For Immediate Release
Chicago, IL – September 5, 2018 – Zacks Equity Research highlights Movado Group (MOV - Free Report) as the Bull of the Day, Ethan Allen Interiors (ETH - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis onVanguard FTSE Emerging Markets ETF (VWO - Free Report) and iShares Core MSCI Emerging Markets ETF (IEMG - Free Report) .
Here is a synopsis of all two stocks and two ETFs:
Bull of the Day:
When the economy is humming along on all cylinders like it is now, people tend to splurge on a bit on purchases. That means luxury items see increased demand. Watches are certainly on that list. Go try and find a new Rolex submariner at your local jeweler and you’ll see what I mean. That’s helping companies like Signet beat earnings and it’s also helping today’s Bull of the Day, Movado Group.
Movado Group, Inc. designs, develops, sources, markets, and distributes fine watches in the United States and internationally. The company operates in two segments, Wholesale and Retail. The company offers its watches under the Coach, Concord, Ebel, Olivia Burton, Rebecca Minkoff and Uri Minkoff, Scuderia Ferrari, HUGO BOSS, Juicy Couture, Lacoste, Movado, and Tommy Hilfiger brand names.
The stock is currently a Zack Rank #1 (Strong Buy) in an industry that’s rocking out in the Top 4% of our Zacks Industry Rank. The reason for the favorable Zacks Rank lies in the change to current year estimates. Over the last week alone, analysts have pushed up their earnings estimates for the stock. The bullish moves have increased our Zacks Consensus Estimate from $2.41 to $2.52 for the current year. That reflects year-over-year growth of 26%.
This is on the heels of a disappointing move following its last earnings report, the stock has come down considerably. The stock went from $52 to under $42 in only three trading sessions. It’s still trading above its 200-day moving average which is down at $39.09. There’s a saying us technicians have that says, “Gaps get filled.” There was a huge gap up on the May earnings report which just got filled following this most recent report. I wouldn’t be surprised to see the stock crawl back into that gap range over the next few weeks.
Bear of the Day:
Stock prices are fickle. One day you’re a rock star, the next you’re down in the dumps. Prices change on a dime and are tough to predict from day-to-day. What’s much more constant is the trend of earnings. Earnings estimates typically don’t gyrate back-and-forth like prices do. They tend to move in the same direction for several quarters in a row. When looking for a Bear of the Day, I like to find earnings trends which are moving in the negative direction. That’s exactly the case with today’s Bear, Ethan Allen Interiors.
Ethan Allen Interiors Inc. operates as an interior design company, and manufacturer and retailer of home furnishings in North America, Asia, the Middle East, and Europe. The company operates through two segments, Wholesale and Retail. Its products include case goods items, such as beds, dressers, armoires, tables, chairs, buffets, entertainment units, home office furniture, and wooden accents; upholstery items comprising sleepers, recliners and other motion furniture, chairs, ottomans, custom pillows, sofas, loveseats, cut fabrics, and leather; and home accents and other items consisting of window treatments and drapery hardware, wall decors, florals, lighting, clocks, mattresses, bedspreads, throws, pillows, decorative accents, area rugs, wall coverings, and home and garden furnishings.
The stock is a Zacks Rank #5 (Strong Sell) right now in an industry which ranks in the Bottom 21% of our Zacks Industry Rank. The reason for the unfavorable rank lies in recent negative moves from analysts. Over the last sixty days, five analysts have cut their earnings estimates for the current year while two analysts have dropped their number for next year. This has dropped the Zacks Consensus Estimate for the current year from $1.63 to $1.53 while next year’s number has come down from $1.87 to $1.71.
The Emerging Markets’ Currency Crisis: What Investors Should Know
As the U.S. dollar rallies, other nations, especially those with emerging markets, are suffering from weakening currencies against the benchmark. Starting with the crash of the Turkish lira a few weeks ago, the Mexican peso, Argentinean peso, South African rand, and Indonesian rupiah have all crashed in a very short span of time.
On Tuesday morning, the rand plunged as much as 3.4 percent after a report showed South Africa has unexpectedly entered into an economic recession for the first time in nearly a decade. The lira also dived as much as 1.3 percent, with it having lost more than 40 percent over the course of this year. Mexico’s peso continued to sink as much as 1.6 percent. Argentina’s peso weakened to a record low value, with the government asking for funds to the IMF. Indonesia’s rupiah fell for a sixth day, diving into a two-decade low.
The main causes of this crisis are a stronger dollar, the intensification of global trade disputes, rising short-term interest rates in the U.S, and a boost in corporate spending. According to Reuters, Michael Every at Rabobank said, “As long as the U.S. continues to raise rates, keep corporate taxes relatively low, blowout the fiscal deficit, sucking in U.S. dollar, and keep trade war fears on the radar, the dollar will remain on the front foot versus emerging markets.”
But emerging market currency crises aren’t new. In 2013, when the U.S. Federal Reserve started to cease the Quantitative Easing program that was initiated in 2008, the “Fragile Five” emerged. Brazil, India, Indonesia, Turkey and South Africa suffered most heavily due to extreme currency depreciation as the Fed cut back its bond-buying program. However, in less than five years, those countries regained their political stability and currency power—for the most part.
This time, economists and investors are worried that it won’t be so easy for the afflicted countries to recover, largely because of debt. Emerging markets are heavily indebted, and a stronger dollar makes it tougher for them to pay that money back.
The main issue is that corporate debt in emerging and developing economies is significantly more than it was before the 2008 global financial crisis. As the volume of debt is much larger, the fall could be more detrimental.
This summer has been tough for emerging market investors. A dilemma for investors is whether to keep investing, hoping the emerging economies will have a comeback, or to step back from these markets for a while, especially during such volatile times.
It will be helpful to note, though, that interest rates are rising in the U.S. and other major economies, making it altogether more difficult to invest in developing markets. Will the emerging market bubble burst? We will still need to see, but the current crisis seems to be a long way from being solved.
Not surprisingly, major exchange-traded funds (ETFs) that track emerging-market equities slid on Tuesday. The Vanguard FTSE Emerging Markets ETF dived 2.3%. The iShares Core MSCI Emerging Markets ETF sank 2%.
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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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