For Immediate Release
Chicago, IL – June 5, 2020 – Zacks Equity Research Shares of Dollar General (DG - Free Report) as the Bull of the Day, Hanesbrands Inc. (HBI - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Visa Inc. (V - Free Report) , Mastercard Inc. (MA - Free Report) and American Express Co. (AXP - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Dollar General is one of the largest discount retailers in the U.S., and offers low-priced merchandise typically $10 or less in its stores. Its product selection is wide, and customers can find everything from seasonal items to home products and apparel.
Strong Earnings Leads to Analyst Optimism
For the first quarter, DG reported a whopping 73% increase in earnings per share, and net sales increased 27.6% year-over-year.
Business was very strong in March, and comparable store sales surged 34.5% for the month alone.
Operating profit also saw strong growth, and was up almost 70% during the quarter. CFO John Garratt said this rise was primarily due to higher sales related to the coronavirus pandemic and general economic uncertainty.
As a result, analyst Kelly Bania from BMO Capital and analyst Anthony Chukumba from Loop Capital raised their price targets on the stock to $200 per share and $190 per share, respectively.
Both analysts pointed towards DG’s strong Q1 results, as well as higher demand during the Covid-19 lockdowns, as the reason for the increase.
DG Is Soaring
Year-to-date, shares of DG are up about 19% compared to the S&P 500’s 4% decline. Earnings estimates have been rising, and Dollar General is a Zacks Rank #1 (Strong Buy) right now.
For the current fiscal year, 13 analysts have revised their bottom line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up 67 cents to $8.11 per share; earnings are expected to increase 20.5% compared to the prior year period. 2021 looks strong as well, with 10 analysts boosting their earnings estimate for the year.
With unemployment at record highs, Dollar General has become a resource for consumers looking to by necessities and other goods at a discounted price. In many smaller communities, DG is often the only option to buy pantry staples.
The company just reported its 30th consecutive year of comps growth in 2019, and management is confident about their current growth trajectory.
If you’re an investor searching for a retail stock to add to your portfolio, make sure to keep DG on your shortlist.
Bear of the Day:
Hanesbrands Inc. designs, manufactures, and sells apparel essentials for men, women, and kids in the U.S. and internationally. Its brand portfolio is well-established, and includes Hanes, Champion, Playtex, Bali, Just My Size, Wonderbra, and Barely There.
Q1 Results Show Coronavirus Impact
Both earnings and revenue fell short of the analyst consensus estimate; total sales plunged 17% year-over-year.
Outerwear sales dropped 10.2% and innerware sales declined 9.4%.
Management did offer some concrete estimates of the financial impact from the coronavirus. The company believes that earnings would have been 20 cents higher if it wasn’t for the pandemic; it also lost $181 million in revenue.
"We were on a pace to deliver a strong first quarter above our expectations until the late quarter impact of the COVID-19 pandemic," CEO Gerald Evans Jr. said.
But, operating cash flow actually improved by $100 million in Q1. The company only burned through $84 million in Q1 2020 compared to $194 million in Q1 2019.
HBI is now a Zacks Rank #5 (Strong Sell). Six analysts have cut their full year earnings outlook over the past 60 days, and the consensus estimate has fallen 74 cents from $1.34 to $0.60 a share; earnings are expected to decline almost 66% for the fiscal year.
For nearly all economic sectors, the real damage from the coronavirus is still unclear.
But Hanesbrands has been able to stave off greater losses by switching and making face masks and other protective medical garments.
"We believe our mask and protective garment business could be a sizable revenue opportunity with growth potential over the next several years," he said. The company expects its medical garment business will generate $300 million in sales.
This new business segment could be just the thing to help HBI get through these current shaky economic times.
Visa Inc. has announced that its business started to improve on the back of a spurred spending due to relaxation of shelter-in-place restrictions, which were in effect to limit the spread of the COVID-19 sickness.
For Visa in May, total U.S. payments volume declined 5% year over year, reflecting a 13% improvement over April-level. Debit payments grew 12% while credit payments fell 21% year over year in May, translating to a respective 17% and 9% improvement from the levels registered in April.
The continued distribution of Economic Impact Payments (EIP) and the easing of shelter-in-place rules across a number of states are driving the above-mentioned trends.
The Treasury-sponsored EIP Card is a method to provide money efficiently and securely to eligible recipients and their families. The card contains the money received by Americans, courtesy of the Coronavirus Aid, Relief and Economic Security Act (CARES Act). It is sponsored by the Treasury Department’s Bureau of the Fiscal Service as part of the US Debit Card Program.
More than 140 million of Economic Impact Payments worth $239 billion is already delivered to Americans by direct deposits to accounts at financial institutions, Direct Express card accounts and also through checks. These EIP cards can be utilized for shopping in places where Visa Debit Cards are accepted: in-store, online or over the phone including bill payments..
Reopening of International Markets
Resumption of Economic Activity in Global Markets
International markets are in various phases of reopening and recovery. Visa reported that a rebound in the international markets in which the company carries out its majority transactions lagged the recovery in United States in May.
The spending trends across most parts of Europe as well as Australia, Canada and Japan are comparable to those in the United States. India and Singapore are also gradually limping back to business activities. A few specific markets, such as New Zealand, Denmark and Chile witness constant year-over-year dollar growth in May. Therefore, global processed transactions declined 12% in May, accounting for a 12% improvement over April-levels.
Visa’s cross-border volumes excluding intra-Europe transactions (which perks up its international transaction revenues) plunged 45% in May, bettering 6% from the level recorded in April. Travel-related cross-border volumes (card present and card not present) slumped 78% in May while cross-border e-commerce (excluding travel) volumes made a consistent surge, reflecting a solid upside of 18%.
Progress in Varied Spheres
Spending levels were distinct across different categories. Segments of food, drugstores, home improvement, retail services, automotive retail goods, and telecom and utilities saw a spike in spending.
Meanwhile, spending in business supplies, department stores, education, government healthcare, restaurant and QSR, entertainment fuel and travel remained drab.
Visa Poised to Grow in Contactless Payment Space
The shift to online, cards and mobile mode of payments gained momentum in recent years due to the rapid advancement of technology, which simplifies the task of making payments just at the click of a button. Other companies in the same space, including Mastercard Inc. and American Express Co., are also poised to gain from the fast-evolving payments market.
Visa is poised to cash in on the thriving payments space, given its vast international reach, superior brand value, solid capital position and hefty capital infusion in technology. Recently, the company acquired Plaid, a fintech entity, for a deal value of $5.3 billion. The takeover expands Visa’s addressable market in banking, lending, payments, PFM and business services.
Year to date, this currently Zacks Rank #3 (Hold) stock has gained 4.8% compared with its industry’s growth of 1.84%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
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