

Last month, shares of Sony soared as much as 10% after reporting better-than-expected third quarter results.

Revenue grew 9% year-over-year to about $26.5 billion, while net income soared 62% to $3.5 billion.

The two big factors driving revenue growth were the company’s music and gaming segments. Music sales rose 22% and gaming and network services sales grew 40% compared to the prior year period.

As a result of these impressive results, Sony raised its outlook for fiscal 2021, and upped its revenue guidance for all segments except pictures.

Sony also anticipated that its gaming segment will be its largest this fiscal year, mostly thanks to the PlayStation 5.

Demand for the new console has been very strong, but recent key chip shortages—driven by pandemic-related volatility—has led to some hiccups in actually making the PS5.

Despite this, Sony still expects to be able meet demand, and in the meantime, the company can lean on high profit margins from the PS4 hardware (which offset any initial losses from the PS5).

SNE Breaks Out

In the past six months, shares of SNE have jumped over 33% compared to the S&P 500’s almost 11% increase. Earnings estimates have been rising too, and SNE is a Zacks Rank #1 (Strong Buy) right now.

For fiscal 2021, four analysts have revised their bottom-line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up $1.81 to $8.16 per share. Earnings are expected to grow 92.5% compared to the prior year period. Fiscal 2022 looks strong too, despite tough year-over-year comparisons, and analysts remain bullish.

Sony pulled off an impressive turnaround over the past few years thanks to the popularity of its gaming consoles. If you’re an investor searching for a tech stock to add to your portfolio, make sure to keep SNE on your shortlist.

Bear of the Day:

Planet Fitness is a popular fitness center chain with a domestic and international presence. It currently operates over 2,000 locations throughout the U.S., Puerto Rico, Canada, the Dominican Republic, Panama, Mexico, and Australia.

Q4 Earnings Recap

Back in February, Planet Fitness reported disappointing results for its fiscal fourth quarter.

Revenue dropped 30% year-over-year and system-wide same-store sales decreased 10.6%. As seen in the report, the Covid-19 pandemic continues to take a toll on PLNT’s business and the broader fitness industry.

Q4 franchise segment revenue fell 8.8% due to temporary store closures and reduced membership levels, while adjusted EBITDA declined 33.3% to $51.1 million.

“While we anticipate the operating environment to remain volatile and unit growth to be modest in the near-term, we are increasingly optimistic about our growth opportunities as the vaccine continues to rollout and consumers increasingly return to daily activities, such as bricks and mortar fitness," said CEO Chris Rondeau.

PLNT did not provide a full-year outlook for 2021 due to the pandemic-related uncertainty.

Bottom Line

PLNT is now a Zacks Rank #5 (Strong Sell).

11 analysts have cut their full year earnings outlook over the past 60 days, and the consensus estimate has fallen 45 cents to $1.10 per share; earnings and sales are expected to see significant year-over-year gains for fiscal 2021, though that’s to be expected after the losses faced in 2020.

Shares are up only 7.2% in the past one-year period compared to the S&P 500’s gain of 23%.

With the vaccine rollout speeding up, an economic rebound is within reach. But that doesn’t mean everything will bounce back at once. Planet Fitness still has a hard road ahead of it to get back to pre-pandemic growth, so investors may want to stay on the sidelines until the return to long-term growth appears.

Additional content:

Beyond Meat Prepares for High-Growth Phase

I’ve been a Beyond Meat fan for a while now, despite the crazy way the pandemic has moved its shares around. Somehow, I really like the sound of “revolutionary plant-based meats made from simple ingredients without GMOs, bioengineered ingredients, hormones, antibiotics, or cholesterol.”

Everyone may not care for a meat substitute when they can have the real thing. But my feeling is that more and more people will have it at least sometimes, as a token to the environment, or out of animal love, or for health reasons. And when they do that, they might consider an offering from a popular brand name. Especially when it’s so easily available at the friendly neighborhood McDonalds. Or a KFC, or a Pizza Hut or, or a Taco Bell for that matter.

So it’s important to remember that we are in unusual times. And unusual things happen in unusual times.

And if that means that a company like Beyond Meat has to offer discounts, write off some inventory, or absorb extra costs, so be it. After all, nobody could have planned for a health crisis coming along and shutting down all the restaurants and sending people indoors for protection.

As investors, we should be thinking longer-term.

That means we should be looking at the long-term potential for revenue and earnings growth despite the near-term challenges.

Let’s take revenue first. In the just-reported quarter, the company managed to grow sales just 3.5% from the year-ago period, as softness at foodservice offset tremendous growth at retail (both in the U.S and international markets).

People generally buy familiar brands at grocery stores. So the surge in sales indicates strong underlying demand and growing brand awareness.

Okay, so it’s offering discounts. But so is prime competitor Impossible Foods. There’s something of a pricing war going on there with Impossible being the more aggressive. Management commentary also indicates that the absorption of higher fixed cost from operating below capacity in the prior quarter was a bigger driver of weakness.

The company is also adding IT infrastructure, it’s also adding headcount in an effort to boost R&D and marketing and support international expansion in Europe and China. It’s also adding production capacity in these two international markets.

So while on the one hand we are seeing it building its own brand and internal capabilities, on the other, it is signing long-term deals with leading brands like McDonalds and Yum Brands. When you’re mainly selling into mom n pops, business can be more uncertain. But when you’re selling into recognized leaders in foodservice with deeper pockets to withstand near-term issues, and also testing the water in healthy snacks, the business will obviously be more stable.

But all this wouldn’t be as good if Beyond Meat wasn’t a great innovator. And it has made great strides in this. It has moved on from its burger patty to create sausage and meatballs. Its agreement with McDonalds includes a promise of co-developed plant-based chicken, pork and eggs. Its agreement with Yum includes the creation of signature menu items in different plant-based categories.

Zacks Estimates currently expect the company to swing to a profit this year while growing revenues 53.8%. Both these numbers are due for a revision given the new deals and expected increase in costs (the commencement of production at international facilities should have a mitigating effect on cost and reduce logistics complications).

While trading below their median value over the past year, Beyond Meat shares aren’t cheap. So we could wait for a better entry point.

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Sony Corporation (SNE) : Free Stock Analysis Report
 
McDonalds Corporation (MCD) : Free Stock Analysis Report
 
Yum Brands, Inc. (YUM) : Free Stock Analysis Report
 
Planet Fitness, Inc. (PLNT) : Free Stock Analysis Report
 
Beyond Meat, Inc. (BYND) : Free Stock Analysis Report
 
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