For Immediate Release
Chicago, IL – August 8, 2018 – Zacks Equity Research highlights Callaway Golf (ELY - Free Report) as the Bull of the Day, Ferrari (RACE - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Walt Disney (DIS - Free Report) .
Here is a synopsis of all three stocks:
Bull of the Day:
Callaway Golf is a Zacks Rank #1 (Strong Buy) and sports a growth style score of A - so you know the stock is on my radar screen. With the golf season reaching its peak, this stock is soaring. ELY is the Bull of the Day.
Callaway Golf Company, makes and sells golf clubs, golf balls, golf bags, and other golf-related accessories. Callaway Golf Company was founded in 1982 and is based in Carlsbad, California.
On August 2, the company posted EPS of $0.63 and that was $0.16 better than expected. Revenue growth was 30% on a year over year basis and also came in ahead of expectations.
The company also guided higher for 3QEPS and the full year as well.
Since the report estimates have inched higher. The current quarter shows the loss of 6 cents shrinking down to a loss of 4 cents. The full year Zacks Consensus Estimate moved from $0.81 to $0.86.
Next year looks even better, with the Zacks Consensus Estimate for 2019 moving from $0.88 to $0.95.
The valuation here is right where you would expect it to be for a stock that is posting 30% year over year revenue growth. I see a 25x forward PE and an 18x trailing PE. A price to book of 2.8x is reasonable as is the 1.7x price to sales multiple.
What stands out to me is the margin expansion over the last three quarters. The company posted operating margins of 4.9%, then 7.5% and finally 9.2% in the most recent quarter. That is just what I want to see!
Bear of the Day:
Ferrari is a Zacks Rank #5 (Strong Sell) and it is the Bear of the Day.
Let's face it, few of us will ever even know someone that owns a Ferrari, but I know David Bartosiak and he has owned 3 Corvettes in the last 4 years and it is his dream to own one. I think he achieves the dream in a few more years... like maybe 10.
RACE has been on a huge run over the last year or two, but the brakes were pumped at the most recent earnings event.
On a recent conference call, new CEO Camilleri reportedly described the targets set by his predecessor, Marchionne, as "aspirational" and said that they are accompanied by "risks and opportunities."
This caused a dramatic pessimistic investor reaction. The company stated that they will update their strategy in the fall.
Analysts, however, are not waiting for the fall. They are updating models and numbers are headed lower. The Zacks Consensus Estimate for the current quarter slid from $0.93 to $0.77. The full year number came in to $3.17 from $3.64.
The 2019 Zacks Consensus Estimate fell from $3.94 to $3.44.
When estimates fall like that, the Zacks Rank tends to follow.
Walt Disney (DIS - Free Report) Q3 Earnings and Revenues Lag Estimates
Walt Disney reported quarterly earnings of $1.87 per share, missing the Zacks Consensus Estimate of $1.97 per share. This compares to earnings of $1.58 per share a year ago. These figures are adjusted for non-recurring items.
This quarterly report represents an earnings surprise of -5.08%. A quarter ago, it was expected that this entertainment company would post earnings of $1.68 per share when it actually produced earnings of $1.84, delivering a surprise of 9.52%.
Disney, which belongs to the Zacks Media Conglomerates industry, posted revenues of $15.23 billion for the quarter ended June 2018, missing the Zacks Consensus Estimate by 1.71%. This compares to year-ago revenues of $14.24 billion. The company has topped consensus revenue estimates two times over the last four quarters.
The firm’s Media Networks unit, which includes ESPN, climbed 5% to $6.16 billion, while Parks and Resorts popped 6% to $5.19 billion. Meanwhile, the company’s Studio Entertainment division soared 20% to $2.88 billion. This segment was boosted by strong box office results from Avengers: Infinity War and Incredibles 2.
Shares of Disney were trading down 2.28% at $113.90 per share as of 4:34 p.m. Eastern.
What's Next for Disney?
While Disney has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?
There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.
Ahead of this earnings release, the estimate revisions trend for Disney was unfavorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #4 (Sell) for the stock. So, the shares are expected to underperform the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $1.36 on $14.05 billion in revenues for the coming quarter and $7.04 on $59.26 billion in revenues for the current fiscal year.
Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Media Conglomerates is currently in the top 29% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
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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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