For Immediate Release
Chicago, IL – November 13, 2018 – Zacks Equity Research Etsy Inc. (ETSY - Free Report) as the Bull of the Day, Chuy’s Holdings Inc. (CHUY - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Tesla (TSLA - Free Report) , CSX Rail (CSX - Free Report) and Enterprise Product Partners LP (EPD - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Headquartered in Brooklyn, New York, Etsy Inc. is a fast-growing e-commerce company that provides online and offline marketplaces to buy and sell goods. Available products range from art, home and living décor, and mobile accessories to jewelry, wedding goods, and much more. Etsy operates throughout the world, since sellers can set up shop right from their computer.
Impressive Q3 Earnings
Shares of Etsy surged as much as 25% after the company reported higher-than-expected third quarter earnings results last week.
Earnings of 15 cents per share crushed the Zacks Consensus Estimate of 7 cents per share.
Revenues of $150.4 million matched our consensus estimate, and were up 41.3% year-over-year, while gross merchandise sales (GMS) rose 20% to $923 million.
In the earnings release, CEO Josh Silverman said “Etsy’s growth accelerated again in Q3, on a currency neutral basis, and we achieved several key milestones. We put our new pricing structure to work by increasing investments in marketing and product initiatives to fuel growth. We also completed a major step in our migration to the Cloud, a key foundational investment as we scale for future growth.”
Etsy also raised its outlook fort the full year. The company now expects revenue and GMS growth to fall between 35% and 36% and 19% and 20%, respectively. Earnings also got a boost, and management now anticipates full-year EBITDA between $132 and $138 million.
Year-to-date, ETSY stock has gained around 150%, and shares are up over 200% over the past 12 months. In comparison, the S&P 500 is only up 2.6% and 6.4%, respectively.
Estimates have been rising lately too, pushing the stock towards a Zacks Rank #1 (Strong Buy).
For the current fiscal year, Etsy’s earnings are expected to grow almost 30% year-over-year. The Zacks Consensus Estimate has moved 8 cents higher in the past 60 days from $0.41 to $0.49 cents per share.
Next year looks pretty strong too, and earnings are expected to grow over 43%; the consensus estimate sits at $0.70 cents per share, with five upward revisions in the last two months.
Bear of the Day:
Based in Austin, Texas, Chuy’s Holdings Inc. owns and operates full-service restaurants with a Mexican-focused menu. Menu items include appetizers, soups and salads, tacos, burritos, enchiladas, fajitas and combination platters. Chuy’s operates chains throughout Texas, Alabama, Indiana, Kentucky, and Tennessee.
Shares of CHUY have experienced a rocky stretch lately, falling almost 19% in the past three months, and mixed results in Chuy’s third-quarter earnings report didn’t much help the stock.
Q3 Earnings In-Depth
Earnings of 20 cents per share missed the Zacks Consensus Estimate of 29 cents per share.
Revenues grew less than 10% to $101 million, also missing our consensus estimate. Analysts were hoping to see 13% year-over-year gains,
Comparable restaurant sales were up only 0.5% from the year-ago period.
During Q3, Chuy’s was impacted by poor weather conditions including heavy rains in Texas and Hurricane Florence in the Southeastern U.S. This mirrors the sales disruption the company experienced last year in Q3 due to Hurricanes Harvey and Irma.
The Tex-Mex chain said that patio sales plummeted 18% this quarter because of bad weather; patio sales are a big source of revenue for the restaurant company.
As a result, Chuy’s cut its guidance for the full-year. EPS projections were slashed by over 20 cents, and earnings are now anticipated to fall between $0.88 and $0.92 per share. Comps are expected to be flat, compared to previous guidance of a 1% gain.
It didn’t take long for analysts to lower their estimates for fiscal 2018, and five have slashed their earnings outlook in the last 60 days; our consensus has fallen 17 cents from $1.10 to $0.93. Earnings are expected to decline around 3% for this time period.
The consensus estimate has fallen for next fiscal year, too, down 19 cents from $1.19 to $1.00 per share. Five analysts have also cut their estimates for this time period as well.
CHUY is now a Zacks Rank #5 (Strong Sell).
Right now, Chuy’s is facing some serious headwinds, from rising labor costs and intense competition, that are causing a slowdown in growth.
However, the company hopes that by putting the brakes on its expansion plans for next year—Chuy’s is now going to open just five to seven new restaurants—it can focus on improving labor efficiency, tech initiatives, and profit margins.
Will Something Cheer Up Stocks? Global Week Ahead
With lots of red on traders’ screens, showing them an empty hand for suffering through the many macro risks cast across an entire year, we enter a mid-November trading week without much bonhomie.
Can the global stock markets finally find something to cheer about? It has been a sobering year of poverty… in terms of returns.
Can some country index prevail, somewhere? We shall see.
Below are five big underlying macro themes. These are the most likely to dominate the thinking of investors and traders alike in the Global Week Ahead.
(1) Here Comes Thanksgiving, Amid Hopes for a New Year
As 2018 inches toward its close, many investors, such as those sitting on 16-percent losses on emerging market stocks, will be looking forward to turning the page on the year.
Ditto for those who bought Italian bonds and found themselves 12 percent in the red. Buyers of U.S. equities, on the other hand, with 6 percent-plus returns, will have something to be grateful for at Thanksgiving.
As for 2019, where exactly should the canny fund manager go? Some clarity may emerge in coming days as investors start to detail investment bets for the year ahead, including at Reuters’ annual asset allocation summit which runs all week in London, New York and Singapore. More than 30 hedge fund managers, stock and bond investors, short sellers and macroeconomists managing tens of trillions of dollars will lay out their vision for 2019.
We hasten to add that the events of 2018 wrong-footed some summit attendees from last year, not least on emerging markets and Italy. Others correctly called a Turkish crisis and stuck to holding U.S. tech, despite pricey valuations.
The summit coincides with a tricky investment landscape — will equities remain the go-to sector as the sugar-rush of President Trump’s $1.5 trillion stimulus starts to wear off? Will European growth and profits buck up? Tech — this year’s “most crowded” trade — shows signs of exhaustion.
As for China, that’s anyone’s guess.
(2) What Does the U.S. President Do After Midterms?
It’s become pretty much evident, stateside, that the script has been torn up on all things White House-related.
Midterm elections, at least, delivered the expected outcome — and despite Trump’s proclivity to credit Republican policies for the equity boom, investors seem to have cheered Democrats’ winning the U.S. House of Representatives. A sign maybe that more stimulus is not necessarily what markets want for an economy growing at 3.5 percent — above the 2 percent rate considered its trend level.
Unsurprisingly, the Fed is keeping a steady course for a December rate rise. Another two moves are likely next year. But could that become three? Data on Wednesday may show. October inflation is expected at 2.4 percent (2.3 percent in September) but labor markets are tightening — average hourly wage inflation of 3.1 percent is the highest since 2009; some sectors report 5-10 percent wage growth.
The Fed question brings up the other issue: what does Trump do next? Deprived of a midterm win, starting his re-election bid and irked by the dollar’s rise, he might ramp up his attacks on Fed policy. Also, expect rhetoric on migration. And, of course, on trade — where China can safely expect to be in line for more flak.
(3) Does a China Growth Slowdown Bite?
Speaking of China, Trump’s trade tantrums and Beijing’s own credit clampdown are clearly cooling growth there.
Probably more than Chinese authorities had expected. Factory inflation slowed in October for the fourth month, and the car market — the world’s largest — may be heading for an annual contraction, its first since at least 1990. Beijing therefore looks certain to unveil some stimulus, weakening the yuan further — and provoking even more ire from Trump.
Retail sales and industrial data ahead may show if existing measures have had any impact. However, each bout of weak data raises more stimulus exceptions, keeping the pressure on the yuan. The currency just had its worst week since July and is down 6.5 percent year-to-date. Beijing will be hoping to plot some kind of middle course to take pressure off President Xi Jinping when he comes face-to-face with Trump at a G20 summit later in November.
(4) Italy Must Submit a Budget to the EU This Week
Italy has until Tuesday to submit a new draft budget to Brussels.
EU rules require it to revise its 2019 structural deficit so that it falls by 0.6 percent of GDP versus this year, rather than rise by 0.8 percent as planned now.
But the coalition in Rome, having won power on back of some generous election promises, is digging in its heels. Expectations of a collision with the EU is stressing its bond and stock markets, with Italy’s 10-year bond yield premium over Germany staying stubbornly near the 300 basis-point mark that indicates financial strain.
But there’s another layer of worry for markets — signs of tension within the coalition itself. A recent confidence vote in the government passed easily, but differences on policy are raising the prospect of fresh elections.
So far, markets and politicians have taken heart from the S&P’s recent decision not to downgrade Italy’s credit rating.
Talk of a fresh round of cheap ECB bank loans has helped too. Both factors have helped the Italy-Germany yield gap to hold below 300 bps. The question now is how long can that last in the face of the budget standoff?
(5) What Happens to the U.K. Pound?
Brexit is nearing and the pound is getting twitchy.
A mere "thumbs up" flashed by Brexit Secretary Dominic Raab at a BBC reporter after a cabinet meeting on Tuesday was enough to send sterling to that day's high of nearly $1.31.
Growing expectations of a divorce deal by end-November between Britain and the EU have lifted sterling for two straight weeks. And because of a large number of short sterling positions held in options markets, the currency has tended to rise more sharply on signs of a breakthrough than it falls when talks reach impasse.
But there is still fear there’s not enough progress on key sticking points — especially the Irish border — to hold an emergency EU summit later in November to sign a deal. And any mooted deal is sure to face opposition in parliament and within Prime Minister Theresa May’s Conservative party.
One sign of nerves is that sterling-dollar risk-reversals, a ratio of puts to calls on the currency and a barometer of investor bearishness are near two-year highs. So at the upcoming cabinet meeting, May will be hoping her ministers give the nod — or a thumbs-up — to her Brexit negotiating position.
Top Zacks Stocks—
Tesla:Believe it or not, the electric car-maker is a Zacks #1 Rank. Shares price at $350. These shares have range-traded for a number of months. I wouldn’t expect any change on that. The Zacks up-ranking just reflects the latest positive profit report from the recent quarter.
CSX Rail:Yes. U.S. rails are staying hot in earnings fundamental terms. This is a $60B market cap stock at a share price of $70. But the Zacks Value score is poor at D. Even after the October sell-off, you might want to watch and wait for a better entry point.
Enterprise Product Partners LP: This is a solid Natural Gas Liquid (NGL) player, tied to a $58B market cap stock. And the stock is a 6.3% annual dividend payer, in the Energy space. With the Saudi production cut in play on Monday, keep an eye on stocks like this. It has a nice Zacks VGM score of B, along with our #1 Rank.
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