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Williams-Sonoma and Freshpet have been highlighted as Zacks Bull and Bear of the Day
Read MoreHide Full Article
For Immediate Release
Chicago, IL – April 6, 2022 – Zacks Equity Research shares Williams-Sonoma Inc. (WSM - Free Report) as the Bull of the Day and Freshpet Inc. (FRPT - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on — Essential Utilities Inc. (WTRG - Free Report) and California Water Service Group (CWT - Free Report) .
Headquartered in San Francisco, Williams-Sonoma Inc. is a specialty home goods and furniture retailer founded in 1973.
The company has five core operating segments, each of which make up its brand portfolio: Pottery Barn, West Elm, the namesake Williams-Sonoma, Pottery Barn Kids & Teen, and Other, which includes Rejuvenation and Mark and Graham.
Q4 Earnings Recap
A few weeks ago, Williams-Sonoma crushed expectations for its fiscal 2021 fourth quarter.
Adjusted earnings per share came in at $5.42 while revenue hit $2.5 billion, up 9% year-over-year, easily beating top and bottom-line estimates.
Impressively, e-commerce now makes up 66% of the company's total revenue.
Total comparable sales rose nearly 11% compared to the prior-year period. West Elm was a standout once again, reporting comps growth of 18.3% and Pottery Barn saw comps growth of 16.2%.
Gross margin expanded 290 basis points to 45%, driven higher by year-over-year merchandise margin gains. Operating margin expanded by 3.5 percentage points to 21%.
WSM's liquidity position remains strong. The retailer ended 2021 with $850 million in cash and no debt, as well as $1.4 billion in operating cash flow. This allowed WSM to return almost $1.1 billion to shareholders via dividends and share repurchases.
Plus, Williams-Sonoma just announced a 10% dividend increase; the upcoming dividend of $0.78 will be paid out on May 27 to investors of record as of April 22. Shares currently yield about 1.9% on an annual basis. This is in addition to a newly authorized $1.5 billion share buyback program.
Can WSM Surge Higher?
Year-to-date, shares of WSM have fallen about 12% compared to the S&P 500's loss of 4%, but earnings estimates are on the climb, making the home-focused retailer a Zacks Rank #1 (Strong Buy) right now.
For the current fiscal year, nine analysts have revised their bottom-line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up from $14.35 per share to $15.56 per share. Earnings and sales are expected to notch modest gains for 2022, with 2023 continuing the positive earnings growth trend.
"[Last quarter's] results reflect the resilience in our business model, as we successfully navigated unprecedented challenges within the supply chain, material and labor shortages, and capacity limitations from our incredible consumer demand," CEO Laura Alber said in a press release.
Williams-Sonoma's growth initiatives are clearly paying off faster than expected.
The company now anticipates full-year 2022 revenue growth to be in the "mid-to-high single-digit" range. Additionally, management believes it will now reach its goal of $10 billion in annual sales by 2024.
If you're an investor searching for a retail stock that offers both future growth and a well-covered dividend, make sure to keep WSM on your shortlist.
Freshpet Inc. is a pet food company that manufactures and markets natural fresh foods, refrigerated meals, and treats for dogs and cats in the United States and Canada. Freshpet provides meat-based recipes, such as chicken, beef, lamb and salmon; fruits and vegetables like carrots, peas and leafy green vegetables; and high-fiber grains, such as brown rice, oats and barley. It sells its products under the Freshpet, Dognation, and Dog Joy brand names, and is headquartered in Secaucus, New Jersey.
Q4 Earnings Recap
Back in early March, Freshpet released fourth-quarter earnings results that were actually better-than-expected.
Revenue of $115.9 million matched the analyst consensus and rose 37.1% year-over-year.
Adjusted gross margin, however, sharply decreased to 41.7% from 45.8%, weighed down by wage increases, cost inflation, and increased capacity investments.
Selling, general, and administrative costs popped by 46%, and because of this, adjusted EBITDA dipped from $12.9 million to $9.7 million for the period. Freshpet also reported a GAAP loss of $0.21 per share compared to estimates of a loss of $0.16 per share.
What really caught investors' eyes was Freshpet's bullish guidance.
The company now expects full-year revenue of at least $575 million, which would represent growth in the range of 33.5% and 35%. Freshpet also guided adjusted EBITDA to be greater than $55 million.
Bottom Line
FRPT is currently a Zacks Rank #5 (Strong Sell).
Eight analysts have cut their full year earnings outlook over the past 60 days, and the consensus estimate has fallen 33 cents to a loss of $0.46 per share. However, Freshpet's earnings are expected to increase in 2022, up about 33% year-over-year, and it looks like bottom-line growth will continue next fiscal year as well.
Shares are up roughly 13% year-to-date compared to the S&P 500's loss of 4% thanks to a post-earnings rally.
Despite some hiccups in Q4, Freshpet's management is confident in the company's progress so far in 2022. "Over the past two years, we have invested in significant new capacity and the talent to support it. We plan to use that capacity wisely -- budgeting conservatively to ensure the reliability of our operations in an uncertain environment but also planning aggressively to maximize our growth potential," said CEO Billy Cyr.
In addition to a lower earnings consensus estimate, FRPT is still expensive (even after its big pullback over the last year). The company is still unprofitable and trades at a price-to-sales ratio of 11X, which is expensive for a consumer staples stock.
While Freshpet is experiencing some notable tailwinds at the moment, shares may continue to experience some ups and downs as inflation hits business and the supply chain crisis lingers, so potential investors should proceed with caution.
Additional content:
Which Water Utility Stock Is Better to Own Now?
An uninterrupted supply of clean potable water and reliable sewer services are essential for healthy and hygienic living. Per the Environmental Protection Agency (EPA), at present, more than 51,000 community water systems and 16,000 community wastewater systems in the United States are providing water solutions to customers. A highly fragmented industry creates challenges in the proper maintenance of infrastructure. Thus, upgrading the aging assets to maintain quality services is the need of the hour. Hence, utilities continuously replace old pipelines and add new ones to expand operations.
Utility operators own storage tanks, treatment plants and desalination plants to supply uninterrupted potable water across customer classes. Large water utilities are making systematic acquisitions to expand operations and make essential investments to upgrade and maintain the aging assets of acquired companies. However, due to the delay in essential pipeline repairs and maintenance, 2.1 trillion gallons of treated water are lost every year in the United States.
Upgrade and maintenance of old pipelines, along with the proper usage of potable water and water-efficient appliances, can help in stopping the wastage of this priceless resource. However, huge investments are required to upgrade and maintain the aging U.S. water infrastructure. Per the EPA, an estimated $744 billion investment is necessary to maintain and expand drinking water and wastewater services to meet demand over the next 20 years.
In addition, the U.S. government is also planning to invest in upgrading water infrastructure. The American Jobs Plan has provisions for $111 billion in water and wastewater infrastructure upgrades.
Amid such a backdrop, we run a comparative analysis on two stocks from the Utility - Water Supply — Essential Utilities Inc. and California Water Service Group — to decide which stock is a better pick for your portfolio now.
Essential Utilities has a market capitalization of $13.3 billion, while the same for California Water Service is $3.3 billion.
Growth Projections & Surprise History
The Zacks Consensus Estimate for Essential Utilities' 2022 earnings is pegged at $1.78 per share on revenues of $1.97 billion. The bottom line suggests a year-over-year increase of 6.6%.
The Zacks Consensus Estimate for California Water Service's 2022 earnings is pegged at $1.88 per share on revenues of $0.8 billion. The bottom line suggests a year-over-year decrease of 4.1%.
Essential Utilities delivered an average earnings surprise of 1.9% in the last four quarters, while California Water Service delivered a negative average earnings surprise of 2.6% in the last four quarters.
Price Performance
In the past six months, WTRG shares have rallied 9.0% compared with the industry's growth of 5.7%. Meanwhile, shares of CWT have declined 2.1% in the same period.
Investment Plans
Essential Utilities continues to make systematic investments to strengthen water, wastewater and natural gas infrastructure. Essential Utilities plans to invest $3 billion through 2024 to rehabilitate and strengthen water and natural gas pipeline systems to efficiently serve the expanding customer base.
California Water Service invested $293.2 million and $298.7 million in 2021 and 2020, respectively. The majority of capital expenditures were associated with mains and water treatment equipment. Also, the midpoint of its capital expenditure planned for 2022, 2023 and 2024 is $355 million, $360 million and $365 million, respectively, which will assist California Water Serviceto meet the increasing need to replace and maintain infrastructure.
Return on Equity
Return on Equity (ROE) is a measure of a company's efficiency in utilizing shareholders' funds. ROE for the trailing 12 months for WTRG and CWT is 8.7% and 9.6%, respectively, compared with the industry's ROE of 9.6%.
Debt to Capital
Debt to capital is a good indicator of the financial position of a company. The indicator shows how much debt is used to run the business. Essential Utilities and California Water Service have a debt to capital of 53.6% and 48.1%, respectively, compared with the industry's average debt-to-capital level of 49.6%.
Dividend Yield
Utility companies generally distribute dividends. Currently, the dividend yield for Essential Utilities and California Water Service is 2.1% and 1.7%, respectively, compared with the industry average of 1.6%.
Outcome
Although these companies are efficiently providing services to customers, Essential Utilities, with its consistent positive earnings surprise, a higher dividend yield and a higher return over the past six months, is a better stock to add to your portfolio.
Why Haven't You Looked at Zacks' Top Stocks?
Our 5 best-performing strategies have blown away the S&P's impressive +28.8% gain in 2021. Amazingly, they soared+40.3%, +48.2%, +67.6%, +94.4%, and+95.3%. Today you can access their live picks without cost or obligation.
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/performancefor information about the performance numbers displayed in this press release.
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Williams-Sonoma and Freshpet have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – April 6, 2022 – Zacks Equity Research shares Williams-Sonoma Inc. (WSM - Free Report) as the Bull of the Day and Freshpet Inc. (FRPT - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on — Essential Utilities Inc. (WTRG - Free Report) and California Water Service Group (CWT - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Headquartered in San Francisco, Williams-Sonoma Inc. is a specialty home goods and furniture retailer founded in 1973.
The company has five core operating segments, each of which make up its brand portfolio: Pottery Barn, West Elm, the namesake Williams-Sonoma, Pottery Barn Kids & Teen, and Other, which includes Rejuvenation and Mark and Graham.
Q4 Earnings Recap
A few weeks ago, Williams-Sonoma crushed expectations for its fiscal 2021 fourth quarter.
Adjusted earnings per share came in at $5.42 while revenue hit $2.5 billion, up 9% year-over-year, easily beating top and bottom-line estimates.
Impressively, e-commerce now makes up 66% of the company's total revenue.
Total comparable sales rose nearly 11% compared to the prior-year period. West Elm was a standout once again, reporting comps growth of 18.3% and Pottery Barn saw comps growth of 16.2%.
Gross margin expanded 290 basis points to 45%, driven higher by year-over-year merchandise margin gains. Operating margin expanded by 3.5 percentage points to 21%.
WSM's liquidity position remains strong. The retailer ended 2021 with $850 million in cash and no debt, as well as $1.4 billion in operating cash flow. This allowed WSM to return almost $1.1 billion to shareholders via dividends and share repurchases.
Plus, Williams-Sonoma just announced a 10% dividend increase; the upcoming dividend of $0.78 will be paid out on May 27 to investors of record as of April 22. Shares currently yield about 1.9% on an annual basis. This is in addition to a newly authorized $1.5 billion share buyback program.
Can WSM Surge Higher?
Year-to-date, shares of WSM have fallen about 12% compared to the S&P 500's loss of 4%, but earnings estimates are on the climb, making the home-focused retailer a Zacks Rank #1 (Strong Buy) right now.
For the current fiscal year, nine analysts have revised their bottom-line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up from $14.35 per share to $15.56 per share. Earnings and sales are expected to notch modest gains for 2022, with 2023 continuing the positive earnings growth trend.
"[Last quarter's] results reflect the resilience in our business model, as we successfully navigated unprecedented challenges within the supply chain, material and labor shortages, and capacity limitations from our incredible consumer demand," CEO Laura Alber said in a press release.
Williams-Sonoma's growth initiatives are clearly paying off faster than expected.
The company now anticipates full-year 2022 revenue growth to be in the "mid-to-high single-digit" range. Additionally, management believes it will now reach its goal of $10 billion in annual sales by 2024.
If you're an investor searching for a retail stock that offers both future growth and a well-covered dividend, make sure to keep WSM on your shortlist.
Bear of the Day:
Freshpet Inc. is a pet food company that manufactures and markets natural fresh foods, refrigerated meals, and treats for dogs and cats in the United States and Canada. Freshpet provides meat-based recipes, such as chicken, beef, lamb and salmon; fruits and vegetables like carrots, peas and leafy green vegetables; and high-fiber grains, such as brown rice, oats and barley. It sells its products under the Freshpet, Dognation, and Dog Joy brand names, and is headquartered in Secaucus, New Jersey.
Q4 Earnings Recap
Back in early March, Freshpet released fourth-quarter earnings results that were actually better-than-expected.
Revenue of $115.9 million matched the analyst consensus and rose 37.1% year-over-year.
Adjusted gross margin, however, sharply decreased to 41.7% from 45.8%, weighed down by wage increases, cost inflation, and increased capacity investments.
Selling, general, and administrative costs popped by 46%, and because of this, adjusted EBITDA dipped from $12.9 million to $9.7 million for the period. Freshpet also reported a GAAP loss of $0.21 per share compared to estimates of a loss of $0.16 per share.
What really caught investors' eyes was Freshpet's bullish guidance.
The company now expects full-year revenue of at least $575 million, which would represent growth in the range of 33.5% and 35%. Freshpet also guided adjusted EBITDA to be greater than $55 million.
Bottom Line
FRPT is currently a Zacks Rank #5 (Strong Sell).
Eight analysts have cut their full year earnings outlook over the past 60 days, and the consensus estimate has fallen 33 cents to a loss of $0.46 per share. However, Freshpet's earnings are expected to increase in 2022, up about 33% year-over-year, and it looks like bottom-line growth will continue next fiscal year as well.
Shares are up roughly 13% year-to-date compared to the S&P 500's loss of 4% thanks to a post-earnings rally.
Despite some hiccups in Q4, Freshpet's management is confident in the company's progress so far in 2022. "Over the past two years, we have invested in significant new capacity and the talent to support it. We plan to use that capacity wisely -- budgeting conservatively to ensure the reliability of our operations in an uncertain environment but also planning aggressively to maximize our growth potential," said CEO Billy Cyr.
In addition to a lower earnings consensus estimate, FRPT is still expensive (even after its big pullback over the last year). The company is still unprofitable and trades at a price-to-sales ratio of 11X, which is expensive for a consumer staples stock.
While Freshpet is experiencing some notable tailwinds at the moment, shares may continue to experience some ups and downs as inflation hits business and the supply chain crisis lingers, so potential investors should proceed with caution.
Additional content:
Which Water Utility Stock Is Better to Own Now?
An uninterrupted supply of clean potable water and reliable sewer services are essential for healthy and hygienic living. Per the Environmental Protection Agency (EPA), at present, more than 51,000 community water systems and 16,000 community wastewater systems in the United States are providing water solutions to customers. A highly fragmented industry creates challenges in the proper maintenance of infrastructure. Thus, upgrading the aging assets to maintain quality services is the need of the hour. Hence, utilities continuously replace old pipelines and add new ones to expand operations.
Utility operators own storage tanks, treatment plants and desalination plants to supply uninterrupted potable water across customer classes. Large water utilities are making systematic acquisitions to expand operations and make essential investments to upgrade and maintain the aging assets of acquired companies. However, due to the delay in essential pipeline repairs and maintenance, 2.1 trillion gallons of treated water are lost every year in the United States.
Upgrade and maintenance of old pipelines, along with the proper usage of potable water and water-efficient appliances, can help in stopping the wastage of this priceless resource. However, huge investments are required to upgrade and maintain the aging U.S. water infrastructure. Per the EPA, an estimated $744 billion investment is necessary to maintain and expand drinking water and wastewater services to meet demand over the next 20 years.
In addition, the U.S. government is also planning to invest in upgrading water infrastructure. The American Jobs Plan has provisions for $111 billion in water and wastewater infrastructure upgrades.
Amid such a backdrop, we run a comparative analysis on two stocks from the Utility - Water Supply — Essential Utilities Inc. and California Water Service Group — to decide which stock is a better pick for your portfolio now.
Both the stocks currently carry a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank(Strong Buy)stocks here.
Essential Utilities has a market capitalization of $13.3 billion, while the same for California Water Service is $3.3 billion.
Growth Projections & Surprise History
The Zacks Consensus Estimate for Essential Utilities' 2022 earnings is pegged at $1.78 per share on revenues of $1.97 billion. The bottom line suggests a year-over-year increase of 6.6%.
The Zacks Consensus Estimate for California Water Service's 2022 earnings is pegged at $1.88 per share on revenues of $0.8 billion. The bottom line suggests a year-over-year decrease of 4.1%.
Essential Utilities delivered an average earnings surprise of 1.9% in the last four quarters, while California Water Service delivered a negative average earnings surprise of 2.6% in the last four quarters.
Price Performance
In the past six months, WTRG shares have rallied 9.0% compared with the industry's growth of 5.7%. Meanwhile, shares of CWT have declined 2.1% in the same period.
Investment Plans
Essential Utilities continues to make systematic investments to strengthen water, wastewater and natural gas infrastructure. Essential Utilities plans to invest $3 billion through 2024 to rehabilitate and strengthen water and natural gas pipeline systems to efficiently serve the expanding customer base.
California Water Service invested $293.2 million and $298.7 million in 2021 and 2020, respectively. The majority of capital expenditures were associated with mains and water treatment equipment. Also, the midpoint of its capital expenditure planned for 2022, 2023 and 2024 is $355 million, $360 million and $365 million, respectively, which will assist California Water Serviceto meet the increasing need to replace and maintain infrastructure.
Return on Equity
Return on Equity (ROE) is a measure of a company's efficiency in utilizing shareholders' funds. ROE for the trailing 12 months for WTRG and CWT is 8.7% and 9.6%, respectively, compared with the industry's ROE of 9.6%.
Debt to Capital
Debt to capital is a good indicator of the financial position of a company. The indicator shows how much debt is used to run the business. Essential Utilities and California Water Service have a debt to capital of 53.6% and 48.1%, respectively, compared with the industry's average debt-to-capital level of 49.6%.
Dividend Yield
Utility companies generally distribute dividends. Currently, the dividend yield for Essential Utilities and California Water Service is 2.1% and 1.7%, respectively, compared with the industry average of 1.6%.
Outcome
Although these companies are efficiently providing services to customers, Essential Utilities, with its consistent positive earnings surprise, a higher dividend yield and a higher return over the past six months, is a better stock to add to your portfolio.
Why Haven't You Looked at Zacks' Top Stocks?
Our 5 best-performing strategies have blown away the S&P's impressive +28.8% gain in 2021. Amazingly, they soared+40.3%, +48.2%, +67.6%, +94.4%, and+95.3%. Today you can access their live picks without cost or obligation.
See Stocks Free >>
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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/performancefor information about the performance numbers displayed in this press release.