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Global oil prices rose on Tuesday as concerns related to supply levels continue to mount. A strike in Norway and disruptions in Libya have added to these concerns, while sanctions against Iran and the ongoing Venezuela crisis have devastated inventory. Nevertheless, disciplined oil behemoths like BP plc might actually be able to take advantage of these trends.
BP is one of the world's largest petroleum and petrochemicals groups. Its main activities are exploration and production of crude oil and natural gas; refining, marketing, supply and transportation; and manufacturing and marketing of petrochemicals.
Positive earnings estimate revisions have earned BP a Zacks Rank #1 (Strong Buy), and this strong analyst sentiment underscores exciting growth opportunities for investors right now. Let’s take a closer look.
Latest Earnings Outlook
We are obviously heading into the heart of Q2 earnings season soon, and BP’s next report is expected to be out about a month from now. For that quarter, current consensus estimates are calling for earnings of $0.87 per share, which would mark growth of more than 314% year over year.
Backing things out a bit, the Zacks Consensus Estimate for BP’s full-year 2018 earnings currently sits at $3.34 per share, and investors should note that this figure has been trending upward recently. Specifically, this consensus projection has added 21 cents over the past 30 days thanks to three positive estimate revisions.
Positive estimate revision trends speak to the company’s strong Zacks Rank, but as noted, there are a few more reasons to be bullish on BP right now.
Other Reasons To Buy
As mentioned, one of the key issues throughout the global oil business recently has been meeting demand, but BP certainly does not have to worry about its production. Since 2016, the company has placed 15 key upstream projects online, leading to its record Q1 production in 2018. Meanwhile, BP is on track to increase production by 900 thousand barrels of oil equivalent per day by 2021.
Investors will also note BP’s commitment to its shareholders. The company has been paying dividends to ADS holders for 14 consecutive quarters, and its current dividend yield of 5.1% would certainly attract any income-focused investor. BP expects operating cash flow to improve 23% in 2018, and many believe a dividend hike is in the cards. This likely explains why BP has surged nearly 36% over the past year, outpacing its industry’s rally of 21.6%.
Valuation
Finally, we should also note that a number of key valuation metrics for BP look pretty solid right now. The stock is currently trading at about 14x forward earnings, which is a slight premium to its industry’s average of 12x—but definitely still within reason.
Meanwhile, the stock has a PEG ratio of 0.8, which is a discount to the industry’s 1.2 average PEG. This shows that investors are getting a decent price for BP’s earnings growth prospects. Investors will also notice that BP’s P/S ratio of 0.6 is a discount to the industry average.
The retail industry has seen its fair share of near and full-blown casualties over the past several years, but perhaps no brick-and-mortar bankruptcy has been greater than that of Toys ‘R’ Us. What’s worse, the liquidation of Toys ‘R’ Us has had a negative effect on some of the iconic brands it carried, including Mattel, Inc.
Mattel is one of the world’s largest manufacturers of toys. Its family of brands includes Barbie, Hot Wheels, Matchbox, American Girl, Fisher-Price, and more. These iconic toy lines obviously still carry plenty of clout in the industry, but recent headwinds make MAT look like a stock to avoid for now.
Investors should also note that these headwinds have led to negative analyst sentiment and downward earnings estimate revisions, which has earned the stock a Zacks Rank #5 (Strong Sell). Plus, there’s probably a few other reasons to be bearish on MAT right now. Let’s take a closer look.
Latest Earnings and Outlook
Mattel most recently reported earnings on April 26. For that period, Mattel reported an adjusted loss of 60 cents per share, which was much wider than the consensus estimate of a 39-cent loss. In the prior-year quarter, Mattel saw a loss of 32 cents per share.
Mattel’s Q1 2018 results were significantly affected by the Toys ‘R’ Us bankruptcy, and management said it expects this to continue being an issue in the near term.
The company’s next earnings report is expected to be released after the market closes on July 25. For this second quarter, the Zacks Consensus Estimate is calling for Mattel to report an adjusted loss of 31 cents per share. This would mark a year-over-year decline over more than 121%.
Looking out a bit further, the Zacks Consensus Estimate for Mattel’s full-year 2018 earnings currently sits at -$0.55 per share, and this figure has been trending downward. In fact, three negative revisions over the past 60 days have dragged this projection down about three cents.
This negative revision activity has earned the stock a #5 (Strong Sell), but as mentioned, there are a few other reasons to be hesitant about MAT right now.
Reasons for Concern
Part of the underlying issue for Mattel is tighter retail inventory management. This put a huge dent on the company’s Q1 sales and is expected to continue being a headwind going forward. Add this to marketing and promotional costs, as well as cost associated with developing digital platforms, and it’s no surprise that Mattel's margins are under pressure.
Another issue to be aware of is a broader problem throughout the toy industry. Unfortunately for these traditional brands, the advent of video games, MP3 players, tablets, and smartphones has grabbed the attention of their core audiences.
This would only hurt so much if Mattel could respond with strong product innovation and design. But that’s not really something we’ve seen from Mattel lately—although the company’s recent renewed commitment to building core brands like American Girl, Barbie, and Fisher-Price might be a long-term catalyst.
Mattel suspended its dividend at the end of 2017, and there’s not been many positive signs since then. Simply put, there are too many questions about the company’s near-term earnings outlook and broader industry trends for investors to want to dive into this stock right now.
Shares of Stitch Fix were up more than 8% through early afternoon trading Tuesday after analysts from KeyBanc Capital Markets initiated coverage on the stock with an overweight rating and a bullish price target.
Specifically, KeyBanc’s Ed Yruma acknowledged the subscription-based personal shopping service’s unique use of data.
“Stitch Fix's use of data is a significant advantage relative to the traditional apparel/retail competitive set and allows it to build a scalable, yet highly human, recommendation model,” Yruma wrote in a note to clients.
“We think share gains will continue in the core women's market, and that men's, plus, and now kids will help to further accelerate growth.”
Yruma slapped a $38 price target on SFIX, marking a 22% upside to its previous close. In a further display of how the analyst views Stitch Fix in contrast to its traditional retail peers, he also downgraded shares of Nordstrom and Urban Outfitters.
Tuesday’s gains add to Stitch Fix’s recent momentum, and the stock has now added more than 30% in the past month. SFIX has also started to generate noticeable earnings estimate revision momentum.
Within the past two months, Stitch Fix has witnessed four positive revisions to its full-year 2018 earnings estimates. The company has seen zero negative revisions to full-year estimates in that time. These positive revisions have lifted the Zacks Consensus Estimate for Stitch Fix’s 2018 earnings by six cents.
Positive earnings estimates have earned SFIX a Zacks Rank #2 (Buy). The stock is also sporting an “A” grade for Growth in our Style Scores system.
Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year. See these high-potential stocks free >>.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
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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BP, Mattel, Stitch Fix, Nordstrom and Urban Outfitters highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – July 11, 2018 – Zacks Equity Research highlights BP plc (BP - Free Report) as the Bull of the Day, Mattel, Inc. (MAT - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis onStitch Fix (SFIX - Free Report) , Nordstrom (JWN - Free Report) and Urban Outfitters (URBN - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Global oil prices rose on Tuesday as concerns related to supply levels continue to mount. A strike in Norway and disruptions in Libya have added to these concerns, while sanctions against Iran and the ongoing Venezuela crisis have devastated inventory. Nevertheless, disciplined oil behemoths like BP plc might actually be able to take advantage of these trends.
BP is one of the world's largest petroleum and petrochemicals groups. Its main activities are exploration and production of crude oil and natural gas; refining, marketing, supply and transportation; and manufacturing and marketing of petrochemicals.
Positive earnings estimate revisions have earned BP a Zacks Rank #1 (Strong Buy), and this strong analyst sentiment underscores exciting growth opportunities for investors right now. Let’s take a closer look.
Latest Earnings Outlook
We are obviously heading into the heart of Q2 earnings season soon, and BP’s next report is expected to be out about a month from now. For that quarter, current consensus estimates are calling for earnings of $0.87 per share, which would mark growth of more than 314% year over year.
Backing things out a bit, the Zacks Consensus Estimate for BP’s full-year 2018 earnings currently sits at $3.34 per share, and investors should note that this figure has been trending upward recently. Specifically, this consensus projection has added 21 cents over the past 30 days thanks to three positive estimate revisions.
Positive estimate revision trends speak to the company’s strong Zacks Rank, but as noted, there are a few more reasons to be bullish on BP right now.
Other Reasons To Buy
As mentioned, one of the key issues throughout the global oil business recently has been meeting demand, but BP certainly does not have to worry about its production. Since 2016, the company has placed 15 key upstream projects online, leading to its record Q1 production in 2018. Meanwhile, BP is on track to increase production by 900 thousand barrels of oil equivalent per day by 2021.
Investors will also note BP’s commitment to its shareholders. The company has been paying dividends to ADS holders for 14 consecutive quarters, and its current dividend yield of 5.1% would certainly attract any income-focused investor. BP expects operating cash flow to improve 23% in 2018, and many believe a dividend hike is in the cards. This likely explains why BP has surged nearly 36% over the past year, outpacing its industry’s rally of 21.6%.
Valuation
Finally, we should also note that a number of key valuation metrics for BP look pretty solid right now. The stock is currently trading at about 14x forward earnings, which is a slight premium to its industry’s average of 12x—but definitely still within reason.
Meanwhile, the stock has a PEG ratio of 0.8, which is a discount to the industry’s 1.2 average PEG. This shows that investors are getting a decent price for BP’s earnings growth prospects. Investors will also notice that BP’s P/S ratio of 0.6 is a discount to the industry average.
Bear of the Day:
The retail industry has seen its fair share of near and full-blown casualties over the past several years, but perhaps no brick-and-mortar bankruptcy has been greater than that of Toys ‘R’ Us. What’s worse, the liquidation of Toys ‘R’ Us has had a negative effect on some of the iconic brands it carried, including Mattel, Inc.
Mattel is one of the world’s largest manufacturers of toys. Its family of brands includes Barbie, Hot Wheels, Matchbox, American Girl, Fisher-Price, and more. These iconic toy lines obviously still carry plenty of clout in the industry, but recent headwinds make MAT look like a stock to avoid for now.
Investors should also note that these headwinds have led to negative analyst sentiment and downward earnings estimate revisions, which has earned the stock a Zacks Rank #5 (Strong Sell). Plus, there’s probably a few other reasons to be bearish on MAT right now. Let’s take a closer look.
Latest Earnings and Outlook
Mattel most recently reported earnings on April 26. For that period, Mattel reported an adjusted loss of 60 cents per share, which was much wider than the consensus estimate of a 39-cent loss. In the prior-year quarter, Mattel saw a loss of 32 cents per share.
Mattel’s Q1 2018 results were significantly affected by the Toys ‘R’ Us bankruptcy, and management said it expects this to continue being an issue in the near term.
The company’s next earnings report is expected to be released after the market closes on July 25. For this second quarter, the Zacks Consensus Estimate is calling for Mattel to report an adjusted loss of 31 cents per share. This would mark a year-over-year decline over more than 121%.
Looking out a bit further, the Zacks Consensus Estimate for Mattel’s full-year 2018 earnings currently sits at -$0.55 per share, and this figure has been trending downward. In fact, three negative revisions over the past 60 days have dragged this projection down about three cents.
This negative revision activity has earned the stock a #5 (Strong Sell), but as mentioned, there are a few other reasons to be hesitant about MAT right now.
Reasons for Concern
Part of the underlying issue for Mattel is tighter retail inventory management. This put a huge dent on the company’s Q1 sales and is expected to continue being a headwind going forward. Add this to marketing and promotional costs, as well as cost associated with developing digital platforms, and it’s no surprise that Mattel's margins are under pressure.
Another issue to be aware of is a broader problem throughout the toy industry. Unfortunately for these traditional brands, the advent of video games, MP3 players, tablets, and smartphones has grabbed the attention of their core audiences.
This would only hurt so much if Mattel could respond with strong product innovation and design. But that’s not really something we’ve seen from Mattel lately—although the company’s recent renewed commitment to building core brands like American Girl, Barbie, and Fisher-Price might be a long-term catalyst.
Mattel suspended its dividend at the end of 2017, and there’s not been many positive signs since then. Simply put, there are too many questions about the company’s near-term earnings outlook and broader industry trends for investors to want to dive into this stock right now.
Additional content:
Here’s Why StitchFix (SFIX - Free Report) Soared on Tuesday
Shares of Stitch Fix were up more than 8% through early afternoon trading Tuesday after analysts from KeyBanc Capital Markets initiated coverage on the stock with an overweight rating and a bullish price target.
Specifically, KeyBanc’s Ed Yruma acknowledged the subscription-based personal shopping service’s unique use of data.
“Stitch Fix's use of data is a significant advantage relative to the traditional apparel/retail competitive set and allows it to build a scalable, yet highly human, recommendation model,” Yruma wrote in a note to clients.
“We think share gains will continue in the core women's market, and that men's, plus, and now kids will help to further accelerate growth.”
Yruma slapped a $38 price target on SFIX, marking a 22% upside to its previous close. In a further display of how the analyst views Stitch Fix in contrast to its traditional retail peers, he also downgraded shares of Nordstrom and Urban Outfitters.
Tuesday’s gains add to Stitch Fix’s recent momentum, and the stock has now added more than 30% in the past month. SFIX has also started to generate noticeable earnings estimate revision momentum.
Within the past two months, Stitch Fix has witnessed four positive revisions to its full-year 2018 earnings estimates. The company has seen zero negative revisions to full-year estimates in that time. These positive revisions have lifted the Zacks Consensus Estimate for Stitch Fix’s 2018 earnings by six cents.
Positive earnings estimates have earned SFIX a Zacks Rank #2 (Buy). The stock is also sporting an “A” grade for Growth in our Style Scores system.
Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>
Get today’s Zacks #1 Stock of the Day with your free subscription to Profit from the Pros newsletter:
About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year. See these high-potential stocks free >>.
Follow us on Twitter: https://twitter.com/zacksresearch
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Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
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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.