For Immediate Release
Chicago, IL – June 12, 2019 – Zacks Equity Research Hibbett Sports Inc. (HIBB - Free Report) as the Bull of the Day, Texas Roadhouse, Inc. (TXRH - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Salesforce (CRM - Free Report) , Tableau (DATA - Free Report) and Google (GOOGL - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Based in Birmingham, AL, Hibbett Sports Inc. is a sporting goods store chain that operates in small in and mid-size markets, predominantly in the South, Southwest, Mid-Atlantic, and Midwestern U.S. The company offers shoppers a broad assortment of quality branded athletic footwear, apparel, and equipment with a high level of customer service.
Shares Surge on Strong Q1 Results
The morning Hibbett Sports reported its first quarter earnings, share soared as much as 27% after investors liked what they saw: strong numbers across the board.
Net sales of $343.3 million jumped 25% year-over-year, easily surpassing the Zacks Consensus Estimate; strong top line performance was driven by its recent City Gear acquisition and a solid 5.1% increase in same-store sales (analysts were only projecting 0.7% in comps) Net.
Adjusted earnings of $1.61 also beat our consensus estimate of $1.29 per share without a hitch. Net income came in at $29.8 million.
Additionally, Hibbett opened three new stores, expanded one high-performing location, and closed 24 underperforming stores. The sporting goods retailer now operates a total of 1,144 locations.
"Our first quarter results reflect improved performance in both the store and e-commerce channels," said President and CEO Jeff Rosenthal in the earnings press release. "We believe our improved web traffic and mobile app, along with continued traction in Buy Online, Pickup in Store, are translating to traffic in our stores and online."
HIBB on the Move
Year-to-date, shares of HIBB have increased over 47% compared to the S&P 500’s return of roughly 15.2%.
Earnings estimates have since been rising, and the stock is now a Zacks Rank #1 (Strong Buy).
For the current fiscal year, five analysts have revised their estimate upwards in the past 60 days, and the Zacks Consensus Estimate has jumped 21 cents during that same time period. 2021 looks pretty strong too, with earnings expected to still remain in positive growth positive territory.
Looking ahead, management upped its EPS guidance for fiscal 2020, and now expects to fall between $2.00-$2.15 from $1.80-$2.00 per share; the company will close about 95 more stores in fiscal 2020 as well.
Thanks to bullish guidance, soaring sales and a strong near-term outlook, the future is looking promising for Hibbett Sports. If you’re an investor searching for a retail stock to add to your portfolio, make sure to keep HIBB on your shortlist.
Bear of the Day:
Texas Roadhouse, Inc. is a full-service, casual dining restaurant chain that offers assorted seasoned and aged steaks hand-cut daily on site and cooked to order over open gas-fired grills. It operates restaurants under the Texas Roadhouse and Aspen Creek names. The firm also offers its guests a selection of ribs, fish, seafood, chicken, pork chops, pulled pork and vegetable plates, an assortment of hamburgers, salads and sandwiches. Texas Roadhouse also provides supervisory and administrative services for other license and franchise restaurants.
Q1 Earnings Disappoint
At the end of April, Texas Roadhouse reported disappointing first quarter results that seemed to catch investors off guard; shares fell just over 13% for that month, and continued their decline in May.
Earnings of 70 cents per share came in well-below the Zacks Consensus Estimate of 82 cents per share, and the bottom line was down 8.1% year-over-year. Net income also fell year-over-year, down 7.6%.
One of the biggest things that hurt TXRH last quarter was the unexpected rise in workforce expenses. Restaurant margin, as a percentage of restaurant and other sales, fell 128 basis points to 17.9%, mostly due to labor costs (which rose 118 basis points).
Despite the top line missing our consensus estimate, revenues managed to grow 10% over the prior-year period. And, comparable sales growth climbed 5.2%, showing strong top line expansion in the face of increasing workforce expenses.
Estimates Keep Falling
Analysts have since turned bearish on Texas Roadhouse, with nine cutting estimates in the last 60 days for the current fiscal year. However, earnings could see growth of about 4% for the year, though the Zacks Consensus Estimate has dropped 18 cents during that same time period from $2.47 to $2.29 per share.
This sentiment has stretched into 2020. Like this fiscal year, earnings growth could be positive, but our consensus estimate has dropped 19 cents in the past two months.
TXRH is now a Zacks Rank #5 (Strong Sell).
Shares of the restaurant chain have fallen almost 15% over the past six months compared to the S&P 500’s gain of 9.3%.
Management reiterated its guidance for 2019, and expects positive comps growth (including a menu price increase of 1.5% starting in Q2); the company will also open 25 to 30 new restaurants this year.
The biggest thing going forward for Texas Roadhouse will be proving to investors that it can successfully manage its expenses if they continue to rise.
The Fight for Big Data: CRM vs. DATA
Big data is becoming an essential element for businesses to remain competitive in any industry. Whether they are using it to understand and predict consumption patterns or improve operational efficiency. Companies like Salesforce can see the burgeoning demand for big data and the analytics involved. They are planting their stake deep in the foundation of the industry no matter the cost.
Salesforce just announced an all-stock acquisition of Seattle-based Tableau, giving the firm an enterprise value of $15.7 billion, and marking the largest acquisition for CRM since its inception. Salesforce is paying a roughly 45% premium from DATA’s closing price on Friday. This is an astounding premium to pay for a firm that wasn’t cheap to begin with. This deal is expected to be finalized October 1st of this year.
The Fight for Big Data
This release is following Google’s announcement to acquire Looker for $2.6 billion (62.5% premium over the prior valuation), which was reported last week. Looker is a business intelligence and data analytics platform that has been competing on the heels of Tableau. The fight over cloud computing and big data is beginning to escalate, and I believe more consolidation can be expected as these firms wrestle for market share.
Salesforce and Google are both marking their territory before anyone else can swoop in to steal it. Unfortunately, this is done without much regard for valuation or economic cycle. The premiums that these firms are willing to pay to extend their arms in the fight for big data may not be worth the price at this late stage in the business cycle.
Below you can see a 10-year forward price-to-sales (P/S) chart for the computer-software industry, which comprises all your favorite big data names. You can see that this industry is far from cheap, with P/S valuations right around its 10-year high. As an investor I would venture to say that this is not the most opportune time to make large acquisitions in the space.
CRM with DATA
There are some obvious synergies between CRM and DATA with Salesforce being the biggest customer relationship management (CRM - Free Report) firm and Tableau as a leading data analytics company. Combining efforts will improve Tableau’s ability to scale, and further broaden and ingrain Salesforce’s dominance in the cloud & big data market.
Salesforce investors are not over-enthusiastic about this expensive late-stage acquisition, with CRM seeing a 7% dip since the announcement. Tableau, on the other hand, has seen its stock surge over 32%, with investors exultant about a 45% premium on the stocks they held.
This purchase is following Salesforce’s $6.5 billion acquisition of Mulesoft last spring. Mulesoft helps with application and data integration so that big data can work together seamlessly. Salesforce is a on a mission to become synonymous with big data and cloud computing as it acquires useful players on its way to the top.
Cloud computing and big data analytics are still in the early stages of development and will likely see more prolific growth in the coming years as technology and AI continue to advance. Firms like Salesforce and Google are both operating with a considerable amount of excess free cash flow, which could be impeding their judgment for shrewd valuations. The synergies between Salesforce and Tableau are there but whether the cost can create positive value in the years to come remains to be seen. Keep an eye on how investors continue to react to CRM as analysts scramble to adjust their models.
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