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Costco, Kimberly-Clark, AutoNation and Tesla highlighted as Zacks Bull and Bear of the Day
Read MoreHide Full Article
For Immediate Release
Chicago, IL – November 15, 2021 – Zacks Equity Research Shares of Costco Wholesale Corporation (COST - Free Report) as the Bull of the Day, Kimberly-Clark Corporation (KMB - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on AutoNation, Inc. (AN - Free Report) , and Tesla, Inc. (TSLA - Free Report) .
Based in Issaquah, Washington, Costco Wholesale is one of the largest warehouse club operators in the U.S., selling high volumes of food and general merchandise (including household products and appliances) at discounted prices through its membership program.
Q4 Earnings Recap
Revenue rose 17.5% year-over-year to $62.7 billion and EPS grew to $3.76 per share from $3.13 in the year-ago quarter. Both the top and bottom line easily beat consensus estimates of $61.4 billion and $3.58 per share.
Same-store sales spiked 15.5%, which helped drive Costco’s robust performance last quarter, and comparable e-commerce sales increased 11.2% year-over-year.
Additionally, the company’s app now has over 10 million downloads; COO Richard Galanti said that “it’s continually improving, with additional features coming soon.”
Membership fee revenue moved 11.7% higher to $1.23 billion, and Costco ended fiscal 2021 with 61.7 million paid member households. This represents 6.2% growth compared to 2020.
Costco did experience some margin pressure in its core merchandise categories in Q4—gross margin decreased by 0.32 percentage points year-over-year—but strong sales overall helped boost profit.
COST Breaks Out
Year-to-date, shares of COST have jumped 37.3%, which is above the S&P 500’s 24.7% increase. Earnings estimates have been rising too, and COST is a Zacks Rank #1 (Strong Buy) right now.
For fiscal 2022, 12 analysts have revised their bottom-line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up 58 cents to $12.15 per share. Earnings are expected to grow 9.7% compared to the prior year period. Fiscal 2023 looks strong too; seven analysts have upped their outlook and our consensus estimate has climbed 61 cents to $13.30 per share.
Despite its outstanding performance, not even Costco can escape supply chain and inflation challenges. Galanti explained on a call with analysts that “port delays, container shortages, COVID disruptions, shortages on various components, raw materials and ingredients, labor cost pressures, and [trucks] and driver shortages” all impacted its business.
However, Costco’s financial strength and strong balance sheet helped the retailer successfully navigate an extremely challenging operating environment, proving once again why investors are willing to pay a premium for COST stock.
If you’re an investor searching for a retail sector stock to add to your portfolio, make sure to keep COST on your shortlist.
Founded in 1928, Kimberly Clark is a well-known global consumer products manufacturer. Its brand portfolio includes Huggies, Pull-Ups, Kleenex, Scott, and Cottonelle.
Q3 Earnings Weaker-Than-Expected
Even though slowing growth was expected this year, Kimberly Clark’s latest quarterly performance continued to show and intense slowdown in business.
Organic sales did rise 4% (an improvement from last quarter’s 3% decline), but sales volumes were roughly flat and prices increased by 3%.
However, price hikes weren’t enough to offset soaring costs, and operating profit declined, gross margin took a hit, and net income fell 1% to $469 million
"Our third quarter results reflect a dynamic and challenging macro environment," CEO Mike Hsu said in a press release. While management was happy with KMB’s results, it said that supply chain challenges and inventory pressures heavily impacted the company in Q3.
Bottom Line
KMB is now a Zacks Rank #5 (Strong Sell).
Five analysts have cut their full year earnings outlook over the past 60 days, and the consensus estimate has fallen 57 cents to $6.16 per share. Wall Street has lowered its earnings picture for 2022 as well, but the bottom line is still expected to post year-over-year growth.
Shares have struggled to gain traction so far in 2021. Year-to-date, KMB has lost 0.7% compared to the S&P 500’s gain of 24.7%.
Looking ahead, Kimberly Clark cut its outlook across the board, reflecting 2021’s tough selling environment.
Earnings are now expected to fall between $6.05 and $6.25 per share for 2021, down from the previous forecast range of $6.25 to $6.65 per share, and Kimberly-Clark is still anticipating a modest revenue drop this year as well. Management also expects supply chain and cost concerns to linger, impacting its stock buyback spending.
The short-term picture for KMB looks pretty gloomy as it tries to find its footing in this stage of the coronavirus pandemic. But for investors, any price pain will be healed by KMB’s juicy dividend, which sports a yield of 3.4%.
Additional content:
Hot Inflation Won't Deter Year-End Wall Street Rally: 3 Picks
Consumers in the United States have been spending a lot more on non-durable goods this year than they did in 2020. However, the threat of inflation doesn’t seem to dissipate, which in turn may hurt consumer spending and disrupt economic growth. No doubt, inflation shouldn’t be beneficial for growth-oriented stocks since it impacts their cash flows.
But such stocks shrugged off rising inflationary pressure and are now poised to scale further north in the near term. This is because encouraging third-quarter earnings results, a strong labor market, and the House passing Biden’s infrastructure plan gave the broader stock market the wherewithal to move higher. Thus, at the moment, investing in growth-oriented stocks like AutoNation, Costco and Tesla seems prudent.
Biggest Surge in Inflation in 30 Years
The consumer price index (CPI), which mostly includes products ranging from groceries to health care to gasoline, soared 6.2% in October on a year-over-year basis, an almost 31-year high, stated the Labor Department, as mentioned in a CNBC article. The article further noted that CPI increased 0.9% month-over-month in October. In fact, fuel prices, energy prices, food prices, to even used vehicle prices witnessed an uptick in October.
So, what led to the price spikes? Last year, businesses were shut down, and the economy was almost on the brink of collapse due to the coronavirus outbreak. However, Fed’s accommodative monetary policy and the government’s stimulus measures helped the economy chug along, with consumer demand picking up. But businesses had to struggle to meet such demand. They faced labor shortages and supply-chain disruptions, leading to higher costs. And such higher costs are now passed on to consumers in the form of bumped-up prices.
Rise in Inflation Isn’t Hampering Bullish Sentiments
Stock market investors, in reality, aren’t rattled by the relentless rise in the prices of goods and services. This is because companies performed beyond expectations in the third quarter. Earnings results were encouraging despite headwinds such as slow economic growth in China and supply-chain disturbances. Out of the 445 S&P 500 companies that have reported third-quarter results so far, earnings are up 42.9% from the same period a year ago (read more: Are Earnings Estimates Going Down?).
Strong labor market conditions and the House passing the bipartisan infrastructure bill also bolstered investors’ sentiment. With pandemic-related concerns easing, employers have started to offer new jobs.
In October, 531,000 new jobs were added in the United States, while the unemployment rate dropped to 4.6%, a tell-tale sign that the economy is chugging along, citing a financial times article. At the same time, the long-awaited bipartisan infrastructure bill got passed by the House of Representatives on Nov 5 -- something that will boost the economy in the long run (read more: 3 Big Winners as House Passes $1.2T US Infrastructure Bill).
3 Solid Growth Stocks to Buy Now
With the promising third-quarter earnings, better labor market conditions and the passing of the infrastructure bill by the House overshadowing inflation concerns, things are looking up for the stock market. Hence, it’s judicious to invest in the above-mentioned stocks that currently possess a Zacks Rank #1 (Strong Buy) and a Growth Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
AutoNation is the largest automotive retailer in the United States. Its several sources of income as well as its diversified product mix are expected to boost bottom-line growth in the near future.
AutoNation’s initiative to expand stores is also praiseworthy. The Zacks Consensus Estimate for its current-year earnings has moved up 16.4% over the past 60 days. AutoNation’s expected earnings growth rate for the current year is a superb 142.6%.
Costco Wholesale sells high volumes of foods and general merchandise at discounted prices through membership warehouses. Costco Wholesale’s initiative to penetrate the e-commerce business has paid off well. Better price management and growth strategies also bode well for Costco Wholesale.
The Zacks Consensus Estimate for its current-year earnings has moved up 5% over the past 60 days. Costco Wholesale’s expected earnings growth rate for the current year is a steady 9.7%.
Tesla has evolved into a dynamic technology innovator. It recently became the second-fastest company to join the elite $1T club. The global demand to reduce carbon emissions has increased the requirement for electric vehicles -- something that suites Tesla well (read more: Tesla is a Screaming Buy as It Joins the Elite $1T Club).
The Zacks Consensus Estimate for its current-year earnings has moved up 16.8% over the past 60 days. Tesla’s expected earnings growth rate for the current year is a solid 166.5%.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Costco, Kimberly-Clark, AutoNation and Tesla highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – November 15, 2021 – Zacks Equity Research Shares of Costco Wholesale Corporation (COST - Free Report) as the Bull of the Day, Kimberly-Clark Corporation (KMB - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on AutoNation, Inc. (AN - Free Report) , and Tesla, Inc. (TSLA - Free Report) .
Here is a synopsis of all four stocks:
Bull of the Day:
Based in Issaquah, Washington, Costco Wholesale is one of the largest warehouse club operators in the U.S., selling high volumes of food and general merchandise (including household products and appliances) at discounted prices through its membership program.
Q4 Earnings Recap
Revenue rose 17.5% year-over-year to $62.7 billion and EPS grew to $3.76 per share from $3.13 in the year-ago quarter. Both the top and bottom line easily beat consensus estimates of $61.4 billion and $3.58 per share.
Same-store sales spiked 15.5%, which helped drive Costco’s robust performance last quarter, and comparable e-commerce sales increased 11.2% year-over-year.
Additionally, the company’s app now has over 10 million downloads; COO Richard Galanti said that “it’s continually improving, with additional features coming soon.”
Membership fee revenue moved 11.7% higher to $1.23 billion, and Costco ended fiscal 2021 with 61.7 million paid member households. This represents 6.2% growth compared to 2020.
Costco did experience some margin pressure in its core merchandise categories in Q4—gross margin decreased by 0.32 percentage points year-over-year—but strong sales overall helped boost profit.
COST Breaks Out
Year-to-date, shares of COST have jumped 37.3%, which is above the S&P 500’s 24.7% increase. Earnings estimates have been rising too, and COST is a Zacks Rank #1 (Strong Buy) right now.
For fiscal 2022, 12 analysts have revised their bottom-line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up 58 cents to $12.15 per share. Earnings are expected to grow 9.7% compared to the prior year period. Fiscal 2023 looks strong too; seven analysts have upped their outlook and our consensus estimate has climbed 61 cents to $13.30 per share.
Despite its outstanding performance, not even Costco can escape supply chain and inflation challenges. Galanti explained on a call with analysts that “port delays, container shortages, COVID disruptions, shortages on various components, raw materials and ingredients, labor cost pressures, and [trucks] and driver shortages” all impacted its business.
However, Costco’s financial strength and strong balance sheet helped the retailer successfully navigate an extremely challenging operating environment, proving once again why investors are willing to pay a premium for COST stock.
If you’re an investor searching for a retail sector stock to add to your portfolio, make sure to keep COST on your shortlist.
Bear of the Day:
Founded in 1928, Kimberly Clark is a well-known global consumer products manufacturer. Its brand portfolio includes Huggies, Pull-Ups, Kleenex, Scott, and Cottonelle.
Q3 Earnings Weaker-Than-Expected
Even though slowing growth was expected this year, Kimberly Clark’s latest quarterly performance continued to show and intense slowdown in business.
Organic sales did rise 4% (an improvement from last quarter’s 3% decline), but sales volumes were roughly flat and prices increased by 3%.
However, price hikes weren’t enough to offset soaring costs, and operating profit declined, gross margin took a hit, and net income fell 1% to $469 million
"Our third quarter results reflect a dynamic and challenging macro environment," CEO Mike Hsu said in a press release. While management was happy with KMB’s results, it said that supply chain challenges and inventory pressures heavily impacted the company in Q3.
Bottom Line
KMB is now a Zacks Rank #5 (Strong Sell).
Five analysts have cut their full year earnings outlook over the past 60 days, and the consensus estimate has fallen 57 cents to $6.16 per share. Wall Street has lowered its earnings picture for 2022 as well, but the bottom line is still expected to post year-over-year growth.
Shares have struggled to gain traction so far in 2021. Year-to-date, KMB has lost 0.7% compared to the S&P 500’s gain of 24.7%.
Looking ahead, Kimberly Clark cut its outlook across the board, reflecting 2021’s tough selling environment.
Earnings are now expected to fall between $6.05 and $6.25 per share for 2021, down from the previous forecast range of $6.25 to $6.65 per share, and Kimberly-Clark is still anticipating a modest revenue drop this year as well. Management also expects supply chain and cost concerns to linger, impacting its stock buyback spending.
The short-term picture for KMB looks pretty gloomy as it tries to find its footing in this stage of the coronavirus pandemic. But for investors, any price pain will be healed by KMB’s juicy dividend, which sports a yield of 3.4%.
Additional content:
Hot Inflation Won't Deter Year-End Wall Street Rally: 3 Picks
Consumers in the United States have been spending a lot more on non-durable goods this year than they did in 2020. However, the threat of inflation doesn’t seem to dissipate, which in turn may hurt consumer spending and disrupt economic growth. No doubt, inflation shouldn’t be beneficial for growth-oriented stocks since it impacts their cash flows.
But such stocks shrugged off rising inflationary pressure and are now poised to scale further north in the near term. This is because encouraging third-quarter earnings results, a strong labor market, and the House passing Biden’s infrastructure plan gave the broader stock market the wherewithal to move higher. Thus, at the moment, investing in growth-oriented stocks like AutoNation, Costco and Tesla seems prudent.
Biggest Surge in Inflation in 30 Years
The consumer price index (CPI), which mostly includes products ranging from groceries to health care to gasoline, soared 6.2% in October on a year-over-year basis, an almost 31-year high, stated the Labor Department, as mentioned in a CNBC article. The article further noted that CPI increased 0.9% month-over-month in October. In fact, fuel prices, energy prices, food prices, to even used vehicle prices witnessed an uptick in October.
So, what led to the price spikes? Last year, businesses were shut down, and the economy was almost on the brink of collapse due to the coronavirus outbreak. However, Fed’s accommodative monetary policy and the government’s stimulus measures helped the economy chug along, with consumer demand picking up. But businesses had to struggle to meet such demand. They faced labor shortages and supply-chain disruptions, leading to higher costs. And such higher costs are now passed on to consumers in the form of bumped-up prices.
Rise in Inflation Isn’t Hampering Bullish Sentiments
Stock market investors, in reality, aren’t rattled by the relentless rise in the prices of goods and services. This is because companies performed beyond expectations in the third quarter. Earnings results were encouraging despite headwinds such as slow economic growth in China and supply-chain disturbances. Out of the 445 S&P 500 companies that have reported third-quarter results so far, earnings are up 42.9% from the same period a year ago (read more: Are Earnings Estimates Going Down?).
Strong labor market conditions and the House passing the bipartisan infrastructure bill also bolstered investors’ sentiment. With pandemic-related concerns easing, employers have started to offer new jobs.
In October, 531,000 new jobs were added in the United States, while the unemployment rate dropped to 4.6%, a tell-tale sign that the economy is chugging along, citing a financial times article. At the same time, the long-awaited bipartisan infrastructure bill got passed by the House of Representatives on Nov 5 -- something that will boost the economy in the long run (read more: 3 Big Winners as House Passes $1.2T US Infrastructure Bill).
3 Solid Growth Stocks to Buy Now
With the promising third-quarter earnings, better labor market conditions and the passing of the infrastructure bill by the House overshadowing inflation concerns, things are looking up for the stock market. Hence, it’s judicious to invest in the above-mentioned stocks that currently possess a Zacks Rank #1 (Strong Buy) and a Growth Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
AutoNation is the largest automotive retailer in the United States. Its several sources of income as well as its diversified product mix are expected to boost bottom-line growth in the near future.
AutoNation’s initiative to expand stores is also praiseworthy. The Zacks Consensus Estimate for its current-year earnings has moved up 16.4% over the past 60 days. AutoNation’s expected earnings growth rate for the current year is a superb 142.6%.
Costco Wholesale sells high volumes of foods and general merchandise at discounted prices through membership warehouses. Costco Wholesale’s initiative to penetrate the e-commerce business has paid off well. Better price management and growth strategies also bode well for Costco Wholesale.
The Zacks Consensus Estimate for its current-year earnings has moved up 5% over the past 60 days. Costco Wholesale’s expected earnings growth rate for the current year is a steady 9.7%.
Tesla has evolved into a dynamic technology innovator. It recently became the second-fastest company to join the elite $1T club. The global demand to reduce carbon emissions has increased the requirement for electric vehicles -- something that suites Tesla well (read more: Tesla is a Screaming Buy as It Joins the Elite $1T Club).
The Zacks Consensus Estimate for its current-year earnings has moved up 16.8% over the past 60 days. Tesla’s expected earnings growth rate for the current year is a solid 166.5%.
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.