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For Immediate Release
Chicago, IL – September 30, 2021 – Zacks Equity Research Shares of Williams-Sonoma Inc. WSM as the Bull of the Day, Aterian Inc. ATER as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Marriott International, Inc. MAR, Choice Hotels International, Inc. CHH and Playa Hotels & Resorts N.V. PLYA.
Here is a synopsis of all five stocks:
Bull of the Day:
Headquartered in San Francisco, Williams-Sonoma is a specialty home goods and furniture retailer founded in 1973.
The company has five core operating segments, each of which make up its brand portfolio: Pottery Barn, West Elm, the namesake Williams-Sonoma, Pottery Barn Kids & Teen, and Other, which includes Rejuvenation and Mark and Graham.
Q2 Earnings Recap
Back in August, Williams-Sonoma crushed expectations for its fiscal second quarter.
Adjusted earnings per share came in at $3.24 while revenue hit $1.96 billion, up 30.7% year-over-year, easily beating top and bottom-line estimates.
Impressively, e-commerce now makes up 65% of the company’s total revenue.
Total comparable sales rose nearly 30% compared to the prior-year period. West Elm was a stand out once again, reporting comps growth of 51.1%; Pottery Barn saw comps rise 29.6% as well.
Gross margin expanded 710 basis points to 44.1%, driven higher by year-over-year merchandise margin gains.
WSM’s liquidity position remains strong. The retailer generated $655 million in cash and more than $475 million in operational cash flow in Q2. This allowed WSM to repurchase an additional $135 million in shares during the period.
Plus, Williams-Sonoma rewarded shareholders with a 20% dividend increase; the upcoming dividend of $0.71 will be paid out on Nov. 26 to investors of record as of Oct. 22. Shares currently yield 1.23% on an annual basis.
Can WSM Surge Higher?
Year-to-date, shares of WSM have risen over 88% compared to the S&P 500’s gain of 16%. Earnings estimates have climbed as well, making the home-focused retailer a Zacks Rank #1 (Strong Buy) right now.
For the current fiscal year, nine analysts have revised their bottom-line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up from $11.74 per share to $13.31 per share. Earnings are expected to spike over 47% year-over-year for fiscal 2021, with 2022 continuing the positive earnings growth trend.
Williams-Sonoma’s growth initiatives are clearly paying off faster than expected.
The company now anticipates full-year revenue growth to be in a “high-teens to low-20s” percentage target range. Additionally, management believes it will now reach its goal of $10 billion in annual sales by 2024, one year ahead of estimates.
If you’re an investor searching for a retail stock that offers both future growth and a well-covered dividend, make sure to keep WSM on your shortlist.
Bear of the Day:
Aterian, formerly known as Mohawk Group Holdings, is a technology-enabled platform which builds, acquires, and partners with e-commerce brands by harnessing proprietary software and an agile supply chain to create consumer products.
Why Q2 Earnings Disappointed Wall Street
Shares plunged after Aterian reported second quarter results back in August.
Even though revenue grew 14% year-over-year to $68 million, the top line fell well below analyst expectations of $94 million. Adjusted EBITDA fell to a loss of $3.7 million versus estimates of an EBITDA gain of $3.3 million.
CEO Yaniv Sarig said that last quarter was deeply impacted by the “global supply chain crisis, inflation, and an extreme shift in consumer behavior due to the opening of brick-and-mortar stores” now that Covid-19 restrictions are relaxing.
Because of this, management declined to offer guidance for its near-term financial results.
ATER is now a Zacks Rank #5 (Strong Sell).
Two analysts have cut their full year earnings outlook over the past 60 days. Aterian’s bottom line is expected to decline almost 200% year-over-year, and the consensus estimate has fallen from a loss of $2.74 to a loss of $4.47 per share for fiscal 2021. Next year’s earnings consensus has dropped as well, but Wall Street expects earnings to post double-digit growth.
Shares have been volatile so far in 2021. Year-to-date, ATER is down roughly 42% compared to the S&P 500’s gain of 16%.
Looking ahead, the company anticipates high uncertainty for its business to continue for the time being, as inflationary and rising shipping costs put pressure on its profitability goals.
Another factor weighing on the stock is a recent agreement Aterian made with lender High Trail to pay down $66.3 million in debt, but part of the deal was Aterian issuing new shares to help pay down the money it owes. This isn’t the first time the company has decided to sell new shares in order to raise capital, magnifying concerns about overall share dilution.
Even though management remains optimistic about the company’s long-term growth potential, investors may want to wait on the sidelines until the outlook improves.
3 Hotel Stocks to Watch as Occupancies, RevPAR Improve
Although the pandemic has forced alterations in consumer behaviour and spending toward travel and tourism, the U.S. hospitality industry continues to show resilience. Heightened consumer confidence owing to leniency in restrictions and ramped up vaccinations have been paving a path for higher-than-expected room blocks. Also, the fact that the hoteliers are focusing on cost reduction and productivity enhancement initiatives is lowering breakeven occupancy levels across the globe.
Improving Trends Uplifting Spirits
Per the STR report, U.S. hotel occupancy (from Sep 12 to Sep 18, 2021) improved week over week, primarily on a rise in weekly group demand. Occupancy rates for the week ending Sep 18 came in at 63% compared with 60% in the prior week.
Although an improvement in group demand created a lowering effect on average daily rate (ADR) primarily on account of lower room prices, ADR improved week over week. ADR during the week came in at $131.04 compared with $130.82 in the previous week. During this duration, RevPAR for U.S. hotels came in at $82.5 compared with $78.46 in the previous week.
Although the rate of recovery continues to be highly uneven and heavily dependent on successful vaccination rollouts, the companies are witnessing rapid return of guests in areas where rules have been eased and people feel they can travel safely.
Among the top 25 markets tracked by STR, New Orleans reported highest occupancy and RevPAR growth of 7.3% and 18.2% through Sep 12 to Sep 18, 2021 compared with 2019 levels. Miami reported the highest ADR growth of 22.5% (to $166.04) compared with 2019 levels.
What Next for the Industry?
As regions prepare for recovery and owners focus on growth opportunities, emphasis on development activities is gaining momentum. Hotel owners continue to focus on maintaining a balance between maximizing hotel profitability, while driving guest satisfaction.
To this end, hoteliers have continued with the practice of evolving their respective contactless experience and leveraged technologies such as mobile and web check-in as well as mobile key. Also, they have increased the use of these digital tools to strengthen infrastructure, grow online package sales, enable self-service bookings, make real-time offerings and enhance the overall customer experience.
Ease in international travel is likely to act as a tailwind. Per a Reuters report, the White House issued a statement, wherein it lifted restrictions on vaccinated international travelers. This includes travelers from France, Germany, Italy, Spain, Switzerland and Greece as well as Britain, Ireland, China, India, South Africa, Iran and Brazil.
As we continue to keep a close eye on variant strains, optimism about continued global recovery remains intact on the back of increased air traffic. Although leisure transient trends are encouraging, we are fully aware that group and business transient demands need to improve significantly to reach full revenue per available room (or RevPAR) recovery.
3 Hotel Stocks to Keep an Eye On
Given the backdrop, this is an appropriate time to look at some hotel companies with strong fundamentals that stand to benefit. Here, we have highlighted three stocks that have not only performed better than the industry in the past year but also boast solid prospects. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Marriott Internationaloperates, franchises and licenses hotel, residential as well as timeshare properties worldwide. Shares of this Zacks Rank #3 (Hold) company have surged 65.9% in the past year compared with the industry’s 45.1% rally.
The company has been benefiting from focus on expansion initiatives, digital innovation and loyalty programs. It is also witnessing improvement in occupancy and new bookings in Mainland China, as businesses are picking up.
The company plans to strengthen presence outside the United States, especially in Asia, Latin America, Middle East and Africa. The Zacks Consensus Estimate for 2021 earnings has been revised 55.4% upward in the past 90 days. The consensus mark for its 2021 earnings indicates an improvement of 1,583.3% year over year.
Choice Hotels International, a hospitality company, owns and franchises hotels across the globe. Shares of this Zacks Rank #3 company have gained 50.6% in the past year. The company is benefiting from continued expansion strategies through acquisitions and franchise agreements.
Choice Hotels’ Ascend portfolio has been doing solid business. Going forward, it is likely to benefit from the expansion strategies, enhancement of the mid-scale brand as well as transformation and advancement of the Comfort brands.
The Zacks Consensus Estimate for its 2021 earnings has been revised 15.1% upward in the past 90 days. The consensus mark for its 2021 earnings indicates a surge of 71.6% year over year.
Playa Hotels & Resorts, together with its subsidiaries, owns, develops and operates resorts in prime beachfront locations in Mexico and the Caribbean. Shares of this Zacks Rank #3 company have gained 104.3% in the past year. Focus on direct booking channels enabled the company to ramp up occupancy faster than many third-party reliant competitors.
Going forward, the company is optimistic with respect to ramped up airlift activities particularly for Europeans and Canadians. This along with pent-up demand and improved execution of offerings are likely to add to the positives.
The Zacks Consensus Estimate for 2021 earnings has been revised 66.3% upward in the past 90 days. The consensus mark for its 2021 earnings indicates a rise of 59.6% year over year.
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Marriott International, Inc. (MAR) : Free Stock Analysis Report
Choice Hotels International, Inc. (CHH) : Free Stock Analysis Report
WilliamsSonoma, Inc. (WSM) : Free Stock Analysis Report
Playa Hotels & Resorts N.V. (PLYA) : Free Stock Analysis Report
Aterian, Inc. (ATER) : Free Stock Analysis Report
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