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Tech Data, Tailored Brands, Texas Instruments and Xilinx highlighted as Zacks Bull and Bear of the Day

Zacks Equity Research
Bull Of The Day: Lockheed Martin (LMT)

For Immediate Release

Chicago, IL – January 23, 2019 – Zacks Equity Research Tech Data Corporation TECD as the Bull of the Day, Tailored Brands, Inc. TLRD asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Texas Instruments TXN and Xilinx XLNX.

Here is a synopsis of all four stocks:

Bull of the Day:

Tech Data Corporation is one of the world’s biggest technology distributors. The company certifies, trains, instructs, and supports their reseller customers, and helps configure, install, and finance their purchases. Tech Data’s end-to-end portfolio of products, services and solutions, highly specialized skills, and expertise in next-generation technologies enable channel partners to bring to market the products and solutions the world needs to connect, grow, and advance.

Q3 Earnings Impressed Investors

At the end of last November, Tech Data reported third quarter numbers that blew straight past estimates.

Adjusted earnings of $3.02 per share handily beat the Zacks Consensus Estimate of $2.19 per share, while adjusted net income soared 50% to $116.3 million.

Revenues climbed 11% from the prior year period to $9.34 billion, also beating our consensus estimate. All of its regions performed very well, with sales in the Americas, Europe, and Asia Pacific up 13%, 9%, and 6%, respectively.

Tech Data also paid down $100 of debt and repurchased $44 million in Q3.

In the earnings release, CEO Rich Hume said that the strong results seen in the third quarter “reflect the powerful combination of our end-to-end portfolio and strong execution by our global teams. Theyalso validate the strategic role we play in the IT supply chain -- delivering high value through our end-to-end portfolio to channel partners across the broad spectrum of IT products and solutions."

Over the past three months, TECD has gained over 30%, and shares have bounced back nicely from the market pullback seen at the end of last year.

Estimates have been rising lately too, pushing the stock towards a Zacks Rank #1 (Strong Buy).

For the current fiscal year, Tech Data’s earnings are expected to grow around 20% year-over-year. Four analysts have upped their estimate, and the Zacks Consensus Estimate has moved nearly a dollar higher in the past 60 days from $9.99 to $10.94 per share.

Next year looks pretty strong too. The consensus estimate sits at $11.50 per share, with three upward revisions in the last two months.

Bottom Line

Looking ahead to its current fiscal fourth quarter, Tech Data expects revenues in the range of $10.5 billion to $10.9 billion on top of adjusted EPS in the range of $3.90 to $4.20 per share. The lower ends of the both the top and bottom line are well above consensus estimates. The current Zacks Consensus Estimate for earnings and revenues falls roughly in the middle of both estimate ranges ($4.08 per share and $10.7 billion).

Like most tech stocks, TECD couldn’t escape that volatile run that hit the broader market late last year, but the company appears to be on a good path going forward, and looks to continue its outperformance. For those investors looking for a technology stock to add to their portfolio, TECD should definitely be on the shortlist.

Bear of the Day:

Based in Houston, Texas, Tailored Brands, Inc. is a specialty retailer of men’s suits and tuxedo rentals across the U.S. and Canada. The company used to be known as The Men’s Wearhouse, and provides customers with a wide range of suiting options including suit separates, sport coats, slacks, dress shirts, sportwear and outerwear, and shoes and accessories.

In the past six months, shares of Tailored Brands have fallen around 48%. Disappointing guidance in its third-quarter earnings report overshadowed an earnings beat and left investors scrambling.

Earnings of $1.01 beat the Zacks Consensus Estimate of 94 cents thanks to lower interest expenses and a lower tax rate; earnings also increased from 75 cents reported in the prior year quarter.

Revenues of $812.7 million missed our consensus but was up 0.2% year-over-year. Retail comparable sales jumped 2.3%, driven by a 1.7% increase at Men’s Wearhouse and a 3.8% increase at Jos. A. Bank.

Investors were most concerned about Tailored Brands’ big guidance cut. For the full year, the retailer now expects to earn between $2.30 and $2.35 per share on a non-GAAP basis, down from a previous guidance range of $2.35 to $2.50.

“As the third quarter progressed we saw a softening of comparable sales due to lower transactions at Men’s Wearhouse and that trend continued into November. As a result, we have taken a more cautious outlook on fourth quarter comparable sales for Men’s Wearhouse,” said Executive Chairman Dinesh Lathi. This “softening” led to the company’s full year guidance cut.

It didn’t take long for analysts to lower their estimates for fiscal 2019, and two have cut their earnings outlook in the last 60 days; our consensus has fallen 20 cents, down from $2.50 to $2.30 per share, but earnings could see year-over-year growth of 4.5%.

The consensus estimate has fallen for next fiscal year, too, down 39 cents from $2.91 to $2.52 per share. Two analysts have also cut their estimates for this time period as well.

TLRD is now Zacks Rank #5 (Strong Sell).

In addition to slashing its outlook for the year, Tailored Brands cut its guidance for the upcoming fiscal fourth quarter recently. Due to weaker-than-expected performance at Jos. A. Bank, the company now expects comparable sales to be flat in Q4 and adjusted loss per share of $0.34 to $0.29, down from a previous range of $0.29 to $0.24.

Additional content:

Key Predictions for Q4 Earnings Reports: TXN & XLNX

The fourth-quarter reporting cycle is currently underway, with a significant number of reports slated to be released this week.

The start to the earnings season has not been very impressive. According to the Earnings Preview as of Jan 18, tech sector earnings are expected to decelerate meaningfully in the fourth quarter, up +3.8%, after back-to-back quarters of very strong growth.

The recent market-wide volatility and concerns have definitely impacted the semiconductor stocks. Moreover, the ongoing trade war between the United States and China has created a volatile environment that is not conducive for investments. Also, volatility in foreign exchange, primarily due to current macro-economic scenario and headwinds in the emerging markets, does not bode well.

However, robust demand for memory chips and other semiconductor products, owing to the rapid adoption of cloud, Internet of Things (“IoT”), autonomous cars, advanced driver assisted systems (“ADAS”), gaming, wearables, drones, virtual reality/augmented reality (“VR/AR”) devices, artificial intelligence (“AI”), and cryptocurrencies, is fueling massive growth in the space.

Two semiconductor stocks, namely Texas Instruments and Xilinx, are scheduled to announce their respective quarterly results tomorrow. Let’s have a close look at the factors that will likely impact their results.

Predictions for Texas Instruments

We expect Texas Instruments’ fourth-quarter earnings to be driven by strength in several higher-margin and high-growth market areas. The company’s expanding exposure in industrial and automotive markets should benefit the upcoming results.

Also, the analog segment should have performed well during the quarter, driven by TI’s compelling product line and manufacturing efficiencies that include growing 300-millimeter Analog output.

However, sluggishness in the company’s embedded processing unit due to weak performing processors remains a concern and may continue to impact its performance in the to-be-reported quarter. This segment was down 4% year over year in the last reported quarter as well, owing to weak performance of processors and sluggishness in the communications equipment market.

Also, rising competition, particularly in auto chips, is currently a major headwind for Texas Instruments.

Predictions for Xilinx

We expect strength across majority of the end markets to drive Xilinx’s fiscal third-quarter results. Solid performances of Communications businesses, as well as broad-based growth at Data Center, Testing, Measurement, and Emulation (TME) plus Industrial segments are likely to act as catalysts.

Also, the wireless business should continue to benefit from LTE upgrades and the early deployment of 5G, thereby expanding its top-line growth.

However, increasing operating expenses of the company due to higher employee compensation, including profit sharing and sales incentive, might impact profits in the quarter to be reported.

In addition, the full integration of DeePhi acquisition will likely be an overhang on its margins in the quarter. Additionally, intensifying competition from Intel is a negative for Xilinx and may impact its bottom line. (Read: Will End-Markets Uptick Benefit Xilinx Q3 Earnings?)

What Our Model Says

Our research shows that when a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) stock is combined with a positive Earnings ESP, the chance of beating earnings estimates is high. Zacks Rank #4 or 5 (Sell rated) are best avoided, especially if they have a negative Earnings ESP.

Texas Instruments currently carries a Zacks Rank #4 and its Earnings ESP is 0.00%, which does not indicate a likely positive surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Xilinx currently holds a Zacks Rank #3 and has an Earnings ESP of 0.00%, which also does not indicate a likely positive earnings surprise in the quarter to be reported. However, the company surpassed estimates in three of the trailing four quarters, with average positive surprise of 8.74%. You can seethe complete list of today’s Zacks #1 Rank stocks here.

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Tech Data Corporation (TECD) : Free Stock Analysis Report
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Xilinx, Inc. (XLNX) : Free Stock Analysis Report
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