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Ralph Lauren, J.B. Hunt Transport, Walmart, Amazon and Target highlighted as Zacks Bull and Bear of the Day

Zacks Equity Research

For Immediate Release

Chicago, IL – February 14, 2020 – Zacks Equity Research Shares of Ralph Lauren RL as the Bull of the Day, J.B. Hunt Transport JBHT asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Walmart WMT, Amazon AMZN and Target TGT.

Here is a synopsis of all five stocks:

Bull of the Day:

Ralph Lauren is a Zacks Rank #1 (Strong Buy) that is a major designer, marketer and distributor of premium lifestyle brands. The company offers products in the apparel, footwear, accessories, home furnishings, and other licensed product categories. Some popular brands include Polo, Purple Label, Polo Golf, Ralph Lauren Children.

Impressive Q3 Earnings Help Stock Jump 10%

Earlier this month, the company reported a 17% EPS surprise to the upside. The stock popped from $113 to $129 on premarket trading before pulling back to the $120 level. The reason for the move higher was a both top and bottom line beat, along with positive guidance. Revenues came in at $1.75 Billion vs the $1.71 expected. Along with the revenue beat, the company guided Same Store Sales up 2% and Q4 revenue up slightly.

The EPS beat is normal for the Ralph Lauren, but the magnitude was much higher than the company has been seeing. For that reason, investors cheered the quarter and have been buying the stock.

CEO Patrice Louvet had some positive comments on the quarter: "We continue to make strong progress on our Next Great Chapter plan amid a volatile backdrop, with third quarter results ahead of our overall expectations, including better than expected revenues, operating margin, and double-digit EPS growth."

Piper had positive comments after earnings, saying that while traffic remains challenging, AUR strength, digital ecosystem improvement and GM upside delivery are positives. Since earnings, the stock has also seen positive comments from Citigroup and Telsey Advisory Group, with the later giving the stock a $140 price target.

Overall, analyst estimates have gone higher for the current year, despite fears surrounding the trade war and the Coronavirus. Analyst have lifted the current years expectations 5.5%, from $7.69 to $8.12 over the last 30 days. Moreover, 2021 estimates have gone up 5% over that same time period.

Shares of Ralph Lauren are up almost 50% from the lows made in August of 2018. While the recent improvement in the business might be priced in, there is reason to believe that the stock can continue higher. The $120 level has been resistance since last summer and with the stock above that level, a breakout could come. There is still a long way to go to get to all-time highs of $192, but with the recent earnings improvement the stock has bulls watching closely.

Is Coronavirus a Risk?

The company is exposed to China so there is a valid concern that future manufacturing and revenues could be hurt. The company was out this week to give some color on the issue announcing that 2/3rds of the company’s stores have closed. They also stated that $55- $470 million in sales could be negatively impacted. With almost $2 Billion in sales, the longer it lasts the worse it will be. However, considering the slowing of the virus recently, this is perceived as a small risk at the moment.

In Summary

Over the last few years, investors have avoided retail in every form. However, there are pockets that are succeeding because of positive earnings numbers stemming from great management. Ralph Lauren looks poised to finally break out of its multi-year rut and head higher.

Bear of the Day:

J.B. Hunt Transport is a Zacks Rank #5 (Strong Sell) that is a provider of transportation services in the United States, Canada and Mexico. The Arkansas based company operates in four segments, which give it some diversification. This has helped the stock hold up despite tough times in the logistics business. However, earnings and analyst outlooks do not look good going forward.  

Big Miss on Q4

The company reported in January, seeing an 11% miss on earnings. While the stock dropped initially, the company raised its dividend 3.8%, bringing in some buyers. Since EPS, the stock has remained at pre-earnings levels, despite a negative atmosphere in the industry.

Shares of JBHT are up over 30% from April of last year. But with falling estimates, investors have to be asking themselves why they would hold going forward.

Over the last 30 days, analysts have dropped their current year estimates from $5.90 to $5.64, or 4.4%. The current quarter is even more concerning, with estimates falling 9% in the same timeframe. If the trend continues and the trucking market doesn’t turn around, it could be tough times for J.B. Hunt investors.

Trucking Recession

Despite the booming economy, trucking is still struggling. The Cass Index, which measures monthly freight expenditures and volumes, was down 6.4% quarter over quarter in January and 7.9% year over year. China being offline due to the trade war is one reason, but the abnormal market is hitting logistic companies hard. The trucking segment from JB was down 20% year over year.

Looking forward, the shutdown in China due to the Coronavirus might hurt short-term as certain parts of China continues to be shutdown. While longer-term J.B. Hunt might come out a winner, investors should avoid the long side for now.

In Summary

J.B Hunt has held up well, while other logistics companies have seen falling stock prices. Investors should be avoid J.B. Hunt in 2020, or until trucking sees some positive momentum.

Additional content:

Is Sluggish Walmart (WMT) a Buy Ahead of Earnings?

Walmart shares have lagged the market in the last three months, down 4% against the S&P 500’s 9% climb. So, is it time to buy WMT stock with the retailer set to report its Q4 financial results before the market opens on Tuesday, February 18?

Walmart’s E-Commerce Push

The explosion of e-commerce has fueled the narrative around retail for years. And while Amazon has driven many stores out of business, Walmart and fellow giants such as Target have seriously beefed up their digital commerce offerings.

Walmart has expanded its e-commerce business and rolled out multiple delivery and curbside pickup offerings to meet growing consumer demand. Walmart closed the third quarter with more than 3,000 grocery pickup locations in the U.S. and over 1,400 same-day grocery delivery locations. The firm even launched its new “InHome Delivery” offering in three markets.

These initiatives helped the Bentonville, Arkansas-based company’s U.S. e-commerce sales soar 41%—which came on top of the year-ago period’s 43% e-commerce growth. Online grocery helped boost Walmart’s e-commerce growth and overall U.S. comp sales popped 3.2%. This pushed WMT’s streak to five years of quarterly sales gains.

On top of that, Walmart has now owned Flipkart, which is one of India’s largest e-commerce sites, for over a year. WMT has also purchased smaller digital-heavy retailers and niche higher-end companies such as Jet.com and Bonobos.

Other Fundamentals 

The phase-one trade deal between the U.S. and China earlier this year helped ease some worries. And Wall Street appears to have shaken off coronavirus fears with the Dow, the S&P 500, and the Nasdaq all at new highs, driven by better-than-expected earnings results from giants like Amazon.

Last Friday’s jobs report was also strong and U.S. unemployment remains near 50-year lows. Looking back to the holiday season, which is key for Walmart, the National Retail Federation said that retail sales climbed 4.1%.

The nearby chart shows us that WMT stock is up 35% in the last five years to top its industry’s 24% climb. The last three years have been even better, with Walmart up 71%, against its industry’s 35% and the S&P’s 45%.

As we mentioned at the top, Walmart stock is down over 4% in the last three months and is flat in the past month. WMT closed regular trading Wednesday at $115.85 a share, down roughly 8% from its 52-week highs.

This could give the stock some room to run as it rests below its 50-day moving average. The retailer also currently pays an annualized dividend of $2.12 per share, for a 1.84% yield, which tops the 10-year U.S. Treasury’s current 1.63%.

Outlook

Looking ahead, our current Zacks estimates call for Walmart’s Q4 fiscal 2020 revenue to jump 2.7% to $142.48 billion. This would beat last quarter’s 2.5% and come on top of Q4 FY19’s 1.9% revenue growth.

WMT’s fiscal 2020 sales are projected to climb 2.2% higher, with 2021 expected to climb over 3.1% to $541.59 billion. These would both compare relatively well against 2019’s 2.8% and 2018’s 3% revenue expansion.

More specifically, Walmart’s quarterly same-store sales are expected to pop 2.6%. This would fall short of Q3’s 3.2% growth but it comes against the year-ago period’s harder to compare 4.2% comps jump. And its fiscal 2020 U.S. comp sales are expected to climb 3%, after they popped 3.6% last year.

Meanwhile, Walmart’s adjusted quarterly earnings are projected to climb 2.1% to $1.44 per share. The company’s fiscal-year EPS figure is set to pop 1.4%, with 2021 earnings expected to jump 4.4% higher.

Bottom Line

Walmart is currently a Zacks Rank #3 (Hold) and its valuation picture is somewhat stretched. And playing stocks around earnings can be risky.

With that said, Walmart does appear ready to grow in the e-commerce age and it is likely due for a comeback sometime soon.

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Click to get this free report Target Corporation (TGT) : Free Stock Analysis Report Amazon.com, Inc. (AMZN) : Free Stock Analysis Report Walmart Inc. (WMT) : Free Stock Analysis Report Ralph Lauren Corporation (RL) : Free Stock Analysis Report J.B. Hunt Transport Services, Inc. (JBHT) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research