For Immediate Release
Chicago, IL – June 26, 2019 – Zacks Equity Research Estée Lauder (EL - Free Report) as the Bull of the Day, Visteon Corporation (VC - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on FedEx (FDX - Free Report) , Micron (MU - Free Report) and Broadcom (AVGO - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Shares of Estée Lauder have crushed the market in 2019 and touched yet another new high on Tuesday. The high-end makeup firm posted better-than-projected third quarter fiscal 2019 results in May and raised its full-year outlook.
Estée Lauder’s business is made up completely of what it calls “prestige” skin care, makeup, fragrance, and hair care. Today, the historic beauty company’s portfolio includes over 25 brands that are sold around the world. This list includes its namesake Estée Lauder, as well as Michael Kors, Tom Ford Beauty, Tommy Hilfiger, and many more.
The overall prestige beauty industry is in the midst of a boom that includes upstart brands that have been able to expand in a digital and social media-focused retail age, led by the likes of Instagram and others. For instance, music star Rihanna’s Fenty Beauty brand, which she owns with French luxury goods giant LVMH, exploded onto the scene in just a few years to help her become the world’s richest female musician, according to Forbes. “Favorable demographic trends make prestige beauty a desirable, growing industry, and as the best diversified pure play, we are confident in our ability to lead and to gain global share,” EL’s CEO Fabrizio Freda said in prepared remarks last quarter.
Estée Lauder’s chief executive has helped the company impress Wall Street in recent years. The firm has topped our quarterly Zacks earnings estimates for 19 straight periods. Meanwhile, the makeup giant’s quarterly sales results have beaten expectations nine quarters in a row.
Last quarter, EL’s strongest growth drivers were the Asia/Pacific region, along with skin care, its namesake brand, La Mer and Tom Ford Beauty brands, as well as travel retail and global online channels. Plus, as we mentioned at the top, Estée Lauder raised its net sales and EPS guidance for the year.
With all this in mind, it’s easy to see why EL stock is up big over the last several years. Shares of Estée Lauder have climbed 41% since the start of the year, which blows away the S&P 500’s 16% and the Soaps-Cosmetics Market’s 22%—which includes Avon, e.l.f. Beauty, Revlon and others. EL closed Tuesday at $183.95 per share, after touching a brand new 52-week and all-time high of $184.48 in intraday trading.
Outlook & Earnings Trends
Moving on, current Zacks Consensus Estimate calls for the company’s fourth-quarter fiscal 2019 revenue to jump 6.5% to $3.51 billion. This would mark a slowdown from last quarter’s 11% top-line expansion. Meanwhile, Estée Lauder’s full-year revenue is projected to jump 8.1% to $14.79 billion. Peeking further ahead, EL’s fiscal 2020 revenue is expected to climb nearly 7% above our current-year estimate to $15.79 billion in a sign of stable and strong top-line growth.
At the bottom end of the income statement, Estée Lauder’s adjusted Q4 earnings are projected to slip 18% to $0.50 per share. Despite this expected downturn, EL’s full-year fiscal 2019 earnings are expected to jump 15.5% to $5.21 per share. On top of that, the company’s fiscal 2020 EPS figure is projected to surge 10.6% higher than our 2019 estimate.
Along with its expected longer-term earnings growth, Estée Lauder has topped earnings estimates in the trailing four periods by an average of 14%, including a 19% beat last quarter, as part of the larger run of positive surprises. Plus, EL’s fiscal 2019 and 2020 estimates have come up in a big way over the last 60 days.
A few of EL’s key valuation metrics are currently a little stretched compared to where they have been over the last five years, which is to be somewhat expected as Estée Lauder stock continues to climb. Yet, Estée Lauder’s longer-term earnings estimate positivity helps the company earn a Zacks Rank #1 (Strong Buy) at the moment.
Some investors might be hesitant to think about buying EL at its new highs, so it might not hurt to wait for a possible pullback. But buying a stock at new highs shouldn’t be dismissed out of hand, because if you owned the stock already one would be extremely happy to see it continue to hit new highs as it has for the last six months. Estée Lauder is also a dividend payer that has raised its payout in recent years. And the Cosmetics industry, which Estée Lauder is part of, rests in the top 11% of our 254 Zacks industries right now.
Bear of the Day:
Visteon Corporation shares have tumbled 20% since the company reported disappointing first-quarter 2019 results in April. Looking ahead, the cockpit electronics and connected-car technology firm’s full-year fiscal 2019 earnings are projected to tumble.
Visteon designs, engineers, and manufactures cockpit electronics and connected car solutions. The Van Buren Township, Michigan-headquartered firm could be in a position to capitalize on the long-term digitalization of the auto industry as vehicle displays look more and more like something out of a science fiction novel. With that said, Visteon posted a massive first quarter earnings miss.
The firm posted adjusted Q1 earnings of $0.53 per share, when our Zacks Consensus Estimate called for $1.06 per share. On top of that, Visteon’s quarterly revenue slipped from $814 million in the year-ago period to $737 million. The company blamed the top-line drop on “unfavorable vehicle production volumes, customer pricing net of design changes, and unfavorable currency.” Meanwhile, executives said the margin crunch, which led to the big earning miss, was caused by “lower sales, launch challenges with a curved center information display, inefficiencies associated with a plant transfer in Mexico, and timing of engineering expense.”
Visteon CEO Sachin Lawande said he expects the operational challenges that hurt margins last quarter to diminish and be largely resolved in the second and third quarters. Despite the positivity from executives, Wall Street hasn’t been kind to VC stock. In fact, shares of Visteon have plummeted roughly 60% over the last 12 months, as part of a larger rollercoaster ride over the past five years. Visteon closed regular trading Tuesday at $54.79 per share.
Outlook & Earnings Trends
Looking ahead to Q2, the connected car tech firm’s revenue is projected to slip 3.3% from $758.00 million in the prior-year quarter to $732.72 million, based on our current Zacks Consensus Estimate. The company’s full-year fiscal 2019 revenue is projected to slip 1.8% to $2.93 billion.
Moving onto the bottom end of the income statement, the company’s adjusted second-quarter earnings are projected to decline roughly 71% from $1.37 in Q2 2018 to $0.40 per share. VC’s Q3 EPS figure is then expected to dip 1.8%. Overall, full-year earnings are projected to fall 38.5%, driven by Q1’s downturn and Q2’s projected decline.
Furthermore, the company’s earnings estimates have trended heavily in the wrong direction recently. More specifically, the company’s 2019, 2020, and 2021 earnings estimates have tumbled for some time now.
Visteon’s negative earnings estimate revision picture helps the company earn a Zacks Rank #5 (Strong Sell) at the moment. VC also sports an “F” grade for Momentum in our Style Scores system. It is worth noting that the company is projected to rebound slightly on both the top and bottom lines in 2020 from the projected 2019 downturns. But until Visteon shows some signs of a turnaround, investors are probably best served to stay away.
Both FedEx (FDX - Free Report) and Micron (MU - Free Report) Beat on Bottom Line
A couple key earnings reports hit the tape after Tuesday's market close, with global delivery and logistics giant FedEx beating bottom-line estimates by 20 cents per share, while semiconductor major Micron beat even bigger: $1.05 per share versus 78 cents expected. For revenues, FedEx came in about exactly even with estimates at $17.8 billion, while Micron surprised to the upside to $4.79 billion.
Put in proper context, however, Micron's top line took a big hit year over year -- $7.8 billion was what the company reported in the year-ago quarter. Industry-related difficulties related to U.S.-China trade-war casualty Huawei and its access to U.S.-based semi firms like Micron (which is based in Boise, ID) have already tripped up companies like Broadcom, so investors were looking for a bit of a slip in MU's report this afternoon. In fact, the Semiconductor Memory sub-industry is the lowest in the Zacks universe: 254 out of 254.
For FedEx, this is the company's first earnings beat in its last 4 quarters; FDX had missed on the bottom line 6 of its previous 10 quarters. International softness -- again stemming from the trade war between the U.S. and China -- were expected here, as well. Earlier today, FedEx filed a lawsuit against the U.S. Department of Commerce, claiming the department's prohibitions related to Export Administration Regulations is unfairly hurting FDX's business.
While both these companies have been facing challenges that showed up in quarterly data this afternoon, neither suffered the dire possibilities that some analysts were expecting. We now look to the companies' conference calls for a way forward for both. Ahead of the earnings releases, FedEx was rated a Zacks Rank #2 (Hold), while Micron was a Zacks Rank #5 (Strong Sell).
(NOTE: We are reissuing this article to correct a mistake. The original version, released only minutes before, should not be relied upon.)
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