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In a historic economic expansion and 10 plus-year bull run for the markets, the strength of the US consumer has been one of the most important drivers of increasing corporate revenues and earnings.
While traditional retailers have in some cases suffered from stiff online competition, the best -run retail companies have not only survived, but are absolutely thriving.
Dick’s Sporting Goods is definitely among the best in that category.
The company began in 1948 as a single retail store aimed primarily at fishermen that was seeded with a $300 loan that founder Dick Stack received from a family member. Dick’s current CEO, Ed Stack, is the founder’s son and has been running the company – along with two of his siblings – since 1984. The company went public in 2002, but in a sense remains a family business.
As the largest sporting goods retailer in the US, Dick’s currently operates approximately 730 retail locations and also owns the Golf Galaxy and Field and Stream specialty store chains - aimed at golfers and outdoor enthusiasts, respectively. They maintain an extensive internet presence - with all of their products available online as well as in stores.
In November 2019, Dick’s turned in a nearly perfect quarterly earnings report in which they exceeded analyst estimates for both revenues and earnings and significantly raised full year guidance.
The company delivered third quarter 2019 earnings of $0.52/share, beating the Zacks Consensus Earnings Estimate of $0.38/share by nearly 37%. Gross revenues of $1.96 billion were 5.6% higher than the prior-year period. Consolidated same-store sales were up 6% and e-commerce sales grew by 13%.
Dick’s also raised its full-year 2019 earnings guidance to a range of $3.63 – 3.73/share, up from a previous range of $3.30 – 3.45/share.
That increase in guidance sent analyst estimates soaring, earning Dick’s a Zacks Rank #1 (Strong Buy).
In the wake of several deadly mass shootings, Dicks has taken an aggressive and somewhat controversial stand on the issue of gun control by eliminating the sale of some types of firearms, and discontinuing the sale of any guns or ammunition to customers under the age of 21.
Dicks had been one of the country’s largest retailers of firearms and analysts and investors rightfully worried about the potential effect of that the loss of revenues from hunting enthusiasts.
Those customers tend to be strong advocates of second amendment rights who might see the move to limit the sales of firearms as an intrusion on those rights.
The decision came in February of 2018 and by the end of the year, Dick’s estimated that they had lost approximately $150 million in sales of guns in ammunition.
It turns out those initial investor fears were unwarranted because overall same store sales at Dick’s have actually been increasing significantly, including that 6% jump in the most recent quarter.
The hunting and shooting items that Dick’s stopped selling actually turned out to be fairly low-margin business – and one in which they often went head-to-head with the nation’s largest discount retailer, Walmart.
Dick’s selection of women’s and performance athletic apparel sell in greater dollar volumes and at higher profits than the firearms products they replaced. That’s largely due to an advantage of scale Dick’s enjoys because of its sheer size. They feature popular brands like Nike, Adidas and UnderArmour, but they also have several private-label brands that are available exclusively at Dick’s.
The company has developed a line of women’s apparel and footwear called Calia with celebrity Carrie Underwood and also a brand of high-performance compression athletic garments called Second Skin that take aim at UnderArmour’s most popular items.
It’s a powerful one-two punch. Name-brand items bring customers into the stores, but intense price competition and higher wholesale prices often mean reduced margins on those goods. Offering customers choices of in-house brands gives Dick’s the chance to also sell those customers items with a lower retail price, but at bigger profits.
Dick’s shares saw a significant rally after that blowout earnings report, yet remain very attractively valued. They’re still trading at less than 13 times 12 month forward earnings estimates - significantly cheaper than the S&P 500 which is currently trading at almost 19 times next year’s expected earnings.
They also pay a reliable dividend with a current yield of 2.4% annually and bought back approximately $100 million in stock last quarter.
Initial reports on the 2019 holiday shopping season suggest that retail sales at stores like Dick’s were stronger than ever. With record low unemployment and rising wages, the economic situation in the US points to more big retail numbers this quarter.
Dick’s Sporting Goods is likely to be a big beneficiary when they report Q4 2019 results next month.
If you live in a cold winter climate – especially in Urban areas, you’ve no doubt noticed the proliferation of bulky down parkas with fur lined hoods and collars and a distinctive embroidered patch signifying that they are from the collection of high-end outdoor garment maker Canada Goose.
Around the downtown Chicago offices of Zacks, the Canada Goose parka is the winter wear de rigueur for the millennial crowd. It would be understandable if you thought it was actually a required uniform if you’re going to be standing in line at Starbucksor the hip place next door that sells take-out salads for 11 bucks.
You may also be aware that those garments are very expensive, with the price of the flagship parka starting at about $800 and going up to $1,400 and beyond. Other garments are priced at similar levels with lighter weight jackets, outerwear pants and premium knit items all selling for over $500.
So how does a company with popular, premium-priced products end up as the Bear of the Day?
Lowered earnings estimates, stagnating long-term forecasts and the wildcard of selling products made from animal feathers and fur that have been the subject of negative press and an FTC investigation into the company’s claims of “ethical sourcing.”
There’s also the issue that while those expensive parkas have become ubiquitous in the big city coffee lines, they were noticeably absent from the slopes of ski resorts in places like Jackson Hole, WY and Vail CO during the holiday season. In fact, an informal survey of outdoor winter sports enthusiasts finds that that group still prefers high-performance, technical outerwear from the likes of the North Face, Patagonia and Columbia Sportswear and considers Canada Goose a fashion "poser" brand.
Having a hot fashion brand can be a double-edged sword. While consumer demand for the newest items can drive sales and help a company hold gross margins, those tastes are notoriously fickle and require a marketing spend that quickly becomes unsustainable if sales dip.
In the case of Canada Goose, the company relies on large, stylish “flagship” stores in prime luxury shopping districts across the US and Canada as well as in London, Paris, Beijing, Shanghai, Hong Kong and Tokyo.
Those stores utilize extremely expensive retail commercial real estate. Floor space is arranged to showcase new inventory and the stores function more as advertisements that draw attention to the brand rather than as a channel for significant retail sales.
Early reports are that Canada Goose outerwear – which was rarely discounted in previous seasons – has been the subject of steep markdowns during the 2019 holiday season. The average discount to MSRP this year was calculated at 13% by one industry analysis firm. Pushback from animal rights groups is affecting consumer demand for the garments at full price. Activists have been critical of the conditions in which geese for the down stuffing are raised as well as the use of leg traps - necessary to procure coyote fur from wild animals.
Recent downward revisions for Q4 2019 earnings from $0.96/share to $0.87/share earn Canada Goose a Zacks Rank #5 (Strong Sell). Though the company turned in an earnings beat last quarter, management declined to adjust future guidance and the shares have been declining - trading recently at less than ½ the all-time high of $70.05/share reached at the end of 2018.
During the same period, the S&P 500 has increased more than 20%.
Additional content:
Renewables to Lead World Energy Usage by 2050: 3 Stocks to Buy
In a recently released report, the U.S. Energy Information Administration (EIA) projected world energy consumption to grow nearly 50% between 2018 and 2050. Of this growth, renewables are estimated to constitute the maximum portion, surpassing petroleum and other liquids to become the most used energy source.
Statistically, worldwide renewable energy consumption is predicted to increase 3.1% per year in the aforementioned time period, compared with 0.6% annual growth in petroleum and other liquids, 0.4% growth in coal, and 1.1% annual growth in natural gas consumption.
Why Renewables?
While the need for adopting clean energy to avoid environmental hazards arising from carbon emissions has been the primary catalyst driving the rise of renewables as the most preferred energy source, rapidly plummeting cost of electricity generation from the same has also been a notable motivation. There are several drivers leading to such notable cost deceleration, with improved product design being one of them. For instance, wind turbines are now much larger and have much higher capacity factors. Another reason for the cost decline is improvement in manufacturing efficiency, which has lowered the cost of producing solar PV panels dramatically.
Policies such as tax credits, preferential feed-in tariffs, and increased adoption of renewable portfolio standards (RPS) have also been boosting usage of renewables in recent times. Increasing corporate investment in renewables has been another growth driver. Per the latest Global Trends in Renewable Energy Investment report, 2018 marked the fifth successive year in which global investment in renewables exceeded $250 billion.
These factors set the stage for analysts to predict that renewables will lead global energy consumption in the near future.
Stocks to Invest
Considering the aforementioned discussion, let us focus on a handful of stocks that are working relentlessly to promote clean energy and have made notable progress in the same. These should thus find a place in investors’ portfolio.
JinkoSolar Holding: This solar cell and module manufacturer has been consistently innovating products to capture a larger share of the booming solar market. Notably, in November 2019, the company unveiled a new module, named Tiger, which will significantly improve efficiency, lower production costs and better internal rate of return. Driven by aggressive clean energy policies adopted by U.S. states recently, the company remains optimistic about increased demand for its products and consequent installations over the next four years.
This Zacks Rank #1 (Strong Buy) stock’s long-term earnings growth rate is estimated to be 20%, thereby indicating solid growth prospects in the coming years. You can seethe complete list of today’s Zacks #1 Rank stocks here.
Sunrun: This solar storage and energy provider has pioneered residential solar energy service in the United States. The company offers homeowners the ability to generate and store their own energy with its Brightbox service. With growing outages in varied parts of the nation, demand for Brightbox is increasing, As of Nov 12, Sunrun installed more than 8,000 Brightbox systems.
This Zacks Rank #3 (Hold) stock’s long-term earnings growth rate is pegged at 5%.
Bloom Energy Corp.: This company’s proprietary solid oxide fuel cell technology, Bloom Energy Server is a stationary power generation platform capable of delivering highly reliable, uninterrupted, 24x7 constant power that is clean and sustainable. It converts fuel into electricity without combustion at the highest efficiency of any power solution available in the world today. Bloom Energy caters to the electric power market, which according to Marketline, is projected to witness compound annual growth rate of 4.3% to $2.9 trillion in 2021.
This Zacks Rank #3 stock’s long-term earnings growth rate is projected to be 25%.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Dick's Sporting Goods, Canada Goose, JinkoSolar, Sunrun and Bloom Energy highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – January 15, 2020 – Zacks Equity Research Shares of Dick’s Sporting Goods (DKS - Free Report) as the Bull of the Day, Canada Goose (GOOS - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on JinkoSolar Holding (JKS - Free Report) , Sunrun (RUN - Free Report) and Bloom Energy Corp. (BE - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
In a historic economic expansion and 10 plus-year bull run for the markets, the strength of the US consumer has been one of the most important drivers of increasing corporate revenues and earnings.
While traditional retailers have in some cases suffered from stiff online competition, the best -run retail companies have not only survived, but are absolutely thriving.
Dick’s Sporting Goods is definitely among the best in that category.
The company began in 1948 as a single retail store aimed primarily at fishermen that was seeded with a $300 loan that founder Dick Stack received from a family member. Dick’s current CEO, Ed Stack, is the founder’s son and has been running the company – along with two of his siblings – since 1984. The company went public in 2002, but in a sense remains a family business.
As the largest sporting goods retailer in the US, Dick’s currently operates approximately 730 retail locations and also owns the Golf Galaxy and Field and Stream specialty store chains - aimed at golfers and outdoor enthusiasts, respectively. They maintain an extensive internet presence - with all of their products available online as well as in stores.
In November 2019, Dick’s turned in a nearly perfect quarterly earnings report in which they exceeded analyst estimates for both revenues and earnings and significantly raised full year guidance.
The company delivered third quarter 2019 earnings of $0.52/share, beating the Zacks Consensus Earnings Estimate of $0.38/share by nearly 37%. Gross revenues of $1.96 billion were 5.6% higher than the prior-year period. Consolidated same-store sales were up 6% and e-commerce sales grew by 13%.
Dick’s also raised its full-year 2019 earnings guidance to a range of $3.63 – 3.73/share, up from a previous range of $3.30 – 3.45/share.
That increase in guidance sent analyst estimates soaring, earning Dick’s a Zacks Rank #1 (Strong Buy).
In the wake of several deadly mass shootings, Dicks has taken an aggressive and somewhat controversial stand on the issue of gun control by eliminating the sale of some types of firearms, and discontinuing the sale of any guns or ammunition to customers under the age of 21.
Dicks had been one of the country’s largest retailers of firearms and analysts and investors rightfully worried about the potential effect of that the loss of revenues from hunting enthusiasts.
Those customers tend to be strong advocates of second amendment rights who might see the move to limit the sales of firearms as an intrusion on those rights.
The decision came in February of 2018 and by the end of the year, Dick’s estimated that they had lost approximately $150 million in sales of guns in ammunition.
It turns out those initial investor fears were unwarranted because overall same store sales at Dick’s have actually been increasing significantly, including that 6% jump in the most recent quarter.
The hunting and shooting items that Dick’s stopped selling actually turned out to be fairly low-margin business – and one in which they often went head-to-head with the nation’s largest discount retailer, Walmart.
Dick’s selection of women’s and performance athletic apparel sell in greater dollar volumes and at higher profits than the firearms products they replaced. That’s largely due to an advantage of scale Dick’s enjoys because of its sheer size. They feature popular brands like Nike, Adidas and UnderArmour, but they also have several private-label brands that are available exclusively at Dick’s.
The company has developed a line of women’s apparel and footwear called Calia with celebrity Carrie Underwood and also a brand of high-performance compression athletic garments called Second Skin that take aim at UnderArmour’s most popular items.
It’s a powerful one-two punch. Name-brand items bring customers into the stores, but intense price competition and higher wholesale prices often mean reduced margins on those goods. Offering customers choices of in-house brands gives Dick’s the chance to also sell those customers items with a lower retail price, but at bigger profits.
Dick’s shares saw a significant rally after that blowout earnings report, yet remain very attractively valued. They’re still trading at less than 13 times 12 month forward earnings estimates - significantly cheaper than the S&P 500 which is currently trading at almost 19 times next year’s expected earnings.
They also pay a reliable dividend with a current yield of 2.4% annually and bought back approximately $100 million in stock last quarter.
Initial reports on the 2019 holiday shopping season suggest that retail sales at stores like Dick’s were stronger than ever. With record low unemployment and rising wages, the economic situation in the US points to more big retail numbers this quarter.
Dick’s Sporting Goods is likely to be a big beneficiary when they report Q4 2019 results next month.
Bear of the Day:
If you live in a cold winter climate – especially in Urban areas, you’ve no doubt noticed the proliferation of bulky down parkas with fur lined hoods and collars and a distinctive embroidered patch signifying that they are from the collection of high-end outdoor garment maker Canada Goose.
Around the downtown Chicago offices of Zacks, the Canada Goose parka is the winter wear de rigueur for the millennial crowd. It would be understandable if you thought it was actually a required uniform if you’re going to be standing in line at Starbucksor the hip place next door that sells take-out salads for 11 bucks.
You may also be aware that those garments are very expensive, with the price of the flagship parka starting at about $800 and going up to $1,400 and beyond. Other garments are priced at similar levels with lighter weight jackets, outerwear pants and premium knit items all selling for over $500.
So how does a company with popular, premium-priced products end up as the Bear of the Day?
Lowered earnings estimates, stagnating long-term forecasts and the wildcard of selling products made from animal feathers and fur that have been the subject of negative press and an FTC investigation into the company’s claims of “ethical sourcing.”
There’s also the issue that while those expensive parkas have become ubiquitous in the big city coffee lines, they were noticeably absent from the slopes of ski resorts in places like Jackson Hole, WY and Vail CO during the holiday season. In fact, an informal survey of outdoor winter sports enthusiasts finds that that group still prefers high-performance, technical outerwear from the likes of the North Face, Patagonia and Columbia Sportswear and considers Canada Goose a fashion "poser" brand.
Having a hot fashion brand can be a double-edged sword. While consumer demand for the newest items can drive sales and help a company hold gross margins, those tastes are notoriously fickle and require a marketing spend that quickly becomes unsustainable if sales dip.
In the case of Canada Goose, the company relies on large, stylish “flagship” stores in prime luxury shopping districts across the US and Canada as well as in London, Paris, Beijing, Shanghai, Hong Kong and Tokyo.
Those stores utilize extremely expensive retail commercial real estate. Floor space is arranged to showcase new inventory and the stores function more as advertisements that draw attention to the brand rather than as a channel for significant retail sales.
Early reports are that Canada Goose outerwear – which was rarely discounted in previous seasons – has been the subject of steep markdowns during the 2019 holiday season. The average discount to MSRP this year was calculated at 13% by one industry analysis firm. Pushback from animal rights groups is affecting consumer demand for the garments at full price. Activists have been critical of the conditions in which geese for the down stuffing are raised as well as the use of leg traps - necessary to procure coyote fur from wild animals.
Recent downward revisions for Q4 2019 earnings from $0.96/share to $0.87/share earn Canada Goose a Zacks Rank #5 (Strong Sell). Though the company turned in an earnings beat last quarter, management declined to adjust future guidance and the shares have been declining - trading recently at less than ½ the all-time high of $70.05/share reached at the end of 2018.
During the same period, the S&P 500 has increased more than 20%.
Additional content:
Renewables to Lead World Energy Usage by 2050: 3 Stocks to Buy
In a recently released report, the U.S. Energy Information Administration (EIA) projected world energy consumption to grow nearly 50% between 2018 and 2050. Of this growth, renewables are estimated to constitute the maximum portion, surpassing petroleum and other liquids to become the most used energy source.
Statistically, worldwide renewable energy consumption is predicted to increase 3.1% per year in the aforementioned time period, compared with 0.6% annual growth in petroleum and other liquids, 0.4% growth in coal, and 1.1% annual growth in natural gas consumption.
Why Renewables?
While the need for adopting clean energy to avoid environmental hazards arising from carbon emissions has been the primary catalyst driving the rise of renewables as the most preferred energy source, rapidly plummeting cost of electricity generation from the same has also been a notable motivation. There are several drivers leading to such notable cost deceleration, with improved product design being one of them. For instance, wind turbines are now much larger and have much higher capacity factors. Another reason for the cost decline is improvement in manufacturing efficiency, which has lowered the cost of producing solar PV panels dramatically.
Policies such as tax credits, preferential feed-in tariffs, and increased adoption of renewable portfolio standards (RPS) have also been boosting usage of renewables in recent times. Increasing corporate investment in renewables has been another growth driver. Per the latest Global Trends in Renewable Energy Investment report, 2018 marked the fifth successive year in which global investment in renewables exceeded $250 billion.
These factors set the stage for analysts to predict that renewables will lead global energy consumption in the near future.
Stocks to Invest
Considering the aforementioned discussion, let us focus on a handful of stocks that are working relentlessly to promote clean energy and have made notable progress in the same. These should thus find a place in investors’ portfolio.
JinkoSolar Holding: This solar cell and module manufacturer has been consistently innovating products to capture a larger share of the booming solar market. Notably, in November 2019, the company unveiled a new module, named Tiger, which will significantly improve efficiency, lower production costs and better internal rate of return. Driven by aggressive clean energy policies adopted by U.S. states recently, the company remains optimistic about increased demand for its products and consequent installations over the next four years.
This Zacks Rank #1 (Strong Buy) stock’s long-term earnings growth rate is estimated to be 20%, thereby indicating solid growth prospects in the coming years. You can seethe complete list of today’s Zacks #1 Rank stocks here.
Sunrun: This solar storage and energy provider has pioneered residential solar energy service in the United States. The company offers homeowners the ability to generate and store their own energy with its Brightbox service. With growing outages in varied parts of the nation, demand for Brightbox is increasing, As of Nov 12, Sunrun installed more than 8,000 Brightbox systems.
This Zacks Rank #3 (Hold) stock’s long-term earnings growth rate is pegged at 5%.
Bloom Energy Corp.: This company’s proprietary solid oxide fuel cell technology, Bloom Energy Server is a stationary power generation platform capable of delivering highly reliable, uninterrupted, 24x7 constant power that is clean and sustainable. It converts fuel into electricity without combustion at the highest efficiency of any power solution available in the world today. Bloom Energy caters to the electric power market, which according to Marketline, is projected to witness compound annual growth rate of 4.3% to $2.9 trillion in 2021.
This Zacks Rank #3 stock’s long-term earnings growth rate is projected to be 25%.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
See these 7 breakthrough stocks now>>
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.