For Immediate Release
Chicago, IL – April 09, 2014– Zacks Equity Research highlights Southwest Airlines (LUV-Free Report) as the Bull of the Day and UTi Worldwide (UTIW-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Amazon.com Inc. (AMZN-Free Report), Office Depot, Inc. (ODP-Free Report) and Staples, Inc. (SPLS-Free Report).
Here is a synopsis of all five stocks:
Bull of the Day:
Southwest Airlines (LUV-Free Report) recently completed its 41st consecutive year of profitability - a stunning number for any airline.
And following better-than-expected Q4 results in January, analysts revised their earnings estimates significantly higher for Southwest for both 2014 and 2015. This sent the stock to a Zacks Rank #1 (Strong Buy). Estimates have continued to climb as the company approaches its Q1 earnings release on April 24.
Southwest Airlines Co. is the nation's largest carrier in terms of originating domestic passengers boarded. Including AirTran (which it acquired in 2011), it operates the largest fleet of Boeing aircraft in the world, serving 96 destinations in 41 states, the District of Columbia, Puerto Rico, and five near-international countries.
Southwest delivered solid Q4 results on January 23. Adjusted earnings per share reached a Q4 record of 33 cents, beating the Zacks Consensus Estimate of 28 cents. This was significantly higher than the 9 cents earned in the same quarter the year before.
Bear of the Day:
Earnings estimates have fallen sharply for UTi Worldwide (UTIW-Free Report) following disappointing Q4 results on March 31. It is a Zacks Rank #5 (Strong Sell) stock.
Since I last wrote about UTi Worldwide as the Bear of the Day on September 12, 2013, shares have plunged nearly 30%.
UTi Worldwide Inc. provides supply chain services and solutions around the globe.
UTi Worldwide reported disappointing Q4 results on March 31. Adjusted earnings per share came in at a loss of 15 cents, missing the Zacks Consensus Estimate calling for a loss of 4 cents.
Revenues declined 2.1% year-over-year to $1.076 billion, which fell short of the consensus of $1.104 billion.
CEO Eric Kirchner stated that "[r]esults... continued to reflect a lackluster global economy and difficult operating conditions" and that " pricing pressure continued to weigh on margins."
2 Office Suppliers on a Dismal Run
The office supplies industry is grappling with secular as well as cyclical headwinds. Demand for office products has been curbed by the latest technological advancements. Smartphones, tablets and laptops are fast emerging as viable substitutes to paper-based office supplies.
The recent global meltdown and deteriorating credit markets have resulted in lower business and consumer spending, and in turn a prolonged weakness in the office products’ sector. As big-ticket items face declining demand, top line bears the brunt. We foresee this softness in the sector to leave a near-term impact.
Additionally, heightened competition from discount department stores, warehouse clubs and online giants such as Amazon.com Inc. (AMZN-Free Report) has squeezed out a large share of profits from office supply retailers.
The sector is still to tide over these challenges that have prevailed over the past few years. The analysts are compelled to be less constructive on the future of Office Depot, Inc. (ODP-Free Report) and Staples, Inc. (SPLS-Free Report). Investors are clearly losing confidence in these office supply retailers. If we look at the past performances of these two stocks a dismal run is revealed. Both the stocks hold a Zacks Rank #5 (Strong Sell).
Shares of Office Depot have crashed 23.5% year-to-date. Looking at the company’s performance in the trailing four quarters, it has missed the Zacks Consensus Estimate by an average of 122.2%. In the most recent quarter, earnings fell short of the estimate by 200%. As a result, the Zacks Consensus Estimate has been portraying a downward movement. For 2014, it has plunged 56% to 11 cents, while for 2015 it has plummeted 42.1% to 33 cents in the last 60 days.
Staples has also seen a downslide, with shares falling 22.1% so far in the year. The company registered negative earnings surprises over the trailing four quarters with an average miss of 8.2%. In the last concluded quarter, Staples missed the Zacks expectation by 15.4%. Consequently, estimates for Staples have shown a downtrend since it posted the results. For 2014, the Zacks Consensus Estimate has fallen 16.8% to $1.09, while for 2015 it has dropped 18.9% to $1.07 in the past 60 days.
Both companies are taking a rational approach for returning to the growth trajectory. Their focus on cost containment, underperforming store closures, store space optimization, introduction of smaller format stores, bringing more products under their ambit and e-Commerce initiatives should reap results over time. Until then, we abstain from being constructive on the two stocks.
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