Chipotle Mexican Grill, Oracle, Citi Trends, Hanesbrands and Nike highlighted as Zacks Bull and Bear of the Day
CHICAGO, Oct. 13, 2014 /PRNewswire/ -- Zacks Equity Research highlights Chipotle Mexican Grill (NYSE:CMG-Free Report) as the Bull of the Day and Oracle (NYSE:ORCL-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis onCiti Trends, Inc. (Nasdaq:CTRN-Free Report), Hanesbrands Inc. (NYSE:HBI-Free Report) and Nike, Inc. (NYSE:NKE-Free Report).
Here is a synopsis of all four stocks:
Chipotle Mexican Grill (NYSE:CMG-Free Report) is one super-star stock with both price momentum and the earnings momentum to justify it. Since the company reported a big 15% EPS beat for Q2 in July, the stock has been a Zacks #1 Rank Strong Buy or #2 Rank Buy.
The $3.50 per share reported earnings were 24% higher year-over-year on the back of solid top-line growth. Revenues also beat the consensus mark and increased 29% year over year, thanks to higher "comps" (same store sales) and unit expansion. Despite the recent menu price hike, comps grew year over year as well as sequentially driven by higher traffic.
Chipotle has been witnessing a fairly stable traffic trend over the past few years driven by strong market position, innovative menu launches and increased media exposure.
Given this recent back-drop and the more than doubling of the share price since a July 2012 earnings miss, investors may be looking forward nervously to next Monday October 20 when CMG reports its third quarter results, for which they had also raised guidance in July.
Obviously, this "burrito machine" has been the premier growth story of fast-casual dining.
Maybe that's because they seemed to so effectively model the extremely efficient food service "machine" that one-time investor, McDonalds, perfected with its systems and attention to consistency and details.
And I can tell you from experience that there is almost always a line at the Chipotle stores I see in the Chicago metro area. Delicious, quality food prepared fast and consistently, at a reasonable price and by friendly staff, keeps them coming back for more.
Oracle (NYSE:ORCL-Free Report) has become a Zacks #5 Rank Strong Sell for the first time in several years. But since March it's been a #4 Rank Sell quite a bit.
The story is one of analysts gradually ratcheting down earnings estimates this year. But recently, the magnitude of downward estimate revisions really picked up to knock ORCL into the cellar of earnings momentum.
In the last two months, the majority of covering analysts have chimed in and taken down this fiscal year's EPS consensus to $2.88 from $3.02, a 4.6% cut. And the next fiscal year was hit by 4.9% when the consensus fell to $3.12 from $3.28.
We don't need to know the intricacies of Oracle's enterprise software business to make use of this data. That's what the analysts are for. And we aren't interested in their "buy, sell, or hold" recommendations either.
The Zacks Rank takes their Earnings Estimate Revisions (EER) and plugs them into a precise formula that compares every company's EPS growth to over 4,000 other stocks. And the resulting relative ranking can make all the difference.
A #5 Rank says "stay away right now." So, when do you come back to ORCL? When it's been released from the cellar. And the Rank will tell you when.
There will be much talk this week about the sales and earnings warnings coming from the semiconductor industry. This will have obvious knock-on effects throughout the Technology sector and other sectors which are sensitive to cyclical worries about slower growth.
Additional content:
Should We Expect a Cheerful Holiday Season?
Retailers are looking forward to this year's busiest shopping season as the economy is on high gear. Their enthusiasm has compounded with no snags like a 16-day government shutdown, political impasse or soft job scene that crippled the economy last year. Six less days between Black Friday and Christmas in 2013 had also dampened the mood.
The year 2014 saw a soft start as emerging economies failed to convince, stock markets lost steam and a severe winter locked consumers indoors. Then, the economy started to step up and the Federal Reserve hinted at recovery by winding up its stimulus program which was initiated to boost economic growth and keep interest rates low.
Economy Back on Growth Path
Gradual recovery in the housing market, strengthening manufacturing sector, and an improving labor market abated fears of a derailed U.S. economy that intensified after first-quarter 2014 GDP data revealed that the economy actually shrunk by a revised 2.1%. Now, the markets look more balanced and less obscure with consumer confidence moving north.
The economy swung to a growth trajectory in the second quarter, rising 4.6%, according to the "advance estimate" by the Bureau of Economic Analysis and faring better than the second and first projections of 4.2% and 4% increase, respectively. This is the best performance since the final quarter of 2011 that signals a bullish atmosphere for the balance of the year. Higher business investment and export along with improved consumer spending primarily for health services laid the foundation for a strong GDP.
Positive Sentiment Prevailing Among Consumers
Consumer confidence – a key determinant of the economy's health – also improved significantly, reaching the pinnacle this September since July 2013. The data released by the University of Michigan and Thomson Reuters showed that the consumer sentiment index buoyed to 84.6 in September from the August reading of 82.5, on improving fundamentals. What is inspiring consumer confidence is better job prospect.
The economy added 248,000 jobs in September, and the unemployment rate reached its lowest level of 5.9% in six years, according to the Bureau of Labor Statistics. The strong jobs report confirms that the U.S. economy's fundamentals are sturdy enough to sustain the positive momentum despite the sub-par outlook for its trading partners in Europe, Japan and China .
We expect this positive sentiment to encourage consumer spending, which accounts for over two-thirds of U.S. economic activity. The Commerce Department revealed that consumer spending inched up 0.5% sequentially in August, after remaining unchanged in July. This came on the back of a 0.3% increase in personal income that reflects an improvement from 0.2% growth registered in July. We believe that despite favorable economic numbers, the Fed will not be in any rush to increase the interest rate for fear of derailing the recovery with a sudden rise.
Holiday Sales to Soar
Data compiled by the nation ' s largest retail trade group, National Retail Federation (NRF), suggested a 4.1% jump in holiday sales (November and December) to $616.9 billion, against a 3.1% growth registered last year and better than the 10-year average sales increment of 2.9%. Online sales for the holiday season are projected to increase 8–11% to approximately $105 billion, according to Shop.org. Moreover, NRF revealed that retailers would employ between 725,000 and 800,000 seasonal workforce this holiday season compared with 768,000 hired in the prior year.
With positive economic news pouring in, consumers seem to be in a better position to spend more this holiday season and retailers need to be on their toes to make the most of it. They need to grab every opportunity and try all means to drive in consumers. Be it early-hour store openings, promotional events, free shipping on online purchases or heavy discounts, retailers will try every trick to push sales in the holiday season.
Banking on its wide spectrum, the Retail/Wholesale sector remains a lucrative investment opportunity, and identifying its future winners would be a prudent idea before taking an investment decision. Here, we have highlighted three Retail/Wholesale stocks that could enrich your portfolio this holiday season.
3 Prominent Picks
We suggest investing in Citi Trends, Inc. (Nasdaq:CTRN-Free Report), the retailer of urban fashion apparel and accessories. The stock holds a Zacks Rank #1 (Strong Buy) and has amassed a year-to-date return of roughly 20.5%. Though the stock looks pricey with a forward P/E (price-to-earnings) multiple of 37.72, it should not disappoint investors given the company ' s long-term expected earnings growth of 15%. This Savannah, GA-based company delivered an average positive earnings surprise of 4.6% over the trailing four quarters.
Hanesbrands Inc. (NYSE:HBI-Free Report), a designer and manufacturer of basic apparel in the United States , is another stock to bet on. This Zacks Rank #1 stock has amassed a year-to-date return of 57.9% 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 of 19.39x, a premium to the industry average and are attractive from an earnings growth perspective. The company delivered an average positive earnings surprise of 3.9% over the trailing four quarters.
Another stock that investors may look forward to is Nike, Inc. (NYSE:NKE-Free Report), the designer, marketer and seller of athletic footwear, apparel, equipment and accessories. Also a Zacks Rank #1 stock, this trades at a forward P/E of 24.30x, a premium to the industry average, and has amassed a year-to-date return of 12.5%. This Beaverton , OR based company posted an average positive earnings surprise of 2% over the trailing four quarters, and has a long-term earnings growth rate of 13.9% that makes it attractive.
We believe that the above stocks boast strong fundamentals and growth prospects that can satisfy investors' appetite for market winners.
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