For Immediate Release
Chicago, IL – June 19, 2020 – Zacks Equity Research Shares of Wayfair Inc. W as the Bull of the Day, H&E Equipment Services, Inc. HEES asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Tesla TSLA, HollyFrontier HFC and Phillips 66 PSX.
Here is a synopsis of all five stocks:
Bull of the Day:
Wayfair Inc. is one of the big COVID-19 retail winners, but can the magic last? This Zacks Rank #1 (Strong Buy) is expected to grow sales by the double digits this year.
Wayfair is an online home products retailer that operates several brands including Wayfair, Joss & Main, AllModern, Birch Lane, and Perigold in the United States and Europe.
A Q1 Beat That Shook the Market
On May 5, Wayfair reported its first quarter results and beat the Zacks Consensus by 9.5%. Earnings were a loss of $2.30 versus the Zacks Consensus of a loss of $2.54.
But it was the surge in revenue that excited Wall Street. Net revenue jumped 19.8% to $2.3 billion as shelter-in-place purchases soared.
The consumer WAS buying during the pandemic.
U.S. net revenue was up 19.1% while International jumped 23.7%.
Non-GAAP free cash flow was a negative $354.6 million.
At the end of the first quarter, cash, cash equivalents, and short- and long-term investments were $891 million.
Analysts Raise Full Year Estimates
The analysts are bullish as consumers have taken to online shopping during the lock down and home is where the heart is.
16 estimates were revised higher for the full year in the last 2 months which pushed the Zacks Consensus Estimate up to a loss of $4.23 from a loss of $9.62 just 90 days ago.
They are bullish on 2021 as well as the Zacks Consensus jumped up to a loss of $3.12 from a loss of $8.32 in the last 90 days.
Sales are now expected to jump to $12.47 billion up from $9.13 billion last year, which is growth of 36.7%.
Too Hot to Handle?
Wayfair shares have been among the big winners this year. They are up 122% year-to-date, but the bounce off the March bottom has been even more striking.
Over the last 3 months, shares are up 554%.
Is it too hot to handle?
The company has never made money and isn't expected to this year or next. Many are asking, if it can't make money when everyone is buying online during a pandemic, when will it?
It's market cap of $19 billion dwarfs that of profitable competitors like Williams-Sonoma, another Zacks Rank #1 (Strong Buy) which has a market cap of $6.6 billion.
But if you're playing the momentum, there are few stocks with as much momentum in 2020 as Wayfair.
[In full disclosure, the author of this article owns shares of WSM in her personal portfolio.]
Bear of the Day:
H&E Equipment Services, Inc. got hit by the COVID-19 slowdown in March. This Zacks Rank #5 (Strong Sell) saw revenue decline 8.8% in the first quarter.
H&E Equipment Services rents, sells and provides parts and service support in the United States for specialized equipment in 4 core areas: (1) hi-lift or aerial platform equipment; (2) cranes; (3) earthmoving equipment; and (4) industrial lift trucks.
Another Earnings Beat in the First Quarter
On May 8, H&E Equipment reported its first quarter results and beat the Zacks Consensus by $0.07. Earnings were $0.30 versus the Consensus Estimate of $0.23.
Revenue fell 8.8% to $285.9 million down from $313.6 million a year ago.
New equipment sales fell 47.8% to $30.9 million from $59.1 million in the prior year as the COVID-19 pandemic caused businesses to get cautious.
Used equipment sales actually rose 5.3% to $31.2 million, up from $29.6 million a year ago.
2020 and 2021 Estimates are Cut
H&E Equipment is an essential business, so they have remained operating throughout but the analysts are bearish on the rest of the year as the pandemic continues to impact the US economy.
2 estimates were cut in the last 2 months for 2020 which pushed the Zacks Consensus Estimate down to $0.78 from $2.13 just 90 days before.
That's a decline of 71% as the company made $2.67 in 2019.
Analysts also cut 2021 which pushed down the Zacks Consensus Estimate to $1.43 from $2.34 just 3 months before.
Shares Up Big Off the Lows
Like many stocks, H&E Equipment's shares fell sharply in the coronavirus sell-off and has now staged a big recovery.
Shares are up 55.4% in the last 3 months, but still remain down 45.7% year-to-date.
Because of the earnings cuts, they're not cheap on a P/E level, with a forward P/E of 23.7.
The company does reward shareholders and is still paying its dividend, which yields 5.9%.
Market Races Toward the Green in Thursday Trading
Market indexes made a race to positive territory in the last hour of regular trading Thursday, with both the S&P 500 and Russell 2000 crossing just a hair into the green. The Nasdaq had kept on the plus-side most of the day, keeping its strength among indexes as it stays positive for the ninth trading day in the last 10 — led by big-cap tech, as per usual.
Nasdaq superstar Tesla finished above $1000 per share Thursday on upward guidance, growing 1.23% during regular trading hours. The stock has been on a tear, now up 140% year to date. Which is extraordinary for a good stock in a great industry, let alone one expected to deliver 50% fewer automobiles over the course of Q2. Tesla has no delivery guidance, as pandemic conditions have wreaked havoc on auto manufacturers’ expectations.
Also demonstrating strength today were Energy stocks, including HollyFrontier, up nearly 5% today, and Phillips 66, up 4.6%. A meeting today of OPEC+ heads recommitted their commitment to production cuts going forward, in order to work down the global supply glut and bring about price increases. The gradual reopening of economies around the world will bring about more fossil fuel energy use, and unless everyone goes out and buys a Tesla — which some people clearly expect to happen (see above) — more motorists on the roads will help bring about more oil usage.
We have fewer than two weeks before the end of calendar Q2. By all accounts, it will be a rough one. But when earnings reports begin to filter in a month from now, along with monthly and quarterly economic data, the bad news we’re certain to absorb will come with one comforting thought: it was a condition of the recent past. As long as the path forward is filled with reopenings — and especially re-hirings — we might expect a far better Q3.
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