For Immediate Release
Chicago, IL – August 25, 2017 – Zacks Equity Research Tyson Foods (NYSE: (TSN - Free Report) – Free Report)as the Bull of the Day, L Brands (NYSE: (LB - Free Report) – Free Report)as the Bear of the Day. In addition, Zacks Equity Research provides analysis onAmazon(NASDAQ: (AMZN - Free Report) – Free Report) and Wal-Mart (NYSE: (WMT - Free Report) – Free Report).
Here is a synopsis of all four stocks:
Bull of the Day:
Founded in 1935 and headquartered in Springdale, Arkansas, Tyson Foods (NYSE: (TSN - Free Report) – Free Report)is one of the largest food companies in the world. They produce, distribute and market chicken, beef, pork, prepared foods and related products.
They currently operate in the US, China, and India and sell food all over the world. Their products are marketed and sold primarily by sales staff to grocery retailers, grocery wholesalers, meat distributors, military commissaries, industrial food processing companies, chain restaurants, international export companies and domestic distributors.
The company owns some of the industry leading brands including Tyson, Jimmy Dean, Hillshire farm, Ball Park, State Fair and Aidells. They currently produce about 1 in 5 pounds of chicken, beef and pork in the US.
Solid Quarterly Results
Tyson Foods reported better-than-expected results, beating on both the top and bottom lines. Adjusted earnings of $1.28 per share were ahead of the Zacks Conesus Estimate and up 6% year over year. Net sales increased 4.8% to $9.85 and also beat the Zacks Consensus Estimate.
“We expect strong global demand for protein and superior focus on the fundamentals will contribute to a favorable operating environment in our Beef and Pork segments. In our Chicken segment, we will build our business through continued capacity expansion, No Antibiotics Ever and organic products, innovation and strong support of the Tyson brand,” said the CEO.
“In the Prepared Foods segment, we continue to strengthen our business through improved execution in our foodservice operations, on-trend protein innovation and the integration of AdvancePierre.”
Analysts have been raising their estimates for the company after stronger than expected results and updated guidance. Zacks Consensus Estimates for the current and next year are now $5.09 per share and $5.30 per share, up from $5.06 and $4.95 respectively, before the results.
Bear of the Day:
Founded in 1963 and in headquartered in Columbus, Ohio, L Brands (NYSE: (LB - Free Report) – Free Report)is a specialty retailer of women's intimate and other apparel, personal care, home fragrance and beauty products. They own Victoria’s Secret, PINK, Bath & Body Works, La Senza and Henri Bendel brands.
The company operates more than 3,000 owned specialty stores in the US, Canada, the UK and China, and its brands are sold in more than 1,000 additional franchised locations worldwide. Their products are also available online.
Weak Guidance Reflects Rising Challenges
The company posted quarterly earnings of 48 cents per share beating the Zacks Consensus Estimate of 45 cents and also above the company’s initial guidance of 40-45 cents. However, the earnings were down 31% year over year. The company also missed our consensus estimate for sales.
The management cut their FY 2017 guidance. They now earnings in the range of $3.00-$3.20 per share, down from the previous guidance of $3.10-$3.40 and also below the previous year earnings of $3.74.
Shares plunged almost 7% in the after-hours trading and are now down about 46% this year.
Analysts have slashed their estimates for the company after weak guidance. Zacks Consensus Estimates for the current and next fiscal year have fallen to $3.12 per share and $3.19 per share from $3.24 and $3.33 respectively, before the report.
Here’s the Reason for Amazon’s Recent Pullback
Shares of Amazon (NASDAQ: (AMZN - Free Report) – Free Report) dipped again on Thursday, amid what has already been a rough August for the online retail powerhouse. The company has seen its stock price plummet almost 12% over the last month.
Based solely on the number of times that Amazon has been referenced in the same breath as “changing the world” or “ending retail as we know” in the last year, it would be all too easy to assume that the company became impervious to growing pains.
Yet, shares of Amazon fell by as much as 1.40% Thursday to hit an intraday low of $945.20 per share, which is over $120 a share below its 52-week high.
Amazon might very well still be on its way to global retail domination, so why has the online powerhouse shown signs of vulnerability over the last month?
What’s Going On?
Jeff Bezos’ company saw its stock price skyrocket from $759 a share a year ago to hit an all-time intraday trading high of $1083.31 per share on July 27, directly ahead of its second-quarter earnings report.
Later that day, Amazon announced that its revenues soared 25% year-over-year to $38 billion and operating cash flow jumped 37% to $17.9 billion. But Amazon fell way short of earnings estimates and has seen its stock price regress steadily since then.
Evercore ISI technical analyst Rich Ross cautioned Amazon investors that the "stock is in a vulnerable technical position" on CNBC’s "Power Lunch" on Thursday.
"In three of the last five years, the stock has had 30 percent pullbacks,” Ross told CNBC. “That's not the base case here, but with the stock just 10 percent off an all-time high going into the worst month for stocks historically, I would not be a buyer… I would be a buyer lower—down around $900, $870."
The simple fact that the company is actively trying to expand its business at break-neck speeds has negatively impacted Amazon’s bottom line (also read: It's a Go: Amazon-Whole Foods Merger Gets FTC Approval).
Amazon has tried to rapidly expand everything from original programming and media content to its shipping business, sometimes to the detriment of near-term gains. However, investors seemed undeterred by the company’s massive, at all-costs expansion until the late-July and August pullback.
"It's not that they're not making revenues—they're still taking over the world—it's just way more expensive than they originally thought. And so technology costs and marketing costs are both significantly higher," S&P Global portfolio manager Erin Gibbs told CNBC on Wednesday. "I'd say we could see more of a decline until we see some stabilization of those costs."
It seems clear that investors might need to come to terms with Amazon’s expansion harming the company’s profits—while top-line sales soar—for the foreseeable future.
Major old-school retailers have fought back in a big way recently. Wal-Mart’s (NYSE: (WMT - Free Report) – Free Report) online transactions climbed 60% in Q2, while the company also posted same-store U.S. sales growth for the 12th-consecutive quarter.
The big-box retailer helped to show the retail industry and investors that all hope is not lost in the fight against Amazon in one simple way: major retailers can become competitive e-commerce players with the right tactics.
Amazon seems to be looking far into the future with the array of unique, non-linear moves and acquisitions. But this has reduced the company’s current value for investors. Amazon is a Zacks Rank #5 (Strong Sell) and scored an “F” for Value and a “D” for Momentum in our Style Score system.
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