For Immediate Release
Chicago, IL – May 31, 2016 – Zacks Equity Research highlights Facebook (NASDAQ:FB) (FB) as the Bull of the Day and Ralph Lauren (NYSE:RL) (RL) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Zoe's Kitchen, Inc. (ZOES), Darden Restaurants (NYSE:DRI), Inc. (DRI) and Habit Restaurants, Inc. (HABT).
Here is a synopsis of all five stocks:
Facebook (FB) looks poised for new highs in June after consolidating under $120 this month following another strong quarterly report.
My colleague Eric Dutram chose FB for his Bull of the Day in early April before the company beat on the top and bottom lines and here's what he observed...
Facebook remains in a class by itself for investors, as it is the only one of the four (FANG stocks) with a strong double digit stock performance (roughly) in Q1, and it is now easily leading the group over the past six months as well.
But some concerns are now starting to appear over FB and their prospects. A few are worried about user post levels and publisher interest in the Instant Article program, and the stock is selling off as a result.
However, are these really reasons to be worried about FB shares, or does this present a great entry point for Facebook ahead of the next leg up? I think that Facebook still represents a great growth story, and if you look to recent estimates and some of its metrics, I think you’ll agree that FB is a buy at these levels.
I agreed with Eric back then and I bought FB shares for my Zacks Follow The Money portfolio right before their April 27 report. I'm glad I did, as that strong quarter and outlook prompted analysts to raise earnings estimates significantly in the past 30 days, moving the full-year 2016 consensus from $2.41 to $2.80, representing 88% EPS growth!
2017 profit projections rose from $3.37 to $3.81, for a very respectable 36% advance in year-over-year growth.
Why Facebook is Must-Own at New Highs
I made a video blog last week titled 3 Stocks You Can Love at New Highs following another blow-out quarter from Ulta Beauty. Facebook joined ULTA as one of the three and here's what I had to say...
This story can be summed up fairly easy: Facebook is must-own for all kinds and sizes of fund managers because it has access to potentially billions of customers who use its platform every day and it is making significant progress on monetizing those eyeballs and clicks with mobile advertising and other initiatives.
I first wrote about Ralph Lauren (RL) as the Bear of the Day almost 2 years ago in June of 2014 as its declining earnings momentum earned it a spot in the cellar of the Zacks Rank.
Since then, the stock completed a multi-year head-and-shoulders top in December of 2014 just below $190 and has proceeded to trend down, severely underperforming the stock market and other apparel companies.
RL shares have spent the past few months bouncing off of 5-year lows in the low $80s. Here's what I wrote two years ago about the warnings before this collapse, as I observed a decline from $190 to $150 over a year period from the middle of 2013...
The steady decline in shares of Ralph Lauren has had a single, constant precedent in 2014: steadily declining EPS estimates. Followers of the Zacks Rank know this because the stock has earned either a #4 Sell or #5 Strong Sell Rank consistently all year.
I doubt that RL branded fashion has lost much appeal among its affluent devotees. But maybe some competition from Michael Kors has nibbled away at the franchise.
Earnings Trend Dictates Price Trend
This is a perfect example of why it's so important to use the Zacks Rank to identify earnings momentum of both good stocks and bad ones.
Additional content:
Zoe’s Kitchen (ZOES) Q1 Earnings: Surprise in Store?
Zoe's Kitchen, Inc. (ZOES) is set to report first-quarter 2016 results on May 31, after the market closes. Last quarter, it posted a positive earnings surprise of 50%, bringing the trailing four-quarter average to 97.92%. Let’s see how things are shaping up for this announcement.
Factors to Consider
Zoe's Kitchen began trading in Apr 2014. This fast casual restaurant specializing in Mediterranean cuisine has posted better-than-expected revenues and earnings in all the four quarters reported so far.
Comps improved in all the previous quarters backed by improved traffic and an increase in product mix. We expect the trend to continue in the to-be-reported quarter as well, given the company’s efforts to develop new menu items and marketing and promotional campaigns to promote these items.
Further, Zoe's Kitchen’s various cost savings initiatives, including savings in food costs through waste reduction, efficiency initiatives in supply chain and lowering labor costs, are likely to boost first-quarter earnings.
However, challenges persist in the restaurant industry. Like other food chains, increasing labor costs remain a concern for Zoe’s Kitchen too. These factors are likely to have an impact on the first quarter results.
Earnings Whispers
Our proven model does not conclusively show that Zoe's Kitchen is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 4 cents. Hence, the difference is 0.00%.
Zacks Rank: Zoe's Kitchen’s Zacks Rank #3 (Hold) increases the predictive power of the ESP. However, we need a positive ESP to be confident of an earnings surprise.
Note that the Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
Stocks to Consider
Some stocks in the broader retail sector that have both a positive Earnings ESP and a favorable Zacks Rank are:
Darden Restaurants, Inc. (DRI), with an Earnings ESP of +0.93% and a Zacks Rank #3.
The Habit Restaurants, Inc. (HABT), with an Earnings ESP of +10.00% and a Zacks Rank #3.
About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
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FACEBOOK INC-A (FB): Free Stock Analysis Report
RALPH LAUREN CP (RL): Free Stock Analysis Report
ZOES KITCHEN (ZOES): Free Stock Analysis Report
DARDEN RESTRNT (DRI): Free Stock Analysis Report
HABIT RESTRNTS (HABT): Free Stock Analysis Report
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