For Immediate Release
Chicago, IL – October 11, 2016 – Zacks Equity Research highlights J.C. Penney Company, Inc. (NYSE:JCP- Free Report) as the Bull of the Day and SONIC Corporation (NASDAQ:SONC- Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on BHP Billiton (LON:BLT) (NYSE:BHP-Free Report),Wellcare Heath (NYSE:WCG-Free Report) andST Microelectronics (NYSE:STM- Free Report).
Here is a synopsis of all the five stocks:
J.C. Penney Company, Inc. (NYSE:JCP- Free Report) isn't dead yet. This Zacks Rank #1 (Strong Buy) has completely turned itself around and is expected to be profitable this year and next.
J. C. Penny is one of the oldest apparel and home furnishing retailers in the United States, operating over 1,000 store locations in the U.S. and Puerto Rico and its online website.
4 Big Beats in a Row
Last year, Wall Street left J.C. Penney for dead as earnings and revenue spiraled lower, pushed by the relentless attacks on the old model department store.
It looked like the retailer was going to go the way of Montgomery Ward.
But the company got a new CEO in 2015 in Marvin Ellison. He had been at Home Depot (NYSE:HD) and brought Home Depot's sensibility over to the clothing retailer.
It looks to be working. J.C. Penney has beat the street 4 quarters in a row.
It's second quarter beat was by $0.10, as the company reported a loss of $0.05 versus the Zacks Consensus of $0.15.
Comparable store sales rose 2.2% as its top selling divisions were beauty and cosmetics company Sephora, Home and Footwear and Handbags.
Geographically, the Ohio Valley and the Pacific were the two best performing regions.
Beauty and Appliances
Its alliance with Sephora continues to give the stores a big boost. It will be rolling out more in-store Sephora locations over the next few years.
It also recently started an aggressive national advertising campaign touting its appliances. It will roll out appliance sales in 500 stores and on jcp.com.
To compete with online retailers, it is also rolling out same day in-store pickup.
Earnings Estimates Rise
In August, J.C. Penney reaffirmed its full year guidance which included comparable store sales of 3% to 4%.
It also presented its 3-year strategy for growth which included annual compounded comparable sales growth of 3%.
The analysts liked what they heard as 10 estimates were raised for fiscal 2016 in the last 2 months. 1 analyst recently lowered estimates however.
Still, the analysts believe J.C. Penney will return to profitability this year. The fiscal 2016 Zacks Consensus Estimate jumped to $0.16 from $0.05 in that time period.
The company lost $1.03 last year so that is earnings growth of 115%.
Analysts are also bullish about fiscal 2017. The 2017 Zacks Consensus Estimate has jumped to $0.72 from $0.69 in the last 30 days.
That's earnings growth of 345%.
The CEO Dives In and Buys More Shares
It's not just the analysts who are buying into the turnaround story.
The new CEO has bought shares twice in 2016. His first open market purchase was in march 2016 when he bought 50,000 shares.
He recently bought another 50,000 shares on August 25, 2016.
He has over 2.5 million shares and gets awards from the company. When an insider buys more shares using their own cash it sends a bullish signal.
Many buy because they believe the shares are likely to go higher.
Are Shares Cheap?
Share sold off to multi-year lows in recent years on the belief that the company may not survive.
They haven't recovered much and have yet to break out to even a 2-year high.
SONIC Corporation (NASDAQ:SONC- Free Report) had been crushing it in the burger wars for several years. But this Zacks Rank #5 (Strong Sell) just warned about its fourth quarter results.
Are burgers going out of favor in America?
Sonic is America's largest drive-in restaurant chain with 3500 locations. For over 60 years it has served customers and now sees about 3 million customers a day.
Warned on the Fourth Quarter
On Sep 27, Sonic issued preliminary results for its fiscal fourth quarter which ended Aug 31 and it wasn't good.
Same store sales fell 2% with a decrease of 3% at company owned drive-ins and 1.8% at franchise drive-ins.
The disappointing sales was the result of lower-than-expected traffic, as consumers spent less eating out, and aggressive competition in the burger industry. There are a LOT of burger chains now, all competing for the same dollars.
Still, the company continues to expand. It opened 53 new drive-ins in fiscal 2016.
Estimates Cut
The analysts didn't like what they heard as 8 estimates were cut for fiscal 2016 and 8 were also cut for next year.
The fiscal 2016 Zacks Consensus Estimate fell to $1.29 from $1.33. that's still earnings growth of 17.4% compared to the prior year.
The fiscal 2017 Zacks Consensus Estimate fell $0.10 to $1.41 from $1.51. While you never want to see estimate cuts, it still results in 2017 earnings growth of 9.4%.
Additional content:
When Rich Nation Growth Stagnates: Zacks Market Strategy
The latest Zacks Market Strategy report holds two provocative insights hailing from advanced (translation:rich) countries. First, rich nations other than the USA struggle to build any real GDP growth momentum. Second, their consumer price inflation looks subdued vis-à-vis the USA, too.
U.K. in Denial About Looming Brexit GDP Weakness
Let’s start with the latest news from the U.K. Frosh U.K. Prime Minister Theresa May now says Brexit begins by the end of March 2017.
According to comments published in the Financial Times, whichever way you look at it, things aren’t pretty for the U.K. pound. And the U.K. pound has already hit lows last seen in 1985.
A number of major FX strategists expect things to get messier still—
With a -6% flash crash in hand, I can’t say I disagree with what was written by these pessimistic FX strategists. The U.K. pound is headed lower. But the export sensitivity of U.K. FTSE stocks keeps the share markets there headed higher – for now.
When we see U.K. stocks crash, due to U.K. macroeconomic weakness showing up, then the political tone may well change.
The narrative away from the USA interested me this month, as I looked further into the matter of advanced nation GDP growth stagnation. Check out this writing from USA economists on the West Coast…
Output Growth in Advanced Countries STAGNANT — San Fran Fed
“In particular, [San Fran Fed economists say] output growth in other advanced economies, such as the Euro area and Japan, has been relatively stagnant since the global financial crisis. Foreign inflation has also been subdued in comparison with the United States.
“These differences in economic performance have resulted in diverging monetary policy stances. The United States has begun to normalize its monetary policy and is expected to tighten it more in the future.
“In contrast, the European Central Bank and the Bank of Japan have eased monetary policy further—through more negative rates on reserve deposits and greater quantitative easing—and both central banks are expected to stay very accommodative in the near term.
“This divergence in policy paths has increased demand for U.S. assets by foreign investors seeking higher returns, and further pushed U.S. long-term interest rates down.”
GDPNow Has USA GDP Growth at +2.2% in Q3
The USA is staying only a small step ahead of advanced country GDP growth doldrums, with +2.2% GDP growth forecast for Q3-16. But USA consumer spending is holding up much better. According to the Atlanta Fed’s GDPNow growth tracker on Oct. 5th, third quarter real consumer spending was +2.7% y/y.
On that relatively upbeat note, I found the Zacks Industry Ranks to show lots of medium upgrades -- and no real loser sectors this month.
Zacks Sector/Industry/Company Telescope – USA Consumer Is Lively
(1) Materials rise to Very Attractive this month. Big winners are Paper, Metals Non-Ferrous, Building Products-Construction Materials, and Containers & Glass.
Zacks #1 (STRONG BUY) Company: BHP Billiton (NYSE:BHP- Free Report)
BHP Billiton is a leader in the global natural resources industry. The Group has high-value and industry-leading positions in aluminum, metallurgical coal, thermal coal, copper, ferro-alloys, iron ore and titanium minerals and also has substantial interests in oil, gas, nickel, diamonds and silver.
(2) Health Care remains at Attractive. The Medical Care industry leads.
Zacks #1 (STRONG BUY) Company: Wellcare Heath (NYSE:WCG- Free Report)
WellCare Health Plans, Inc. provides managed care services targeted exclusively to government-sponsored healthcare programs, focusing on Medicaid and Medicare. WellCare provides high-quality, affordable healthcare services to members in Florida, New York, Connecticut, Illinois and Indiana.
(3) Info Tech stays at Attractive. Big industry winners are the usual Semiconductors and Misc. Tech.
Zacks #2 (BUY) Company: ST Microelectronics (NYSE:STM- Free Report)
STMicroelectronics is a global independent semiconductor company which designs, develops, manufactures and markets a broad range of semiconductor integrated circuits and discrete devices used in a wide variety of microelectronic applications, including telecommunications systems, computer systems, consumer products, automotive products and industrial automation and control systems.
(4) Financials rise to Attractive from Unattractive. Big winners are Investment Funds and Real Estate. Banks cluster around Market Weight.
(5) Consumer Staples is an Attractive sector, rising from Unattractive last month. Big winners are Food and Beverages at Very Attractive.
(6) Consumer Discretionary moves up to Market Weight from an Unattractive rating last month. Big winners are Consumer Electronics and Other Cons. Disc. at Very Attractive now.
(7) Energy remains at a Market Weight. There is a full cluster at the center. Range-bound.
(8) Industrials are a Market Weight. The leader is Metal Fabricating. Conglomerate and Airlines are at the back.
(9) Telcos are at Market Weight.
(10) Utilities are at Market Weight.
This is an excerpt from Zacks Strategist John Blank’s latest Monthly Market Strategy report. To view the whole PDF, click here>>
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PENNEY (JC) INC (JCP): Free Stock Analysis Report
SONIC CORP (SONC): Free Stock Analysis Report
BHP BILLITN LTD (BHP): Free Stock Analysis Report
WELLCARE HEALTH (WCG): Free Stock Analysis Report
STMICROELECTRON (STM): Free Stock Analysis Report
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