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TJX Companies, Alibaba, Bluerock Residential Growth REIT, Spectrum Brands and Metropolitan Bank highlighted as Zacks Bull and Bear of the Day
Read MoreHide Full Article
For Immediate Release
Chicago, IL – October 7, 2021 – Zacks Equity Research Shares of The TJX Companies, Inc. (TJX - Free Report) as the Bull of the Day, Alibaba Group Holding Limited (BABA - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Bluerock Residential Growth REIT, Inc. , Spectrum Brands Holdings, Inc. (SPB - Free Report) and Metropolitan Bank Holding Corp. (MCB - Free Report) .
TJX Companies is a retail star that I have been waiting for the right moment to pick up. It looks like that entry opportunity has finally come as the broader equity market sells off while TJX’s fundamental growth narrative remains unchanged.
Consumers are rushing to Main Street with the new normal ushering in a slew of digitally inclined product offerings. TJX is one of the rare (and maybe only) retailers that didn’t need digital sales to survive the pandemic. Nevertheless, it has been developing digital omnichannel platforms, positioning the company for accelerated growth through the Roaring 20s.
TJX is now over 15% off its August highs and poised for a buy as the stock comes down to robust technical support that should encourage bullish capital to flood into this Millennial favored “off-price” retailer.
Analysts are getting increasingly bullish on TJX as retail foot traffic swells in this economic resurgence. Consumers are looking to refresh their fall & winter wardrobes and evolving consumption patterns of younger generations with a penchant for value, providing a long-term tailwind for TJX and its niche quality at a discount product offering.
TJX analysts have been continuously raising price targets, and EPS estimates alike as the company’s future growth gets progressively priced in, pushing this stock up to a Zacks Rank #1 (Strong Buy).
The Business
TJX Companies, comprised of TJ Maxx, Marshalls, HomeGoods, & more, has become a beacon of hope amid the ‘retail apocalypse.’ Many brick-and-mortar storefronts closed their doors for the last time during the pandemic lockdowns in 2020, with more than 10,000 store closures 30 major retailers being forced to file bankruptcy last year. Meanwhile, TJX grew its global store count by 136 since the pandemic began.
TJX Companies has gained tremendous popularity from Millennials, now the largest consuming generation, because of the value hunting possibilities it offers customers. TJX’s diverse portfolio of global companies provides a wide array of growth opportunities.
Direct e-commerce sales were not a part of TJX’s original “value-hunting” framework because of the nature of these types of operations (constantly changing inventories). However, the enterprise has adapted digital sales options on their websites, and it has proven to be a potent driver for new customer acquisitions in recent quarters.
TJ Maxx, Marshall, and TK Maxx (the international TJ Maxx) established transactional online sites over the past decade or so, and HomeGoods just recently launched its own e-commerce platform. As I mentioned above, TJX didn’t need digital sales to survive the pandemic’s brick-and-mortar shutdown, with a mere 3% of revenue coming from its online platforms. Still, the pandemic did help to develop a new digital consumer base that will continue to expand in the post-pandemic world.
TJX experienced significant pandemic headwinds, exhibiting two-quarters of losses, which was the first time in recent history (last 25 years) that the company could not turn a quarterly profit. Nevertheless, this discount retailer bounced back fast, with its latest July quarter illustrating record Q2 results. This past quarter painted a picture of resilience and core growth. Its topline increased by 20% year-over-year on an open-only comp basis and saw over 81% annual sales expansion on a nominal basis.
This legacy retailer’s revived growth narrative is just beginning as its online presence grows with its bread-and-butter physical storefronts.
TJX was so resilient to the retail apocalypse because of the satisfying in-person experience it provides the growing number of bargain shoppers. There is a peculiar dopamine-powered bliss in finding that item you were looking for at a considerable discount to what you would typically pay, like finding a needle in a haystack.
The Charts
TJX bounced off a critical Fib-derived support level around noon. If you want to draw this Fibonacci extension (price targets to the downside) yourself, you would start with the September 13th lows and pull it up to the highs we reached on September 17th (Monday to Friday).
TJX closed yesterday’s session just about 30 cents above its pre-pandemic record, which it notched at the end of February 2020.
Final Thoughts
The stock is currently trading below its most pessimistic price target with a 27% upside to its average price target. TJX is a buy from both a technical and a fundamental standpoint.
A new wave of consumers is being ushered into this flourishing economy with a penchant for value and convenience. TJX’s new omnichannel platform equips the company with both of these profit-driving qualities.
This company’s savvy management team has managed to gain brick-and-mortar market share as storefronts close down at a record pace. TJX seems to be doing everything right, and I want to be a part of its growth narrative.
I am pitching Alibaba, the Amazon of the East, as the Bear of the Day purely due to geopolitical risks, which have grown daily since Jack Ma's criticism of China's financial system nearly a year ago. The significant and highly uncertain regulatory overhang coming out of Beijing has made Chinese tech an uninvestable class of securities at this time. The growing threat of delisting in the US is pushing market participants away from this toxic equity.
Despite Alibaba's unbelievably profitable growth and significant valuation discount to its western competitor (Amazon), the dangers surrounding Xi Jinping's recent crackdown on tech has investors running for the hills.
Analysts have been precipitously dropping EPS estimates on BABA since its fintech subsidiary, Ant Group, was forced to suspend its IPO last year combined with Xi's tightening autocratic grip on Chinese tech, pushing BABA down to a Zacks Rank #5 (Strong Sell).
Bear Market for Regulation-Ridden Chinese Tech
Hong Kong officially entered a bear market (over 20% below recent highs) at the end of August as its innovation-powered Hang Seng Index experienced endless regulation catalyzed capitulation. Beijing has been busy releasing a flood of value-killing statutes that have brought Chinese tech stocks to their knees.
Alibaba's co-founder and former CEO, Jack Ma, and his eccentric, outspoken personality catalyzed this endless flow of tech-focused regulation in China. Jack Ma's fame and influence on society made his candid opinions a "threat" to the communist state, and ultimately Xi Jinping's control.
Xi's regime impeded Ma's fintech giant Ant Group's nearly half a trillion-dollar IPO last year, wiping out over $150 billion in market value from this fintech titan virtually overnight last November, with a fresh regulatory overhaul aimed at Ant Group's unique lending methods, which BABA own a 33% stake in. This move by Chinese officials appeared to be in retaliation to Jack Ma's (founder and owner of the business) public criticism of the republic's financial system. Alibaba has since lost $435 billion in value, and now holds on to less than half the market cap that it had just 1-year ago.
Jack Ma's denouncement of China's financial practices seems to have triggered this fresh wave of tech regulation in the region. Xi fears that he could lose control of his economy to ostentatious billionaires like Ma (the man who founded both Alibaba & Ant Group), or worse, US investors.
Another 'timely' restriction came just 2 days after DiDi, the Uber of China, released its shares to US investors, the Cyberspace Administration in China announced a data-security review of the company that would require them to temporarily halt user growth. DIDI shares have since lost over $50 of their value. In fact, every publicly traded Chinese tech stock has taken a sizable dip since these restrictive announcements became a systemic issue earlier this year.
The progressing communist regime once headed towards capitalism is now reeling back towards a Mao Zedong style government-controlled autocratic economy.
However, it is not unusual for the Chinese stock market to see these 20%+ stock market sell-off in any given year. In the past decade, the Hang Seng Index has experienced an over 15% market downturn in all but 2 of those years, entered a bear market (20%+ decline) in 4 of the last 6 years. The volatility that we are seeing in the Chinese market today is not unusual, but the mounting regulatory overhang causing this value deterioration is unique to 2021. As I said, the unusual uncertainty here is what continues to compress Tencent and its cohorts' valuations.
Xi Jinping's rule is reversing decades of progress that China had been making towards a democratized international superpower. I only hope that it doesn't turn into a full-on totalitarian nation.
Final Thoughts
There is geopolitical risk in every foreign entity, but China tech shares may hold the most as Beijing's clamps on innovative growth tighten. Since this wave of regulation was catalyzed by Jack Ma, founder of Alibaba, I see significant risk in these shares specifically, though there is a value argument to be made for the stock.
The investability of BABA stands with what you believe China's end goal is with these tech-specific regulations. Does Xi want to rid its country of US investors, or is this flood of regulation just a short-term powerplay to show these companies who's really in charge?
I'm hoping that Xi isn't dumb enough to destroy the value of his country's largest GDP drivers for nationalist reasons, so I hope that the latter of these reasonings turns out to be true. Either way, I would stay clear of Chinese equities until the opacity surrounding this situation clears.
Additional content:
Thinking of Taking Some Profits?
Alright. We’ve seen a bit of upside after days of disappointment in the stock market. And of course, as is often the case, it was helped by big tech. So one question we’re probably asking ourselves is whether there’s more upside waiting to happen. Or whether we’re into a downward trend in shares.
Because while things could improve in the final months of the year, and we all hope that they do, the fact remains that there are a whole lot of challenges this year. We can’t just wish away the inflation, which is front and center of the problems we have right now, or the fact that soaring energy prices and rising input costs continue to drive it.
The energy crisis isn’t going away any time soon either. Nor are the ships standing in cue on the west coast. Nor the driver crisis in the trucking market. So inflation is going to be longer-lived than expected just a couple of months earlier.
And then there’s the debt ceiling. No matter what is decided today, debating will only serve to raise it, allowing the government to continue spending (including on more free money), which will have the effect of increasing demand and therefore contribute to incremental inflation.
On the other hand, the government can’t default, so the ceiling will have to be raised.
And as if that wasn’t enough, this earnings season is expected to be less spectacular than the last as we anniversary last year’s bounce-back.
While I have been bullish on the market through most of the year, my expectations for the rest of the year are tempered by these concerns. That’s despite the bump-up we usually get from the holiday season.
So I have been looking for stocks that appear to be losing steam because now’s as good a time as any to take some profits. Because just in case market reaction to earnings is more positive than currently expected, that cash could be put to use quickly.
I’ve partly relied on the Zacks stock ranking system, the direction of price movement, as well as the direction estimates are moving-
Bluerock Residential Growth REIT
Bluerock develops and acquires a diversified portfolio of institutional-quality highly-amenitized apartment communities for live/work/play in attractive knowledge economy growth markets in the Sun Belt preferred by renters.
As more companies increasingly set up offices in the sun belt, the demand for rental accommodation in the region has increased. This has led to great opportunities for companies like Bluerock.
The Zacks Rank #4 (Sell) company is highly leveraged with a debt-cap ratio of 74% and 79% of its shareholders equity in preferred stock. So it has a lot of payments to make. And despite the increase in the average occupancy and rental rates this year, which improved operating profits and margins, Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate (“EBITDAre”) declined.
Management recently decided to consider its options including a sale of the company or its recapitalization, which sent its shares up. In fact, the shares had a roller coaster ride this year, but since this announcement last month, they have shot up. It doesn’t look like the shares have much more room to run, so it’s probably a good idea to offload them now.
The company’s estimates have also edged lower in the last 60 days and while it does have a good history of positive surprises, the price response hasn’t been too exciting.
Spectrum Brands Holdings
Spectrum Brands is a global consumer products company with a portfolio of leading brands in product categories like residential locksets, plumbing, electric shaving and grooming products, personal care products, small household appliances, specialty pet supplies, lawn and garden and home pest control products and repellents. It operates in 160 countries.
In September, the company decided to divest its Hardware & Home Improvement (HHI) segment to Swedish lock maker ASSA ABLOY in a cash deal worth $4.3 billion. The proceeds from the sale of this fast-growing business were intended to pay down its debt (debt-cap ratio is quite high at 63.9%) and strengthen its balance sheet. The HHI segment, which includes security, plumbing and hardware products, accounts for a third of its revenues.
This comes at a time when the Zacks Rank #5 (Strong Sell) company is also seeing increased inflationary pressures from higher transportation and commodity costs.
These factors have contributed to the 41-cent reduction in its 2021 (ending September) estimate and $1.85 reduction in its 2022 estimate in the last 30 days.
The shares shot up after the divestiture announcement and are now trading at a P/E multiple that’s very close to their annual high. It doesn’t look like there’s further upside potential at the moment.
Also, while prices do appear to be positively correlated with earnings surprises, both positive and negative, the response is usually muted. So there shouldn’t be a major impact on prices, even if the company manages a positive surprise.
Metropolitan Bank Holding Corp.
Metropolitan Bank Holding Corp. is the holding company for Metropolitan Commercial Bank, The Entrepreneurial Bank. The company is a chartered commercial bank which provides deposits, small business lending, trade finance, cash management solutions, specialty markets, personal checking, savings, electronic banking and prepaid cards. It operates primarily in Manhattan, Boro Park, Brooklyn and Great Neck, Long Island.
The shares have responded positively to both the earnings announcement in July and the public offering of 2,300,000 shares of its common stock. The proceeds from the shares will be used for the repayment or redemption of outstanding debt, or share repurchases, or investments in the Bank, as regulatory capital or otherwise, ongoing operations, interest and dividend payments and possible acquisitions of businesses or assets.
As a result, shares of this Zacks Rank #5 company have appreciated 43.4% in the last three months. However, it appears that they are treading water right now.
The Zacks Rank #5 company’s estimates are also on a decline: the 2021 estimate is down 38 cents while the 2022 estimate is down $1.28.
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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TJX Companies, Alibaba, Bluerock Residential Growth REIT, Spectrum Brands and Metropolitan Bank highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – October 7, 2021 – Zacks Equity Research Shares of The TJX Companies, Inc. (TJX - Free Report) as the Bull of the Day, Alibaba Group Holding Limited (BABA - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Bluerock Residential Growth REIT, Inc. , Spectrum Brands Holdings, Inc. (SPB - Free Report) and Metropolitan Bank Holding Corp. (MCB - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
TJX Companies is a retail star that I have been waiting for the right moment to pick up. It looks like that entry opportunity has finally come as the broader equity market sells off while TJX’s fundamental growth narrative remains unchanged.
Consumers are rushing to Main Street with the new normal ushering in a slew of digitally inclined product offerings. TJX is one of the rare (and maybe only) retailers that didn’t need digital sales to survive the pandemic. Nevertheless, it has been developing digital omnichannel platforms, positioning the company for accelerated growth through the Roaring 20s.
TJX is now over 15% off its August highs and poised for a buy as the stock comes down to robust technical support that should encourage bullish capital to flood into this Millennial favored “off-price” retailer.
Analysts are getting increasingly bullish on TJX as retail foot traffic swells in this economic resurgence. Consumers are looking to refresh their fall & winter wardrobes and evolving consumption patterns of younger generations with a penchant for value, providing a long-term tailwind for TJX and its niche quality at a discount product offering.
TJX analysts have been continuously raising price targets, and EPS estimates alike as the company’s future growth gets progressively priced in, pushing this stock up to a Zacks Rank #1 (Strong Buy).
The Business
TJX Companies, comprised of TJ Maxx, Marshalls, HomeGoods, & more, has become a beacon of hope amid the ‘retail apocalypse.’ Many brick-and-mortar storefronts closed their doors for the last time during the pandemic lockdowns in 2020, with more than 10,000 store closures 30 major retailers being forced to file bankruptcy last year. Meanwhile, TJX grew its global store count by 136 since the pandemic began.
TJX Companies has gained tremendous popularity from Millennials, now the largest consuming generation, because of the value hunting possibilities it offers customers. TJX’s diverse portfolio of global companies provides a wide array of growth opportunities.
Direct e-commerce sales were not a part of TJX’s original “value-hunting” framework because of the nature of these types of operations (constantly changing inventories). However, the enterprise has adapted digital sales options on their websites, and it has proven to be a potent driver for new customer acquisitions in recent quarters.
TJ Maxx, Marshall, and TK Maxx (the international TJ Maxx) established transactional online sites over the past decade or so, and HomeGoods just recently launched its own e-commerce platform. As I mentioned above, TJX didn’t need digital sales to survive the pandemic’s brick-and-mortar shutdown, with a mere 3% of revenue coming from its online platforms. Still, the pandemic did help to develop a new digital consumer base that will continue to expand in the post-pandemic world.
TJX experienced significant pandemic headwinds, exhibiting two-quarters of losses, which was the first time in recent history (last 25 years) that the company could not turn a quarterly profit. Nevertheless, this discount retailer bounced back fast, with its latest July quarter illustrating record Q2 results. This past quarter painted a picture of resilience and core growth. Its topline increased by 20% year-over-year on an open-only comp basis and saw over 81% annual sales expansion on a nominal basis.
This legacy retailer’s revived growth narrative is just beginning as its online presence grows with its bread-and-butter physical storefronts.
TJX was so resilient to the retail apocalypse because of the satisfying in-person experience it provides the growing number of bargain shoppers. There is a peculiar dopamine-powered bliss in finding that item you were looking for at a considerable discount to what you would typically pay, like finding a needle in a haystack.
The Charts
TJX bounced off a critical Fib-derived support level around noon. If you want to draw this Fibonacci extension (price targets to the downside) yourself, you would start with the September 13th lows and pull it up to the highs we reached on September 17th (Monday to Friday).
TJX closed yesterday’s session just about 30 cents above its pre-pandemic record, which it notched at the end of February 2020.
Final Thoughts
The stock is currently trading below its most pessimistic price target with a 27% upside to its average price target. TJX is a buy from both a technical and a fundamental standpoint.
A new wave of consumers is being ushered into this flourishing economy with a penchant for value and convenience. TJX’s new omnichannel platform equips the company with both of these profit-driving qualities.
This company’s savvy management team has managed to gain brick-and-mortar market share as storefronts close down at a record pace. TJX seems to be doing everything right, and I want to be a part of its growth narrative.
Bear of the Day:
I am pitching Alibaba, the Amazon of the East, as the Bear of the Day purely due to geopolitical risks, which have grown daily since Jack Ma's criticism of China's financial system nearly a year ago. The significant and highly uncertain regulatory overhang coming out of Beijing has made Chinese tech an uninvestable class of securities at this time. The growing threat of delisting in the US is pushing market participants away from this toxic equity.
Despite Alibaba's unbelievably profitable growth and significant valuation discount to its western competitor (Amazon), the dangers surrounding Xi Jinping's recent crackdown on tech has investors running for the hills.
Analysts have been precipitously dropping EPS estimates on BABA since its fintech subsidiary, Ant Group, was forced to suspend its IPO last year combined with Xi's tightening autocratic grip on Chinese tech, pushing BABA down to a Zacks Rank #5 (Strong Sell).
Bear Market for Regulation-Ridden Chinese Tech
Hong Kong officially entered a bear market (over 20% below recent highs) at the end of August as its innovation-powered Hang Seng Index experienced endless regulation catalyzed capitulation. Beijing has been busy releasing a flood of value-killing statutes that have brought Chinese tech stocks to their knees.
Alibaba's co-founder and former CEO, Jack Ma, and his eccentric, outspoken personality catalyzed this endless flow of tech-focused regulation in China. Jack Ma's fame and influence on society made his candid opinions a "threat" to the communist state, and ultimately Xi Jinping's control.
Xi's regime impeded Ma's fintech giant Ant Group's nearly half a trillion-dollar IPO last year, wiping out over $150 billion in market value from this fintech titan virtually overnight last November, with a fresh regulatory overhaul aimed at Ant Group's unique lending methods, which BABA own a 33% stake in. This move by Chinese officials appeared to be in retaliation to Jack Ma's (founder and owner of the business) public criticism of the republic's financial system. Alibaba has since lost $435 billion in value, and now holds on to less than half the market cap that it had just 1-year ago.
Jack Ma's denouncement of China's financial practices seems to have triggered this fresh wave of tech regulation in the region. Xi fears that he could lose control of his economy to ostentatious billionaires like Ma (the man who founded both Alibaba & Ant Group), or worse, US investors.
Another 'timely' restriction came just 2 days after DiDi, the Uber of China, released its shares to US investors, the Cyberspace Administration in China announced a data-security review of the company that would require them to temporarily halt user growth. DIDI shares have since lost over $50 of their value. In fact, every publicly traded Chinese tech stock has taken a sizable dip since these restrictive announcements became a systemic issue earlier this year.
The progressing communist regime once headed towards capitalism is now reeling back towards a Mao Zedong style government-controlled autocratic economy.
However, it is not unusual for the Chinese stock market to see these 20%+ stock market sell-off in any given year. In the past decade, the Hang Seng Index has experienced an over 15% market downturn in all but 2 of those years, entered a bear market (20%+ decline) in 4 of the last 6 years. The volatility that we are seeing in the Chinese market today is not unusual, but the mounting regulatory overhang causing this value deterioration is unique to 2021. As I said, the unusual uncertainty here is what continues to compress Tencent and its cohorts' valuations.
Xi Jinping's rule is reversing decades of progress that China had been making towards a democratized international superpower. I only hope that it doesn't turn into a full-on totalitarian nation.
Final Thoughts
There is geopolitical risk in every foreign entity, but China tech shares may hold the most as Beijing's clamps on innovative growth tighten. Since this wave of regulation was catalyzed by Jack Ma, founder of Alibaba, I see significant risk in these shares specifically, though there is a value argument to be made for the stock.
The investability of BABA stands with what you believe China's end goal is with these tech-specific regulations. Does Xi want to rid its country of US investors, or is this flood of regulation just a short-term powerplay to show these companies who's really in charge?
I'm hoping that Xi isn't dumb enough to destroy the value of his country's largest GDP drivers for nationalist reasons, so I hope that the latter of these reasonings turns out to be true. Either way, I would stay clear of Chinese equities until the opacity surrounding this situation clears.
Additional content:
Thinking of Taking Some Profits?
Alright. We’ve seen a bit of upside after days of disappointment in the stock market. And of course, as is often the case, it was helped by big tech. So one question we’re probably asking ourselves is whether there’s more upside waiting to happen. Or whether we’re into a downward trend in shares.
Because while things could improve in the final months of the year, and we all hope that they do, the fact remains that there are a whole lot of challenges this year. We can’t just wish away the inflation, which is front and center of the problems we have right now, or the fact that soaring energy prices and rising input costs continue to drive it.
The energy crisis isn’t going away any time soon either. Nor are the ships standing in cue on the west coast. Nor the driver crisis in the trucking market. So inflation is going to be longer-lived than expected just a couple of months earlier.
And then there’s the debt ceiling. No matter what is decided today, debating will only serve to raise it, allowing the government to continue spending (including on more free money), which will have the effect of increasing demand and therefore contribute to incremental inflation.
On the other hand, the government can’t default, so the ceiling will have to be raised.
And as if that wasn’t enough, this earnings season is expected to be less spectacular than the last as we anniversary last year’s bounce-back.
While I have been bullish on the market through most of the year, my expectations for the rest of the year are tempered by these concerns. That’s despite the bump-up we usually get from the holiday season.
So I have been looking for stocks that appear to be losing steam because now’s as good a time as any to take some profits. Because just in case market reaction to earnings is more positive than currently expected, that cash could be put to use quickly.
I’ve partly relied on the Zacks stock ranking system, the direction of price movement, as well as the direction estimates are moving-
Bluerock Residential Growth REIT
Bluerock develops and acquires a diversified portfolio of institutional-quality highly-amenitized apartment communities for live/work/play in attractive knowledge economy growth markets in the Sun Belt preferred by renters.
As more companies increasingly set up offices in the sun belt, the demand for rental accommodation in the region has increased. This has led to great opportunities for companies like Bluerock.
The Zacks Rank #4 (Sell) company is highly leveraged with a debt-cap ratio of 74% and 79% of its shareholders equity in preferred stock. So it has a lot of payments to make. And despite the increase in the average occupancy and rental rates this year, which improved operating profits and margins, Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate (“EBITDAre”) declined.
Management recently decided to consider its options including a sale of the company or its recapitalization, which sent its shares up. In fact, the shares had a roller coaster ride this year, but since this announcement last month, they have shot up. It doesn’t look like the shares have much more room to run, so it’s probably a good idea to offload them now.
The company’s estimates have also edged lower in the last 60 days and while it does have a good history of positive surprises, the price response hasn’t been too exciting.
Spectrum Brands Holdings
Spectrum Brands is a global consumer products company with a portfolio of leading brands in product categories like residential locksets, plumbing, electric shaving and grooming products, personal care products, small household appliances, specialty pet supplies, lawn and garden and home pest control products and repellents. It operates in 160 countries.
In September, the company decided to divest its Hardware & Home Improvement (HHI) segment to Swedish lock maker ASSA ABLOY in a cash deal worth $4.3 billion. The proceeds from the sale of this fast-growing business were intended to pay down its debt (debt-cap ratio is quite high at 63.9%) and strengthen its balance sheet. The HHI segment, which includes security, plumbing and hardware products, accounts for a third of its revenues.
This comes at a time when the Zacks Rank #5 (Strong Sell) company is also seeing increased inflationary pressures from higher transportation and commodity costs.
These factors have contributed to the 41-cent reduction in its 2021 (ending September) estimate and $1.85 reduction in its 2022 estimate in the last 30 days.
The shares shot up after the divestiture announcement and are now trading at a P/E multiple that’s very close to their annual high. It doesn’t look like there’s further upside potential at the moment.
Also, while prices do appear to be positively correlated with earnings surprises, both positive and negative, the response is usually muted. So there shouldn’t be a major impact on prices, even if the company manages a positive surprise.
Metropolitan Bank Holding Corp.
Metropolitan Bank Holding Corp. is the holding company for Metropolitan Commercial Bank, The Entrepreneurial Bank. The company is a chartered commercial bank which provides deposits, small business lending, trade finance, cash management solutions, specialty markets, personal checking, savings, electronic banking and prepaid cards. It operates primarily in Manhattan, Boro Park, Brooklyn and Great Neck, Long Island.
The shares have responded positively to both the earnings announcement in July and the public offering of 2,300,000 shares of its common stock. The proceeds from the shares will be used for the repayment or redemption of outstanding debt, or share repurchases, or investments in the Bank, as regulatory capital or otherwise, ongoing operations, interest and dividend payments and possible acquisitions of businesses or assets.
As a result, shares of this Zacks Rank #5 company have appreciated 43.4% in the last three months. However, it appears that they are treading water right now.
The Zacks Rank #5 company’s estimates are also on a decline: the 2021 estimate is down 38 cents while the 2022 estimate is down $1.28.
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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.