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Modine and Bassett Furniture have been highlighted as Zacks Bull and Bear of the Day
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For Immediate Release
Chicago, IL – October 4, 2023 – Zacks Equity Research shares Modine (MOD - Free Report) as the Bull of the Day and Bassett Furniture Industries, Inc. (BSET - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Automatic Data Processing, Inc. (ADP - Free Report) , Verisk Analytics (VRSK - Free Report) and Broadridge (BR - Free Report) .
Modine is operating in some of the hottest areas of the economy, including data centers. This Zacks Rank #1 (Strong Buy) just reported a record fiscal first quarter.
Modine operates in thermal management with operations in North America, South America, Europe and Asia. This $2.3 billion market cap company is headquartered in Racine, WI and has over 11,000 employees.
The company has two segments: Climate Solutions and Performance Technologies. Modine has been in business over 100 years.
A Record Quarter in Fiscal Q1
On Aug 2, 2023, Modine reported its fiscal first quarter results and posted record revenue and significant margin expansion.
It beat the Zacks Consensus by 98%, reporting earnings of $0.85 versus the Zacks Consensus of $0.43. That's a $0.42 beat.
Modine has been executing its 80/20 strategy to transform the business but the benefits have come faster than expected. The Data Center vertical had a strong quarter, with orders materializing earlier than expected.
Net sales rose 15% to $622.4 million from $541 million a year ago due to sales volume improvements in both Climate Solutions and Performance Technologies.
Gross margin improved by 520 basis points to 20.6%, primarily due to the favorable impact of higher sales.
Climate Solutions sales were up 11% to $271.8 million due to higher sales of data center cooling products, partially offset by lower sales of heat transfer products and HVAC and refrigeration products.
Performance Technologies sales jumped 18% to $358.9 million due to higher sales across all product groups as well as favorable commercial pricing.
Raised Full Year Fiscal 2024 Guidance
The quarter was so good, Modine raised its full year fiscal 2024 guidance while also remaining cautious on some segments heading into the end of the year.
As a result, the analysts have been raising Modine's earnings estimates. In the last 60 days, 2 estimates were raised for Fiscal 2024, pushing the Zacks Consensus up to $2.88 from $2.32.
That's earnings growth of 48% as the company only made $1.95 in fiscal 2023.
Analysts also see further growth in fiscal 2025 with those estimates jumping to $3.27 from $2.84 during the same time. That's another 13.4% earnings growth.
Shares Soar, But Are Still Cheap
As business began to heat up this year, and earnings moved higher, the shares jumped to new 5-year highs. They're up 120% year-to-date, easily beating the S&P 500 which is up 10.7%.
Yet, they're still attractive on a valuation basis. Modine trades with a forward P/E of just 15.8 and has a PEG ratio of 0.6. A PEG ratio under 1.0 means a company has both growth and value, a rare combination.
If you're looking for a company with strong earnings growth and is a value stock, Modine should be on your short list.
[In full disclosure, Tracey owns MOD in the Zacks Value Investor portfolio.]
Bassett Furniture Industries, Inc. is seeing a dramatically slower business environment in 2023. This Zacks Rank #5 (Strong Sell) is expected to see earnings slump this year.
Bassett Furniture Industries makes home furnishings. It operates 89 company- and licensee-owned stores, which offer free in-home design visits, coordinating accessories and on-trend furniture styles.
Bassett also has a traditional wholesale business with more than 700 accounts on the open market, across the United States and internationally, and a logistics business specializing in home furnishings.
In Sep 2022, it acquired Montreal mid-priced e-commerce furniture retailer Noa, which has operations in Canada, Australia, Singapore and the United Kingdom.
A Beat in the Fiscal Third Quarter
On Sep 28, 2023, Bassett reported its fiscal third quarter 2023 results and beat the Zacks Consensus by $0.29. It reported a loss of $0.30 versus the Consensus of a loss of $0.59.
Consolidated sales were down 26.1% to $87.2 million from $118 million a year ago. Wholesale sales were down 28.2% to $56.7 million from $79 million while Retail sales were down 26.2% to $52.3 million from $70.9 million.
The company was bearish in its earnings press release.
"Writing new business, both at wholesale and retail, proved very difficult in the twelve weeks between Memorial Day and the start of our Labor Day promotion in late August," said Robert H. Spilman, Jr., CEO.
"Although we continue to see increased business around the important holiday events, day-to-day store traffic and wholesale order writing between the big events remain very challenging. We first began to see signs of a slowdown in the third quarter of 2022 and this year’s period represented another 4.6% decline in wholesale orders," he added.
The company has had excess inventory in the Club Level business. It peaked at $22 million in Aug of 2022. At the most recent August close, it was slightly over $11 million, or 49% below last year.
Ultimately, Bassett believes that $5 to $6 million of inventory will be sufficient to support the Club Level line.
On the retail side of the business, the company said that things had changed "dramatically" from 2022, it's best retail year ever. It did not generate enough retail revenue to break even in this fiscal third quarter.
While gross margins were comparable to last year, with a 26% decline in sales, Bassett could not reduce its fixed and variable SG&A costs enough to maintain profitability with the reported level of sales.
In the retail segment, Bassett said that in the first four weeks of the fiscal fourth quarter, average weekly sales did improve markedly, but were aided by the expected Labor Day boost and by several new product introductions that coincided with the promotion.
New Website Launched
On Aug 10, 2023, Bassett launched its new website which was three years in the making and included the complete re-architecture of its product data.
It has already seen returns as engagement has improved with consumers spending more time on the new site with each visit compared to previous metrics with the old platform. Bassett also sent out its new fall catalog in the mail at the same time as the launching of the new website which has a fresh new styling direction.
Bassett said sell-through of the new items was off to a good start.
Analysts are Bearish
With the tough industry conditions, and big drop in sales, the analysts have gotten more bearish on fiscal 2023.
1 estimate has been cut in the last week, pushing the fiscal 2023 Zacks Consensus down to $0.12 from $0.94 in the last 30 days. That's also a 95.6% decline from fiscal 2022, where it made $2.70.
1 estimate has also been cut for fiscal 2024 in the last week, pushing the Zacks Consensus down to $1.31 from $1.75 just 7 days before. While that's an earnings rebound from this year, it's still well under fiscal 2022's earnings.
Shares Fall in 2023
Bassett shares have not participated in the 2023 rally. They are down 12.5% year-to-date while the S&P 500 is still up 10.7%.
But it's not exactly "cheap" on a P/E basis. It trades at 122x now because earnings estimates have plunged.
Bassett is shareholder friendly. In July, Bassett's board raised the dividend by 12.5%. It's currently yielding 4.9%. It has returned $8.5 million to shareholders in both dividends and shareholders year-to-date.
But with business conditions challenging and uncertainty in the economy, investors may want to wait on the sidelines on the furniture retailers, like Bassett, for an improving earnings outlook.
Additional content:
ADP Stock Up +9% in 3 Months: Here's What to Know
Automatic Data Processing, Inc. shares have had an impressive run over the past three months. The stock has rallied 9.3% compared with the 6.7% rise of the industry it belongs to and the 3.2% decline of the Zacks S&P 500 composite.
Factors in Favor
ADP has an impressive earnings surprise history. Earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, delivering an average beat of 3.1%.
ADP has been able to accelerate DataCloud penetration and increase investment in inside sales, mid-market migrations and service alignment initiatives through its ongoing transformation initiatives. Through these initiatives, the company continues to innovate, improve operations, expand margins and enhance innovation abilities.
ADP maintains its strong position as a human capital management (HCM) technology and services provider. The company is focused on delivering a complete suite of cloud-based HCM and HR Outsourcing solutions. It is expanding its international HCM and HRO businesses with established local, in-country software solutions and cloud-based multi-country solutions.
ADP continues to pursue acquisitions that strategically fit its overall business mix and are easy to integrate over the long term. The recent acquisition of Sora enhanced the company’s ability to streamline HR processes through automation, combining Sora's user-friendly platform with its own HCM solutions for improved efficiency and employee experiences.
Zacks Rank and Other Stocks to Consider
ADP currently carries a Zacks Rank #2 (Buy).
The following top-ranked stocks from the Business Services sector are also worth consideration:
Verisk Analytics beat the Zacks Consensus Estimate in three of the four previous quarters and matched on one instance, with an average surprise of 9.9%. The consensus mark for 2023 revenues is pegged at $2.66 billion, which reflects a decrease of 8.2% from the year-ago figure. Earnings are pegged at $5.71 per share for 2023, which is 14% above the year-ago figure. VRSK currently has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Broadridge currently carries a Zacks Rank of 2. It beat the Zacks Consensus Estimate in two of the trailing four quarters, missed once and matched on one instance, the average surprise being 0.5%. The consensus estimate for fiscal 2024 revenues and earnings indicates a rise of 7.2% and 8.8% year over year, respectively.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
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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Modine and Bassett Furniture have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – October 4, 2023 – Zacks Equity Research shares Modine (MOD - Free Report) as the Bull of the Day and Bassett Furniture Industries, Inc. (BSET - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Automatic Data Processing, Inc. (ADP - Free Report) , Verisk Analytics (VRSK - Free Report) and Broadridge (BR - Free Report) .
Here is a synopsis of all five stocks.
Bull of the Day:
Modine is operating in some of the hottest areas of the economy, including data centers. This Zacks Rank #1 (Strong Buy) just reported a record fiscal first quarter.
Modine operates in thermal management with operations in North America, South America, Europe and Asia. This $2.3 billion market cap company is headquartered in Racine, WI and has over 11,000 employees.
The company has two segments: Climate Solutions and Performance Technologies. Modine has been in business over 100 years.
A Record Quarter in Fiscal Q1
On Aug 2, 2023, Modine reported its fiscal first quarter results and posted record revenue and significant margin expansion.
It beat the Zacks Consensus by 98%, reporting earnings of $0.85 versus the Zacks Consensus of $0.43. That's a $0.42 beat.
Modine has been executing its 80/20 strategy to transform the business but the benefits have come faster than expected. The Data Center vertical had a strong quarter, with orders materializing earlier than expected.
Net sales rose 15% to $622.4 million from $541 million a year ago due to sales volume improvements in both Climate Solutions and Performance Technologies.
Gross margin improved by 520 basis points to 20.6%, primarily due to the favorable impact of higher sales.
Climate Solutions sales were up 11% to $271.8 million due to higher sales of data center cooling products, partially offset by lower sales of heat transfer products and HVAC and refrigeration products.
Performance Technologies sales jumped 18% to $358.9 million due to higher sales across all product groups as well as favorable commercial pricing.
Raised Full Year Fiscal 2024 Guidance
The quarter was so good, Modine raised its full year fiscal 2024 guidance while also remaining cautious on some segments heading into the end of the year.
As a result, the analysts have been raising Modine's earnings estimates. In the last 60 days, 2 estimates were raised for Fiscal 2024, pushing the Zacks Consensus up to $2.88 from $2.32.
That's earnings growth of 48% as the company only made $1.95 in fiscal 2023.
Analysts also see further growth in fiscal 2025 with those estimates jumping to $3.27 from $2.84 during the same time. That's another 13.4% earnings growth.
Shares Soar, But Are Still Cheap
As business began to heat up this year, and earnings moved higher, the shares jumped to new 5-year highs. They're up 120% year-to-date, easily beating the S&P 500 which is up 10.7%.
Yet, they're still attractive on a valuation basis. Modine trades with a forward P/E of just 15.8 and has a PEG ratio of 0.6. A PEG ratio under 1.0 means a company has both growth and value, a rare combination.
If you're looking for a company with strong earnings growth and is a value stock, Modine should be on your short list.
[In full disclosure, Tracey owns MOD in the Zacks Value Investor portfolio.]
Bear of the Day:
Bassett Furniture Industries, Inc. is seeing a dramatically slower business environment in 2023. This Zacks Rank #5 (Strong Sell) is expected to see earnings slump this year.
Bassett Furniture Industries makes home furnishings. It operates 89 company- and licensee-owned stores, which offer free in-home design visits, coordinating accessories and on-trend furniture styles.
Bassett also has a traditional wholesale business with more than 700 accounts on the open market, across the United States and internationally, and a logistics business specializing in home furnishings.
In Sep 2022, it acquired Montreal mid-priced e-commerce furniture retailer Noa, which has operations in Canada, Australia, Singapore and the United Kingdom.
A Beat in the Fiscal Third Quarter
On Sep 28, 2023, Bassett reported its fiscal third quarter 2023 results and beat the Zacks Consensus by $0.29. It reported a loss of $0.30 versus the Consensus of a loss of $0.59.
Consolidated sales were down 26.1% to $87.2 million from $118 million a year ago. Wholesale sales were down 28.2% to $56.7 million from $79 million while Retail sales were down 26.2% to $52.3 million from $70.9 million.
The company was bearish in its earnings press release.
"Writing new business, both at wholesale and retail, proved very difficult in the twelve weeks between Memorial Day and the start of our Labor Day promotion in late August," said Robert H. Spilman, Jr., CEO.
"Although we continue to see increased business around the important holiday events, day-to-day store traffic and wholesale order writing between the big events remain very challenging. We first began to see signs of a slowdown in the third quarter of 2022 and this year’s period represented another 4.6% decline in wholesale orders," he added.
The company has had excess inventory in the Club Level business. It peaked at $22 million in Aug of 2022. At the most recent August close, it was slightly over $11 million, or 49% below last year.
Ultimately, Bassett believes that $5 to $6 million of inventory will be sufficient to support the Club Level line.
On the retail side of the business, the company said that things had changed "dramatically" from 2022, it's best retail year ever. It did not generate enough retail revenue to break even in this fiscal third quarter.
While gross margins were comparable to last year, with a 26% decline in sales, Bassett could not reduce its fixed and variable SG&A costs enough to maintain profitability with the reported level of sales.
In the retail segment, Bassett said that in the first four weeks of the fiscal fourth quarter, average weekly sales did improve markedly, but were aided by the expected Labor Day boost and by several new product introductions that coincided with the promotion.
New Website Launched
On Aug 10, 2023, Bassett launched its new website which was three years in the making and included the complete re-architecture of its product data.
It has already seen returns as engagement has improved with consumers spending more time on the new site with each visit compared to previous metrics with the old platform. Bassett also sent out its new fall catalog in the mail at the same time as the launching of the new website which has a fresh new styling direction.
Bassett said sell-through of the new items was off to a good start.
Analysts are Bearish
With the tough industry conditions, and big drop in sales, the analysts have gotten more bearish on fiscal 2023.
1 estimate has been cut in the last week, pushing the fiscal 2023 Zacks Consensus down to $0.12 from $0.94 in the last 30 days. That's also a 95.6% decline from fiscal 2022, where it made $2.70.
1 estimate has also been cut for fiscal 2024 in the last week, pushing the Zacks Consensus down to $1.31 from $1.75 just 7 days before. While that's an earnings rebound from this year, it's still well under fiscal 2022's earnings.
Shares Fall in 2023
Bassett shares have not participated in the 2023 rally. They are down 12.5% year-to-date while the S&P 500 is still up 10.7%.
But it's not exactly "cheap" on a P/E basis. It trades at 122x now because earnings estimates have plunged.
Bassett is shareholder friendly. In July, Bassett's board raised the dividend by 12.5%. It's currently yielding 4.9%. It has returned $8.5 million to shareholders in both dividends and shareholders year-to-date.
But with business conditions challenging and uncertainty in the economy, investors may want to wait on the sidelines on the furniture retailers, like Bassett, for an improving earnings outlook.
Additional content:
ADP Stock Up +9% in 3 Months: Here's What to Know
Automatic Data Processing, Inc. shares have had an impressive run over the past three months. The stock has rallied 9.3% compared with the 6.7% rise of the industry it belongs to and the 3.2% decline of the Zacks S&P 500 composite.
Factors in Favor
ADP has an impressive earnings surprise history. Earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, delivering an average beat of 3.1%.
Automatic Data Processing, Inc. price | Automatic Data Processing, Inc. Quote
ADP has been able to accelerate DataCloud penetration and increase investment in inside sales, mid-market migrations and service alignment initiatives through its ongoing transformation initiatives. Through these initiatives, the company continues to innovate, improve operations, expand margins and enhance innovation abilities.
ADP maintains its strong position as a human capital management (HCM) technology and services provider. The company is focused on delivering a complete suite of cloud-based HCM and HR Outsourcing solutions. It is expanding its international HCM and HRO businesses with established local, in-country software solutions and cloud-based multi-country solutions.
ADP continues to pursue acquisitions that strategically fit its overall business mix and are easy to integrate over the long term. The recent acquisition of Sora enhanced the company’s ability to streamline HR processes through automation, combining Sora's user-friendly platform with its own HCM solutions for improved efficiency and employee experiences.
Zacks Rank and Other Stocks to Consider
ADP currently carries a Zacks Rank #2 (Buy).
The following top-ranked stocks from the Business Services sector are also worth consideration:
Verisk Analytics beat the Zacks Consensus Estimate in three of the four previous quarters and matched on one instance, with an average surprise of 9.9%. The consensus mark for 2023 revenues is pegged at $2.66 billion, which reflects a decrease of 8.2% from the year-ago figure. Earnings are pegged at $5.71 per share for 2023, which is 14% above the year-ago figure. VRSK currently has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Broadridge currently carries a Zacks Rank of 2. It beat the Zacks Consensus Estimate in two of the trailing four quarters, missed once and matched on one instance, the average surprise being 0.5%. The consensus estimate for fiscal 2024 revenues and earnings indicates a rise of 7.2% and 8.8% year over year, respectively.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
See Stocks Free >>
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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.