For Immediate Release
Chicago, IL – Feb 14, 2018 – Zacks Equity Research highlights Foot Locker, Inc. (FL - Free Report) as the Bull of the Day, Avis Budget Group (CAR - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Chipotle (CMG - Free Report) and Yum! Brands (YUM - Free Report) .
Here is a synopsis of all four stocks:
Bull of the Day:
Much has been made about the death of traditional retail, but several specialty stores have attempted to adapt to the changing times and are now showing signs of life. One of the strongest stocks in this space right now is Foot Locker, Inc.
Foot Locker is a leading global retailer of athletically inspired shoes and apparel. The company operates several notable chains, including Foot Locker, Champs Sports, Kids Foot Locker, and Footaction. Foot Locker also owns direct-to-consumer platforms like Eastbay.
The retail environment is still challenging right now, and investors are not flocking to Foot Locker based on the strength of its year-over-year growth. Instead, we see potential in the retailer’s digital investments and sense an opportunity to cash in on improved analyst sentiment. FL is currently sporting a Zacks Rank #1 (Strong Buy).
Latest Earnings and Outlook
Foot Locker most recently reported earnings on Nov. 17. The company’s better-than-expected third-quarter fiscal 2017 results gave a fresh breath of life to the stock, which in the recent past had struggled on account of sluggish performance in the preceding two quarters.
For the third quarter, Foot Locker reported adjusted earnings of $0.87 per share, beating the Zacks Consensus Estimate of $0.80. Total revenues came in at $1.87 billion, surpassing our consensus estimate of $1.84 billion. Direct-to-customer comparable sales increased 6.1% during the quarter.
Management announced that it expected overall comparable-store sales to decline in the range of 2% to 4% during the fourth quarter. This is not a particularly encouraging outlook, but it represents an improvement to the company’s recent performance and signals a possible trend reversal in the near future.
Foot Locker is expected to report its fourth-quarter results on March 3. Based on our current consensus estimates, we expect the company to post earnings of $1.24 per share and revenues of $2.22 billion. These results would represent year-over-year growth of -9.5% and +4.9%, respectively.
But analyst sentiment has improved recently. Foot Locker is currently sporting a Most Accurate Estimate of $1.28 per share, which is more than 3% better than its overall consensus estimate. The Most Accurate Estimate is a representation of the most-recent earnings estimates, so this shows that analysts are more optimistic about the company’s Q4 performance than they once were.
Bear of the Day:
One might conclude that a stronger global economy would spell good news for companies engaged with the travel and tourism industries. While that is generally the case, certain businesses within this sector—including the rental car industry—face unique headwinds. For many companies, including Avis Budget Group, these headwinds are piling up right now.
Avis Budget Group is provider of vehicle rental services, with operations in more than seventy countries. The company operates the Avid and Budget brands. Avis is a leading supplier to the premium commercial and leisure segments of the travel industry, and Budget is a leading supplier to price-conscious car rental segments.
Nevertheless, Avis Budget Group is currently facing higher fleet costs and tough competition from lower-priced rivals. Shares have slipped more than 17% over the past four weeks, and analyst sentiment is worsening. CAR is currently sporting a Zacks Rank #5 (Strong Sell).
Avis is not expected to release its latest quarterly report until next week, but management did pre-announce some of its results last month. The company estimates that it will report full-year revenues of $8.81 billion, which was actually higher than our consensus estimate.
However, investors reacted negatively to management’s warning that 2018 will be more challenging than expected. Notably, the company cautioned that cost-cutting efforts would only partially offset the downward pressure of higher interest rates.
Chipotle Soars as Former Taco Bell Chief Named CEO
Chipotle announced on Tuesday afternoon that former Yum! Brands executive Brian Niccol will replace founder Steve Ells as the company’s chief executive. Shares of the struggling fast-casual burrito chain surged over 11% in after-hours trading following the announcement.
Chipotle began its search for a CEO to replace Ells, who will become the company’s executive chairman, in late November. The hope was to find someone who could help the brand innovate and build better customer relations as it tries to navigate through a series of public relations nightmares, most of which stem from foodborne sicknesses.
Niccol, who most recently served as the CEO of Taco Bell, will take over as chief executive officer on March 5. As the head of Taco Bell, Niccol helped oversee numerous product launches, including some of its new breakfast initiatives.
The company also credited Niccol with helping transform the fast-food taco chain into a social media leader, along with leading Taco Bell’s big push into mobile ordering and payment.
"His expertise in digital technologies, restaurant operations and branding make him a perfect fit for Chipotle as we seek to enhance our customer experience, drive sales growth and make our brand more relevant,” Ells said in a statement.
Niccol helped worldwide system sales climb by 7% at Taco Bell in 2017. But Taco Bell’s constant menu changes and crazy food pairings aren’t likely to work at Chipotle, which is billed as a healthier and hearty, fast-casual option.
"At Chipotle's core is delicious food, which I will look to pair up with consistently great customer experiences,” Niccol said. “I will also focus on dialing up Chipotle's cultural relevance through innovation in menu and digital communications.”
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About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
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