For Immediate Release
Chicago, IL – June 26, 2018 – Zacks Equity Research highlights Zagg Inc. (ZAGG - Free Report) as the Bull of the Day, Edgewell Personal Care Co. (EPC - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis onHarley-Davidson Inc. (HOG - Free Report) .
Here is a synopsis of all three stocks:
Bull of the Day:
Headquartered in Midvale, UT, Zagg Inc. designs and manufactures protective clear coverings and accessories for consumer electronics and hand-held devices under its flagship brand, invisibleSHIELD.
InvisibleSHIELD is a protective, high-tech patented film covering, designed for iPods, laptops, cell phones, digital cameras, PDAs, watch faces, GPS systems, gaming devices and other items. It’s the first scratch protection solution of its kind on the market and has sold over one million units.
The company continues to increase its product lines to offer additional electronic accessories to its tech-savvy customer base, as well as an expanded array of invisibleSHIELD products for other industries.
Shares Soar on Strong Q1 Earnings
Last month, the Zacks Rank #1 (Strong Buy) Zagg reported impressive Q1 numbers across the board. Shares soared almost 28% as a result, suggesting analysts were very much impressed by the electronic company’s performance.
Both its top and bottom line easily beat the Zacks Consensus estimate, with earnings of 24 cents per share coming in well above our estimate of a loss of a penny per share.
Revenues grew 21% year-over-year thanks to an increase in sales of its power management products and accessories supporting wireless charging, as well as sales growth in its screen protection products.
Gross profit came to 34% of net sales, while adjusted EBITDA was $13.6 million, both metrics improving from Q1 2017.
Zagg reiterated its 2018 guidance, and expects revenues in the range of $550 million to $570 million, with earnings of $1.30 and $1.50 per share.
Strong Earnings Outlook
For ZAGG, its bottom line is trending upward for the foreseeable future.
Current fiscal year figures are looking pretty great, with four upwards estimates in the last 60 days. The Zacks Consensus estimate trend has jumped nine cents from $1.31 per share to $1.40 per share.
Next year is looking good as well, with earnings expected to grow about 6.8%; the consensus has increased 18 cents in the past two months.
ZAGG has an average earnings surprise of over 630%.
ZAGG: What’s Next for the Stock?
Shares of Zagg have gained over 100% in the past one-year period. In comparison, the S&P 500 has gained 11.6% in the same time period.
Bear of the Day:
Edgewell Personal Care Co., formerly known as Energizer Holdings, is a company that owns many popular personal care brands, from Banana Boat and Hawaiian Tropic sun care products; Playtex, Carefree, and o.b. feminine care products; to Edge and Skintimate shave creams; Diaper Genie and gloves; and Wet Ones moist wipes.
While Edgewell’s most recent quarterly results surpassed our consensus estimates, the company has been on a downward track for the better part of the last year. What’s going on with this Zacks Rank #5 (Strong Sell) stock?
In early May, Edgewell reported results that beat the Zacks Consensus on both the top and bottom line.
However, excluding the $2.4 million benefit from the one month of the Jack Black acquisition, a $3.8 million negative impact from the Playtex gloves divestiture, and a $19.3 million benefit from currency, net sales fell 3.4% year-over-year.
Looking at geographic revenues, North America sales declined 7% but International market sales grew 4%. In particular, volumes were lower in North America Wet Shave, Infant Care and Feminine Care, but were offset in part by higher volumes in global Sun and Skin Care and International Wet Shave.
Gross margin decreased 100 basis points because of an unfavorable price mix due to increased Sun Care returns, as well as higher promotional activity in support of new Wet Shave products.
Updated 2018 Guidance
As a result, the company revised its full-year EPS and sales outlook in order to reflect increased risks.
Edgewell now expects adjusted EPS in the range of $3.40 to $3.60 per share (down from $3.90 to $4.10 per share).
Net sales are projected to decline about 50 basis points, while organic net sales should now be down roughly 3% (previously 1%).
Estimates took a hit in the days following the report.
For the current quarter, five analysts cut their outlook in the last 60 days, and the consensus has dipped 38 cents from $1.16 to $0.78 per share. Earnings are expected to decline almost 30% for the period.
Six analysts have revised their estimates downward for fiscal 2018 as well, with earnings projected to fall about 13.6%. The consensus has decreased from $3.76 to $3.43 per share.
Looking at the next fiscal year, earnings could grow 7.8%, but the current consensus sits at $3.70 per share, falling 35 cents in the past 60 days.
Can EPC Stock Turn Things Around?
Shares of Edgewell Personal Care are down over 17% so far this year and have slipped over 36% in the past one year. Compared to the S&P 500, the index has gained 0.8% and 11.6%, respectively.
Shares of Harley-Davidson (HOG - Free Report) Slip 55% on EU Tariff Retaliation
Shares of Harley-Davidson Inc. fell 5.5% by Monday afternoon with news that the firm will be moving a portion of its European consumer production out of the United States to its international facilities. This news comes after the European Union imposed $3.2 billion in tariffs on the US on Friday, on goods including motorcycles, denim, and cigarettes, amongst others.
The Big Picture
As our team highlighted, HOG foresees costs from these tariffs amounting to $100 million annually, and between $30 to $45 million for the rest of this year. The EU raised its 6% motorcycle tariff to 31%, which according to the firm makes each bike $2,200 more expensive to export.
The firm also announced that it will not raise prices to cover costs, instead making this production shift to help soften the burden. HOG expects the increase in production in international plants to require incremental investment and to take between 9 to 18 months to be fully complete.
More details about the financial implications of this move, as well as plans to mitigate the effects of the tariff, will be released during the firm’s Q2 earnings conference call in late July.
Europe is a key segment for HOG, representing the second largest portion of the firm’s total revenue, second only to the US. This news is the latest in a string of bad news for HOG. In its Q1 earnings report, HOG announced a 7.2% decrease in worldwide retail sales of motorcycles, guided primarily by weakening demand in the US. The firm believes the trend will continue, expecting to ship between 231,000-236,000 units of motorcycles in fiscal 2018, down from the 241,498 units in the previous year.
These trends are reflected in the stock’s performance, which has seen a 16% loss in value over the last six months compared to the industry average of a 3% loss. Furthermore, the firm has seen a consistent downward trend in gross margin in recent quarters, falling 2.6% to 38.7% since Q4 2015, a reflection of rising costs and industry pains.
Although recent news has been less than stellar, not all is bleak for the firm. The firm is making long-term investments to expand its product portfolio, aiming to launch 100 new motorcycles by 2027. The firm also plans to release electric motorcycles by as soon as 2019.
Furthermore, HOG is increasing its international exposure, expecting an increase of 50% of yearly volume by 2027 and adding 150-200 new dealerships internationally by 2020. These initiatives will help reduce the effect of consumer trends in the US.
HOG currently sits at a Zacks Rank #3 (Hold) and holds an “A” grade for Value in our Style Scores system. While the firm is projected to see a 2.6% decrease in EPS this fiscal year to $3.38, it is also projected to see a 17.1% increase next fiscal year to $3.96 based on recent earnings estimate revisions. Overall, the stock is one that investors should remain vigilant in monitoring moving forward.
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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.
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