For Immediate Release
Chicago, IL – August 9, 2019 – Zacks Equity Research e.l.f. Beauty (ELF - Free Report) as the Bull of the Day, Vishay Intertechnology (VSH - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Shake Shack (SHAK - Free Report) , Chipotle (CMG - Free Report) , Domino’s (DPZ - Free Report) , Starbucks (SBUX - Free Report) and McDonald’s (MCD - Free Report) .
Here is a synopsis of all seven stocks:
Bull of the Day:
e.l.f. Beautyis cashing in on the hot beauty trade. This Zacks Rank #1 (Strong Buy) recently beat and raised full year guidance.
e.l.f. Beauty makes value cosmetics and skin care products that are sold at Target, Walmart and Ulta Beauty. The products are 100% vegan and cruelty-free.
Another Beat in the Fiscal First Quarter
On Aug 7, e.l.f. Beauty reports its fiscal first quarter results ending June 30 and blew by the Zacks Consensus Estimate by 133%. Earnings were $0.14 versus the consensus of just $0.06.
It's in the middle of its turnaround strategy. It has closed its 22 retail stores and launched new marketing and digital initiatives.
It appears to already be working as net sales rose 7% to $60 million, excluding the e.l.f. stores. Growth was driven by sales at national retailers and on elfcosmetics.com.
It's top selling item at national retailers in the quarter was poreless putty primer.
Raised Full Year Guidance
The company raised prices in July 2019 due to the tariffs so the impact of those increases on volume is unknown. However, given the strength of the digital initiatives, the company still felt comfortable enough to raise its full year guidance.
Fiscal year sales guidance was increased to a range of $246 million to $256 million from $235 million to $245 million.
Earnings were raised to a range of $0.37 to $0.41 from $0.35 to $0.39.
Analysts had already been raising estimates into the earnings report. The Zacks Consensus Estimate is already at $0.40. Look for possible further increases to the consensus in the coming days.
That's earnings growth of 4.8% as the company made $0.38 last year.
Shares Soar in 2019
The Street is buying into the turnaround plan as the shares have soared from all-time lows at the end of 2018.
They're up about 100% in 2019.
They're not cheap, as they sport a P/E of 41.
But mass market beauty has made a comeback in 2019 and e.l.f. Beauty is one of the leading brands.
For investors looking for a play on the consumer, in the hot beauty category, e.l.f. Beauty should be on the short list.
Bear of the Day:
Vishay Intertechnology continues to grapple with the tough semiconductor market in 2019. This Zacks Rank #5 (Strong Sell) is again seeing its 2019 earnings estimates cut. When will the semis bottom?
Vishay Intertechnology is one of the world's largest manufacturers of discrete semiconductors (diodes, rectifiers, MOSFETs, optoelectronics, and selected ICs) and passive electronic components (resistors, inductors, and capacitors).
These components are used in virtually all types of electronic devices and equipment, in the industrial, computing, automotive, consumer, telecommunications, military, aerospace, power supplies, and medical markets.
A Beat in the Second Quarter as Sales Plunge
On July 30, Vishay reported its second quarter results and beat the Zacks Consensus Estimate by 2 cents. Earnings were $0.36 versus the consensus of $0.34.
Revenue sank to $685.2 million from $761 million in the year ago quarter.
The company blamed high levels of inventories in the supply chain which led to lower than expected demand, mainly from distribution, which negatively impacted the quarter.
It announced a $15 million global cost reduction and management rejuvenation program, which will result in layoffs.
The semiconductors are cyclical and, right now, the industry is in the downward part of the cycle.
Estimates Slashed Again
For the third quarter, the company said it expected an acceleration of the reduction of inventories in the channel and guided for revenue in the range of $600 to $640 million.
The analysts came away from the report more bearish than ever. Even though they've been cutting the earnings estimates all year long, they cut again after the report.
The 2019 Zacks Consensus Estimate has fallen to just $1.29 from $1.65 in the last month with one analyst cutting in the last week.
That's an earnings decline of 39% as Vishay made $2.12 last year.
2020 isn't looking much better. The analysts have been cutting estimates there too.
The 2020 Zacks Consensus Estimate has fallen to $1.07 from $1.76 in the prior 30 days. That's another decline of 16.8%.
A Buying Opportunity?
It's been a tough 52-weeks for the semiconductor stocks even as they tried to rebound in 2019.
Over the last year, Vishay shares have fallen 33% and are still down 9.9% in 2019.
And while it has a forward P/E of 12, with those earnings estimates being cut, it's more of a value trap than a true value.
For those interested in this industry, however, you might want to consider Broadcom. While estimates are being cut on Broadcom too, it's still expected to grow earnings in fiscal 2019 by 2.6%. It's a Zacks Rank #3 (Hold).
Are You an Investor or a Spectator?
(Please use this soundcloud link: https://soundcloud.com/zacks-investment-research/are-you-an-investor-or-a)
Welcome to Episode #153 of the Value Investor Podcast
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.
This week, Tracey continues with her series looking at Benjamin Graham’s best-selling book for value investors called “The Intelligent Investor.”
First published in 1949, the last edition by Graham was published in 1973. But in 2003, Jason Zweig, along with a preface by Warren Buffett, updated the book to account for the events of the last 40 years.
Investing or Speculating?
One of the key themes throughout the book is distinguishing between investing and speculating.
Investors are long-term buyers of a company. Fundamentals matter because an investor is buying the earnings, sales and tangible assets of a company.
Speculators are short-term buyers of a company. The chart matters more than what the company does or makes.
Restaurant Stocks: Are you Investing or Speculating?
Taking a look at the top restaurant brands, they have solid earnings and sales growth. Same-store-sales are also positive year-over-year at all of them.
But Graham would ask: “How much” are you paying for those sales and earnings?
1. Shake Shack has been one of the big winners this year, as shares have soared 83%. It has double digit sales growth but a forward P/E of 147.
2. Chipotle has rebounded and is up 84% on the year. It’s back! But it has a forward P/E of 59 with a PEG of 3.2. And it doesn’t pay a dividend.
3. Domino’s has been the king of the restaurants the last few years with its double digit same-store-sales comps. But shares are down 1.4% year-to-date and it still trades with a forward P/E of 25.7.
4. Starbucks is the comeback kid. After three years of going nowhere, the shares have popped 48% in 2019. What are you willing to pay for sales growth of 6.7% in 2019?
5. McDonald’s may be the old guy in the group, but shares are up 39.3% over the last year. It pays the highest dividend of these five, with a yield of 2.2%. It has a PEG ratio of 3. But what about growth?
Find out all you need to know about investing versus speculating on this week’s episode.
[In full disclosure, Tracey currently owns shares of SBUX in her personal portfolio.]
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