For Immediate Release
Chicago, IL – October 14, 2021 – Zacks Equity Research shares Walmart Inc. (
WMT Quick Quote WMT - Free Report) as the Bull of the Day, and Beyond Meat (BYND) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on The Procter & Gamble Company ( PG Quick Quote PG - Free Report) , and General Dynamics Corp. ( GD Quick Quote GD - Free Report) . Here is a synopsis of all five stocks:
Big retailers were edging out smaller competitors for decades and the pandemic-induced shopping environment helped cement their standing as they push deeper into e-commerce and delivery.
Walmart Inc. posted a banner year in 2020 and its outlook remains strong. Now, its year-long underperformance could make for an enticing entry point into the world's largest retailer. Looking to the Future
Walmart’s revenue climbed 7% last year (its fiscal 2021), while its comparable sales climbed 9%. Expanded delivery and various pick-up options helped drive 80% e-commerce growth. In an effort to directly challenge Amazon’s popular Prime service, which includes many delivery perks, WMT launched last fall its own subscription service dubbed Walmart+.
The service costs $98 a year ($12.95/month) and offers free deliveries, discounts on fuel, access to new-age in-store checkout offerings, and more. The subscription service reached roughly 32 million U.S. households in one year, according to a recent Deutsche Bank report.
Walmart is also focused on landing partnerships with up and coming and digital native retailers. This includes teaming up with secondhand e-commerce clothing firm ThredUp, partnering with Shopify to bring more small businesses to its own third-party marketplace, and more.
On top of that, WMT is set to benefit from the booming digital advertising industry, as more dollars shift away from legacy media. Google and Facebookstill grab a lion’s share of the digital advertising market, but as more online searches begin on e-commerce sites, the money is following. Amazon and Walmart both have growing digital ad units, with WMT’s high-margin ad business on track to be a multi-billion-dollar-a-year segment in short order.
WMT has spent and partnered with fintech firms to improve its own in-house financial services offerings. The company is also slowly building out its telehealth services around the country to complement its in-person Walmart Health centers.
Walmart, like Target, Costco and other big-box retailers, posted its strongest performance in years in 2020. Despite the tough comparisons, Zacks estimates call for WMT’s revenue to climb another 1% this year and 2.2% higher next year to reach $578 billion. Both of these mark improvements from earlier estimates.
At the bottom end, its adjusted earnings are projected to jump 16% and 5%, respectively during this same stretch. WMT topped our EPS estimate by 14% last quarter and 39% in Q1. The company’s overall earnings outlook has improved recently to help it grab a Zacks Rank #1 (Strong Buy).
WMT lands a “B” grade for Growth in our Style Scores system and its Retail – Supermarkets space is in the top 11% of over 250 Zacks industries at the moment. This showcases broader positivity heading into the vital holiday shopping season, even with supply chain worries and pricing concerns. And August’s consumer spending data pointed to a strong and resilient U.S. consumer sector.
Wall Street analysts are bullish on Walmart, with 12 of the 19 brokerage recommendations Zacks has at “Strong Buys.” Three more recommendations are “Buys” and none come in below a “Hold.” And its 1.59% dividend yield edges out the recently-rising 10-year U.S. Treasury and the S&P 500’s 1.30%.
With these fundamentals, some investors might be surprised to know that WMT has lagged far behind the market in the past 12 months, down around 4% compared to the benchmark index’s 26% climb. The downturn is part of a broader sector-wide pullback after a surge off the coronavirus lows.
Walmart has also experienced a rather up and down stretch in 2021 and it closed regular hours Wednesday roughly 9% below its records. WMT sold off heavily after its Q2 release as investors took profits and speculated how the delta variant and other headwinds would impact pricing and the holiday season.
WMT shares have still outclimbed its sector in the last five years and just barely lagged behind the benchmark—mostly due to its recent performance. The drop has Walmart trading near its year-long lows at 21.3X forward earnings, which marks over a 20% discount to its sector.
Therefore, investors with long-term outlooks might want to consider scooping up the retail titan at what appears to be a solid entry point.
Beyond Meat stock skyrocketed during its first few months on the public markets back in the spring of 2019. It then tumbled back to earth and BYND has been on a wild up and down ride ever since, including a 20% decline in the past three months.
The plant-based meat firm has fallen well short of earnings estimates over the last year and BYND is projected to post an even larger adjusted loss in 2021.
Beyond Meat’s Pitch
Beyond Meat was founded over a decade ago and it sells so-called plant-based meats. The company and rivals aim to mimic the taste and consistency of real meat rivals, unlike veggie burgers and other offerings that have been around for longer. BYND has expanded its portfolio to include everything from multiple burger patties to sausages, chicken, and more.
The company’s diversification efforts include more affordable options and larger quantity packaging. Beyond Meat also boasts that its plant-based meats are healthier than traditional meat, but these claims have been disputed.
Therefore, its long-term success might hinge on its ability to sell consumers and Wall Street on its larger goals of shifting from animal to plant-based meat, to counteract what it calls “four growing issues attributed to livestock production: human health, climate change, constraints on natural resources and animal welfare.”
Beyond Meat has landed deals with firms like Dunkin’ and its packaged food can be found in stores everywhere from Safeway to Target.
Its sales soared by 239% in 2019, with FY20 revenue up 37% higher at $407 million. But the company is still losing money and it reported a larger-than-projected adjusted loss of -$0.31 a share in Q2. Management also warned at the time that covid could impact its near-term business in retail and foodservice.
Beyond Meat’s fiscal 2021 sales are still projected to climb 33%, with FY22 set to jump another 48% higher to reach $799.5 million. That said, Zacks estimates call for it to expand its adjusted full-year loss from -$0.60 a share to -$1.29 per share. BYND is then projected to bounce back to -$0.60 in FY22.
BYND’s earnings revisions help it land a Zacks Rank #5 (Strong Sell) at the moment, alongside “F” grades for Value and Growth in our Style Scores system. And Wall Street is hardly high on the stock, with 11 of the 15 brokerage recommendations Zacks has at either “Holds” or worse.
Clearly, the stock could bounce back and go on another run. However, it appears to be more of a trader’s stock at the moment.
Additional content: 3 Top-Ranked Dividend Aristocrats to Buy in Q4
The month of October has a reputation of not being good for the stock market. Per a
Barron’s article, historically, the S&P 500 had declined 0.4% in October, particularly after the broader index decreased more than 2% in the prior month, which by the way, did happen this time.
Also, the October effect cannot be completely written off. It states that Wall Street had witnessed some of the worst declines in the month of October, including the great crash in 1987, and 1929’s Black Tuesday and Thursday.
We may not witness huge crashes this October, but certainly, the month hasn’t been off to a good start for the stock market. In fact, the three major U.S. benchmarks have been dragged lower for the third successive trading session on Oct 12, and have witnessed choppy trading so far this month. Of course, there are a series of headwinds that are impacting the stock market’s upward journey and may well continue to do so this quarter.
Investors now believe that the Fed may move away from its easy monetary policy soon, which actually helped the stock market stay afloat amid the coronavirus pandemic. The Fed may soon taper its bond-buying program and is widely expected to hike rates next year.
Moreover, the European Central Bank is also expected to join the Fed in increasing its key interest rates in 2022. Thus, the possibility of higher interest dampens the prospects of growth-oriented tech stocks as it may impact the company’s ability to buy back stock and fund its growth.
Adding to the woes is the current rise in energy prices. This is because an increase in energy prices leads to higher inflation, which curtails consumer spending, slows down economic growth, and drags stocks lower.
On Oct 12, the U.S. crude benchmark – West Texas Intermediate, settled at $80.64 a barrel, its highest settlement value in almost seven years, citing a
Wall Street Journal article. Similarly, coal price has hit a record high, the price of natural gas has jumped and Americans are paying the highest at gas stations since 2014.
Talking about inflation, the Fed’s preferred gauge of inflation, in reality, had already climbed the highest in 30 years on a yearly basis during the month of August. This rise in prices of essential goods would certainly have an impact on consumers’ outlays in the near future, something that doesn’t bode well for the economy vis-à-vis the stock market (read more:
3 of the Best Stocks to Buy as Inflation Threat Rises).
By the way, the International Monetary Fund (IMF) has recently lowered its growth predictions for the world economy for this year. The spread of the more contagious Delta variant of the coronavirus and supply-chain disruptions across major economies compelled the IMF to cut the global growth forecast. Undoubtedly, such gloomy forecasts aren’t good for stocks in the near term.
However, from an investment standpoint, investors shouldn’t shun equities completely at this time. Instead, they can opt to invest in dividend aristocrats. After all, these stocks boast solid fundamentals and are unfazed by any market gyrations.
Furthermore, they have better quality business compared to just dividend payers. Let us, thus, take a look at the three top dividend aristocrats that should be added to your portfolio. These stocks also possess a Zacks Rank #1 (Strong Buy) or 2 (Buy).
The Procter & Gamble Compan provides branded consumer packaged goods to consumers. Procter & Gamble has paid out dividends for almost 130 years and has raised its payout for a whopping 64 successive years.
The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved up 0.2% over the past 60 days. The company’s expected earnings growth rate for the current year is nearly 5%.
Walmart Inc. has evolved from just being a traditional brick-and-mortar retailer into an omnichannel player. This company is known for raising its dividend for 48 consecutive years. It currently has a Zacks Rank #1.
The Zacks Consensus Estimate for its current-year earnings has moved up 5.7% over the past 60 days. The company’s expected earnings growth rate for the current year is 15.5%. You can see
the complete list of today’s Zacks #1 Rank stocks here. General Dynamics Corp. engages in mission-critical information systems and technologies; land and expeditionary combat vehicles, armaments and munitions; shipbuilding and marine systems; and business aviation. For 25+ straight years, the company has raised its dividend.
The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved up 0.4% over the past 60 days. The company’s expected earnings growth rate for the current year is 4.5%.
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