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Jabil and GameStop have been highlighted as Zacks Bull and Bear of the Day
Read MoreHide Full Article
For Immediate Release
Chicago, IL – April 1, 2022 – Zacks Equity Research shares Jabil (JBL - Free Report) as the Bull of the Day and GameStop (GME - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Kroger (KR - Free Report) , Nordstrom, Inc. (JWN - Free Report) and Builders FirstSource, Inc. (BLDR - Free Report) .
Businesses built for the new economy have been investors' bullish focus in recent weeks, as stock-picking begins to reveal itself as the primary market theme for 2022. I think it's about time to add a next-generation industrial play to your portfolio mix as nations look to bring operations back home (economic independence through reversing globalization).
Jabil, a leading manufacturer of highly diversified new economy partners, is perfectly positioned for this onshoring push as the world rapidly deglobalizes in the wake of the commencing digital renaissance the pandemic has accelerated (with new technology allowing the reversal of globalized operations to be possible).
Jabil has been exhibiting margin expanding growth throughout the pandemic, which is set to accelerate in the post-pandemic world as demand for its broad-based portfolio of future-focused international manufacturing operations allows it to take a controlling position amid the impending digital renaissance of the commencing 4th Industrial Revolution.
The acceleration of nationalization in the face of the Russia-Ukraine war, years of pandemic-fueled digital adaptation, JBL's breakout above its 50-day and 200-day moving average, and increasingly bullish analysts' estimates following a blowout earnings report in the back half of last week, JBL shares are a ripe new economy play for your future-focused portfolio.
JBL is a Zacks Rank #2 (Buy) with every covering analyst calling the stock a strong buy today, with price targets centering tightly around $80 a share.
Let's dive into this new-economy investment opportunity.
Jabil's Operations
Jabil is a multinational manufacturing giant that not only provides best-in-class manufacturing capabilities, but technical & design expertise, and top-notch sourcing/supply chain knowledge that would benefit any business amid this global resource shortage. This conglomerate operates across 100 locations in 30 different countries, with 260,000 employees (creating local jobs at each specialized site).
Jabil has proven its secular growth narrative over the past 5 years, having generated year-over-year topline growth in the past 21 consecutive quarters, which is expected to continue in the post-pandemic world.
This company's operations were seemingly unaffected by the pandemic's wrath, as this exceptionally flexible manufacturer appears to have only benefited from the digitalizing tailwind that this devastating virus fortuitously generated.
Jabil's highly diverse portfolio of manufacturing services has hedged its operations against most broader market risks with defined end-markets that have been split up into 2 segments.
Diversified Manufacturing: Healthcare & Packaging, Connected Devices, Mobility, and Auto & Transportation.
Electronic Manufacturing: 5G Wireless & Cloud, Industrial & Semiconductors, Digital Print & Retail, and Network & Storage.
These complementary segments have been reliably growing in a consistent margin expanding way, which points to a level of operational excellence that only a superior management team would be able to achieve.
The Valuation
After an abbreviated 10-week correction to kick off 2022, JBL is off to the races once again in the wake of its bid driving quarterly report in mid-March. Jabil easily beat analysts' EPS estimates for the 8th successive quarter while providing bullish guidance for the current quarter.
JBL is trading at an investment ripe forward P/E of 8x, its lowest multiple since the depths of the pandemic sell-off two years ago.
This stock is also rocking a PEG (growth adjusted P/E) of 0.67x, representing a sizable discount from both JBL's 5-year median and industry average, with anything below 1x signifying potential value.
The Chart
JBL has largely traded with the broader markets since 2022 began, with an outsized -27% drawdown from where it started the year. However, JBL's exceptional fiscal Q2 report (ending in February) gave it a market edge that investors are yet to fully bake into this stock.
The stock's leap above its 50-day moving average (orange line) in post-earnings price action looked to be a breakout move. Yet, JBL has been unable to break above that 50% retracement level (from its recent bear market decline), leaving it range-bound between $60 and $62.50 for over 2 weeks now.
Jabil is not a sexy company or stock to trade for that matter, but at this valuation level coupled with its accelerating secular growth outlay, it represents a solid fundamentally-fueled investment opportunity.
JBL shares haven't traded this buoyantly since the peak of the Dotcom Bubble in September 2000, only this time the company has a proven track record of secular growth (topline expansion through pandemic) and is 7x cheaper from a P/E multiple-basis.
Final Thoughts
The US stock market is the safest place to hold your capital in this highly inflationary (rapidly devaluing cash) rising rate environment (weakening bond values), while earnings growth continues with strong economic demand remaining buoyant. Valuation multiples for many new normal stocks have finally fallen to equitable levels.
With intrinsic valuation modeled denominators (aka enterprise discount rates) now aligning with interest rate expectations (if not exceeding), while earnings estimates point to outsized growth in the quarters ahead, many recently discounted US stocks are looking ripe for the picking.
Jabil is built for this new highly adaptable and rapidly digitizing economy. It's time to consider adding JBL to your portfolio as a next-generation manufacturing play as analysts drive up estimates.
GameStop the "meme stock" that shook the financial markets at the beginning of 2021, with a short-squeeze for the history books. GME's unprecedented trading activity showed Wall Street that this new generation of investors/traders possesses a market-moving power that they can't fight.
GME has since evolved from a fundamentally-backed stock into a media-fueled gambling tool, with any hint of optimistic news (or any rumor at all really) driving heavy volume momentum back into this egregiously overvalued public equity.
This has provided GameStop with seemingly endless funding, through secondary equity offerings of unquestionably overvalued stock. Still, the new management team is yet to provide any actionable plan for bringing this dying brick-and-mortar retailer back to life.
The latest earnings highlighted "expanded brand relationships" with PC gaming partners (ambiguous to say the least) and the imminent launch of GameStop's NFT marketplace by the end of April, which is a long way from being a quantifiable segment (and likely even further from profitability).
As much as I want to believe in the GameStop comeback, its $13 billion market valuation is not even close to justified, with the management team offering investors no clear path to profitability. The company's latest earnings report depicted the largest quarterly revenues for GameStop in 3 years. However, this topline expansion came at a substantial cost, revealing GME's worst quarterly loss as a public company.
Analysts are increasingly bearish on this position following a lackluster January quarter report, driving down EPS estimates across the board, dragging down GameStop to a Zacks Rank #5.
Let me be clear about my recommendation: I am not suggesting that you short GME or take any position at all in the stock, but rather advocating for some profit-pulling with the shares looking shaky at its 200-day MA, toeing overbought levels after a 100% 2-weeks run up.
The weekly option plays that are driving a large portion of the recent upside will begin to expire today and the attempted gamma-squeeze (leveraged moves from outside near-term option volumes) will start to abate.
Latest Catalyst
GME has caught a recent bid after the man the myth the legend, Ryan Cohen (Chairman of GameStop), who initially launched this moon-bound stock into the stratosphere when he revealed an over $76 million position in GME in January 2021 (more than 9 million shares), announced the purchase of an additional 100,000 shares on March 22nd, 2022, which seemed to reignited this "meme stock" mania.
GME is now up nearly 100% since its NFT-focused earnings report in mid-March, which demonstrated a top-line beat, and margin oppressing cost spikes that would have had any other group of shareholders shaking in their boots was a bullish signal for this new market cohort of (self-proclaimed) "diamond-handed apes."
The Big Short-Squeeze
A little more than a year ago, a fragmented group of freshman day traders on a Reddit message board called r/WallStreetBets (WSB) were unified by a single stock, GameStop, a dying brick-and-mortar retailer that held market-moving nostalgia.
The GME fuse was lit way before its parabolic moonshot in early 2021, as this new class of market participants began looking for value in the things they knew. GameStop quickly made its way to the top of that list in late 2020. GME could have actually been categorized as a value play in late-2020, trading under a $1 billion market cap into 2021, a valuation that suggested imminent bankruptcy. GME is now at an over $13 billion public company.
Once Ryan Cohen announced RC Ventures' activist position in GameStop, a cascade of retail investing capital flooded into this overly shorted public equity (short-interest above 100%), driving what appeared to be an endless self-fulling prophecy of upside success with near term call options adding fuel to its euphoric short-throttling price action (rally as much as 2,000% in a mere two weeks).
The Ryan Cohen Effect
Ryan Cohen, the co-founder of Chewy and current Chairman of GameStop's board, announced another more than $10 million "investment" for 100,000 GME shares, which he executed through his investment fund, RC Ventures, catalyzing the latest flood of euphoric meme trading activity.
Ryan Cohen now owns roughly 12% of GameStop turning his initital $76 million investment into nearly $2 billion.
Ryan Cohen's $10 million GME purchase on March 22nd reinvigorated GME's "meme stock" momentum as young day traders and hedge funds (momentum chasing) begin buying up absurd volumes of immediate-term call options (100,000s of calls expiring on Friday traded hands today), catalyzing some gamma-squeeze Déjà vu in GME – significant open interest (OI) in soon-to-expire contracts causes leveraged price action due to extreme moves in these Friday contracts' delta, aka gamma (forcing market makers to quickly buy or sell shares to maintain a price agnostic position).
GME ticker mentions on the younger market participants' favorite trading forum, r/WallStreetBets (WSB), have been through the rough, inspiring another big WSB winner, AMC, to shoot 13.6% higher for no other reason than its "meme stock" categorization.
Final Thoughts
Unless you understand how the GME trade works (there is always a technical driver no matter the fundamentals, which appears to be a combination of Fibonacci-retracements and MAs) I would stay away from GME. GME is a trading mechanism at best (losing lottery-ticket at worst), not a buy & hold investment.
Additional content:
3 Earnings All-Stars with Positive Revisions & Surprises
With our first positive month of 2022 out of the way and a new earnings season about to begin, this is a good time to revisit the EPS Growth, Revisions and Positive Surprises. Below are three names that recently passed this screen by securing a high Zacks Rank with upward earnings estimate revisions and positive surprises.
Kroger
Kroger was a real "go-to" destination during the pandemic with restaurants closed and people stuck in their homes, except for trips to the grocery store of course. The environment will change now that covid's days are numbered, but this grocery giant sees plenty of money left on the shelves For example, KR's focus on enhancing its product freshness and expanding its digital sales led to a strong fourth quarter report in early March and a solid guidance for 2022.
This supermarket powerhouse operates under many banners, including Kroger (of course), Food 4 Less, Mariano's, Pick 'n Save and several others. It's four formats are combo stores (food + drugs), multi-department store, marketplace stores and price impact warehouses. As part of the retail-supermarkets space, KR is in the top 10% of the Zacks Industry Rank. Shares are up more than 62% over the past year.
KR reported fourth-quarter earnings per share of 91 cents a few weeks ago, which marked a positive surprise of nearly 25% and eclipsed the Zacks Consensus Estimate for the ninth straight quarter.
Total sales were $33 billion, which topped the Zacks Consensus Estimate by approximately 1.3%. Excluding fuel, sales were up 3.7% year over year. Identical sales, without fuel, rose 4%, while digital sales soared 105% on a two-year stack.
For full year 2022, KR expects to keep its momentum despite a rapidly-changing operating environment. The company sees adjusted earnings per share between $3.75 and $3.85 with identical sales growth (excluding fuel) of 2% to 3%. Despite all the challenges out there, the company still expects to generate total shareholder returns of 8% to 11% over time.
Earnings estimates have increased since the strong quarter and positive guidance. The Zacks Consensus Estimate for this fiscal year (ending January 2023) is $3.66 and next year's (ending January 2024) is at $3.85, marking gains of 6.7% and 6.9%, respectively, over the past 30 days. But those estimates also suggest year-over-year improvement of 5.2%, which is pretty good for a boring old grocery chain.
Nordstrom, Inc.
The market might have gotten off to a rough start in 2022, but Nordstrom saw shares rise approximately 20% year to date. Its fourth quarter report from earlier this month showed a company that's able to increase earnings and sales, while growing its digital footprint.
JWN is a fashion specialty retailer positioned in the upscale segment of the industry. We're talking about serious shoppers here. Some of its main channels include the Nordstrom full-line stores; Nordstrom Rack; and Trunk Club clubhouses.
However, a little luxury is just what's needed at the end of an unprecedented pandemic that had people wearing sweatpants and shorts to online business meetings. JWN is enjoying solid demand for its apparel and footwear, robust digital growth, lower markdowns and higher merchandise margins.
JWN kicked off this month with a strong fiscal fourth quarter performance, which included earnings per share of $1.23 that beat the Zacks Consensus Estimate by 18.3%. Furthermore, revenues of $4.5 billion surged 23% from last year and topped our expectation by more than 1.5%.
However, the company seemed most proud that sales were down only 1% from the same period in fiscal 2019, which suggests it has almost fully recovered from the pandemic. Moving forward, the company's primary focus is on improving the performance of Nordstrom Rack; further increasing profitability; and optimizing its supply chain and inventory flow.
The company expects revenue growth between 5% and 7% for fiscal 2022, as well as adjusted earnings per share of $3.15 to $3.30. The range was above the Zacks Consensus Estimate at the time, but analysts have been hiking expectations to make up the difference.
We now expect earnings of $3.30 for both this fiscal year (ending January 2023) and next fiscal year (ending January 2024). Those estimates have jumped 68% and 43.5%, respectively, over the past 30 days with plenty of time for more improvement moving forward.
Builders FirstSource, Inc.
The first rate hike in over three years (with as many as six more coming in future months) makes people a bit more wary about big purchases like new homes. So it's no surprise that shares of Builders FirstSource are lower so far in 2022.
However, it still expects strong demand this year... and analysts seem to agree. Earnings estimates have moved higher over the past month, allowing BLDR to retain its enviable Zacks Rank #1 (Strong Buy) status. Plus, shares are still higher by more than 42% over the past year.
BLDR is the largest supplier of building materials, manufactured components and construction services. As part of the building products – retail space, it's in the top 7% of the Zacks Industry Rank. One of the big moves of late was the merger with BMC Stock Holdings, which played a part in its fourth-quarter report from early this month.
The company earned $2.78 per share in the quarter, beating the Zacks Consensus Estimate by more than 47% and bringing the four-quarter average surprise to 74%. BLDR has now surpassed our earnings expectations for 14 consecutive reports.
Net sales came to $4.6 billion, surpassing the Zacks Consensus Estimate by more than 6%. The result also improved 23.7% from last year on a pro forma basis. Core organic sales advanced 11.7% on robust demand for single-family housing, R&R and other activities.
For full year 2021, adjusted earnings soared to $10.32 versus $2.79 in 2020. Net sales were $19.9 billion, up 55.8% from the 2020 pro-forma level.
The Zacks Consensus Estimate for this year jumped 30% in the past 30 days to $8.90, while next year increased 33% to $9.23. Therefore, analysts currently see 3.7% year-over-year growth with plenty of time for further improvement.
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Jabil and GameStop have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – April 1, 2022 – Zacks Equity Research shares Jabil (JBL - Free Report) as the Bull of the Day and GameStop (GME - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Kroger (KR - Free Report) , Nordstrom, Inc. (JWN - Free Report) and Builders FirstSource, Inc. (BLDR - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Businesses built for the new economy have been investors' bullish focus in recent weeks, as stock-picking begins to reveal itself as the primary market theme for 2022. I think it's about time to add a next-generation industrial play to your portfolio mix as nations look to bring operations back home (economic independence through reversing globalization).
Jabil, a leading manufacturer of highly diversified new economy partners, is perfectly positioned for this onshoring push as the world rapidly deglobalizes in the wake of the commencing digital renaissance the pandemic has accelerated (with new technology allowing the reversal of globalized operations to be possible).
Jabil has been exhibiting margin expanding growth throughout the pandemic, which is set to accelerate in the post-pandemic world as demand for its broad-based portfolio of future-focused international manufacturing operations allows it to take a controlling position amid the impending digital renaissance of the commencing 4th Industrial Revolution.
The acceleration of nationalization in the face of the Russia-Ukraine war, years of pandemic-fueled digital adaptation, JBL's breakout above its 50-day and 200-day moving average, and increasingly bullish analysts' estimates following a blowout earnings report in the back half of last week, JBL shares are a ripe new economy play for your future-focused portfolio.
JBL is a Zacks Rank #2 (Buy) with every covering analyst calling the stock a strong buy today, with price targets centering tightly around $80 a share.
Let's dive into this new-economy investment opportunity.
Jabil's Operations
Jabil is a multinational manufacturing giant that not only provides best-in-class manufacturing capabilities, but technical & design expertise, and top-notch sourcing/supply chain knowledge that would benefit any business amid this global resource shortage. This conglomerate operates across 100 locations in 30 different countries, with 260,000 employees (creating local jobs at each specialized site).
Jabil has proven its secular growth narrative over the past 5 years, having generated year-over-year topline growth in the past 21 consecutive quarters, which is expected to continue in the post-pandemic world.
This company's operations were seemingly unaffected by the pandemic's wrath, as this exceptionally flexible manufacturer appears to have only benefited from the digitalizing tailwind that this devastating virus fortuitously generated.
Jabil's highly diverse portfolio of manufacturing services has hedged its operations against most broader market risks with defined end-markets that have been split up into 2 segments.
Diversified Manufacturing: Healthcare & Packaging, Connected Devices, Mobility, and Auto & Transportation.
Electronic Manufacturing: 5G Wireless & Cloud, Industrial & Semiconductors, Digital Print & Retail, and Network & Storage.
These complementary segments have been reliably growing in a consistent margin expanding way, which points to a level of operational excellence that only a superior management team would be able to achieve.
The Valuation
After an abbreviated 10-week correction to kick off 2022, JBL is off to the races once again in the wake of its bid driving quarterly report in mid-March. Jabil easily beat analysts' EPS estimates for the 8th successive quarter while providing bullish guidance for the current quarter.
JBL is trading at an investment ripe forward P/E of 8x, its lowest multiple since the depths of the pandemic sell-off two years ago.
This stock is also rocking a PEG (growth adjusted P/E) of 0.67x, representing a sizable discount from both JBL's 5-year median and industry average, with anything below 1x signifying potential value.
The Chart
JBL has largely traded with the broader markets since 2022 began, with an outsized -27% drawdown from where it started the year. However, JBL's exceptional fiscal Q2 report (ending in February) gave it a market edge that investors are yet to fully bake into this stock.
The stock's leap above its 50-day moving average (orange line) in post-earnings price action looked to be a breakout move. Yet, JBL has been unable to break above that 50% retracement level (from its recent bear market decline), leaving it range-bound between $60 and $62.50 for over 2 weeks now.
Jabil is not a sexy company or stock to trade for that matter, but at this valuation level coupled with its accelerating secular growth outlay, it represents a solid fundamentally-fueled investment opportunity.
JBL shares haven't traded this buoyantly since the peak of the Dotcom Bubble in September 2000, only this time the company has a proven track record of secular growth (topline expansion through pandemic) and is 7x cheaper from a P/E multiple-basis.
Final Thoughts
The US stock market is the safest place to hold your capital in this highly inflationary (rapidly devaluing cash) rising rate environment (weakening bond values), while earnings growth continues with strong economic demand remaining buoyant. Valuation multiples for many new normal stocks have finally fallen to equitable levels.
With intrinsic valuation modeled denominators (aka enterprise discount rates) now aligning with interest rate expectations (if not exceeding), while earnings estimates point to outsized growth in the quarters ahead, many recently discounted US stocks are looking ripe for the picking.
Jabil is built for this new highly adaptable and rapidly digitizing economy. It's time to consider adding JBL to your portfolio as a next-generation manufacturing play as analysts drive up estimates.
Bear of the Day:
GameStop the "meme stock" that shook the financial markets at the beginning of 2021, with a short-squeeze for the history books. GME's unprecedented trading activity showed Wall Street that this new generation of investors/traders possesses a market-moving power that they can't fight.
GME has since evolved from a fundamentally-backed stock into a media-fueled gambling tool, with any hint of optimistic news (or any rumor at all really) driving heavy volume momentum back into this egregiously overvalued public equity.
This has provided GameStop with seemingly endless funding, through secondary equity offerings of unquestionably overvalued stock. Still, the new management team is yet to provide any actionable plan for bringing this dying brick-and-mortar retailer back to life.
The latest earnings highlighted "expanded brand relationships" with PC gaming partners (ambiguous to say the least) and the imminent launch of GameStop's NFT marketplace by the end of April, which is a long way from being a quantifiable segment (and likely even further from profitability).
As much as I want to believe in the GameStop comeback, its $13 billion market valuation is not even close to justified, with the management team offering investors no clear path to profitability. The company's latest earnings report depicted the largest quarterly revenues for GameStop in 3 years. However, this topline expansion came at a substantial cost, revealing GME's worst quarterly loss as a public company.
Analysts are increasingly bearish on this position following a lackluster January quarter report, driving down EPS estimates across the board, dragging down GameStop to a Zacks Rank #5.
Let me be clear about my recommendation: I am not suggesting that you short GME or take any position at all in the stock, but rather advocating for some profit-pulling with the shares looking shaky at its 200-day MA, toeing overbought levels after a 100% 2-weeks run up.
The weekly option plays that are driving a large portion of the recent upside will begin to expire today and the attempted gamma-squeeze (leveraged moves from outside near-term option volumes) will start to abate.
Latest Catalyst
GME has caught a recent bid after the man the myth the legend, Ryan Cohen (Chairman of GameStop), who initially launched this moon-bound stock into the stratosphere when he revealed an over $76 million position in GME in January 2021 (more than 9 million shares), announced the purchase of an additional 100,000 shares on March 22nd, 2022, which seemed to reignited this "meme stock" mania.
GME is now up nearly 100% since its NFT-focused earnings report in mid-March, which demonstrated a top-line beat, and margin oppressing cost spikes that would have had any other group of shareholders shaking in their boots was a bullish signal for this new market cohort of (self-proclaimed) "diamond-handed apes."
The Big Short-Squeeze
A little more than a year ago, a fragmented group of freshman day traders on a Reddit message board called r/WallStreetBets (WSB) were unified by a single stock, GameStop, a dying brick-and-mortar retailer that held market-moving nostalgia.
The GME fuse was lit way before its parabolic moonshot in early 2021, as this new class of market participants began looking for value in the things they knew. GameStop quickly made its way to the top of that list in late 2020. GME could have actually been categorized as a value play in late-2020, trading under a $1 billion market cap into 2021, a valuation that suggested imminent bankruptcy. GME is now at an over $13 billion public company.
Once Ryan Cohen announced RC Ventures' activist position in GameStop, a cascade of retail investing capital flooded into this overly shorted public equity (short-interest above 100%), driving what appeared to be an endless self-fulling prophecy of upside success with near term call options adding fuel to its euphoric short-throttling price action (rally as much as 2,000% in a mere two weeks).
The Ryan Cohen Effect
Ryan Cohen, the co-founder of Chewy and current Chairman of GameStop's board, announced another more than $10 million "investment" for 100,000 GME shares, which he executed through his investment fund, RC Ventures, catalyzing the latest flood of euphoric meme trading activity.
Ryan Cohen now owns roughly 12% of GameStop turning his initital $76 million investment into nearly $2 billion.
Ryan Cohen's $10 million GME purchase on March 22nd reinvigorated GME's "meme stock" momentum as young day traders and hedge funds (momentum chasing) begin buying up absurd volumes of immediate-term call options (100,000s of calls expiring on Friday traded hands today), catalyzing some gamma-squeeze Déjà vu in GME – significant open interest (OI) in soon-to-expire contracts causes leveraged price action due to extreme moves in these Friday contracts' delta, aka gamma (forcing market makers to quickly buy or sell shares to maintain a price agnostic position).
GME ticker mentions on the younger market participants' favorite trading forum, r/WallStreetBets (WSB), have been through the rough, inspiring another big WSB winner, AMC, to shoot 13.6% higher for no other reason than its "meme stock" categorization.
Final Thoughts
Unless you understand how the GME trade works (there is always a technical driver no matter the fundamentals, which appears to be a combination of Fibonacci-retracements and MAs) I would stay away from GME. GME is a trading mechanism at best (losing lottery-ticket at worst), not a buy & hold investment.
Additional content:
3 Earnings All-Stars with Positive Revisions & Surprises
With our first positive month of 2022 out of the way and a new earnings season about to begin, this is a good time to revisit the EPS Growth, Revisions and Positive Surprises. Below are three names that recently passed this screen by securing a high Zacks Rank with upward earnings estimate revisions and positive surprises.
Kroger
Kroger was a real "go-to" destination during the pandemic with restaurants closed and people stuck in their homes, except for trips to the grocery store of course. The environment will change now that covid's days are numbered, but this grocery giant sees plenty of money left on the shelves For example, KR's focus on enhancing its product freshness and expanding its digital sales led to a strong fourth quarter report in early March and a solid guidance for 2022.
This supermarket powerhouse operates under many banners, including Kroger (of course), Food 4 Less, Mariano's, Pick 'n Save and several others. It's four formats are combo stores (food + drugs), multi-department store, marketplace stores and price impact warehouses. As part of the retail-supermarkets space, KR is in the top 10% of the Zacks Industry Rank. Shares are up more than 62% over the past year.
KR reported fourth-quarter earnings per share of 91 cents a few weeks ago, which marked a positive surprise of nearly 25% and eclipsed the Zacks Consensus Estimate for the ninth straight quarter.
Total sales were $33 billion, which topped the Zacks Consensus Estimate by approximately 1.3%. Excluding fuel, sales were up 3.7% year over year. Identical sales, without fuel, rose 4%, while digital sales soared 105% on a two-year stack.
For full year 2022, KR expects to keep its momentum despite a rapidly-changing operating environment. The company sees adjusted earnings per share between $3.75 and $3.85 with identical sales growth (excluding fuel) of 2% to 3%. Despite all the challenges out there, the company still expects to generate total shareholder returns of 8% to 11% over time.
Earnings estimates have increased since the strong quarter and positive guidance. The Zacks Consensus Estimate for this fiscal year (ending January 2023) is $3.66 and next year's (ending January 2024) is at $3.85, marking gains of 6.7% and 6.9%, respectively, over the past 30 days. But those estimates also suggest year-over-year improvement of 5.2%, which is pretty good for a boring old grocery chain.
Nordstrom, Inc.
The market might have gotten off to a rough start in 2022, but Nordstrom saw shares rise approximately 20% year to date. Its fourth quarter report from earlier this month showed a company that's able to increase earnings and sales, while growing its digital footprint.
JWN is a fashion specialty retailer positioned in the upscale segment of the industry. We're talking about serious shoppers here. Some of its main channels include the Nordstrom full-line stores; Nordstrom Rack; and Trunk Club clubhouses.
However, a little luxury is just what's needed at the end of an unprecedented pandemic that had people wearing sweatpants and shorts to online business meetings. JWN is enjoying solid demand for its apparel and footwear, robust digital growth, lower markdowns and higher merchandise margins.
JWN kicked off this month with a strong fiscal fourth quarter performance, which included earnings per share of $1.23 that beat the Zacks Consensus Estimate by 18.3%. Furthermore, revenues of $4.5 billion surged 23% from last year and topped our expectation by more than 1.5%.
However, the company seemed most proud that sales were down only 1% from the same period in fiscal 2019, which suggests it has almost fully recovered from the pandemic. Moving forward, the company's primary focus is on improving the performance of Nordstrom Rack; further increasing profitability; and optimizing its supply chain and inventory flow.
The company expects revenue growth between 5% and 7% for fiscal 2022, as well as adjusted earnings per share of $3.15 to $3.30. The range was above the Zacks Consensus Estimate at the time, but analysts have been hiking expectations to make up the difference.
We now expect earnings of $3.30 for both this fiscal year (ending January 2023) and next fiscal year (ending January 2024). Those estimates have jumped 68% and 43.5%, respectively, over the past 30 days with plenty of time for more improvement moving forward.
Builders FirstSource, Inc.
The first rate hike in over three years (with as many as six more coming in future months) makes people a bit more wary about big purchases like new homes. So it's no surprise that shares of Builders FirstSource are lower so far in 2022.
However, it still expects strong demand this year... and analysts seem to agree. Earnings estimates have moved higher over the past month, allowing BLDR to retain its enviable Zacks Rank #1 (Strong Buy) status. Plus, shares are still higher by more than 42% over the past year.
BLDR is the largest supplier of building materials, manufactured components and construction services. As part of the building products – retail space, it's in the top 7% of the Zacks Industry Rank. One of the big moves of late was the merger with BMC Stock Holdings, which played a part in its fourth-quarter report from early this month.
The company earned $2.78 per share in the quarter, beating the Zacks Consensus Estimate by more than 47% and bringing the four-quarter average surprise to 74%. BLDR has now surpassed our earnings expectations for 14 consecutive reports.
Net sales came to $4.6 billion, surpassing the Zacks Consensus Estimate by more than 6%. The result also improved 23.7% from last year on a pro forma basis. Core organic sales advanced 11.7% on robust demand for single-family housing, R&R and other activities.
For full year 2021, adjusted earnings soared to $10.32 versus $2.79 in 2020. Net sales were $19.9 billion, up 55.8% from the 2020 pro-forma level.
The Zacks Consensus Estimate for this year jumped 30% in the past 30 days to $8.90, while next year increased 33% to $9.23. Therefore, analysts currently see 3.7% year-over-year growth with plenty of time for further improvement.
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