The Zacks Analyst Blog Highlights:Yahoo, Coach, G-III Apparel Group, Gildan Activewear and Michael Kors Holdings
CHICAGO, Jan. 29, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Yahoo (Nasdaq:YHOO-Free Report), Coach, Inc. (NYSE:COH-Free Report), G-III Apparel Group, Ltd. (Nasdaq:GIII-Free Report), Gildan Activewear Inc. (NYSE:GIL-Free Report) and Michael Kors Holdings Ltd. (NYSE:KORS-Free Report).
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Here are highlights from Tuesday's Analyst Blog:
Yahoo Beats Earnings, Sales a Tad Light
After the bell Tuesday, Yahoo (Nasdaq:YHOO-Free Report) posted earnings results for the company's fiscal 4th quarter of 2013. Net earnings minus stock-based compensation reaching 39 cents per share soundly beat the Zacks Consensus Estimate of 30 cents -- a 30% positive surprise -- while revenues for the quarter came in just a smidge below our consensus of $1,208 million. Yahoo's Search business (ex-TAC) topped expectations while Display (ex-TAC) was lighter than anticipated.
What is responsible for the 5% sell-off in the after-market is unclear at this juncture. But year-over-year comparisons for various revenue metrics including GAAP revenue for full-year 2013 (-6%) and GAAP income from operations in the quarter (-8%) may be playing a part, at first glance. The Display quarterly number is also down 6% from last year, which is Yahoo's bread-and-butter business.
Going forward, with the recent termination of advertising executive Henrique de Castro's tenure, it's pretty safe to assume the major acquisition spree Yahoo had been on over the past year or so is expected to materialize in 2014. "Monetization" is a key word in describing the future of Yahoo -- not even including the estimate $30 per share in cash YHOO stands to make from the long-anticipated Alibaba IPO -- and will likely be a term thrown around quite a bit during the company's conference call.
Thus, as it has been several quarters now, investors will likely be much more interested in where Yahoo is headed than where it's been. The company has managed to negotiate a deal to keep more shares of Alibaba upon the Chinese e-commerce giant going public (Yahoo will still need to sell 208 million shares at that time), and this huge investment is most definitely what has kept Yahoo stock trading at or near its highest levels since around 2005. Then again, with reports of growth in China decidedly weaker over the last couple years -- causing much of the sell-off we've seen in the U.S. markets lately -- perhaps investors this afternoon are less interested in counting all their Alibaba chickens before they hatch.
Yahoo currently carried a Zacks Rank #4 (Sell).
Bearish View on Coach
We maintain our Underperform recommendation on Coach, Inc. (NYSE:COH-Free Report), the maker of handbags, wallets, shoes and other accessories, with a target price of $44.00. Our bearish stance on the stock is also supported by its Zacks Rank #5 (Strong Sell). So far in the year, the stock has dipped 13.6%.
Why the Reiteration?
Coach sells products that are largely discretionary in nature and thereby depend upon consumers' disposable income. Consumers in turn are highly sensitive to macroeconomic factors. Given the difficult consumer spending environment in the past couple of quarters, things have become a little difficult for Coach.
The company reported dismal second-quarter fiscal 2014 results. The company came up with disappointing sales that declined 6% to $1,419.6 million — after dipping 1% during the first quarter — due to sluggishness in the North American market and also fell short of the Zacks Consensus Estimate of $1,501 million.
The bottom line also failed to impress investors, as quarterly earnings of $1.06 per share missed the Zacks Consensus Estimate of $1.11 and tumbled 13.8% from the prior-year quarter.
The softness in results triggered a downtrend in the Zacks Consensus Estimate, as analysts became less constructive on the stock's future performance. This is evident from the movement witnessed in the Zacks Consensus Estimate that fell 6.6% to $3.24 for fiscal 2014 and 7.1% to $3.54 per share for fiscal 2015 in the past 7 days.
Fashion obsolescence remains a major concern for Coach's business model, which involves a sustained focus on product and design innovation. The company's pioneer position could be affected by delays in product launches. It is noteworthy that the company operates in the highly competitive premium handbag and accessories segment.
Stocks that Warrant a Look
Better-ranked retail stocks that look promising and are expected to sustain their upbeat performance include G-III Apparel Group, Ltd. (Nasdaq:GIII-Free Report) sporting a Zacks Rank #1 (Strong Buy), along with Gildan Activewear Inc. (NYSE:GIL-Free Report) and Michael Kors Holdings Ltd. (NYSE:KORS-Free Report), both of which hold a Zacks Rank #2 (Buy).
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