For Immediate Release
Chicago, IL – January 6, 2020 – Zacks Equity Research Shares of JD.com (JD - Free Report) as the Bull of the Day, American Eagle Outfitters (AEO - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Dick’s Sporting Goods (DKS - Free Report) , Dollar General (DG - Free Report) and Ross Stores (ROST - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
In case nobody has said anything to you about it, chill out. We are not on the brink of World War III. It makes for a great headline and fantastic click-bait. But emotionally driven headlines and articles never made any investor a dime. It’s usually the ones that manage their emotions the best which end up finding their way to profits. While the weekend brough its share of gloom and doom, I’m here to bring a little bit of sunshine to your Monday morning.
It may seem like a bold statement to come out and give you a Bull of the Day ahead of Monday’s open, but on the contrary, it could be the perfect time to load into a stock like this. I’m talking about a Zacks Rank #1 (Strong Buy), JD.com. For the uninitiated, JD.com operates as an e-commerce company and retail infrastructure service provider in the People's Republic of China. It operates in two segments, JD Retail and New Businesses. If Alibaba is the Amazon of China, then consider JD as the eBay. JD is also arguably Alibaba’s largest competitor.
The most obvious reason to investigate a stock like JD.com is the easing of tensions between the US and China. The trade war has raged on for many months but the last few weeks have seen vast improvement. Phase One is done and now the superpowers are looking forward to the next round of talks and the next agreement. This obviously bodes well for oversold Chinese stocks.
The other big reason for taking a closer look here is the recent earnings estimate revisions coming in to the upside. Over the last thirty days, analysts have really been pushing up their earnings estimates for the stock. Current year estimates have risen from 95 cents to $1.06 for the current year, while next year’s number has popped up from $1.22 to $1.47.
Those bullish earnings estimate revisions, along with easing of tensions between the US and China, have helped move the stock along nicely. JD.com traded under $28 in early October. Since then, the stock has staged a dramatic rally, closing a penny shy of $38 into the closing bell last Friday. That’s a move of over 35% in about three months.
Bear of the Day:
I am not going to sit up here and preach Armageddon like the talking heads did all weekend. The US economy is still rocking and rolling, the trade war with China is easing, and we’ve got a big round of earnings ahead of us. In short, there are plenty of reasons to be bullish. Like most news events nowadays, this US-Iran story is getting blown way out of proportion. The 24-hour news cycle would have it no other way. To kickoff the week, investors should be out there looking for bargains. That doesn’t mean we should fall into value traps. In fact, I have a name to be careful of heading into.
That name is today’s Bear of the Day, American Eagle Outfitters. American Eagle Outfitters, Inc. operates as a specialty retailer that provides clothing, accessories, and personal care products under the American Eagle and Aerie brands. The company also provides jeans, and other apparel and accessories for men and women; and intimates, activewear, and swim collections, as well as personal care products for women. In addition, it offers sports apparel under the Tailgate brand; and menswear products under the Todd Snyder New York brand name. As of March 6, 2019, it operated approximately 934 American Eagle stores, 262 Aerie stores, 5 Tailgate stand-alone stores, and 1 Todd Snyder stand-alone store in the United States, Canada, Mexico, China, and Hong Kong
Currently, American Eagle Outfitters is a Zacks Rank #4 (Sell). The reason for the negative Zacks Rank lies in the estimate revisions coming from analysts all over Wall Street. Despite the Retail Industry being in the Top 22% of our Zacks Industry Rank, American Eagle Outfitters has seen nine analysts drop their estimates for the current year, while eight have done so for next year. The move has dropped our current year Zacks Consensus Estimate from $1.59 to $1.47 while next year’s number has come down from $1.65 to $1.48. That sort of contraction means there’s only a very small margin of growth from this year to next year.
3 Retail Stocks to Buy in January
Last year, retail stocks like Target, Walmart and Costco all put together strong performances that bolstered the health of the broader sector. Let’s take a look at a few retail stocks that can follow in these footsteps in the upcoming year.
Dick’s Sporting Goodsis a retailer that put together a strong performance in 2019 as it revamped its business. The company is coming off a third quarter where it saw its net revenue grow 5.6% to $1.96 billion on a 6% surge in comparable-store sales. The firm is trying to remake itself into an all seasons retailer that can resonate with consumers no matter the weather.
In addition, the company has brought in a variety of merchandise to displace its hunting category, which it has vowed to wean itself off of. As the popularity of its private-label merchandise picks up, this could bring extended success to the firm in the new year.
Our Q4 consensus estimates forecast earnings to increase 13% to $1.21 per share and for sales to grow 2.8% to $2.56 billion. Dick’s has had its earnings estimates revised higher, helping earn DKS stock a Zacks Rank #1 (Strong Buy).
Dollar Generalis a discount retailer coming off a strong 2019 where its shares rose over 44%. The company has big plans for 2020; it plans to get on the CBD bandwagon. Dollar General announced that it intends to start selling products infused with cannabidiol in 1,100 stores across seven states by spring 2020. The retail market is expected to be the biggest contributor to CBD’s forecasted $20 billion in sales by 2024, which could make this decision a lucrative one.
In the firm’s latest earnings release, it announced its plans for fiscal 2020, which includes 1,000 new store openings, 1,500 mature store remodels, and 80 store relocations. Dollar General is looking to capitalize on its strong performance in 2019, which could lead to another breakout performance in the new year. Our Q4 estimates project a bottom-line hike of 9.78% to $2.02 per share and a top-line rally of 7.46% to $7.15 billion. DG currently sports a Zacks Rank #2 (Buy).
Ross Storesis another retailer that is looking to keep its momentum going in the new year. Ross shares rose over 40% in 2019, which was capped off by the firm’s third quarter performance. The firm saw its net revenue rise 8%, which was driven by a 5% jump in comparable store sales. The company also lifted guidance for full-year earnings per share to the range of $4.52 to $4.57 from $4.41 to $4.50.
While many other retailers have struggled to survive in the new digitally driven landscape, Ross has actually expanded its brick and mortar footprint. Our Q4 consensus estimates call for earnings to rise over 4% to $1.25 per share and for net revenue to reach $4.37 billion for a 6.42% gain. Ross has surpassed our earnings estimates the past four quarters with an average EPS surprise of 3.77%. The company’s estimate revisions have trended higher, earning its stock a Zacks Rank #2 (Buy).
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