Aramark, Nortek, Hanesbrands, V.F.and Abercrombie & Fitch highlighted as Zacks Bull and Bear of the Day
CHICAGO, Sept. 26, 2014 /PRNewswire/ -- Zacks Equity Research highlights Aramark (NYSE:ARMK-Free Report) as the Bull of the Day and Nortek (Nasdaq:NTK-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Hanesbrands Inc. (NYSE:HBI-Free Report), V.F. Corporation (NYSE:VFC-Free Report) and Abercrombie & Fitch Co. (NYSE:ANF-Free Report).
Here is a synopsis of all five stocks:
After a miserable day like we just saw yesterday, it's tough to jump back in and give a positive spin on anything. It seemed like there was no place to hide unless you were holding GoPro or Zoes. The rest of the market got taken out back behind the woodshed. The sell-off was relentless and affected every sector of the broad market.
But I thought given the situation in the market right now it may make sense to find something that's going to be a bit more defensive. I set out to find a stock we could look at that is an industry that is non-cyclical and could hold up through tough time. I'm not saying the economy is suddenly going to head south. I'm just saying it would be nice to find an old school company with some solid earnings we can sink our teeth into.
Aramark (NYSE:ARMK-Free Report) is a $14 billion global provider of award winning services in food, facilities management, and uniforms. If the fourth quarter goes anything like Q3 2014 was, investors are in for some good news right around the quarter. Q3 saw sales of $3.6 billion with organic growth of 4%. Adjusted operating income was up 10% to $192.4 million while operating income came in at $141.3 million.
This amounted to EPS of 19 cents with year-to-date sales topping $10.9 billion. This caused the company to raise its full year guidance to a range of $1.45 to $1.50. President and CEO Eric J. Floss stated, "I am pleased to report another quarter of strong business results achieved within a challenging consumer and economic environment. Our performance reflects solid execution against a sound strategy and was broad-based across the segments and geographies of our portfolio. Based upon this strength and our overall business momentum, we are increasing our full-year 2014 earnings outlook."
These bullish comments from the CEO definitely influenced analysts covering the stock. Two analysts revised their current year estimates up from $1.27 to $1.33 and next year up from $1.38 to $1.47. Add this to the three upside earnings surprises in a row and you see why ARMK is currently a Zacks Rank #1 (Strong Buy).
Make no mistake about it, yesterday was a bloodbath. After a day like that it's easy to pick on stocks that have been beat down. With today's Bear of the Day I'm not looking to pick on a stock just because it's down. I'm looking to help you avoid an industry that's had weakness in earnings revisions as well as an individual stock that has seen downward revisions as of late.
First I found a stock in the Building Products – Air and Heating industry which ranks in the bottom 7% of our Zacks Industry Rank. Granted the industry only contains four stocks, but none of them is above a Zacks Rank #3 (Hold). But today's Bear is the only Zacks Rank #5 (Strong Sell) in the bunch.
Nortek (Nasdaq:NTK-Free Report) is a manufacturer of residential commercial building products primarily in the United States, Canada and Europe. It offers range hoods, bath fans, indoor air quality systems, heating and air conditioning systems, and technology offerings, including audio, video, access control, security and digital display mounting and mobility products. The company serves remodeling and replacement, residential and commercial new construction, manufactured housing and personal and enterprise computer markets. Nortek is based in Providence, Rhode Island.
Earnings estimates have been coming down recently. The most glaring revision that stands out is the current quarter estimate. Consensus has come down from $1.02 just 90 days ago all the way to 65 cents per share. This has also had an adverse effect on this year's consensus, pulling it down from $2.94 to $2.05.
The recent trend of downward revisions just began recently. Our data shown in the price and consensus chart shows positive revisions from September 2013 through June 2014. Since then these numbers have started to come down along with Nortek's stock price.
Additional content:
3 Apparel Stock to Dress Up Your Holiday Season
With time, consumers' preference and tastes change. To stay abreast with what people want, fashion is always in a state of flux. In fact, the phrase "in fashion" has become synonymous with people's choice in clothing. Thus, apparel retailers have to come up with something new and trendy every season for one's wardrobe only to remain in the race.
The retail landscape has completely morphed with the transition of the economy, advent of new technologies and increasing consumer expectations. Consumers' shopping patterns and techniques have also changed and retailers are fast adapting to various platforms to tap in opportunities.
Retailers are efficiently allocating a large chunk of their capital toward multichannel growth strategy focused on improving merchandise offerings, developing IT infrastructure to enhance the web and mobile experience of customers, renovating stores with a modern look, developing fulfillment centers to enable speedy delivery, implementing an enterprise-wide inventory management system as well as enhancing relationship with existing and new customers.
The U.S. apparel industry, which is one of the largest in the global market, felt the pinch when consumers curtailed their discretionary spending due to recent downturn. However, with the economy gradually making its way out of the woods — consumer confidence moving north and job market conditions steadily improving — and advent of holiday season, apparel retailers are hoping that consumers will now have more money to burn.
The data unveiled by The NPD Group, Inc. highlights that total U.S. retail sales for men's apparel came in at $60.8 billion in 2013, reflecting an increase of 5% from 2012, while women's apparel market jumped 4% reaching sales of $116.4 billion.
While we believe that the outlook for the U.S. apparel industry seems somewhat skewed toward the positive side, earnings growth might have been tempered by harsh weather conditions in the initial part of the year, stiff competition at the cost of margins, rise in raw material prices and cautious consumer behavior. Some disappointment is surely in store, but there are still a few stocks that still hold promise and are backed by a favorable Zacks Rank.
Thus, we draw your attention to three apparel retailers that may suit your wardrobe this holiday season.
Prominent Picks
We suggest investing in Hanesbrands Inc. (NYSE:HBI-Free Report), a designer and manufacturer of basic apparel in the United States. This Zacks Rank #2 (Buy) stock has amassed a year-to-date return of about 54% and has a long-term earnings growth rate of 14.7%. Shares of this Winston-Salem, NC-based company trades at a forward P/E (price-to-earnings) of 19.07x, a discount to the industry average and are also attractive from an earnings growth perspective. The company delivered an average positive earnings surprise of 15.5% over the trailing four quarters. The company is expected to witness earnings growth of 42.1% in 2014 and 12.5% in 2015.
V.F. Corporation (NYSE:VFC-Free Report), designer, manufacturer and marketer of branded apparel and related products in the United States, is another stock to bet on. The stock holds a Zacks Rank #2 and has amassed a year-to-date return of roughly 9%. The stock is trading at a forward P/E multiple of 21.59x, a discount to the industry average and should impress investors with its long-term expected earnings growth of 12.6%. This Greensboro, NC-based company delivered an average positive earnings surprise of 2.4% over the trailing four quarters. The company is expected to witness earnings growth of 13.4% in 2014 and 13.7% in 2015.
Another stock that investors may look forward to is Abercrombie & Fitch Co. (NYSE:ANF-Free Report), a specialty retailer of casual apparel for men, women and kids. Also a Zacks Rank #2 stock, this trades at a forward P/E of 16.23x, a premium to the industry average, and has amassed a year-to-date return of 22%.
This New Albany, OH-based company posted an average positive earnings surprise of 35.7% over the trailing four quarters and has a long-term earnings growth rate of 16.7% that makes it look attractive. The company is expected to witness earnings growth of 23.9% in fiscal 2014 and 20.6% in fiscal 2015.
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