We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Mattel Losing Ground, Bet on These Consumer Stocks for Growth
Read MoreHide Full Article
The Consumer Discretionary sector is witnessing positive trends thanks to the improving economy backed by a favorable labor market, increased consumer spending and enhanced consumer confidence.
While this indicates favorable prospects for the sector participants, leading global manufacturer of toys, Mattel, Inc. (MAT - Free Report) , has been witnessing challenging trends for quite some time. Evidently, the company has lagged earnings estimates in three of the trailing four quarters, with an average negative surprise of 47.5%. Moreover, sales have missed the same for three consecutive quarters.
Consequently, shares of this Zacks Rank #5 (Strong Sell) stock plunged 45.3% year to date, underperforming the industry’s rally of 49.2%.
What’s Troubling Mattel?
We note that one of the prime concerns for the company has been the persistent sluggish performance of certain key brands including Mattel Girls & Boys Brands, Barbie, Thomas, MEGA brands and American Girl Brands. Mattel has been witnessing soft sales for these brands due to increased competitive advertising and value players.
Though the company began 2017 expecting top-line growth in the mid- to high-single digits, it is now targeting low single-digit sales growth for the year. The lowered expectations reflect lower sales of Thomas, American Girl and MEGA brands. These brands represent half of the reduction of the company’s full-year revenue outlook and the impact of lower sales from its fragmented innovation pipeline, which Mattel plans to rebalance and refocus for the rest of 2017 for improving productivity.
While Mattel expects its incremental licensed entertainment portfolio, strategic investments in emerging markets and key power brands – Barbie, Hot Wheels and Fisher-Price – to drive growth in the second half of 2017, we believe it will take time for all the brands to show steady development.
Meanwhile, lack of innovative schemes for brand awareness and brand innovation have been hurting the company’s revenues and POS momentum, which is putting pressure on revenues and margins. Also, the U.S. toy category slowdown, unfavorable foreign exchange translation and loss of Disney deal remain concerns. Competition from technology-based gaming companies poses a significant threat to its market position as well.
Given the deep routed troubles and the negative surprise trends, the company’s estimates have witnessed downward revisions in the last 30 days. The Zacks Consensus Estimate of 73 cents for 2017 and 90 cents for 2018 moved down 7.6% and 10%, respectively. Also, the stock bears a VGM Score of D that signals trouble down the road.
How is the Consumer Discretionary Sector Positioned?
Though Mattel seems in deep trouble, there are many stocks in the Consumer Discretionary space that promise growth. Overall, the sector has put up a decent performance in the past. A look at the sector’s performance shows that it has witnessed growth of 14.9% in the past year, almost in line with the momentum of the S&P 500 index that grew 15%.
Further, it carries a Zacks Sector Rank of #4 (out of 16), placing it at the top 25% of the Zacks classified sectors.
Hence, there lies an opportunity to invest in Consumer Discretionary stocks which are poised to make the best of the improving economic situation.
4 Trending Picks
That said, we bring you four Consumer Discretionary stocks that are displaying solid performance backed by sound fundamentals, Zacks Rank #1 (Strong Buy) or 2 (Buy), a VGM Score of A or B, surging share price and a track record of better-than-expected results. You can see the complete list of today’s Zacks #1 Rank stocks here.
First on the list is Crocs, Inc. (CROX - Free Report) , a major designer, manufacturer and marketer of innovative casual footwear for men, women and children, which carries a Zack Rank #1. It boasts a VGM Score of A and has a long-term EPS earnings growth rate of 15%.
The company remains focused on its ongoing strategic initiatives like product enhancement, marketing campaigns and optimization of its wholesale, retail and e-commerce channels. Its earnings have surpassed the Zacks Consensus Estimate in three of the last four quarters, with an average of 83.9%. In fact, the company’s shares have advanced 41.3% in the last six months, substantially outperforming the industry’s growth of 10.6%.
Also consider PVH Corp. (PVH - Free Report) , a leading designer and marketer of branded dress shirts, neckwear, sportswear, jeanswear, swim products, footwear, handbags and other related products. This Zacks Rank #2 stock has a VGM Score of A and long-term EPS growth rate of 12.6%. The company is gaining from solid momentum at its Calvin Klein and Tommy Hilfiger brands, particularly in the international regions.
Further, its efforts to keep pace with the evolving consumer trends bode well. Notably, its earnings have outpaced the Zacks Consensus Estimate for 13 straight quarters now. The company’s shares have rallied 37.6% in the last six months, ahead of the industry’s growth of 10.6%.
Next, Guess?, Inc. (GES - Free Report) , the leading designer, marketer, and licensor of casual apparel and accessories is a solid bet. This Zacks Rank #2 stock flaunts an impressive long-term earnings growth rate of 17.5% with a VGM Score of A. In fact, the company’s earnings have outpaced the Zacks Consensus Estimate in the last two quarters, with a trailing four-quarter average beat of 20.6%.
Meanwhile, Guess? has been gaining from solid sales at the Europe and Asia segments. Management also remains optimistic about its e-commerce business that has been improving steadily. Moreover, the company has been undertaking cost-saving initiatives through improved supply chain management. The company’s shares have surged more than 44% in the last six months, compared with the industry’s gain of 10.6%.
Investors may also opt for Gildan Activewear Inc. (GIL - Free Report) , a leading manufacturer and marketer of premium quality branded basic activewear. This Zacks Rank #2 stock possesses a VGM Score of A and long-term earnings growth rate of 13.5%. The company’s earnings have surpassed the Zacks Consensus Estimate in three of the last four quarters, with an average beat of 5.5%.
Gildan has been benefiting from its acquisitions, along with the solid sales witnessed at the company’s Branded Apparel and Printwear segments. The company’s shares have gained 20.2% in the last six months, outperforming the industry’s rally of 10.6%.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Image: Bigstock
Mattel Losing Ground, Bet on These Consumer Stocks for Growth
The Consumer Discretionary sector is witnessing positive trends thanks to the improving economy backed by a favorable labor market, increased consumer spending and enhanced consumer confidence.
While this indicates favorable prospects for the sector participants, leading global manufacturer of toys, Mattel, Inc. (MAT - Free Report) , has been witnessing challenging trends for quite some time. Evidently, the company has lagged earnings estimates in three of the trailing four quarters, with an average negative surprise of 47.5%. Moreover, sales have missed the same for three consecutive quarters.
Consequently, shares of this Zacks Rank #5 (Strong Sell) stock plunged 45.3% year to date, underperforming the industry’s rally of 49.2%.
What’s Troubling Mattel?
We note that one of the prime concerns for the company has been the persistent sluggish performance of certain key brands including Mattel Girls & Boys Brands, Barbie, Thomas, MEGA brands and American Girl Brands. Mattel has been witnessing soft sales for these brands due to increased competitive advertising and value players.
Though the company began 2017 expecting top-line growth in the mid- to high-single digits, it is now targeting low single-digit sales growth for the year. The lowered expectations reflect lower sales of Thomas, American Girl and MEGA brands. These brands represent half of the reduction of the company’s full-year revenue outlook and the impact of lower sales from its fragmented innovation pipeline, which Mattel plans to rebalance and refocus for the rest of 2017 for improving productivity.
While Mattel expects its incremental licensed entertainment portfolio, strategic investments in emerging markets and key power brands – Barbie, Hot Wheels and Fisher-Price – to drive growth in the second half of 2017, we believe it will take time for all the brands to show steady development.
Meanwhile, lack of innovative schemes for brand awareness and brand innovation have been hurting the company’s revenues and POS momentum, which is putting pressure on revenues and margins. Also, the U.S. toy category slowdown, unfavorable foreign exchange translation and loss of Disney deal remain concerns. Competition from technology-based gaming companies poses a significant threat to its market position as well.
Given the deep routed troubles and the negative surprise trends, the company’s estimates have witnessed downward revisions in the last 30 days. The Zacks Consensus Estimate of 73 cents for 2017 and 90 cents for 2018 moved down 7.6% and 10%, respectively. Also, the stock bears a VGM Score of D that signals trouble down the road.
How is the Consumer Discretionary Sector Positioned?
Though Mattel seems in deep trouble, there are many stocks in the Consumer Discretionary space that promise growth. Overall, the sector has put up a decent performance in the past. A look at the sector’s performance shows that it has witnessed growth of 14.9% in the past year, almost in line with the momentum of the S&P 500 index that grew 15%.
Further, it carries a Zacks Sector Rank of #4 (out of 16), placing it at the top 25% of the Zacks classified sectors.
Hence, there lies an opportunity to invest in Consumer Discretionary stocks which are poised to make the best of the improving economic situation.
4 Trending Picks
That said, we bring you four Consumer Discretionary stocks that are displaying solid performance backed by sound fundamentals, Zacks Rank #1 (Strong Buy) or 2 (Buy), a VGM Score of A or B, surging share price and a track record of better-than-expected results. You can see the complete list of today’s Zacks #1 Rank stocks here.
First on the list is Crocs, Inc. (CROX - Free Report) , a major designer, manufacturer and marketer of innovative casual footwear for men, women and children, which carries a Zack Rank #1. It boasts a VGM Score of A and has a long-term EPS earnings growth rate of 15%.
The company remains focused on its ongoing strategic initiatives like product enhancement, marketing campaigns and optimization of its wholesale, retail and e-commerce channels. Its earnings have surpassed the Zacks Consensus Estimate in three of the last four quarters, with an average of 83.9%. In fact, the company’s shares have advanced 41.3% in the last six months, substantially outperforming the industry’s growth of 10.6%.
Also consider PVH Corp. (PVH - Free Report) , a leading designer and marketer of branded dress shirts, neckwear, sportswear, jeanswear, swim products, footwear, handbags and other related products. This Zacks Rank #2 stock has a VGM Score of A and long-term EPS growth rate of 12.6%. The company is gaining from solid momentum at its Calvin Klein and Tommy Hilfiger brands, particularly in the international regions.
Further, its efforts to keep pace with the evolving consumer trends bode well. Notably, its earnings have outpaced the Zacks Consensus Estimate for 13 straight quarters now. The company’s shares have rallied 37.6% in the last six months, ahead of the industry’s growth of 10.6%.
Next, Guess?, Inc. (GES - Free Report) , the leading designer, marketer, and licensor of casual apparel and accessories is a solid bet. This Zacks Rank #2 stock flaunts an impressive long-term earnings growth rate of 17.5% with a VGM Score of A. In fact, the company’s earnings have outpaced the Zacks Consensus Estimate in the last two quarters, with a trailing four-quarter average beat of 20.6%.
Meanwhile, Guess? has been gaining from solid sales at the Europe and Asia segments. Management also remains optimistic about its e-commerce business that has been improving steadily. Moreover, the company has been undertaking cost-saving initiatives through improved supply chain management. The company’s shares have surged more than 44% in the last six months, compared with the industry’s gain of 10.6%.
Investors may also opt for Gildan Activewear Inc. (GIL - Free Report) , a leading manufacturer and marketer of premium quality branded basic activewear. This Zacks Rank #2 stock possesses a VGM Score of A and long-term earnings growth rate of 13.5%. The company’s earnings have surpassed the Zacks Consensus Estimate in three of the last four quarters, with an average beat of 5.5%.
Gildan has been benefiting from its acquisitions, along with the solid sales witnessed at the company’s Branded Apparel and Printwear segments. The company’s shares have gained 20.2% in the last six months, outperforming the industry’s rally of 10.6%.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>