For Immediate Release
Chicago, IL – July 29, 2020 – Zacks Equity Research highlights Tractor Supply Company TSCO as the Bull of the Day and Tanger Factory Outlet Centers, Inc. SKT as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Cisco Systems CSCO, Agilent Technologies A and Benefitfocus, Inc. BNFT.
Here is a synopsis of all five stocks:
Bull of the Day:
Tractor Supply Company recently posted one of the best quarters I've ever seen by a big box retailer. This Zacks Rank #1 (Strong Buy) saw record sales and earnings in the second quarter.
Tractor Supply Company operates 1,881 stores in 49 states along with an e-commerce website. If you're not familiar with the brand, that means you don't live in a rural area. It's motto is for life "Out Here". It's a one-stop shop for recreational farmers, ranchers and others living in rural areas.
Additionally, Tractor Supply owns and operates Petsense, a small-box pet specialty supply retailer, which focuses on the needs of pet owners in small and mid-sized communities. It operates 180 Petsense stores in 25 states.
A Big Beat in Q2
The second quarter was supposed to be "awful" for most companies but Tractor Supply operated as an essential business during the coronavirus shutdown, and its customers remained loyal by shopping online and using the extended benefits like curbside pick-up.
On July 23, Tractor Supply reported its second quarter 2020 results and blew by the Zacks Consensus by $0.28. Earnings were $2.90 versus the consensus of $2.62.
Net sales rose 35% to a new record high of $3.2 billion from $2.4 billion in the year ago quarter.
Comparable store sales, a key metric in retail, jumped 30.5% as comparable transaction count and comparable average ticket rose 14.6% and 15.8%, respectively.
It saw unprecedented demand for spring and summer seasonal categories, with big growth in everyday merchandise, including consumable, usable and edible products. Consumers were focusing on their homes, land and animals during the quarter.
It saw strong comps in all geographic regions.
Additionally, its ecommerce business saw triple-digit sales growth.
Gross margin rose 155 basis points to 36.4% from 34.9% due to less promotions and lower transportation costs.
Bullish Q3 Guidance
Tractor Supply saw the strong consumer trends continue into the third quarter so it gave bullish guidance including comparable sales in the range of 12% to 18%. Very few retailers are able to ever get to the magic level of double digit comparables.
Earnings are expected to be between $1.15 to $1.35.
The analysts reacted to the strong second quarter and the guidance by raising their 2020 and 2021 earnings estimates.
The Zacks Consensus for 2020 jumped to $6.18 from $5.64 since the earnings report. That's earnings growth of 32% compared to 2019 as Tractor Supply only made $4.68 last year.
9 estimates were also revised higher for 2021, pushing the Zacks Consensus up to $6.30 from $5.91 in that time.
Plenty of Cash on Hand
Lots of investors want to know what the cash situation is for companies right now. And for good reason.
Tractor Supply had $1.3 billion in cash at the end of the second quarter.
It had not drawn down anything from its $500 million revolving credit facility either.
Shares at 2-Year Highs
Shares have been soaring the last few months and are now up 53% year-to-date.
They're hitting new 2-year highs.
But with earnings estimates actually on the rise, shares are not really expensive here. Tractor Supply has a forward P/E of 23.
Investors also get a dividend, currently yielding 1%.
For investors looking for a retailer operating on all cylinders during the coronavirus crisis, Tractor Supply is one to keep on the short list.
Bear of the Day:
Tanger Factory Outlet Centers has found itself caught in the coronavirus pandemic as its centers closed around the country. This Zacks Rank #5 (Strong Sell) is expected to see earnings fall 28% in 2020.
Tanger Factory Outlet Centers is a REIT that owns and operates 39 upscale outlet shopping centers in 20 states and Canada.
It has leased out over 2,800 stores.
A Business Update as the Economy Re-Opened
On June 15, Tanger gave a business update as mandates had been lifted or eased and in-store shopping was again allowed in all 39 of its outlet centers.
The vast majority are open air centers.
As of June 14, open stores represented 72% of total occupied stores in the portfolio and 69% of pre-COVID-19 annualized base rent.
Weekly traffic exceeded 85% of the prior year levels.
At the centers which had seen in-store retail for 30 days or more, weekly traffic exceeded 90% of the prior year levels and open stores as a percentage of total occupied stores was approaching 90%.
In June, the shoppers were returning.
But since this business update, the company has not put out another one in July. It is due to report second quarter earnings results on Aug 5.
2020 Earnings Estimates Are Cut
The analysts have been bearish on 2020 over the last 90 days.
2 estimates were cut during that time and the Zacks Consensus Estimate has fallen to $1.64 from $1.79.
That's an earnings decline of 27.8% as Tanger made $2.27 a year ago.
Shares Remain Below Prior Highs
Tanger's shares have bounced off the coronavirus lows but still remain down 54% year-to-date.
The shares remain cheap, on a P/E basis, with a forward P/E of just 4.
But the dividend was suspended in May and remains suspended, for now.
This is a difficult time to own a shopping center REIT. Be sure to tune into the earnings calls for companies in this industry this earnings season.
Brokers Recommend These Tech Stocks & So Do We
With the FAANG stocks beginning to report this week, there’s much excitement around tech. That’s because, being some of the largest-cap stocks, they tend to influence overall market movement and especially, tech-heavy indexes like the NASDAQ. And of course movement in these indexes has an overall impact on sentiments, which indirectly impacts movement in other stocks as well. Often times, this is what sustains prolonged bull runs, creating many opportunities for investors.
But it probably isn’t such a good idea to pick your stocks on that basis alone. A certain amount of momentum trading helps generate quick gains (or losses), depending on how opportunistic you’ve been. But overall, it’s a much better idea to look at the company itself, check out its growth prospects, read the numbers and take note of management’s strategic commentary and directional guidance.
This can be a tedious process and at times, hard to understand, especially when the matter you’re reading is highly technical. So to make things simpler, we use Zacks proprietary methodologies that have proved themselves over the years.
Combining these with average broker ratings enables us to identify names on which we are in agreement, which further increases chances of accuracy.
With that goal in mind, I’ve picked three technology stocks that look ripe for the picking-
First up is Cisco Systems. Pretty much a bellwether in its own right, Cisco makes IP-based networking tech like swiches, routers, and wireless and security devices for service providers, enterprises, commercial users and individuals.
The shares carry a Zacks Rank #2 (Buy recommendation) and belong in the computer-networking industry, which is in the top 37% of Zacks-ranked industries.
The Zacks Rank (#1 through #5) identifies directional tendencies in stocks based on a large number of factors. So #1 (Strong Buy) and #2 (Buy) ranks indicate chances of upward movement while #4 (Sell) and #5 (Strong Sell) indicate downward pressure. At times, stocks with strong potential slip back to the #3 (Hold) position simply on valuation considerations. In such cases, it’s advisable to wait for a better entry or exit point.
As far as the industry rank is concerned, it has been proven time and again that of the 250+ Zacks-ranked industries, the top half outperforms the bottom half by a factor of more than 2 to 1. This generally happens because there are factors that affect the industry as a whole and therefore all the players in it. So for instance, when the Internet is used more for both work and entertainment as more people do everything at home, this would naturally tend to increase demand for networking gear from companies providing these services to people.
So all companies providing networking gear (like Cisco, for example) would see rising demand. If unprepared, it could deplete inventory across the industry, push up prices and generate stronger growth for most players. This kind of thing is captured in the industry rank.
Cisco has a Growth Score B. This is a style score, indicating the kind of investor that would find the stock particularly attractive. A growth score of A or B is generally favored by growth investors. The Zacks score takes care to factor in information from the income statement, balance sheet, cash flow and other areas to eliminate the risk inherent in this kind of investment. Since Cisco is a really big company, it typically doesn’t see big fluctuations in earnings, making for more stable returns.
The company will report results on Aug 12. Its earnings expected surprise prediction (ESP) is +2.96%. This means that the more recent estimates on Cisco are higher than the older ones, which generally happens when there is some positive news. When coupled with a Zacks Rank of #3 or higher (as in this case) it is an indication of a positive earnings surprise. Also encouraging in this regard is its surprise history, which averages +3.99% in the preceding four quarters and further increases chances of a positive surprise.
Its average broker rating is 1.85, equivalent to a Zacks Rank #2.
Valuation: On the basis of price to forward 12 months earnings (P/E), the shares are trading at 15.04X, below the median value of 15.56X. The S&P 500 is trading at its annual high of 22.49X. So the shares are undervalued.
Second, we have Agilent Technologies, which makes test and measurement products for electronics, industrial and chemical markets.
The shares carry a Zacks Rank #2 and belong in the electronics-testing equipment industry, which is in the top 13% of Zacks-ranked industries.
Its Growth Score is B.
The company will report on Aug 12. Its earnings ESP is 3.48%, indicating a positive earnings surprise. The average surprise in the preceding four quarters is 7.87%.
The average broker rating for Agilent is 1.91, equivalent to a Zacks Rank #2.
Valuation: Agilent shares are trading at their annual high of 28.23X, just like the S&P 500. But given expectations of a positive earnings surprise, they could move higher before long.
Finally, there’s Benefitfocus, Inc., which offers a cloud-based benefits management platform facilitating shopping, enrollment, management and exchange of benefits information between consumers, employers, insurance carriers and brokers in the U.S.
The Zacks Rank #2 Buy company belongs in the Internet - software industry, which is in the top 38% of Zacks-ranked industries.
Its growth score is B.
The company will report on Aug 5. Its earnings ESP is +3.48%, indicating a positive earnings surprise. The average surprise in the preceding four quarters is 71.65%.
The average broker rating for Benefitfocus is 1.57, equivalent to a Zacks Rank #2.
Valuation: On the basis of price to forward sales (P/S), BNFT is trading at 1.30X, which is below its median value of 1.86X over the past year. The S&P 500 is trading at its annual high of 3.60X. so the shares are undervalued.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
See the 5 high-tech stocks now>>
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Cisco Systems, Inc. (CSCO) : Free Stock Analysis Report
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Tractor Supply Company (TSCO) : Free Stock Analysis Report
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