For Immediate Release
Chicago, IL – January 7, 2020 – Zacks Equity Research Shares of Johnson Outdoors Inc. (JOUT - Free Report) as the Bull of the Day, TripAdvisor Inc. (TRIP - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Heico Corp. (HEI - Free Report) ,ST Microelectronics N.V. (STM - Free Report) and Barclays PLC (BCS - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Johnson Outdoors Inc. is a leading outdoor recreation company known for its innovative, high-quality products. It operates across categories—Watercraft, Marine Electronics, Diving, and Outdoor Equipment—and some of its popular brands include Old Town canoes and kayaks, Escape electric boats, and Lendal paddles.
Q4 Earnings: Another Big Quarter
JOUT posted higher sales and earnings in its fourth quarter fiscal 2019 report.
Total revenue grew 14% year-over-year to $104 million thanks to continued momentum in the company’s Fishing division. And for fiscal 2019, sales grew 3% to $562.4 million.
EPS came in at 39 cents per share, easily beating the Zacks Consensus Estimate of a loss of 21 cents a share. Net profit was $3.9 million compared to a net loss of $5 million in fiscal 2018.
The company’s North American diving market was particularly strong, and JOUT saw solid growth in certain camping products; its Old Town brand also had a great quarter.
“We’re pleased by the strong finish to the year, particularly with the performance of Fishing and Camping brands. Looking ahead, we continue to believe the power of our innovation, the enduring strength of our brand equities and the diversity of our outdoor recreation portfolio combine to well-position Johnson Outdoors for the future,” said CEO Helen Johnson-Leipold.
JOUT on the Rise
Shares of JOUT are up almost 27% over the last one year, getting a nice bump after its fourth quarter earnings report; the stock surged 19%. Earnings estimates have been rising too, and Johnson Outdoors is a Zacks Rank #1 (Strong Buy) right now.
For the current fiscal year, one analyst revised their bottom line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up 47 cents from $4.65 to $5.12 per share; earnings could see positive growth compared to the prior year period, too. 2021 looks pretty strong too, with earnings and revenue expected to continue positive year-over-year growth.
JOUT currently trades around 15X its forward full-year earnings estimates, lower than the broader Consumer Discretionary Market (23.6X).
If you’re an investor searching for a growing recreation stock to add to your portfolio, make sure to keep JOUT on your shortlist.
Bear of the Day:
Based in Massachusetts, TripAdvisor Inc. is one of the biggest online travel research companies, providing a platform for users to share reviews, ratings, and opinions on hotels, destinations, attractions, and restaurants. The company also helps with bookings between hotels and customers.
Q3 Earnings Disappoint
Back in November, TripAdvisor reported third quarter results that disappointed analysts and investors.
Total revenue came in at $428 million, falling 7% year-over-year and missing the Zacks Consensus Estimate of $456 million. The company’s Hotel, Media, and Platform segment revenue decreased 12%.
Even though operating expenses also decreased in Q3, it couldn’t offset TRIP’s worsening revenue patterns, and adjusted EPS fell to 58 cents a share.
One bright spot, however, was Experiences and Dinning, where revenue rose 19%.
TRIP is now a Zacks Rank #5 (Strong Sell).
Company management called the results “frustrating…particularly considering we entered 2019 with such great momentum” in the quarterly conference call.
Shares of the travel company are down about 37% in the last six months, and slumped almost 20% the day of its earnings release. The S&P 500, on the other hand, was on a tear last year, soaring more than 30%.
For fiscal 2019, seven analysts cut their earnings outlook, and the consensus estimate has fallen nine cents from $1.84 to $1.75 per share. Seven analysts also slashed their estimate for next fiscal year, but earnings could see nearly 10% growth.
Competition from Google is definitely hurting TRIP’s business right now, but it’s not the only travel company being negatively affected. Expedia and Trivago are also losing users and revenue to the search giant. TripAdvisor’s latest results only showcase one of the many issues facing businesses like theirs.
Time to Take Trading Profits? Global Week Ahead
In the Global Week Ahead, a fresh “tale of the tape” will show us an open trading battle…
One that has not been seen for months.
After U.S. military events in Baghdad taken against Iran, buyer and seller frontlines are more fairly drawn, between steady stock market bulls and newly pessimistic bears.
For months, bullish traders have put their full trend-following faith in the U.S. Fed.
However, this week, observers shall note a newfound roar from stock market bears.
Bearish traders will be taking their profits off the table. In front of an almost certain, intensifying global clash between the U.S. and Iran.
Today, Reuters refreshed the bull case for us, via the Fed’s ongoing “repo” buying.
The New York Fed began injecting billions of dollars of liquidity into the repo market in mid-September, when a confluence of events sent the cost of overnight loans as high as 10%, more than four times the Fed’s rate at the time.
A month later, the Fed moved to expand its balance sheet — and boost the level of reserves — by snapping up $60 billion a month in U.S. Treasury bills. The Fed will continue pumping tens of billions a day into the repo market through at least the end of January.
Its ability to exit from the repo market after that time will depend on how long it takes the central bank to make the balance sheet large enough so there are adequate reserves in the banking system — and the repo operations are no longer needed.
“It seems implausible to me that the Fed will be able to stop their repo operations by the end of January,” said Mark Cabana, head of U.S. rates strategy at Bank of America Merrill Lynch.
Minutes from the Fed’s December policy meeting released on Friday showed its staffers expected repo operations to be “gradually” reduced after mid-January.
However, staff members also said the central bank may need to continue offering some repo operations until at least April, when tax payments could reduce the level of reserves.
At the end of last week, Reuters also put out its usual five world market themes.
I kept the rises in oil prices, due to the U.S. Iran clash, at the top of the list. Read on.
(1) With U.S. Iran tensions rising, the world’s oil prices are heading up.
Geopolitics is back in the driving seat.
The U.S. killing of a top Iranian commander has doused the nascent New Year rally and delivered a $3 boost for oil prices on fears that any violent retaliation from Tehran would disrupt energy supplies.
Brent crude futures have actually only risen to their highest since mid-September, when an attack on Saudi Arabian crude facilities sparked the biggest price jump in more than 30 years. Whether oil markets calm down and stocks resume their climb hinges on what happens next.
September’s oil price spike was short lived as Riyadh didn’t respond to the attacks, which the U.S. blamed on Iran and which Iran in turn denied. However, if Iran fulfills its threat of “severe retaliation” over the killing of General Qassem Soleimani, it could well magnify market moves.
Any conflict, and surging oil prices, risk snuffing out the nascent global economic recovery.
(2) The global rates markets won’t move much, with a rise in U.S. Iran tensions.
The ructions in the Middle East are a reminder of how hard it will be to kill off a near four-decade-long bull market.
Global bonds had a tepid start to 2020 following a year when U.S. and German borrowing costs posted their biggest annual falls in five years. With a resolution to the U.S.-China trade spat in sight and recession risks receding, super-low bond yields no longer seemed justified. German 10-year government bond yields touched seven-month highs on the first trading day of the new year, while 15-year yields briefly edged above 0% for the first time since July. The U.S. yield curve — a classic indicator of recession risk — is near its steepest levels since October.
Upcoming readings of Eurozone inflation and U.S. employment could encourage further bond selling, should they beat forecasts, but most still think it’s too early to call time on the rally.
For all the talk that sovereign bonds are expensive, many investors are still clearly sticking with them.
(3) Don’t forget about the usual U.S. nonfarm jobs number out Friday.
Friday brings the first U.S. jobs release of the decade.
While it will be hard to beat the 2010s for growth and equity gains, the December 2019 figures could extend year-end bullishness and amplify campaign braggadocio from President Donald Trump.
Leading up to November’s election, he seems to have little to worry about on the economic front.
November’s 3.5% jobless rate was the lowest in half a century and the 266,000 jobs added were the most in 10 months. Last month’s hiring is forecast to have eased to 165,000, still well above the 100,000-a-month rate needed to keep up with growth in the working-age population.
The labor picture suggests Trump’s trade war with China has not had much impact on the broader economy, which clipped along at a 2.1% pace in the third quarter. Manufacturing hiring did take a hit, but hopes are high for a “Phase One” trade deal on January 15th.
If payroll numbers meet or beat expectations, Trump won’t miss an opportunity to repeat tweet “JOBS, JOBS, JOBS.”
(4) Will the “Phase One” U.S. China trade deal get signed in mid-January?
Nearly two years of brinkmanship, stop-start negotiations and tit-for-tat tariffs could end on Jan. 15th, the date that President Trump says will see Beijing and Washington ink a “Phase One” trade deal.
But China’s leadership has kept mum on the subject, and investors don’t know for sure what the deal text will actually say, keeping global markets on edge.
In recent days, Chinese markets have basked in the afterglow of upbeat retail sales data, solid manufacturing gauges and fresh stimulus measures with the central bank slashing banks’ reserve ratio requirements.
But what next?
Services PMIs published on Monday will be crucial, as will Thursday’s inflation figures. Tuesday will bring data on central bank reserves, indicating whether Beijing’s $3 trillion war chest is growing or diminishing.
(5) The U.K. House of Commons reconvenes on Tuesday, January 7th
For some, the New Year brings fresh resolutions, for Britain’s parliament it brings back a Brexit withdrawal bill.
Lawmakers reconvene on Jan 7th and will debate the “divorce deal” Prime Minister Boris Johnson has agreed to with Brussels.
The bill goes to Parliament’s upper house on Thursday and should allow Johnson to fulfill his pledge to “get Brexit done” by Jan. 31st.
But the no-deal Brexit concerns that weighed on U.K. markets in 2019 haven’t dissipated and sterling is back below $1.31, from December highs above $1.35. Once Parliament approves the agreement, the clock starts ticking on Britain’s future trade relationship with the EU. If an agreement isn’t reached by end-2020, the outcome may yet be that Britain is cut loose without trade arrangements in place.
However, with one Brexit step likely taken by the end of the month, sterling could react more than last year to economic data. Reuters polls predict the final reading of December’s U.K. services activity on Monday will reveal a slight uptick, though stay in contraction territory below 50. House price data on Wednesday could also offer clues on Britons’ willingness to splash out on property now that there is a bit more Brexit clarity.
Zacks #1 Rank (STRONG BUY) Stocks
(A) Heico Corp.: With a rise in military conflict ahead, the U.S. Aerospace & Defense industry will get a bullish nod. This is one Zacks #1 Rank stock in that mix.
Florida-based Heico Corporation was incorporated in 1957. The company is one of the world’s leading manufacturers of Federal Aviation Administration (“FAA”)-approved jet engine and aircraft component replacement parts.
This defense-related stock has a $16.2B market cap and a heady $120 share price already. That gives this pick a lousy Zacks Value score of F to go with its solid Zacks Growth score of B.
(B) ST Microelectronics N.V.: This is a $24.5B market cap semi chip stock. It is based in the Netherlands and lists in Europe. I have a Zacks Value score of D and a Zacks Growth score of C. That is producing a Zacks Momentum score of A.
That’s right! Take in those three long-term Zacks score together. It doesn’t make any GARP sense, where you buy “Growth At a Reasonable Price.” Given (D + C = A).
(C) Barclays PLC: This week, Brexit will be back in the headline mix. Let’s look into a major U.K. banking stock.
This $41B market cap pick trades at a paltry $9.50 a share. I note this produces a Zacks Value score of B to go with an awful Zacks Growth score of F.
The market is saying this: Good luck Mr. Johnson!
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