Zacks Bull and Bear of the Day Highlights: Cabela's, Iconix Brand Group, Office Depot, Newell Rubbermaid and Staples
For Immediate Release
Chicago, IL – June 27, 2012 – Zacks Equity Research highlights Cabela's Inc. (CAB) as the Bull of the Day and Iconix Brand Group (ICON) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Office Depot Inc. (ODP), Newell Rubbermaid Inc. (NWL) and Staples Inc. (SPLS).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
Cabela's Inc.'s (CAB) first-quarter 2012 earnings of $0.40 per share beat the Zacks Consensus Estimate of $0.33, and surged 60% from the prior-year quarter. The quarter witnessed healthy revenue growth and profitability at its retail segment, improved performance at Cabela's CLUB Visa program, increased merchandise gross margin and boost in market share. Merchandise gross margin expanded 150 basis points to 34.5% during the quarter.
Management reiterated its long-term goal of increasing the margin by 200-300 basis points. Driven by improving trends, the company expects earnings to increase at a double-digit rate in fiscal 2012. The company, in view of enhancing its retail square footage growth, is focusing on its next-generation store format and new Outpost store format.
Moreover, the company remains committed to alleviate bad debt risk in its credit card business. The gradual improvement in the economy has lowered delinquencies and charge-offs.
We are downgrading our recommendation on Iconix Brand Group (ICON) to Underperform from Neutral, following the disappointing first quarter 2012 results. Iconix's first quarter earnings of $0.43 per share lagged the Zacks Consensus Estimate by $0.03 per share and the prior-year quarter earnings by $0.02 per share, due to revenue declines.
Revenues declined 4% primarily due to underperformance of men's brands of Rocawear, Ecko and Ed Hardy. The weak demand in these brands also led to a cut in the company's revenue and earnings guidance. Further, the transition of Royal Velvet brand to J.C. Penney acted as a significant driver of the decline in the quarter.
Over the last five years, Iconix's shares have traded in the range of 7.0x to 27.4x trailing 12-month earnings. Our target price of $15.00 is based on approximately 8.9x our 2012 earnings estimate.
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Office Depot Partners with Newell
Office Depot Inc. (ODP), a global supplier of office products and services, recently announced a new deal with Newell Rubbermaid Inc. (NWL). As per the new deal, Rubbermaid storage products will be available at Office Depot brick and mortar and online stores.
Office Depot believes that the new deal will drive growth opportunities and open several avenues for the company in the storage and organization solution industry. The company already sells a few Rubbermaid products at its stores and is looking to expand the range of products given the growth prospects in the category.
Newell Rubbermaid foresees several new prospects across the industry and believes that the deal will help expand its customer base and drive the company’s sales going forward.
Office Depot recently posted first-quarter 2012 earnings of 5 cents a share, a sharp improvement from the break-even results in the comparable prior-year quarter. However, reported earnings came in line with the Zacks Consensus Estimate.
The company’s total revenue of $2.87 billion decreased approximately 3% year over year and was almost in line with the Zacks Consensus Estimate.
Management now expects total sales for the second quarter of 2012 to decline 3% from the year-ago quarter, and further hinted that adjusted operating income would decline $20 million to $30 million. Further, Office Depot forecasted that the North American Retail division’s comparable-store sales would decline in the second quarter, and expects International division sales to fall 4% to 5% in constant currency.
Conclusion
We believe that the company’s strategic plan to enter the fast-growing storage and organization industry will prove to be accretive to sales growth.
However, due to high exposure to international markets, Office Depot remains prone to currency fluctuations. The weakening of foreign currencies against the U.S. dollar may require the company to either raise prices or see its profit margins contracting in locations outside of the U.S. An increase in price may have an adverse impact on the demand for the products.
Office Depot faces stiff competition from office supply retailers, such as Staples Inc. (SPLS), and wholesale clubs, discount stores, mass merchandisers, computer and electronics superstores on attributes such as store format, pricing strategy and in-stock consistency. This may weigh upon the company’s results.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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Read the analyst report on CAB
Read the analyst report on ICON
Read the analyst report on ODP
Read the analyst report on NWL
Read the analyst report on SPLS
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