For Immediate Release
Chicago, IL – June 8, 2016– Zacks Equity Research highlights Post Holdings (POST) as the Bull of the Day and Abercrombie & Fitch (ANF) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Facebook (NASDAQ:FB) (FB), Alphabet (NASDAQ:GOOGL) (GOOGL) and Amazon (NASDAQ:AMZN) ( AMZN).
Here is a synopsis of all three stocks:
The planning stage of long-term corporate projects is complicated and tends to run into unforeseen difficulties. But when, after many months of planning and preparing, the strategy comes to fruition it is a wonderful thing to witness. This is the case with the Zacks Bull of the Day, Post Holdings (POST). This company, through strategic planning, calculated acquisitions, and cost containment has caused management to increase guidance for fiscal year 2016.
This Zacks Rank #1 (Strong Buy) company is a manufacturer, marketer and distributor of branded ready-to-eat cereals in the United States and Canada. The Company's products are manufactured through a production platform consisting of four owned primary facilities and sold through a variety of channels such as grocery stores, mass merchandisers, club stores, and drug stores. Its portfolio of brands includes diverse offerings such as Honey Bunches of Oats, Pebbles, Post Selects, Great Grains, Spoon Size Shredded Wheat, Post Raisin Bran, Grape-Nuts and Honeycomb. Post Holdings Inc. is based in St. Louis, Missouri.
Strong Q2 16 Earnings Report
In their most recent earnings report Post Holdings almost doubled the Zacks Consensus Earnings Estimate, and handily beat the Zacks Consensus Revenue Estimate. Specifically, the company saw year over year gains in net sales (+20.7%), gross profit (+48.6%), and adjusted EBITDA (+66.1%). Moreover, the company saw gains in net sales in all four divisions; Post Consumer Brands, Michael Foods Group, Active Nutrition, and Private Brands. According to management, “ The sales increase was driven by the fiscal 2015 acquisition of MOM Brands and the fiscal 2016 acquisition of Willamette Egg Farms, as well as organic sales growth .”
Management Raised Guidance for FY 2016
Because of the strong Q2 16 performance management increased their fiscal 2016 Adjusted EBITDA guidance to a range between $893m to $913m, this is up from the previous guidance range of $810m to $840m. Further, according to management, they continue “ to expect to achieve $50 million in run-rate annualized cost synergies within the Post Consumer Brands segment by the end of fiscal year 2016 and also announced an additional $25 million in run-rate annualized cost synergies, which are expected to be achieved by the end of fiscal year 2018 .”
The retail sector has and continues to be extremely competitive and volatile. Specifically, in the apparel segment competition, cost cutting, and lowering headcounts have kept pressure on the sector for quite some time. For example, it was announced yesterday that Ralph Lauren (NYSE:RL) will be shutting down 50 stores and eliminating almost 1,000 jobs. This tough environment is the reason Abercrombie & Fitch ( ANF) is the Zacks Bear of the Day.
This Zacks Rank #5 (Strong Sell) company is principally engaged in the purchase, distribution and sale of men's, women's and kids' casual apparel. The company's retail activities are conducted under the Abercrombie & Fitch and abercrombie trade names through retail stores, a catalogue, a magazine/catalogue and a website, all bearing some form of the company name. Merchandise is targeted to appeal to customers in specialty markets who have distinctive consumer characteristics.
Recent Earnings Results
In their most recent earnings announcement, the company beat the Zacks consensus revenue estimate, but came in way below the Zacks consensus earnings estimate; came in at -$0.16 against the expectation of $0.12. Specifically, comparable same store sales (SSS) saw a -4% decline in both brands and geography. On the international side, comps declined in Asia, and all across Europe. Also, brand net sales fell -5%, and geography net sales fell -5%. Management also saw SG&A expenses increased by 6.4%
According to Arthur Martinez, Executive Chairman, “Our results for the quarter reflect significant traffic headwinds, particularly in international markets and in our U.S. flagship and tourist stores, resulting in negative comparable sales. However, in the face of these headwinds, we were encouraged by our U.S. business, where comparable sales improved in the Hollister brand, and gross margin rate increased meaningfully for both brands. Overall, our business remains well managed in these challenging times, with our assortment and customer-centricity efforts driving improved conversion, and expense and inventory well controlled.
Potential in Second Half of 2016
Currently, management expects to see strength in the second half of 2016. Mr. Martinez commented on the second half stating, “We expect the second quarter to remain challenging, but to see better results in the back half of the year as our assortments continue to improve and we see returns from significant investments in marketing, store management and omnichannel. In addition, with the new brand presidents and other key roles now filled, we have a strong team in place to drive our brands forward and capitalize on the many opportunities we see ahead of us.”
Additional content:
Facebook, Amazon Battle for Live Videogame Streaming
Facebook (FB) and Blizzard have announced the integration of Facebook login and Facebook Live application programming interfaces (APIs) with the game developer’s Battle.net gaming client.
This means that starting later this month, serious gamers who also frequent Facebook can login with Facebook IDs to play Blizzard titles like the new Overwatch and other Battle.net games. What’s more, thanks to the Facebook Live integration, they can broadcast their gameplay live to their followers on Facebook.
If it’s a hit, Facebook might consider extending the time limit from the current 30 minutes allowed per Live stream. At any rate, they can create multiple live streams of 30 minutes each that are displayed on their timelines as videos.
Why’s This Significant?
For one thing, it could make Facebook a hub for sharing live gameplay.
User generated content (and particularly gameplay) has captured people’s imagination in recent times, leading to the popularity of platforms such as Alphabet’s (GOOGL) YouTube and Amazon’s ( AMZN) Twitch. Both of these platforms were acquired by the tech giants in an attempt to monetize through ads and subscriptions.
Google’s ad serving network and Amazon’s retail business were natural supporters of this business. Facebook is just starting out, so it may not generate a lot of revenue right away. But advertisers certainly like its huge user base and professional content creators will appreciate its analytics (Facebook can churn out huge amounts of viewership data based on the user data it accumulates).
Amazon and Google Should Take Notice
Nothing will happen overnight of course, and Facebook may not even try to monetize the product until it has a significant fan following, similar to what it’s done with other products. But if it’s popular, there will definitely be ads and somewhere along the line, professional content along with subscriptions.
So this is just the beginning, we should expect it to disrupt Twitch and YouTube Gaming in the future. The older platforms have a stickier community but this doesn’t mean the companies can just sit back and relax.
Recommendations
Facebook has a Zacks Rank #1 (Strong Buy), while Amazon and Alphabet are ranked #3 (Hold).
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POST HOLDINGS (POST): Free Stock Analysis Report
ABERCROMBIE (ANF): Free Stock Analysis Report
FACEBOOK INC-A (FB): Free Stock Analysis Report
ALPHABET INC-A (GOOGL): Free Stock Analysis Report
AMAZON.COM INC (AMZN): Free Stock Analysis Report
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