- Oops!Something went wrong.Please try again later.
For Immediate Release
Chicago, IL – May 17, 2021 – Zacks Equity Research Shares of Texas Roadhouse, Inc. TXRH as the Bull of the Day, Kimberly-Clark Corporation KMB as the Bear of the Day. In addition, Zacks Equity Research provides analysis on HP Inc. HPQ, The Interpublic Group of Companies, Inc. IPG and Foot Locker, Inc. FL.
Here is a synopsis of all five stocks:
Bull of the Day:
Texas Roadhouse is a full-service, casual dining restaurant chain known for its seasoned and aged steaks that are hand cut daily, and rustic, Texas-themed laidback décor. The company currently has 540 company-owned locations and another 97 franchised stores primarily in suburban and rural areas throughout the U.S.
Q1 Earnings Recap
Texas Roadhouse posted strong sales growth during the first-quarter. Comparable restaurant sales jumped 18.5% year-over-year, with 13% traffic growth and a 5.5% increase in average check.
Total revenue grew 22.7% over the prior year to over $800 million, helped in part to the company's thriving to-go and meal kit business. To-go sales made up 22% of average weekly store sales in Q1, proving how well-liked the option is regardless of loosening indoor dining restrictions.
Diluted EPS increased to $0.91 per share, beating our consensus estimate; TXRH's bottom line is now back to reaching new all-time highs after a muted 2020.
CFO Tonya Robinson said TXRH updated its full-year inflation forecast to roughly 4%, as the company works around supply and demand uncertainty, particularly for proteins and oils.
"Our operating results have exceeded even pre-pandemic levels thanks to our operators' ability to navigate a number of factors, including the easing of dining room capacity restrictions, guest excitement to get back into our restaurants and the continued strength of our To-Go sales. Going forward, our primary focus will be ensuring that our guests continue to have a legendary experience each and every time they choose us," said CEO and President Jerry Morgan.
TXRH Breaks Out
Shares of Texas Roadhouse have been climbing back from their pandemic lows, up 124% over the past one-year period compared to the S&P 500's gain of 45.8%. Earnings estimates have been rising too, and TXRH is a Zacks Rank #1 (Strong Buy) right now.
For fiscal 2021, 10 analysts have revised their bottom-line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up from $2.38 to $3.26 per share, reflecting bottom-line growth of over 624%. Analysts are bullish about 2022 as well, and TXRH is expected to continue generating strong profits.
Looking ahead, management is confident about Texas Roadhouse's short and long-term growth path. The company plans to open 25 to 30 new locations this year, and reiterated weekly store growth of 4% to 5%.
And good news for investors: TXRH recently announced that it has reinstated its quarterly dividend after suspending the payout last March to help preserve cashflow. Shareholders of record as of May 19 will receive a dividend of $0.40 on June 4. Shares now yield 1.65% on an annual basis.
If you're an investor searching for a restaurant stock to add to your portfolio, make sure to keep TXRH on your shortlist.
Bear of the Day:
Founded in 1928, Kimberly-Clark Corp. is a well-known global consumer products manufacturer. Its brand portfolio includes Huggies, Pull-Ups, Kleenex, Scott, and Cottonelle.
Q1 Earnings Weaker-Than-Expected
Kimberly-Clark reported a sharp decline in growth and sales volume in the first quarter. Organic sales slumped 8% over the prior-year period to $4.7 billion, a stark shift from last quarter's 5% increase.
Management attributed this to tough year-over-year comparisons, when tissue paper and toilet paper were flying off the shelves, as well as weather-related shipping and manufacturing disruptions. Right now, people just aren't stocking up on essentials like they were in the beginning of the pandemic.
Sales in North America fell 7%, and volumes dropped about 7%, driven by supply chain disruptions, and were down in all major product categories.
Expenses ended up outpacing revenue to kick off the fiscal year, and as a result, operating income dropped to $770 million, or 16.2% of sales.
KMB is now a Zacks Rank #5 (Strong Sell).
Five analysts have cut their full year earnings outlook over the past 60 days, and the consensus estimate has fallen 48 cents to $7.41 per share. Wall Street has lowered its earnings picture for 2022 as well, but the bottom line is still expected to post year-over-year growth.
Shares have struggled to gain traction so far in 2021. Year-to-date, KMB is down 0.36% compared to the S&P 500's gain of 11.2%.
Looking ahead, Kimberly-Clark now expects total sales to rise by less than 1% for the year, down from the previous forecast of gains between 1% and 2%; adjusted profits are expected to fall in the range of 3% to 6%.
Management, however, is still optimistic that the business will be back on track by the end of 2021. And for investors, any price pain will be healed by KMB's juice dividend, which sports a yield of 3.4%.
Investors who are interested in adding a consumer staples stock to their portfolio could consider Paper Mate and Sharpie maker Newell Brands, a #2 (Buy) on the Zacks Rank. Its Zacks Consensus Estimate has jumped 9 cents to $1.73 a share for fiscal 2021.
3 Value Stocks Around 52-Week Highs
It's pretty easy to overlook value stocks... especially when we're preparing for an economic boom after an unprecedented pandemic that shut down the economy for more than a year. So you're going to need something more than a good value to get the attention of investors.
That's where the Value Stocks at 52-Week High screen comes in. Not only does this look for good value, but it also demands Zacks Rank #1s (Strong Buys) or #2s (Buys) that are within 5% of their 52-week highs AND have a Zacks Value Style Score of "A". Now that's a lot more exciting than just talking about entry prices and sustainability.
Below are three stocks that have recently passed the test:
Global shipments of PCs continued to soar in the first quarter of 2021 after being in high demand throughout 2020. That's what happens when you shut down the economy and force hundreds of millions of workers/students to do their jobs/studies from their home offices/kitchen tables. It was certainly a boon for good old HP Inc.
The company is a leading provider of personal computing and other access devices, imaging and printing products, and related technologies, solutions and services to individuals and businesses of all sizes. It's Personal Systems segment accounted for 69% of fiscal 2020 revenues, while the Printing segment accounted for 31%.
As part of the computer – mini computers space, HPQ is in the top 18% of the Zacks Industry Rank. Shares are up approximately 125% over the past 12 months and more than 37% this year. It has beaten the Zacks Consensus Estimate for eight straight quarters now and will be taking centerstage again later this month on May 27.
It's most recent report included earnings per share of 92 cents, which beat the Zacks Consensus Estimate by 41.5% and brought the four-quarter average surprise to over 22%. The result also marked a solid improvement over the previous year's 65%.
Revenues of $15.6 billion inched past the Zacks Consensus Estimate of $15.2 billion and improved 7% year over year. Revenue for Personal Systems rose 7%, including a 34% increase for the consumer side. Revenue for the Printing was also up 7% with the consumer increasing 55%. As you'd expect, each segment saw declines for their commercial sides amid the pandemic.
It generated $0.9 billion in free cash flow during the quarter and paid a dividend of $0.1938 per share. HP repurchased about 60.2 million shares of common stock and was, therefore, able to return 179% of free cash flow to shareholders.
Looking forward, HP expects non-GAAP earnings per share between $3.15 and $3.25 for fiscal 2021. The Zacks Consensus Estimate for that year (which ends in October) is up 25% over the past three months to $3.34. Expectations for next fiscal year (ending October 2022) are up 13% in that time to $3.38.
The year-over-year improvement is only four cents at the moment, but that's better than a lot of companies these days. There's plenty of time for improvement, especially since many people will likely choose to continue working from home. That will keep demand robust for desktops, notebooks and workstations moving forward.
Interpublic Group of Companies
There's going to be so much more to advertise in the next few months! With the world's largest economy about to re-open after an unprecedented shutdown, the marketing & advertising space will be getting a lot of business. Companies will want to harness as much of that pent-up demand as possible to make up for this year-long lull, so they're going to need a partner that knows what they're doing and has a track record of success.
That's the cue for Interpublic Group of Companies, which is one of the world leaders in advertising and marketing services. The company specializes in consumer advertising, digital marketing, public relations, communications planning & media buying, and specialized communications disciplines. IPG has a broad list of global and regional customers in more than 110 countries.
Shares of IPG are up approximately 110% in the past 12 months and about 40% so far in 2021. The company has put together 11 straight quarters of positive surprises. The most recent came late last month.
Earnings per share of 45 cents beat the Zacks Consensus Estimate by more than 181%, bringing the four-quarter average to more than 61%. Net revenues of $2.03 billion beat our expectation by 2.8% and improved from the previous year by the same percentage.
IPG's digital capabilities, diversified business model and geographic reach offer the company an advantage moving forward. Plus, it really knows how to take care of its shareholders. IPG paid $398.1 million in dividends last year and $363.1 million in 2019.
Earnings estimates have been on the rise over the past 30 days. The Zacks Consensus Estimate for this year is up 8.2% in that time to $2.12, while next year has advanced 8.5% to $2.31. Therefore, analysts currently expected year-over-year profit growth of 9%, which is likely to increase as the economy gets back to normal.
Remember when a salesperson would actually put the shoe on your foot? That was back in the days when no one heard of 'social distancing'. Like nearly everything else, buying shoes sure has changed over the years. Not only is Al Bundy not necessary, but you don't even really need the store either.
Take Foot Locker, for example. This company got both barrels from the pandemic with store closures and supply chain congestion... and yet it's still beating earnings expectations and enjoying upward estimate revisions. Like any company that made it through this shutdown, it learned how to thrive digitally and is expecting big things once we reopen.
Foot Locker is a retailer of athletic shoes and apparel with approximately 3,000 stores across 28 countries. As part of the Retail – Apparel and Shoes space, it's in the top 27% of the Zacks Industry Rank. Shares are up approximately 173% over the past 12 months, including around 57% year to date.
The company reports again on May 21 when it will be going for a fourth straight quarter with a positive earnings surprise.
In its fiscal fourth quarter, FL reported earnings per share of $1.55, which topped the Zacks Consensus Estimate by practically 14%. Total sales of $2.19 billion fell short of our expectations and declined year over year by 1.4%. However, its digital business saw double-digit growth with strength across the board.
With covid still around (though hopefully on its last legs), FL still doesn't feel comfortable offering guidance for the year. However, the digital growth, robust brand portfolio and smart inventory management are all positives moving forward. In fact, analysts are feeling optimistic for the future.
The Zacks Consensus Estimate for this year (ending January 2022) advanced 4.5% over the past three months to $4.63. Expectations for next year (ending January 2023) are up 6.1% in that time to $5.04. Therefore, analysts currently expect year over year growth of just about 9%.
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/performance for 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
HP Inc. (HPQ) : Free Stock Analysis Report
KimberlyClark Corporation (KMB) : Free Stock Analysis Report
Interpublic Group of Companies, Inc. The (IPG) : Free Stock Analysis Report
Texas Roadhouse, Inc. (TXRH) : Free Stock Analysis Report
Foot Locker, Inc. (FL) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research