For Immediate Release
Chicago, IL – November 28, 2017 – Zacks Equity Research highlights SMART Global Holdings (NASDAQ:SGH) as the Bull of the Day and Signet Jewelers (NYSE:SIG) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Meredith (NYSE:MDP) and Time Inc. (NYSE:TIME) .
Here is a synopsis of all four stocks:
SMART Global Holdingsis a $788 million manufacturer of specialty semiconductor memory solutions, including DRAM and flash products. They are also a leading global provider of electronic components supply chain services for major OEMs.
The company is also the largest in-country manufacturer of memory for smartphones, PCs, and servers in Brazil.
In the midst of its fiscal 2018 first quarter, SMART delivered an earnings pre-announcement on November 15 where management raised their Q1 adjusted EPS view to 90-93 cents from 79-83 cents vs the Zacks Consensus of 82 cents. The revenue outlook was also boosted to $250-$260 million from $225-$240 million, vs the consensus $233 million. Here's what the CEO had to say...
"SMART's progress reinforces our confidence in our strategies," commented Iain MacKenzie, President and Chief Executive Officer of SMART Global Holdings. "We completed fiscal 2017 with significant momentum which has continued through the first two months of our first quarter of fiscal 2018."
"As we benefit from the improving economy and the introduction of new higher density products in SMART Brazil, we currently expect that our second quarter of fiscal 2018 will be similar to the updated results that are provided below for the first quarter which will demonstrate strong year-over-year growth for our second quarter of fiscal 2018," added Mr. MacKenzie.
Wall Street analysts responded with a 21% boost to the current fiscal year EPS consensus and a 18% bump to the following year. Even with the stock's 25% surge this month, these EPS estimate hikes keep the stock trading under 10X next year's projected $4+.
The Little 'Ole Success Story You Never Heard Of
Even though they've been in business for 30 years, SMART just IPO'd in May at $12. And given its growth trajectory, that was an unbelievable steal.
For FY2018 (ending next August), SGH is expected to grow the topline 38% to $1.05 billion from FY2017 sales of $761 million. That gives the stock a very attractive Price-to-Sales ratio of 0.75.
Part of the big revenue growth is all about Brazil right now as their economy recovers and consumer demand for digital electronics picks up.
But the company also has manufacturing locations in a half-dozen other cities around the globe. Founded in 1988 as Smart Modular Technologies, SGH corporate headquarters are in Newark, California and the company employs over 1,100 people.
The company now exists as a holding company for various subsidiaries across its world-wide memory manufacturing and supply chain services.
There is an R&D center in Tewksbury, MA and a European Planning & Sales Center in East Kilbride, Scotland. There are sales centers in Hong Kong and Singapore and an Advanced Package Engineering and R&D center in South Korea.
From these locations, SMART serves a rich list of industries and applications, including automotive, communications, computing, defense, gaming, industrial, and the cloud.
Signet Jewelersreported mixed results in the company's Q3 fiscal 2018 as earnings came in line with the Zacks Consensus Estimate and revenues actually surpassed the same.
But, the company's guidance was not, as if some diamond, to die for. Signet, which recently concluded the first phase of outsourcing of its credit portfolio to Alliance Data Systems (NYSE:ADS) as well as Genesis Financial Solutions, faced glitches in the credit transition process. The problem is likely to persist in the final quarter.
Consequently, the company trimmed fiscal 2018 guidance. The company forecasted EPS in the range of $6.10-$6.50, sharply down from the prior guidance of $7.16-$7.56.
Moreover, same store sales are anticipated to decline by mid-single digits, compared with the prior estimate of down low to mid-single digits.
After a slight recovery from a 2-year downtrend in sales and share prices, SIG had climbed back to $70 only to gap down dramatically below $50 on this report.
Segment Details
Sales at the Sterling Jewelers Division dipped 1.9% to $698.7 million. Same store sales were down 6.2%, reflecting a decline of 7.6% in the number of transactions but an increase of 1.6% in average transaction value.
Sales at the Zale Division edged down 3.6% to $323.6 million. Same store sales decreased 2.5%, reflecting a slump in the number of transactions by 6.9%. However, average transaction value rose by 2.5%. Same store sales for Piercing Pagoda's jumped 2.1% and sales increased 3.7% to $55.4 million.
Sales at the UK Jewelry Division dropped 1.5% to $128.4 million. Same store sales fell 5.1%, reflecting a decline of 12.9% in the number of transactions but an increase of 8.3% in average transaction value.
Analysts Downgrade the Outlook on Subprime Diamond Customers
Since the company's report last week, analysts have not only adjusted their current fiscal year EPS targets lower, but next year's estimates have dropped over 10% from $7.51 to $6.74.
Telsey Advisory Group, the boutique research firm focused on the retail sector, lowered their price target from $83 to $60.
Bank of America (NYSE:BAC) lowered their PT to $66.
And Wells Fargo (NYSE:WFC) analysts reportedly summed up the sentiment with this observation: "No Credit, No Problem... is Becoming a Problem"
Signet may have a shining future ahead, but until the earnings estimates stop going down and start heading back up, you should probably look elsewhere in retail. The Zacks Rank will let you know.
Additional content:
Meredith & Time Stocks Soar After Merger Announcement
Shares of Meredith and Time Inc. surged on Monday morning following an official announcement that Meredith agreed to purchase the publisher of Time and People.
Meredith, the media company that owns magazine publications such as Better Homes & Gardens and Family Circle, announced on Sunday that it reached a “binding agreement to acquire all outstanding shares of Time Inc.”
Meredith agreed to purchase shares of Time for $18.50 per share, which marks a roughly a 9.5% premium compared to Friday's closing price. The all-cash deal—including the assumption of Time’s debt—is valued at $2.8 billion, according to company statements. An influx of $650 million in financial backing from Koch Equity Development helped push the merger through.
Both companies’ boards unanimously approved the deal that is expected to close in about 60 days.
Talks of a Meredith and Time deal first popped up in 2013. Merger negations also fell apart earlier this year. However, two weeks ago, reports began to surface that the Koch brothers would try to help Meredith buy Time. This news helped renew many Time investors’ hopes that a buyout might finally happen.
Time has struggled recently and changed some of its business practices in order to cope with the downturn. The company is set to cut down the number of print issues of the once-weekly Sports Illustrated to 27 in 2018, after limiting the historic sports publication to 38 in 2017.
The publisher of Time also made an aggressive shift to video, and even recently announced its second streaming television channel, “Sports Illustrated TV.”
"We are creating a premier media company serving nearly 200 million American consumers across industry-leading digital, television, print, video, mobile, and social platforms positioned for growth," Meredith CEO Stephen Lacy said in a statement.
"We are adding the rich content-creation capabilities of some of the media industry's strongest national brands to a powerful local television business that is generating record earnings, offering advertisers and marketers unparalleled reach to American adults. We are also creating a powerful digital media business with 170 million monthly unique visitors in the U.S. and over 10 billion annual video views, enhancing Meredith's leadership position in reaching Millennials."
Many Time and Meredith investors are clearly excited by the deal, as shares of both companies skyrocketed on Monday morning. Shares of Meredith jumped over 12% to reach a new 52-week high of $70.70 per share.
The official buyout price tag marked a 46% premium compared to Time’s closing price on Nov. 15—a day before initial merger reports surfaced, when investors seemed far less hopeful in the company’s long-term viability. Today, Time saw its stock price climb as high as 9% in morning trading.
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Meredith Corporation (MDP): Free Stock Analysis Report
Time Inc. (TIME): Free Stock Analysis Report
Signet Jewelers Limited (SIG): Free Stock Analysis Report
SMART Global Holdings, Inc. (SGH): Free Stock Analysis Report
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