For Immediate Release
Chicago, IL – October 3, 2018 – Zacks Equity Research highlights Weight Watchers as the Bull of the Day, Cooper Tire & Rubber Company (CTB - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Costco (COST - Free Report) , Target (TGT - Free Report) and Amazon (AMZN - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Weight Watchers announced last week that the company changed its name to WW, in the latest move to distance itself from a diet firm. Beyond the simple rebrand, Weight Watchers has already expanded its offerings to become a more complete wellness company and looks poised to continue to grow, while expanding its earnings.
Overview & Recent News
Along with its new WW name, the firm will adopt a new marketing tagline, “Wellness that Works.” The New York-based company, which boasts Oprah Winfrey as a major shareholder and one of its biggest ambassadors, has slowly moved beyond a weight loss firm into the broader health and wellness industry.
“We are becoming the world's partner in wellness,” CEO Mindy Grossman said in a statement. “No matter what your goal is – to lose weight, eat healthier, move more, develop a positive mind-set, or all of the above – we will deliver science-based solutions that fit into people's lives.”
Weight Watchers’ CEO told analysts in February that the “world doesn’t need another diet.” Not to long after that, the company unveiled its new WW Healthy Kitchen line of kitchen tools and products, which are set to hit retail stores by the end of 2018. Meanwhile, the firm announced new WW branded meal-prep kits that are expected to launch at some point this year to compete against Blue Apron, Albertson’s Plated, Kroger’s Home Chef, and others.
Looking ahead, the firm is ready to infuse voice assistant technology from Google and Amazon into its app. The Weight Watchers app, which will become the WW app, allows users to track their fitness goals, find workouts geared toward them, search for WW recipes, and more. The firm also plans to roll out WellnessWins, a new program that will reward members for “small, everyday behaviors that are proven to lead to healthier habits.”
Plus, Weight Watchers’ second quarter revenues jumped 20% to $410 million, while its total subscribers climbed by 28% to 4.5 million.
Now let’s look at how Weight Watchers stock has performed to help give investors a better understanding of where the company stands at the moment. Shares of WTW are up roughly 92% over the last five years, which tops its industry’s 81% average. Yet, most of these gains have come over the last 36 months, with Weight Watchers stock up 1,012%. This destroys its industry’s 48% climb and the S&P 500’s 47%.
Investors should note that shares of WTW have cooled off recently, up 65% since the start of the year. After the roughly two and a half years of massive upward movement, shares of Weight Watchers are down nearly 30% in the last three months, which sets up a solid buying opportunity based on its growth projections.
Bear of the Day:
Shares of Cooper Tire & Rubber Company have plummeted 24% since the start of the year, which is even worse than its industry’s 10% decline. Looking ahead, the firm’s earnings projections are all speeding in the wrong direction.
The Findlay, Ohio-based firm posted adjusted second-quarter earnings of $0.30 per share, which actually beat the Zacks Consensus Estimate of $0.24. However, Cooper’s bottom line plummeted from $0.85 per share in the year-ago period. Meanwhile, the firm’s net sales dipped roughly 3% to $698 million. The tire manufacture’s operating profit also sank 61%.
Cooper, which designs and manufactures tires under its namesake brand along with Mastercraft, Dean, Starfire, Roadmaster, and others, faces an uncertain future. In fact, chief executive Brad Hughes said in Cooper’s second-quarter earnings statement that the “challenging industry conditions have continued longer than expected.”
“Due to continuing industry challenges and, in particular, rising raw material costs, we are revising our expectations for the balance of the year,” Hughes continued. “Cooper now anticipates unit volume to be flat in 2018 compared to 2017, with a modest sequential improvement in operating profit margin in the second half of this year.”
On the positive side, the company said it continues to stand by its five-year financial targets. This includes reaching an operating profit of 10% to 14%. But we are less worried about Cooper’s longer-term outlook at the moment.
Investors will see that shares of CTB have plummeted over the last three years to lag its industry’s small gain. The last two years have been even less kind to Cooper, with its shares down over 30%. Yet, the last 12 months have been the worst. Plus, shares of Cooper dipped 5.5% during regular trading hours Tuesday to hit $26.78.
Should You Buy Costco Ahead of Earnings?
Costco shares have climbed over 12% during the last three months as the big-box retail powerhouse continues to impress with its e-commerce push and strong overall sales growth. So, should investors consider buying Costco stock ahead of the firm’s Q4 earnings release Thursday?
Costco released its August sales results in early September. The retailer’s net sales jumped 12.2% hit $11.0 billion. Meanwhile, Costco posted net sales of $43.4 billion in its 16-week fiscal fourth-quarter, which marked a 5% jump from the year-ago period’s $41.4 billion—during a 17-week stretch.
The discount retail firm’s full-year net sales popped 9.7% from $126.2 billion in its 53-week fiscal 2017 to reach $138.4 billion in its 52-week fiscal 2018. Investors should also note that Costco’s U.S. sales jumped 10.8% in the fourth quarter and 9.4% for the year. Plus, the company’s e-commerce sales surged 26.2% in Q4 and 32.2% in fiscal 2018.
Costco has boosted its e-commerce sales through a series of initiatives. The company now offers free two-day delivery for non-perishable food and household supplies to customers nationwide on orders of $75 or more—with a fee added onto smaller orders. The company also expanded its same-day delivery service to “most metropolitan” areas through an updated partnership with Instacart.
Costco’s e-commerce and delivery expansion will help it better compete against the likes of Target and others. It is also worth noting that Costco’s growth helps to show that big-box, brick-and-mortar retail can survive in the age of Amazon (also read: 4-Star & Amazon's Physical Retail Push).
Price Movement and Valuation
Now let’s take a look at COST’s recent movement to help give investors a better sense of what is going on. Costco stock has lagged its industry over the last three years, up roughly 60% compared to its industry’s 91% climb. With that said, shares of COST have soared over 41% in the last 52 weeks, which tops its industry’s 36% and blows away the S&P 500’s 16%.
Shares of Costco have popped 26% since the start of the year, to outpace the S&P’s 9%. COST stock closed regular trading down marginally on Monday to $234.65 per share, which is less than $10 below its 52-week and all-time high of $245.16.
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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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