For Immediate Release
Chicago, IL –October 8, 2019 – Zacks Equity Research Shares of Hasbro, Inc. (HAS - Free Report) as the Bull of the Day, Kohl's Corporation (KSS - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Charles Schwab (SCHW - Free Report) , E-Trade (ETFC - Free Report) and TD Ameritrade (AMTD - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Hasbro, Inc. stock has crushed its industry and the S&P 500 in 2019. The toy and entertainment company, which sells brands such as Monopoly and Nerf, also announced a deal recently that looks poised to expand its reach in the streaming TV era. Plus, new estimates call for a strong holiday shopping season.
Quick Retail Outlook
The National Retail Federation said last Thursday that it expects U.S. holiday shopping sales to climb between 3.8% and 4.2% to reach roughly $730 billion. This would crush last year’s underwhelming 2.1% holiday shopping season expansion that came in far below projections.
The NRF’s projection comes as U.S. unemployment rests at 50-year lows. This could also help calm growing Wall Street nerves that the ongoing trade war between the world’s two largest economies and a slowing global picture is set to hit U.S. consumers.
On the Hasbro side, both Target and Walmart have proved that they are ready to thrive in the Amazon age. On top of that, the firms have been able to fill some of the void left by Toys R Us.
Hasbro’s brand portfolio includesPlay-Doh, Transformers, Monopoly, the rights to make Star Wars and Marvel toys, and much more. The company’s Magic: The Gathering franchise posted an impressive second quarter as it continues to grow. Investors should note that game, which has been around for 25 years, will soon be brought to life for the first time in a Netflix animated series.
More importantly, Hasbro announced on August 22 that it entered into a definitive agreement to purchase Entertainment One for $4 billion. The firm is behind popular children's animated shows Peppa Pig and PJ Masks, along with a slew of other TV shows and movies for adults. The deal could help Hasbro expand into more digital content that could become an integral part of its business for years to come in a streaming TV age that will soon see Apple , Amazon and Netflix all in need of more content to challenge Disney’s expansive library of shows and movies for kids.
The Pawtucket, Rhode Island-based firm’s move should help it diversify amid a changing landscape. This could eventually include interactive augmented reality experiences and more. “By combining two profitable and financially disciplined companies we expect to unlock value in the short- and long-term for our stakeholders,” Hasbro CFO Deborah Thomas said in a statement.
“eOne’s brands and TV and film expertise, together with Hasbro’s brands, toy and game innovation and licensing capabilities, positions us to more quickly drive revenue and profit over the medium-term.”
As we mentioned at the top, HAS stock has gone on a solid run in 2019, up 45% against the S&P 500’s roughly 17% jump and its industry’s 19%. Shares of Hasbro have also climbed 17% during the last 52 weeks, while its industry slipped 19%. Plus, the firm has crushed its industry, which includes rival Mattel, along with video game powers Electronic Arts and Take-Two Interactive, over the last three years as we can see in the chart above—driven by Mattel’s 63% downturn.
Hasbro’s recent success has stretched its valuation picture slightly, with HAS trading at 22.5X forward 12-month Zacks Earnings Estimates. Yet, this figure still marks a discount against its industry’s 26.5X average and its own three-year high of 25.2X. In terms of forward price/sales, HAS stock appears even stronger against its industry, 2.9X vs. 4.9X.
On top of that, Hasbro currently pays a dividend of $0.68 per share, for an annualized payout of $2.72. This is up from its last quarterly dividend of $0.63 and helps the company boast a 2.30% yield, which looks solid compared to the 10-year U.S. Treasury note’s 1.56%.
Q3 Outlook & Beyond
Hasbro is scheduled to release its Q3 financial results on Tuesday, October 22. The firm’s third-quarter fiscal 2019 revenue is projected to surge 9.7% to reach $1.72 billion, based on our current Zacks Consensus Estimates. This figure would top Q2’s 9% top-line expansion.
The toy maker’s fourth-quarter sales are then projected to surge 12.3% to help lift total fiscal 2019 revenue by 9% to $4.99 billion. Peeking a bit further down the line, Hasbro’s full-year 2020 sales are expected to come in 4.6% above our current-year projection to reach $5.22 billion.
Moving on, HAS is projected to post adjusted quarterly earnings of $2.22 per share, which would mark a 15% climb from the year-ago quarter. Investors should note that Hasbro’s adjusted earnings soared 65% and hit $0.78 per share last quarter, which destroyed our $0.51 a share projection.
Hasbro has seen its longer-term earnings estimate revisions trend upward recently, along with positive movement for Q3, which helps the firm earn a Zacks Rank #1 (Strong Buy). The company has also taken steps to try to offset any U.S.-China trade war worries.
The toy and game powerhouse looks ready to bolster its business through a larger push into TV, movies, and digital entrainment. Hasbro stock also could continue to climb during the holiday shopping period, which could see it earn a boost from toys that accompany the release of Disney’s Frozen 2 and Star Wars: The Rise of Skywalker.
Bear of the Day:
Shares of Kohl's Corporation have tumbled in 2019 as the department store industry’s inability to inspire confidence on Wall Street continues. Kohl’s could benefit from what is expected to be a strong holiday shopping season. Nonetheless, investors should probably avoid KSS stock until it is able to show signs of a comeback.
Holiday Shopping and Retail
The story is one we hear all too often: Amazon and e-commerce are killing traditional retail. There is some truth to this sentiment. Yet many retailers are flourishing in the digital age, and new companies seem to pop up every day in a world where many shop directly from their iPhones on platforms such as Instagram and Pinterest.
Meanwhile, giants like Walmart and Target have proven they can thrive in the e-commerce age.
The success of others makes Macy’s, J.C. Penney, Nordstrom and Kohl's lack of growth even harder for investors and Wall Street to swallow. These department stores have tried to adapt and bolster their digital footprint, but the results haven’t materialized—at least not over a sustained period.
On the bright side, the National Retail Federation said last Thursday that it expects U.S. holiday shopping sales to climb between 3.8% and 4.2% to reach roughly $730 billion. This would compare favorably to the 3.7% average over the last five years and top 2018’s disappointing 2.1%.
The NRF’s projection comes as U.S. unemployment rests at 50-year lows. Overall, the NRF report pointed to positivity. “Nonetheless, there has clearly been a slowdown brought on by considerable uncertainty around issues including trade, interest rates, global risk factors and political rhetoric,” NRF CEO Matthew Shay said in a statement.
Outlook & Earnings Trends
Before we take a look at what to expect from Kohl’s it is worth noting that KSS stock has performed far better than Macy’s over the last five years and its industry’s average. Still, shares of Kohl’s have fallen 33% over the last 12 months and its quarterly sales have fallen by an average of roughly 3% over the trailing three periods.
Our current Zacks Consensus Estimates call for Kohl’s Q3 revenues to pop 0.3% to reach $4.64 billion, with the fourth quarter expected to pop 0.97%. These would both crush Q2’s 3.1% and Q1’s 2.9% year-over-year declines. Despite the projected positivity, KSS full-year fiscal 2019 sales are projected to slip 1.9%.
At the bottom end of the income statement, the firm’s adjusted quarterly earnings are projected to sink 12.2% to hit $0.86 per share, with Q4 expected to slip 0.45%. The department store’s full-year EPS figure is expected to dip 6.6%. Plus, Kohl’s has seen its earnings estimate revisions trend heavily in the wrong direction.
KSS is a Zacks Rank #5 (Strong Sell) at the moment that is set to report its Q3 fiscal 2019 financial results on November 19. The firm could certainly see a boost during the holiday shopping season, especially when we consider how much room the stock has to run. Plus, Kohl’s currently pays an annualized dividend of $2.68 per share, with a selloff-induced yield of 5.68%.
Despite some bright spots, Kohl’s is part of the Retail – Regional Department Stores industry that currently ranks in the bottom 1% of our 255 industries. Therefore, investors still interested in the broader Retail space might instead want to consider #2 (Buy)-ranked Lululemon, Crocs and V.F. Corporation.
Death of a Stockbroker
The world of investing has been evolving rapidly over the past 2 decades, and brokers’ commissions continue to shrink. The latest development in the brokerage market is the move to commission-free trading. The largest public e-brokers in the US, Charles Schwab, E-Trade and TD Ameritrade, announced last week that they would be offering no-fee trades in a move that will change the investment landscape from here on out.
Evolution of Brokers
Stockbrokers used to be the kings of Wall Street, and one of the only ways that the common folk could invest their money into the markets. Stockbrokers would take a sizable chunk from every trade and risked nothing in doing so.
The internet age changed everything for the public equity market. Stocks transformed from being a slip declaring company ownership to a ticker on a screen. The digitizing stock market made trading as easy as a click of the mouse.
The internet has almost entirely eliminated the need for stockbrokers. Now anyone can buy and sell shares or even make more complicated trades with options using just their smartphones.
Robinhood’s no-fee, no minimum deposit product offering has driven the younger generation back into the equity markets. Millennials are tied to their smartphones, and Robinhood’s mobile born application caters perfectly to new investors.
Robinhood has started a cultural shift in investing with the average account holding between $1,000 and $5,000, but over 4 million users. This platform has been able to take control of a sizable portion of the broker market.
Robinhood is a privately owned company that is backed by a number of venture capitalist companies. In its latest round of funding in July, the firm was valued at $7.6 billion. There have been rumors circulating that Robinhood is planning to go public soon, but nothing official has been announced.
Big broker stocks have all been getting destroyed this year as investors are more apt to take long positions in passive index funds as well as Robinhood’s attractive “free” trading offering taking business. The race to the lowest trading fees is over as all the major brokers dropped commissions to zero last week.
Investors were not happy with this decision, and e-broker stocks substantially sold off. Since the zero-commission announcement SCHW is down 15%, AMTD broke 27%, and ETFC fell 15%.
The gap down that this announcement caused was icing on the cake of a disappointing year. Both SCHW and AMTD fell to Zacks Rank #5 (Strong Sell) after this announcement.
The brokers are hoping that this commission-free structure will attract more customers and they will be able to profit on margin yields, idle cash, and premium features. It is all going to come down to product offerings. I see consolidation in this field moving forward and potentially larger downsides to the ones that aren’t able to successfully acquire more market share.
Free-trading across the board is great news for retail investors like us (unless you own one of these brokerage stocks). This will likely also create more liquidity for stocks as more small investors enter the market. The barriers to enter the markets have dropped to zero, and an increasing number of millennials are dipping their toes in the financial markets.
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