For Immediate Release
Chicago, IL – March 6, 2020 –
Zacks Equity Research Shares of Macy's, Inc. M as the Bull of the Day, Norwegian Cruise Line Holdings, Inc. ( NCLH Quick Quote NCLH - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Netflix NFLX, Apple AAPL and Amazon AMZN. Here is a synopsis of all five stocks: : Bull of the Day Macy's, Inc.is executing its turnaround strategy as it enters 2020. But can it succeed? This Zacks Rank #1 (Strong Buy) is still paying its dividend, which is currently yielding in the double digits.
Macy’s is a fashion retailer with three retail brands, Macy's, Bloomingdale's and Bluemercury.
An Earnings Beat in the Fourth Quarter
On Feb 25, Macy's reported its fourth quarter fiscal 2019 results and beat on the Zacks Consensus by 8.7%. Earnings were $2.12 compared to the consensus of $1.95. It was the second consecutive beat in a row.
Sales declined in the quarter to $8.3 billion from $8.4 billion a year ago.
Fourth quarter comparable sales for owned and licensed fell 0.5%.
Full year comparable sales for owned and licensed slumped 0.7%.
Full year 2019 sales also fell compared to the year ago period at $24.56 billion compared to 2018 at $24.97 billion.
Reiterated 2020 Guidance
On Feb 25, the company confirmed its earlier 2020 guidance which included fiscal 2020 comparables of a decline between 2.5% and 1.5%.
Additionally, net sales are expected to fall again, declining to a range of $23.6 billion to $23.9 billion.
Macy's still considers 2020 to be a "transition" year.
Earnings are expected to be in the range of $2.20 to $2.40, which is well under the fiscal 2019 earnings of $2.91.
Why Is Macy's a Zacks Rank #1?
Given the decline expected in sales and earnings for fiscal 2020, how could Macy's be a Zacks Rank #1 (Strong Buy)?
The Rank is determined by revisions to analyst earnings estimates.
After the report, 6 analysts revised their earnings estimates for fiscal 2020 higher, pushing the Zacks Consensus Estimate up to $2.49 from $2.32.
That is above the company's guidance range.
The analysts were too pessimistic going into the earnings report and had to revise their estimates higher.
Shares Are Dirt Cheap
Should you bite?
Shares have gotten hammered in the coronavirus correction. They're down 33.6% over the last month and are hitting new 5-year lows.
They're dirt cheap with a forward P/E of just 5.1.
But with falling earnings expected this fiscal year, it does have value trap characteristics.
Macy's is still paying that big dividend, now yielding 11.9%. Last quarter's dividend is payable to shareholders of record as of March 13, 2020 on Apr 1, 2020.
Bear of the Day: Norwegian Cruise Line Holdings, Inc.suddenly finds itself in a crisis not of its own making as the coronavirus fears hit cruise travel. This Zacks Rank #5 (Strong Sell) has fallen over 48% in the last month.
Norwegian is a global cruise company which operates the Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises brands.
It has a combined fleet of 28 ships with approximately 59,150 berths. It offers itineraries to more than 490 destinations worldwide.
The Company will introduce nine additional ships through 2027.
Coronavirus Hitting Earnings for 2020 and 2021
On Feb 20, Norwegian reported its fourth quarter and full year 2019 results. It should have been about the company taking another victory lap.
It saw record revenue and earnings per share for 2019. It was also the 6th consecutive year it had set those records.
Norwegian was also the first global cruise line to eliminate single use water bottles across its entire fleet.
But the coronavirus hit China, and the rest of Asia, in the first quarter of 2020 and that's all anyone can focus on.
It entered the year with a record booked position and at higher pricing, as the global consumer was feeling good and willing to spend on travel.
As of Feb 20, the current known direct impact to operations from COVID-19 was expected to be about $0.75 per share. That included customer incentive compensation and 40 canceled, modified or redeployed Asia voyages across the company's three brands.
They have redeployed the Norwegian Spirit to the Eastern Mediterranean for summer 2020, with an extremely condensed booking window.
It gave a full year guidance range, excluding both known and unknown impacts from the coronavirus outbreak of $5.40 to $5.60.
More Impacts in March
Norwegian said in February that the outbreak continued to impact consumer travel sentiment for cruises in Asia and other areas of operation worldwide.
It had no idea of the extent of this impact and wasn't included in the known $0.75 impact from the canceled Asia cruises.
But based on what airlines are saying about demand, it appears that cruise demand, worldwide, has likely weakened further.
It's not surprising, then, that two analysts have cut 2020 estimates again in the last week.
The 2020 Zacks Consensus has fallen to $4.16 from $5.57 just 30 days ago.
That's an earnings decline of 18.3% from 2019's record of $5.09.
Shares Crushed on Coronavirus Impact Fears
Wall Street likes certainty. Despite giving 2020 guidance just a few weeks ago, it's clear, that no one knows what all the impacts are going to be from the coronavirus on the global economy and businesses.
Therefore, Wall Street sells first and asks questions later.
Norwegian shares have been hammered, declining 48.1% in the last month and now trading at 5-year lows.
Additional content: Buy Surging Netflix (NFLX) to Combat Coronavirus Scare Netflix shares have surged over 40% since late September to rest near their 52-week highs. More recently, the streaming TV stock has popped over 17% in 2020, amid the coronavirus market selloff.
Netflix stock has easily outpaced Apple and Amazon, as well as the S&P 500’s 3% decline in 2020. NFLX has, for the most part, been able to stay above the coronavirus selloff because its business model is almost tailor-made for the current conditions.
Netflix doesn’t face supply chain issues and streaming TV is perfect as more and more people are either forced or choose to stay at home.
Netflix beat its own fourth subscriber estimates and it is still by far the largest streaming TV company in the world, with 167 million global users and counting.
Netflix does face real competition from Disney+ and others, but the cord cutting revolution might just be getting started. In fact, roughly 56 million households will have canceled cable or satellite TV subscriptions by 2023, according to eMarketer. This is set to benefit NFLX and many other streaming-focused firms.
Looking ahead, our Zacks estimates call for Netflix’s adjusted 2020 earnings to climb 47% to $6.06 per share. Meanwhile, its fiscal 2020 revenue is projected to jump 21% to reach $24.4 billion.
NFLX is currently a Zacks Ranks #2 (Buy) and might be worth considering at the moment.
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