For Immediate Release
Chicago, IL – July 1, 2020 – Zacks Equity Research Shares of Ollie’s Bargain Outlet OLLI as the Bull of the Day, Designer Brands Inc. DBI asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on AbbVie ABBV, Microsoft MSFT and Lockheed Martin LMT.
Here is a synopsis of all five stocks:
Bull of the Day:
Based in Harrisburg, PA, Ollie’s Bargain Outlet is a popular discount retailer that sells a wide range of products under the Ollie’s, Ollie’s Army, and Good Stuff Cheap, among others. As of this past May, the company operates 360 outlets in 25 states.
Q1 Earnings Better-Than-Expected
Revenue grew 7.5% year-over-year to $349.4 million, while adjusted earnings per share increased 6.5% to 49 cents a share.
Even though comparable-store sales declined 3.3%, it was much better than the 8.5% decrease expected by analysts.
Adjusted EBITDA climbed 6.6% to $49.1 million and operating income increased 5.4% to $43 million.
Looking at store count, Ollie’s opened 17 new stores and closed two locations; store count jumped 11.1% compared to the prior year period.
President and CEO John Swygert said the company “saw comparable sales turn positive following steep declines mid-quarter, coinciding with the arrival of stimulus checks in addition to our communications to customers that we remain open and have great deals on items they need. The inflection in our comp trend clearly demonstrates our ability to pivot quickly and respond to changing customer demands.”
OLLI Is Rallying
Year-to-date, shares of OLLI are up about 48% compared to the S&P 500’s 4.6% decline. Earnings estimates have been rising too, and Ollie’s is a Zacks Rank #1 (Strong Buy) right now.
For the current fiscal year, six analysts have revised their bottom-line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up 35 cents to $2.24 per share; earnings are expected to increase 14.3% compared to the prior year period. 2021 looks strong as well, and earnings are expected to continue double-digit year-over-year growth.
Because Ollie’s sells essential and discretionary items, it’s a company that can benefit in a recessionary and volatile market environment. Consumers, especially the many that are still laid off or furloughed, are looking to stretch their dollars further, and a business like Ollie’s can be especially helpful in these times.
If you’re an investor searching for a retail stock to add to your portfolio, make sure to keep OLLI on your shortlist.
Bear of the Day:
Formerly known as Designer Shoe Warehouse (DSW), Designer Brands Inc. is a retailer that offers brand-name and designer shoes and accessories for men and women; customers can find dress, casual, and athletic footwear, as well as handbags and luggage. DBI is headquartered in Columbus, Ohio.
Shares Slump After Disappointing Earnings
The DSW parent reported an adjusted loss of $1.83 per share, missing consensus estimates of a loss of $0.74. Total revenue fell 44.7% year-over-year to $482.8 million
Comparable sales plunged 42% compared to a 3% increase in the first quarter of 2019
Gross profit fell to a loss of $26.5 million, primarily driven by an increase in inventory markdown activity and higher shopping costs associated with DBI’s online business.
But, one bright spot was Designer Brands’ digital infrastructure in the quarter; online sales accounted for half of total sales demand and grew 25% over last year.
CEO Roger Rawlins said in the earnings release that “the effect of COVID-19 on our industry has been unprecedented and has created many significant near-term challenges. The pandemic necessitated store closures and heavily impacted consumers.”
Shares of the footwear retailer are down about 57% since January, and slumped over 4% the day of its earnings release. The S&P 500, on the other hand, has been rebounding since its March lows, only down 4% year-to-date.
DBI is now a Zacks Rank #5 (Strong Sell).
Four analysts have cut their full year earnings outlook over the past 60 days, and the consensus estimate has fallen well over two dollars to a loss of $2.45 per share; earnings are expected to see a triple-digit decline for the fiscal year, though the bottom line should rebound in the next year.
The company did not provide guidance for the current quarter and fiscal year, following in the footsteps of many other retailers.
Going forward, management will focus on its top footwear brands, but until the underlying uncertainty from the pandemic eases, it may be a rocky ride for Designer Brands for a little while longer.
3 Dividend Stocks to Buy for 2H 2020
Stocks climbed in morning trading on the last day of the second quarter to finish off what has been a wild three-month stretch for the market. The tech-heavy Nasdaq has returned to new highs and the S&P 500 has come somewhat near its pre-coronavirus levels. Despite the impressive run for the market, fears about spikes in Covid-19 cases in parts of the U.S. have some on Wall Street nervous.
Politicians in states such as California, Texas, Arizona, and elsewhere have reversed some reopening plans, as Disney postpones the reopening of its California park and Apple shuts down more stores. That said, stocks surged Monday on the back of better-than-expected pending home sales, which helped highlight May’s economic comeback from what appears to be rock-bottom in April.
The Dow, the S&P 500, and the Nasdaq are all finishing up their best quarter in years, but June marked a major slowdown and a return to some volatility. In fact, the S&P 500 has moved almost completely sideways in June but is still up over 37% since March 23.
It’s unclear where the market will go if the coronavirus spikes and constant negative headlines continue. However, the political will for a second broad-based lockdown likely isn’t there unless things get far worse. Plus, Wall Street is ready to remain in don’t fight the Fed mode.
With all this in mind, let’s dive into three stocks with solid dividend yields that appear ready to continue to weather the coronavirus economic downturn in the second half of 2020…
AbbVie’s portfolio features one of the world’s top-selling drugs, Humira. The company’s patent protections for Humira are running out outside of the U.S., even though biosimilars won’t hit the U.S. for at least a few years. The pharmaceutical giant has seen this coming and prepared for the future and it officially completed in early May its $63 billion acquisition of Allergan plc. Wall Street has seemed pleased with the Allergan deal that adds Botox and other popular beauty-focused drugs to its expanding roster.
AbbVie’s therapeutics span a wide variety of illnesses and its R&D pipeline is strong. ABBV shares have surged 50% from the market’s March 23 lows to outpace its industry’s 29%. The stock is now up 30% in the past 12 months to crush the Drug Market’s 4% expansion. Luckily for investors, AbbVie still rests 15% below its early 2018 highs and it trades right in-line with its highly-ranked industry’s average. ABBV sports an “A” grade for Value and a “B” for Growth in our Style Scores system.
AbbVie’s 4.87% dividend yield blows away its industry’s 2.89% average, as well as Pfizer’s 4.70%, Merck’s 3.18%, and Eli Lilly’s 1.82%. Peeking ahead, our Zacks estimates call for AbbVie’s revenue to surge 36.5% in FY20 and another 17.5% in FY21, driven in part by its Allergan deal. Plus, ABBV’s adjusted FY20 earnings are projected to jump 18% and another 14.2% higher next year. And AbbVie’s positive earnings revisions help it hold a Zacks Rank #2 (Buy) right now.
Microsoft appears to be a relatively straightforward choice for the second half of 2020 and beyond even compared to other tech giants such as Apple and Amazon. MSFT has outgained all of the FAANG stocks over the last two years, up 100% and it sits just off its new all-time highs. The company’s expansion into cloud computing has driven its impressive run over the last several years and it’s also what makes it somewhat immune to the coronavirus economic downturn. The firm’s Intelligent Cloud revenue jumped 27% for the second period in a row last quarter and it pulled in the most of its three units in Q3 FY20.
MSFT’s cloud business is poised to expand within the booming market. Meanwhile, the historic tech firm’s Office-heavy Productivity and Business Processes segments continue to grow and its Office 365 suite remains vital to businesses, governments, schools, and consumers. Plus, its Teams platform has grabbed the stay-at-home spotlight alongside the likes Zoom. And its consumer electronics and video gaming units present longer-term opportunities as well.
Looking ahead, MSFT’s revenue is projected to jump 12.5% in FY20 and another 10% next year. Microsoft is set to grow during these uncertain times and is positioned to weather nearly any economic storm, as it held over $137 billion in cash and equivalents at the end of last quarter. It has also bought back a ton of stock and it continues to up its dividend, with its current 1.01% yield topping the 10-year U.S. Treasury’s 0.65% and Apple’s 0.90%. Microsoft is currently a Zacks Rank #3 (Hold) that sports a “B” grade for Growth.
Lockheed is a global aerospace powerhouse that largely maintained its fiscal 2020 guidance last quarter despite the broader economic downturn and unknowns. LMT is one of the world’s biggest defense contractors and is ready to benefit from Pentagon spending for years to come. The stock is up 31% in the last three years to top its peer group’s 16% decline, weighed down by Boeing’s recent setbacks.
LMT also trades at a discount compared to its Aerospace – Defense industry’s average, which helps it earn a “B” grade for Value. Lockheed also rocks an “A” grade for Growth, with its revenue projected to climb 6.2% this year and another 5.2% in the following year. This growth would compare favorably to its 2018 and 2017 top-line expansion. Meanwhile, its adjusted fiscal 2020 EPS figure is expected to jump by 9.6%, with FY21 set to come nearly 11% higher.
Lockheed is currently a Zacks Rank #2 (Buy) with a 2.63% dividend yield that easily tops its industry’s 0.88% average, as well as Northrop Grumman’s 1.89%. The stock currently rests 18% off its 52-week highs, which could give it room to run in the second half of 2020. And Lockheed is less impacted by near-term economic worries and largely immune from consumer spending concerns.
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>>
Zacks Investment Research
800-767-3771 ext. 9339
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/performancefor information about the performance numbers displayed in this press release.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
Lockheed Martin Corporation (LMT) : Free Stock Analysis Report
AbbVie Inc. (ABBV) : Free Stock Analysis Report
Ollies Bargain Outlet Holdings, Inc. (OLLI) : Free Stock Analysis Report
Designer Brands Inc. (DBI) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research