For Immediate Release
Chicago, IL – November 5, 2021 – Zacks Equity Research Shares of MarineMax, Inc. (
HZO Quick Quote HZO - Free Report) as the Bull of the Day, Starbucks Corporation ( SBUX Quick Quote SBUX - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Tractor Supply Company ( TSCO Quick Quote TSCO - Free Report) , DICK’S Sporting Goods, Inc. ( DKS Quick Quote DKS - Free Report) and Bed Bath & Beyond Inc. ( BBBY Quick Quote BBBY - Free Report) . Here is a synopsis of all five stocks: MarineMax is a Zacks Rank #1 (Strong Buy) that is the nation's largest recreational boat and yacht retailer. The company sells new and used recreational boats, including pleasure boats, sport cruisers, mega-yachts, sport yachts, fishing boats, pontoon boats, motor boats, ski boats and jet boats.
MarineMax offers premium brands like Sea Ray, Boston Whaler, Meridian, Hatteras, Azimut Yachts, Nautique and more.
The stock has been trading sideways for most of the summer. But after a recent earnings report that surprised to the upside, the stock is trending higher.
More About HZO
The company was founded in 1998 and is headquartered in Clearwater, FL. MarineMax employs about 1,500 people and sells through offsite locations and print catalog. The company has 77 retail locations, typically by water, that are scattered throughout the U.S.
The company is valued at $1.2 billion and offers no dividend. HZO has Zacks Style Scores of “A” in Value and Growth, but “C” in Momentum. The Forward PE is under 8, which makes the stock attractive to value investors.
Like a lot of stocks over the last few months, HZO saw some selling off its spring highs due to supply chain fears. The disruptions in the supply chain caused inventory issues, which concerned investors. The question isn’t about consumer demand, but whether a company can deliver the products.
MarineMax eased many concerns when it reported a 25% EPS beat in late October. The company saw Q3 at $1.41 v the $1.27 expected, while revenues came in at $1.19B v the $1.15B expected. The company also raised FY21 guidance and affirmed FY21 margins.
All but one of the company’s four segments saw year over year growth. Marine revenues were up 25%, Aviation was up 19% and Fitness was up 4%. The laggard was the Outdoor segment, which was down 3% year over year.
Management cited strong demand for active lifestyle products as the reason for record consolidated revenues in the third quarter.
The strong earnings helped analysts take numbers higher across all-time frames. For next quarter, estimates have gone from $1.64 to $1.81 over the last 30 days, a hike of 10%. For the current year, we see a 9% jump in estimates for that same time frame.
After earnings Wedbush commented that “Record gross margins more than outweigh supply-chain-plagued SSS.” So, the margin improvement is what made the quarter. Wedbush says that the boat demand should see lasting benefits from the surge that started during the pandemic.
The Technical Take
As sales took off during the COVID pandemic, the stock did as well. HZO dropped under $10 in March of 2020, but then quickly took off, making highs over $70 this past April.
From there, the stock sold off and fell over 35%, settling in the $45 area. The stock traded sideways around the $50 mark for about six months. During this time, moving averages flattened out, but investors held the HZO up, despite some 200-day moving average breaks.
Since earnings, the stock has started to trend higher. Investors are coming back in and HZO is now above all moving averages. Additionally, the stock is challenging the July highs and a move over that level could start a breakout.
Investors should look for that $55 area as the first spot of resistance and then eye $61 as the next important test. Above that level we could see the stock try for all-time highs again sometime next year.
Boating is in demand thanks to the COVID-19 pandemic. People explored new ways to vacation and get out of their house, causing the camping and boating industries to benefit. Of course, all that stimulus money has helped, but the demand doesn’t seem to be fading.
Moreover, the company is managing supply chain disruptions effectively. The margins the company posted impressed Wall Street and will bring in new investors.
Starbucks is a Zacks Rank #5 (Strong Sell) that is the leading roaster and retailer of specialty coffee globally. In addition to fresh, rich-brewed coffees, Starbucks’ offerings include many complimentary food items and a selection of premium teas and other beverages, sold mainly through the company’s retail stores.
Since making highs back in July, the stock has fallen over 20%. Investors have been getting roasted on back-to-back quarters in which the stock has dropped after earnings.
While the stock did rally from the drop last week, investors should question the upside going forward.
More about SBUX
Starbucks is a very popular brand name that has a loyal following. The company was founded in 1971 in Seattle, WA. It operates over 32,000 store and employs about 350,000 people.
The company is valued around $130 billion and has a PE of 32. SBUX has Zacks Style Scores of “B” in Growth But “D” Value.The company pays a dividend of 1.6%.
Earnings came in as expected, with the company reporting $1.00 on the bottom line. Revenues came in below expectations, as global Same Store Sales came in at +17%, below the +19% expected. Consolidated margins improved, up to 19.6% from 13.2% from last year.
China, an area where SBUX can grow, saw its store count up 15% y/y and revenues up 18% year over year. However, SSS were off 7%. China saw 225 net new stores in Q4 and management commented that 75% of new stores will be outside the US in FY22.
Revenue guidance for FY22came in at $32.5-33B v the $32B expected. The company sees SSS up high single digits and sees EPS up 10% from the FY21 base of $3.10. Starbucks sees the back half of 2022 improving after a low point in Q2. They also expect 2,000 new global store openings and will introduce their share buyback program.
While the quarter and outlook weren’t terrible, the valuation put on the stock has worried some investors. Additionally, analysts are cutting expectations for the stock.
The guidance and outlook show some trouble in the first half of the year and analysts have cut estimates over the last 7 days. For the current year, estimates have fallen from $3.72 to $3.46, or 7%. For next year, analysts have dropped their numbers only 3% over that same timeframe.
So you can see that over the short-term, Starbucks might struggle performing. And since the stock is still trading at high valuation, perhaps investors might want to shy away.
Upgrades and Downgrades
A lot of brokers are keeping there Overweight and Buy ratings, with some price targets higher than $140. However, we saw a lot of firms drop their targets after earnings.
Stifel cut the stock to a hold and dropped its target to $112 from $130. The firm sees significant inflationary pressures and investments weighing on the margin outlook.
Starbucks saw a big rally from the COVID lows, with the stock moving from $50 to $126 back in July. The recent earnings report bought in some selling, and took the stock down to $104.
Since then, the stock has rallied back to $112 and the 200-day moving average. Investors might want to think about selling into this bounce and then revisiting the stock at some point next year.
SBUX hasn’t retraced significantly since the COVID lows. The 61.8% retracement is a perfect place to set an alert, which would be around $80.
Starbucks is a great brand, but inflationary pressures could hamper growth in the first half of the year. Considering the valuation, investors might want to wait for lower prices.
Additional content: Tractor Supply ( TSCO Quick Quote TSCO - Free Report) Gains on Growth Strategies Amid Supply Woes Tractor Supply Company has shown resilience in a tough market, which is plagued with industry-wide supply-chain challenges. The company has been benefiting from strength in the Life Out Here Strategy and healthy customer trends. Its e-commerce business and Neighbor's Club loyalty program have also been drivers. These have resulted in robust top and bottom-line trends for the company.
However, Tractor Supply has been witnessing supply-chain challenges, which have resulted in higher costs, including product cost inflation and escalated freight expenses. Uncertainties relating to the pandemic are also concerning.
Factors Supporting Growth
Tractor Supply’s business momentum can be attributed to sturdy demand for everyday merchandise, including consumable, usable and edible (C.U.E.) products, and robust summer seasonal categories. The company’s third-quarter 2021 top and bottom lines reflected gains from these trends, marking the seventh straight quarter of an earnings surprise and the sixth consecutive sales beat.
The company delivered the sixth straight quarter of more than 10% increase in comparable store sales (comps). Comps were driven by higher comparable average ticket and comparable average transaction count. It witnessed solid double-digit sales growth in the e-commerce business, delivering the 37th consecutive quarter of an increase.
Driven by the solid performance in the first three quarters of 2021, management raised the guidance for the year. Management expects net sales of $12.6 billion, indicating an improvement from the previously mentioned $12.1-$12.3 billion. Comps are likely to grow 16%, up from 11-13% mentioned earlier. The operating margin is anticipated to be 10.2-10.3%, higher than 9.7-9.9% stated earlier.
Net income is now expected to be $972-$985 million for 2021, up from the earlier mentioned $895-$930 million. Earnings per share are expected to be $8.40-$8.50, implying a rise from $7.70-$8.00 mentioned earlier.
Tractor Supply, which shares space with
DICK’S Sporting and Bed Bath & Beyond, is on track to build up on the Out Here lifestyle assortment and convenient shopping format to gain customers and market share. The strategy is essentially based on five key pillars — customers, digitization, execution, team members, and total shareholder return. As part of the Life Out Here Strategy, the company provided long-term financial growth targets for three to five years after the normalizing of macro conditions from the impacts of the COVID-19 pandemic.
Management envisions achieving net sales growth of 6-7%, while comps are expected to grow 4-5%. The operating margin is anticipated to be 9-9.5% and earnings per share are expected to grow 8-10%.
Additionally, the company launched the Field Activity Support Team (“FAST”), and is implementing various technology and service enhancements across the enterprise. It is also in the initial phase of transforming its side lots and mature stores to improve space productivity, bringing the latest merchandising strategies to life and advancing efforts to remain nationally strong and locally relevant.
The company also remains on track with the ‘ONETractor’ strategy, which connects stores and online shopping. Omni-channel investments, including curbside pickup, same-day, next-day delivery, a relaunched website and a new mobile app, contributed to digital sales growth in the third quarter. The company witnessed continued momentum in e-commerce, with double-digit sales growth of more than 40%. Its mobile app has more than 2 million downloads and accounts for above 10% of e-commerce sales.
In addition, Tractor Supply’s Neighbor's Club loyalty program remains sturdy, with a year-over-year sales increase of 20%. The company exited the third quarter with more than 22 million Neighbor's Club members. The members are spending about three times the rate of non-members, with the Neighbor's Club members presently representing roughly 70% of sales. Also, the number of high-value per customers of this program rose about 30% in the quarter.
Hurdles to Overcome
Though the company’s long-term growth prospects are intact, its soft margins remain a hurdle. Higher product cost inflation, escalated freight expenses inclusive of the domestic and import costs, and a more normalized product mix shift in C.U.E. products are hurting the gross margin.
Tractor Supply has also been witnessing increased wage rates and investments in the Life Out Here strategic efforts, which has led to SG&A deleverage. It has been operating amid heightened uncertainty with respect to the pandemic. The factors might continue to hamper the company’s performance, going ahead.
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