For Immediate Release
Chicago, IL – November 4, 2021 – Zacks Equity Research Shares of Pool Corporation (
POOL Quick Quote POOL - Free Report) as the Bull of the Day, Yum China Holdings, Inc. ( YUMC Quick Quote YUMC - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on QUALCOMM Incorporated ( QCOM Quick Quote QCOM - Free Report) , Booking Holdings Inc. ( BKNG Quick Quote BKNG - Free Report) and Etsy, Inc. ( ETSY Quick Quote ETSY - Free Report) . Here is a synopsis of all five stocks: Pool Corporation continues to be a pandemic winner as consumers still crave leisure time at home even on the reopen. This Zacks Rank #1 (Strong Buy) saw record third quarter sales even as supply chain issues hit the global economy.
POOLCORP is the world’s largest wholesale distributor of swimming pool and related backyard products. It operates approximately 409 sales centers in North America, Europe and Australia from which it distributes more than 200,000 national brand and private label products to roughly 120,000 wholesale customers.
It operates in 4 segments including Pool Maintenance, Pool Construction and Renovation, Irrigation and Landscape, and Outdoor Living, which includes lighting, grills, outdoor kitchen components.
Another Quarterly Earnings Beat
On Oct 21, POOLCORP reported its third quarter results and beat the Zacks Consensus by $0.64 reporting $4.51 versus the Zacks Consensus of $3.87.
It was the 10th consecutive earnings beat.
That's impressive given that all of its geographic markets were hit by the pandemic restrictions and closures.
Net sales rose 24% to a record $1.4 billion, up from $1.1 billion a year ago. Base business grew 19%.
That was on top of 27% growth last year as consumers rushed to buy outdoor products while they were staying home.
This year's quarter benefited from continued elevated demand for outdoor living products along with favorable weather conditions.
Gross margin rose 240 basis points to 31.3% from 28.9% a year ago, while base business gross margin also increased by 250 basis points, primarily due to benefits from the company's supply chain management initiatives.
POOLCORP dealt with the uncertainties around the supply chain, and continued strong consumer demand, by increasing inventory. Inventory levels rose 70% to $1 billion, or 63% without inventory from recently acquired businesses, compared with Sep 30, 2020.
Raised Full Year Guidance
Given the record quarter and strong demand, which the company sees continuing through the end of 2021, POOLCORP raised it 2021 earnings guidance range to $14.85 to $15.35 from $13.75 to $14.25.
It's not surprising that the analysts also raised estimates.
2 analysts raised 2021 estimates in the last 30 days, pushing the Zacks Consensus up to $15.17 from $14.20.
That's earnings growth of 80.2% as the company made just $8.42 last year.
3 analysts also raised for 2022, pushing the Zacks Consensus up to $16.05 from $14.78 in the last 30 days. That's another 5.8% earnings growth.
Shares Soar to New All-Time Highs
Pool Corp has been one of the top performers on the S&P 500 since its IPO in 1995.
Over the last 5 years, shares are up 460.3% versus the S&P 500's return of 122%.
Year-to-date, shares have added another 38.6%.
This growth stock now trades with a forward P/E of 34. It's not cheap but the growth is still there with revenue expected to jump another 33% this year.
It's shareholder friendly, with a dividend yielding 0.6%.
There's no indication the emphasis on the home, and the outdoors, is going to slow anytime soon.
For investors looking for a way to play the reopen, POOLCORP is one to keep on your short list.
Yum China Holdings is dealing with the Delta variant outbreak in China, which has entailed restrictions and shutdowns. This Zacks Rank #5 (Strong Sell) is expected to see the weakness continue in the fourth quarter.
Yum China is a licensee of Yum! Brands in mainland China. It operates KFC, Pizza Hut and Taco Bell in mainland China. It also owns the Little Sheep, Huang Ji Huang, East Dawning and COFFii & JOY concepts outright.
Additionally, Yum China has partnered with Lavazza to develop the Lavazza coffee shop concept in China.
It has 11,415 restaurants in over 1,600 cities.
A Miss in the Third Quarter
On Oct 27, Yum China reported its third quarter results and missed on the Zacks Consensus Estimate.
Earnings were $0.22 versus the consensus of $0.26. It was the second consecutive miss in a row.
Revenue rose 9% to $2.255 billion from $2.35 billion in 2020.
But the COVID delta variant outbreak in China really ate into same-store sales, which decreased 7% year-over-year, including a fall of 8% at KFC and 5% at Pizza Hut.
It was the most widely spread outbreak since the one in the first quarter of 2020 and included lock downs of several major cities including Nanjing and Yangzhou, which are key cities for Yum China in eastern China.
There have been fewer social activities and travel has been significantly impacted.
Even with the COVID challenges, Yum China managed to open 524 new stores during the quarter. Total store count reached 11,415, up 1,265 over the past year.
Restaurant margin fell to 12.2% from 18.6% in the year ago quarter, primarily due to sales deleveraging.
COVID Impacts Still Happening in the Fourth Quarter
According to Yum China, COVID-19 outbreaks continued into the fourth quarter, causing cautious consumer spending and subdued travel volume.
The seven-day National Day holiday which started on Oct 1 saw a decline in travel from 2020 and 2019.
Yum China's same-store sales are going take time to rebound.
As a result, the analysts have cut earnings for 2021.
4 estimates have been lowered in the last week, pushing down the Zacks Consensus to $1.45 from $1.91 just 60 days ago.
That's an earnings decline of 5.2% as the company made $1.53 last year.
3 estimates have also been lowered in the last week for 2022 as analysts remain bearish about next year.
The 2022 Zacks Consensus Estimate has fallen to $2.06 from $2.25.
Shares Fall in the Last 3 Months
Shares have fallen 7.4% over the last 3 months, and are now up just 0.4% year-to-date, on worries about the pandemic and Chinese growth.
But you won't get much of a deal as they still trade with an expensive forward P/E of 38.8.
But the outbreaks won't last forever, either.
Investors may want to keep Yum China on their watch lists.
Additional content: Record Index Highs Again on Dovish Fed Taper Announcement
Once again, new record high closes across the board of stock market indexes greeted the Wednesday afternoon bell on Wall Street. The Dow grew another 105 points, +0.29%, while the S&P 500 gained +0.65% to 4660. The Nasdaq put up an even bigger day, +1.04%, or +162 points to 15,811, while the Russell 2000 once again outpaced its larger brethren, +1.80% to 2404. In just the past five sessions, the small-cap index is +8.4%.
Federal Open Market Committee (FOMC) did indeed announce plans to taper asset purchases of Treasury bonds and mortgage-backed securities, beginning later in November, at a rate of $15 billion per month. From the $120 billion per month currently being purchased, this puts the timeline for finishing the tapering process in June of 2022. The Fed did not announce any direct plan for “lift off” (raising interest rates from their current 0-0.25%), but may begin as soon as the tapering process is complete.
Fed Chair Jay Powell reiterated he believes inflation in the current economy is still Covid-related, and that the supply constraints leading to the bottlenecks causing inflation cannot be addressed by the FOMC directly. Powell believes these constraints, while demand remains strong, are what’s causing inflation, and that they will work themselves out over the course of the next year. That said, the Fed will remain “data driven,” with preparations “for different eventualities” as economic metrics dictate.
Market indexes took this news quite well; in actuality, it’s hard to have a more dovish approach toward the direction of raising interest rates while still offering a timetable for doing so. This is pretty much a Goldilocks scenario for investors, even at fresh market highs we’re seeing every day going back to mid-October; the S&P has only posted two lower trading days going back to October 12th.
As far as earnings results,
Qualcomm shares rose +5.5% on big beats for both top and bottom line fiscal Q4 numbers: earnings of $2.55 per share were well above the $2.26 per share expected, on $9.32 billion, which easily outpaced the $8.88 billion in the Zacks consensus. Next quarter guidance was robust: earnings of $2.90-3.10 per share next quarter is a big improvement from the $2.63 estimate, on $10.8 billion in sales, which takes out expectations of $9.89 billion for the quarter.
Booking Holdings shares are +6.5% on strong positive surprises in its Q3 report, with earnings of $37.70 per share on sales of $4.68 billion in the quarter far beyond the $31.56 per share and $4.16 billion in revenues expected, which more than doubled total Q3 revenues in the year-ago quarter. Gross Travel Bookings grew +77% year over year, and the stock is now cresting at all-time highs near $2600 per share.
Another stock that outperformed expectations on both top and bottom lines yesterday afternoon is
Etsy, whose 62 cents per share surpassed the Zacks consensus on 50 cents per share, and sales of $532.4 million swept past the $518.5 million estimate. However, shares are -3.6% in late trading on slowing growth in Active New Buyers: 7.4 million in Q3 follows 8 million in Q2 and 9 million in Q1 of this year. That said, Gross Margin Sales (not counting face masks) are +23% year over year. The e-commerce service provider had brought a Zacks Rank #2 (Buy) rating into its earnings report. Questions or comments about this article and/or its author? Click here>>
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