For Immediate Release
Chicago, IL – February 27, 2019 – Zacks Equity Research Canada Goose Holdings Inc. (GOOS - Free Report) as the Bull of the Day, Fossil Group, Inc. (FOSL - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Ready Capital Corp. (RC - Free Report) , Exantas Capital Corp. and Chatham Lodging Trust .
Here is a synopsis of all five stocks:
Bull of the Day:
Canada Goose Holdings Inc. does it again with a spectacular holiday quarter. This Zacks Rank #1 (Strong Buy) continues to be one of the top luxury specialty retailers.
Canada Goose makes performance luxury apparel, especially warm winter coats. Founded in Toronto, Canada in 1957, it employs 3,400 worldwide and sells through its retail stores, its web site and wholesale.
Another Big Beat in the Fiscal Third Quarter of 2019
On Feb 14, Canada Goose reported its fiscal third quarter 2019 results and beat the Zacks Consensus Estimate by 15 cents. Earnings were $0.73 versus the consensus of $0.58.
Total revenue rose 50.2% to $399.3 million (all figures in Canadian dollars) from $265.9 million.
Direct to Consumer (DTC) revenue rose to $235.3 million from $131.7 million in the year ago quarter due to 5 new retail stores and one new e-commerce site.
Wholesale also rose to $164 million from $134.2 million due to higher order values from existing partners along with earlier shipment timing compared to the prior year.
Gross profit margin rose to 64.4% from 63.6% a year ago thanks to higher proportion of revenue from DTC where the gross profit margin is 76.1%.
Raised Full Year Guidance
Given the strength of the first nine months of the fiscal year, Canada Goose raised its full year guidance.
It now expects revenue growth in the mid-to-high 30% on a percentage basis compared to prior guidance of at least 30%.
The analysts are equally as bullish as they moved to raise both fiscal 2019 and fiscal 2020 earnings estimates.
3 estimates were raised for fiscal 2019 since the report which pushed the Zacks Consensus up to $0.96 versus the prior consensus of $0.94. That is earnings growth of 45% as Canada Goose made just $0.66 in fiscal 2018.
The growth isn't expected to slow much in fiscal 2020.
4 estimates have been revised higher in the past month for next year pushing the Zacks Consensus up to $1.24 from $1.21. That's earnings growth of 28.5%.
A Buying Opportunity?
Canada Goose went IPO in 2017 and the shares had been red hot until the middle of 2018. Like a lot of stocks, these shares sold off to finish 2018 but have rebounded to start 2019.
Shares are still down 3.5% for the last 6 months even though they have spiked 28% in 2019.
They haven't yet retaken their all-time highs.
Bear of the Day:
Fossil Group, Inc. is losing momentum as the Street doubts the turnaround plan. Shares of this Zacks Rank #5 (Strong Sell) have fallen 35% in the last 6 months.
Fossil designs and distributes lifestyle accessories including fashion watches, jewelry, handbags, small leather goods and wearables.
It owns several major brands including Fossil, Michele, Misfit, Relic, Skagen and Zodiac and produces goods for licensed brands including Armani Exchange, BMW, Chaps, Diesel, DKNY, Emporio Armani, kate spade new york, Marc Jacobs, Michael Kors, Puma and Tory Burch.
It operates globally.
A Big Earnings Miss in the Fourth Quarter
On Feb 13, 2019, Fossil reported fourth quarter 2018 results and posted a big miss on the Zacks Consensus of 26 cents. Earnings were $1.01 versus the consensus of $1.27.
Worldwide sales fell 15% to $133.9 million from $118.3 million year over year. Watches, its big category, declined in the Americas and Europe and increased modestly in Asia.
In the Americas, a sales decline in the US drove the decrease. In Europe, sales across the Eurozone and in distributor markets in Eastern Europe and the Middle East declined, with the greatest declines in the UK, Germany and France.
A bright spot was an increase in sales in parts of Asia, including India, China and Hong Kong.
In its retail stores, the story wasn't any better as comparable sales fell 7% year-over-year with declines across all product categories and regions, largely driven by the outlet stores.
Global direct e-commerce sales were one bright spot, as those rose by the double digits in the Americas and Asia but declined moderately in Europe.
The company also saw sales decline in its leathers and jewelry segments in the quarter and for the full fiscal year.
Fossil urged investors, and the analysts, to look at certain key metrics over the next few years as it tries to transform itself. These metrics include net sales, gross margin, operating expenses, operating margin, other income (expense), interest expense and income (loss) before income taxes.
Earnings are not in the equation.
That could be because the analysts are really negative on earnings going forward.
2 estimates were sharply cut in the past 30 days for 2019 which pushed the Zacks Consensus down to $0.64 from $1.54. That's an earnings decline of 18% as Fossil made $0.78 in 2018.
2 estimates were also revised lower for 2020 as the Zacks Consensus plunged to $0.35 from $1.79, which is another decline of 46%.
The earnings are moving in the wrong direction.
Shares Have Downward Momentum
After a big rally in 2018 off the 5-year lows, the hope surrounding the transformation plan is now fading.
Shares are down 35% over the past 6 months.
3 Great REITs to Buy Now
The stock market’s impressive run over the last few years placed high-flying growth stocks, often from the technology sector, front and center. However, the late 2018 downturn helped remind some investors about the need to diversify and add income to their portfolios, which means now might be time for investors to look at real estate investment trusts or REITs.
REITs are companies that own, operate, or finance real estate properties that produce income, such as apartment complexes or retail locations. These companies are heavily regulated and must meet a number of qualifications to be classified as a REIT, but they do offer investors a few distinct advantages.
First, real estate can be a very profitable investment sector when certain economic conditions are present. What’s more, REITs must pay at least 90% of their taxable income in dividends to shareholders, so they are a great option for income investors looking for steady payouts.
The presence of mortgage debt makes this a rate-sensitive industry. But many companies offset this through strong funds from operations (FFO) growth, or they stick out from the pack with large amounts of their debt already fixed at a low rate.
Luckily our proven Zacks Rank, which emphasizes earnings estimates and estimate revisions, works with REITs just as does with any other company. We prefer to use FFO as the metric of profitability here, but the trends work the same otherwise.
The strongest REITs are going to be those with improving outlooks and great Zacks Ranks. So, let’s check out the REITs that our model says are impressive options right now:
1. Ready Capital Corp.
Ready Capital currently sports a Zacks Rank #1 (Strong Buy), along with “B” grades for Value and Momentum in our Style Scores system. The company is a non-bank real estate and small business lender for multifamily and commercial real estate. The publicly traded mortgage REIT, which is externally managed by Waterfall Asset Management, LLC, is projected to see its quarterly FFO surge over 16% and its full-year FFO soar roughly 30%, based on our current Zacks Consensus Estimate.
Meanwhile, the company’s quarterly revenues are projected to pop 11.3%. Plus, RC trades with a P/E of just 8.9, which marks a discount to its industry’s average of 9.4. The company declared a dividend of $0.40 a share in December 2018 and boasts a dividend yield of 10%. Ready Capital stock opened at $15.83 a share Tuesday and has experienced positive momentum to start the year.
2. Exantas Capital Corp.
Exantas Capital is a REIT that provides commercial real estate loans and credit investments such as commercial mortgage-backed securities. XAN currently carries a Zacks Rank #2 (buy) and has “B” grades for both Value and Growth. The company’s quarterly FFO is expected to skyrocket over 264% from the year-ago period, on the back of 33% revenue growth.
On top of that, its full-year FFO figure is projected to expand by 190%, with the following fiscal year’s figure projected to come in 45.7% above our 2018 estimate. The New York-based company also boasts a dividend yield of 6.5%. XAN is also trading under $11 a share and has seen its stock price surge to start 2019.
3. Chatham Lodging Trust
Chatham Lodging is a self-advised hotel REIT that focuses on upscale extended-stay and select-service hotels. The company’s portfolio includes notable brands such as Courtyard, Hampton, Hilton Garden Inn, and many more. These facilities are primarily near large metropolitan markets in the U.S., so Chatham is definitely in some prime lodging real estate.
CLD holds a #2 (Buy) rating. Its consensus estimates for FFO the next quarter, as well as the current and next full fiscal years, have all moved higher over the last 90 days. CLD also trades with a P/E of just 10.9, which is a steep discount to its industry’s average of 15.1. The stock presents a dividend yield of 6.2%, and the company has consistently delivered this payout for years.
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