Today's Must Read
Consumer Direct Offense Plan to Aid Growth at Nike (NKE)
Manulife (MFC) Gains from New Business Volumes in Asia
Monday, November 27, 2017
The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features new research reports on 16 major stocks, including Starbucks (SBUX), NIKE (NKE) and Manulife (MFC). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Starbucks’ shares are up +2.3% year to date, underperforming the Zacks Food & Restaurants industry, which is up +10.9% over the same period. Starbucks reported third-quarter fiscal 2017 results, wherein it met analysts’ expectations on earnings but missed on revenues amid persistent decline in U.S. restaurant sales.
However, its bottom line grew 10% with top line remaining the same year over year. Its global comps grew 2% (softer than 4% in the prior quarter), comprising 1% increase in average ticket with 2% growth in traffic. Again, higher investments in its store partner led to a decline of 90 basis points in operating margin.
As expected, Starbucks reduced its long-term EPS growth target to 12% (vs 15-20% expected earlier), which assumes 3-5% comps growth (vs mid-single-digits) and high-single-digit revenue growth (vs 10%). However, the Zacks analyst likes its best-in-class loyalty program, digital offerings to counter tepid sales growth, and increased strategic investments in China, while trimming down non-performing U.S. units.
Shares of NIKE have outperformed the Zacks Shoes and Retail Apparel industry over the one year (+16.3% vs. +15.2%), driven by strength in international business and the global NIKE Direct business. Also, NIKE has been focused on its Consumer Direct Offense plan.
Driven by its Triple Double strategy, this restructuring plan focuses on using digital methods for rapid innovation and product development, along with strengthening consumer relations by operating through core regions. It also has a positive record of earnings surprises in recent quarters.
However, lackluster sales trend in the company’s key North American market remains a headwind. Notably, sales in the region dipped 3% in first-quarter fiscal 2018, wherein the gross margin was hurt by currency woes and a higher mix of off-price sales.
The company anticipates near-term results to be hurt by the tough retail environment, which led to a bleak second quarter view. Second quarter estimates have been stable ahead of the earnings release.
Manulife’s shares have underperformed the Zacks Life Insurance industry in the year to date period, gaining +19.1% vs. +26.8%. However, Manulife continues to witness new business volumes, particularly in Asia, and positive net flows in its wealth and asset management businesses. A deep reach into Asian markets and a growing asset management business would drive long-term earnings growth.
The company remains on track to achieve more than $100 million in expense synergies. However, declining group benefit sales in Canada segment will weigh on results, volatile global equity markets coupled with low bond yields has largely affected the company’s capital position.
Manulife’s third-quarter 2017 core earnings increased year over year. The quarter witnessed new business value growth in Asia. While insurance sales increased, Wealth sales remained flat year over year. This also marks the 31st straight quarter of positive net flows in global Wealth and Asset Management.
Other noteworthy reports we are featuring today include Lam Research (LRCX), Intuit (INTU) and Vertex (VRTX).
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Note: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here>>>