For Immediate Release
Chicago, IL – Dec 5, 2017 – Zacks Equity Research highlights Skechers (SKX - Free Report) as the Bull of the Day and Revlon (REV - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on the Rio Tinto (RIO - Free Report) , ConocoPhillips (COP - Free Report) and Lam Research (LRCX - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Back in the 1990s and early 2000s, Skechers were inescapable. Every kid, tween, teen, and young adult seemed to have a pair, but more than that, they all wanted a pair because Skechers were the epitome of cool; it certainly helped that the company had the branding power to have pop stars like Britney Spears in their advertisements.
Skechers and its D’Lites slowly faded into the fashion margins, but like all trends—and especially anything from the 90s…Adidas Superstars and choker necklaces, anyone? —the company’s quirky sneakers have made a resurgence.
Skechers have also been helped by the so-called “ugly sneaker” trend that’s taken the fashion industry by storm. From Kanye West’s Yeezy Wave Runner 700s to Balenciaga’s Triple S, the uglier the better. And apparently, the more the shoe looks like a Skechers sneaker, the better, too.
Strong Third Quarter Earnings
Last quarter, the Zacks Rank #1 (Strong Buy) stock reported third quarter earnings that soared past estimates, causing shares to jump over 35% to a new 52-week high.
Earnings came in at 59 cents per share, coming in way above the Zacks Consensus Estimate of 43 cents per share. The company said its profit in Q3 was helped by sales growth in its international wholesale business, its company-owned global retail business, and a lower effective tax rate.
Total revenues grew 16.2% to $1.095 billion, also beating our consensus estimate of $1.065 billion. Skechers saw an impressive 4.4% increase in comparable store sales as well.
CFO David Weinberg said that “We believe the momentum we are experiencing will continue this year and in the coming year."
In the wake of this report, many analysts increased their price targets on the retailer; Wedbush raised its target to $35 from $25 and Cowen and Co. boosted its target to $36 from $35, while Morgan Stanley increased its target to $31 from $28.50.
Growth Estimates Have Improved
In addition to this slew of price target increases, Skechers’ strong earnings report has certainly helped improve its short-term growth estimates
For its current quarter, the company expects earnings to increase an incredible 225%, a testament to the growing popularity of the Skechers brand in addition to how well the company believes it will perform during this holiday season.
Skechers projects net sales in the fourth quarter to fall in the range of $860 million to $885 million, and diluted earnings per share of $0.09 to $0.14.
Earnings estimates for 2018 are also on the rise, jumping to $2.15 per share from $1.97 per share in the last 60 days. Revenues are anticipated to jump about 11.5% in the same time frame.
Shares are Rallying
SKX has had an incredible run these past two or so months, and year-to-date, the stock is up almost 44% compared to the S&P 500’s return of about 16.4%.
Bear of the Day:
Revlon is one of those names in the beauty industry that nearly everyone has heard of. From the iconic shade “Revlon Red” to its everlasting presence in the beauty aisles at your local CVS or Walgreens, the cosmetics giant has built a unique niche for itself in the industry since its founding in 1932.
Today, Revlon manufactures, markets, and sells an extensive array of cosmetics and skin care, fragrances, and personal care products under brand names including Revlon, CND, Elizabeth Arden, Almay, Sinful Colors, and Ultima 2.
But brand recognition can only do so much, and the Zacks Rank #5 (Strong Sell) stock has fallen into hard times as of late.
Big Third Quarter Miss
Last quarter, Revlon reported a big loss per share of 38 cents, coming in way below the Zacks Consensus Estimate of 41 cents per share and representing a negative earnings surprise of 192.68%.
Adjusted net loss for the period was $24 million compared to a gain of $13 million in the prior-year period.
Revenues were $667 million, which actually beat our consensus estimate of $605 million and grew 10.2% on an as reported basis.
However, gross profit margin fell by over 3 percentage points to 62% of sales thanks to weakness in the core U.S. selling market.
Revlon’s international sales of $323.3 million were strong, though, and were a highlight of the report, especially once compared to last year’s figure of $250.3 million.
"While our financial performance and sales results in the U.S. remained soft in a challenging retail environment," CEO Fabian Garcia said, "we are encouraged by the global growth of our iconic Revlon and Elizabeth Arden brands [and] our international sales which remain robust."
Earnings in Decline
Revlon’s bottom line is in a perpetual slump at the moment, and this decline doesn’t seem to be going away any time soon.
For the current quarter, Zacks expects the company to see its earnings decrease over 80%, with sales slumping just over 7% during the same time frame.
The rest of fiscal 2017 doesn’t look too bright either; earnings are projected to tumble in the triple digits from the prior year, and the Zacks Consensus now sits at -$1.96, down from -$1.11 just 60 days ago.
Shares Down on the Year
Shares of Revlon have fallen nearly 24% year-to-date compared to the S&P 500’s return of about 16.4%.
Watch the Usual Suspect: Global Week Ahead
In the Global Week Ahead, to find the biggest fundamental catalyst for stock markets, target the usual suspect at the top of a month – the latest U.S. non-farm payroll report.
On Wednesday, the ADP private payroll report lands. This is a foreshadowing of the preliminary Federal number out on Friday.
What’s the backdrop going into the report? Last week’s U.S. unemployment claims remained low at 238K. A lagging indicator is the U.S. household unemployment rate. It rests at 4.1%. That’s low too.
So Friday’s economist consensus sees monthly job additions number at around +200K for November. That’s a muddle-through call.
Nonetheless, this updated coincident indicator will get studied in great detail.
Perhaps the most closely watched internal numbers become the annual wage growth figures. These are a ‘tell’ on any future pickup in U.S. consumer inflation. In turn, that would get the Federal Open Market Committee’s full attention.
In the halls of Congress, the U.S. is still a fair distance from enacting a tax plan.
The Senate version and House version now go into ‘conference.’ In this set of joint meetings, the House and Senate hash out a common agreement to bridge differences. They will re-submit a single proposal to both chambers.
This Friday, there is an expiring deadline on funding needed to keep the U.S. government open. In other words, a debt ceiling and spending appropriation deadline looms. This opens up a rather small possibility of a government shutdown.
Not to be put on a back burner, the Mueller investigation can surely intensify.
Across the Global Week Ahead, central banks outside the USA will make important policy rate setting decisions.
On Wednesday, in Latin America, consensus expects the Banco Central do Brasil to cut its Selic monetary policy rate by 50 basis points.
Last week, South Korea became the first major Asian central bank since 2014 to hike interest rates.
That was a sign the ‘great unwinding’ of crisis-era low interest rates are spreading. Resurgent growth in Europe and the U.S. has benefitted Asia.
Who is next? Further south, count on Australia to keep rates on hold this week. Focus instead on whether there is any hint of a possible hike next year.
Reserve Banks in Canada and India also hold monetary policy meetings prior to the U.S. payroll report.
Top Zacks Stock Picks—
Some stocks to watch…
Rio Tinto: China is getting Asia moving. That keeps materials companies busy. This stock is a $67 billion market cap iron ore mining company based in western Australia. The stock carries a Zacks long-term VGM score of A.
ConocoPhillips: Don’t forget about the latest rise in global oil prices. This U.S. based oil and gas integrated player is a Zacks #1 Rank now. It has a long-term Zacks VGM score of C.
Lam Research: Yes, the semiconductor stocks got hit hard last week. This week, keep a close eye on the trading action in this industry. This widely held stock is back to a Zacks #1 Rank, and the long-term Zacks VGM score is A.
That set of stock metrics says the fire will be re-lit on semi chip stocks soon.
Zacks Restaurant Recommendations:In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »
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