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Urban Outfitters, Goodyear Tire & Rubber, 21st Century Fox, Walt Disney And Sky As Zacks Bull And Bear Of The Day

Published 12/14/2017, 10:09 PM
Updated 07/09/2023, 06:31 AM

For Immediate Release

Chicago, IL – December 15, 2017 – Zacks Equity Research highlights Urban Outfitters Inc. (NASDAQ:URBN) as the Bull of the Day and The Goodyear Tire & Rubber Company (NASDAQ:GT) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on 21st Century Fox (NASDAQ:FOXA) , Walt Disney Company (NYSE:DIS) and Sky plc (OTC:SKYAY) .

Here is a synopsis of all five stocks:

Bull of the Day:

There’s no denying that the retail sector has made a sort of a comeback in the past few weeks.

Black Friday weekend this year made history, with Cyber Monday becoming America’s largest-ever online shopping day. In-store foot traffic didn’t fall as much as analysts had feared, and if you went out shopping on Black Friday, you likely noticed that a ton of other people decided to join you.

Consumer confidence is high, and when consumers feel good, they like to spend money.

One company that is benefitting from this recent revival is millennial favorite and Zacks #1 (Strong Buy) Urban Outfitters Inc., the parent of brands like Urban Outfitters, Anthropologie, Free People, BHLDN, and Terrain.

Urban Outfitters and…Pizza?

When Urban announced that it would be acquiring The Vetri Family group of restaurants, which includes the award-winning Pizzeria Vetri, investors were a little wary.

It seemed random and a little unorthodox at the time, in addition to the fact that running a restaurant business is costly. How could Urban, a retailer that was already struggling to boost its core apparel business, manage a pizza chain?

What was hard to pinpoint initially was the profit potential. But consumer spending on fast-casual dining has been growing rapidly for some time now, and Pizzeria Vetri offered the company an opportunity to create a unique in-store experience and leverage this restaurant trend to drive store traffic.

The acquisition seems to be working, becoming another strong example of the retail-restaurant model and following in the footsteps of Ralph Lauren (NYSE:RL) and Restoration Hardware (RH). Last quarter, Urban’s Food and Beverage segment pulled in $6.24 million, up from $5.85 million in the year ago period.

Impressive Third Quarter Earnings

Speaking of last quarter, Urban posted strong third quarter numbers.

The apparel retailer reported earnings of 41 cents per share, soaring past the Zacks Consensus of 33 cents per share.

Record revenues of $893 million were much higher than our consensus estimate and increased 3.5% year-over-year.

Overall, comparable retail segment sales, though only increasing 1%, were driven by strong, double-digit growth in the direct-to-consumer channel.

Breaking it down by brand—and excluding the estimated impact if the North American hurricanes in the quarter—Free People comps increased 5%, while Anthro rose 2% and Urban increased 1%.

Rising Estimates

As a result, growth estimates have been steadily increasing, and analysts have grown quite bullish on URBN lately.

For its current quarter, earnings are expected to grow almost 12%, and 12 analysts have revised their estimates upwards in the last 30 days compared to none lower.

Fiscal 2017 figures are also looking quite promising, with 13 estimates moving higher in the past month, compared to none lower. The consensus estimate trend has seen a boost for this time frame, increasing from $1.56 per share to $1.43 per share, an increase of 9.1%.

Earnings estimates for 2018 are on the rise as well, jumping to $1.74 per share from $1.58 per share in the last 30 days.

Will the Rally Continue?

2017 was a pretty rocky year for URBN, but the stock has been able to bounce back, and is currently up around 14.4% year-to-date compared to the S&P 500’s return of 18.8%

Its Q3 earnings were a huge boosting factor, and in the last three months, shares have gained almost 44%.

Bear of the Day:

The Goodyear Tire & Rubber Companyis one of the world’s leading tire companies, with operations around the world and one of the most recognized names in the business.

It operates through three segments—the Americas; Europe, the Middle East, and Africa; and Asia Pacific—developing, manufacturing, marketing, and distributing tires for most applications.

Goodyear also operates roughly 1,100 tire and auto service center outlets where the company offers customers products for sale and provides automotive repair and other services.

Sitting at a #5 (Strong Sell), Goodyear experienced unexpected headwinds this year that negatively impacted its performance.

Disappointing Third Quarter Results

Goodyear faced many challenges in its third quarter, including lower consumer replacement volumes, production cuts by automakers, and an over 30% increase in its raw material input costs.

As a result, adjusted earnings fell almost 40% year-over-year to 71 cents per share, though the bottom line surpassed the Zacks Consensus of 67 cents.

Revenues of $3.92 billion only marginally beat our consensus estimate as well. Breaking it down by segment, revenues in the Americas slipped 1%, but EMEA and Asia Pacific revenues grew 6% and 5%, respectively.

Goodyear said that tire unit volumes were 39.8 million, down 5% from 2016. Replacement tire shipments fell 4%, while original equipment unit volume declined 9% year-over-year due to lower volume sales.

And, segment operating income dropped to $357 million in the reported quarter from $556 million a year ago.

Hurricane Impact

The decline in Goodyear’s Americas segment was due to the major hurricanes that devastated large swaths of the country earlier this year.

It operates three chemical plants in Texas, and has tire distribution and retail operations in the affected areas that were either damaged or shut down.

In particular, sales at company-owned locations were negatively impacted by about $23 million, and Goodyear incurred roughly $12 million in hurricane-related costs during the quarter.

Overall, Goodyear estimated that the negative impact caused by the hurricanes on the U.S. consumer replacement industry was approximately 1%.

Earnings Estimates Lowered

Since the report, it seems that analysts are bearish on GT’s future outlook.

For the current quarter, four analysts cut their estimates in the last 60 days, lowering the Zacks Consensus to 73 cents from 92 cents per share; this represents a year-over-year decline of 22.74%.

This sentiment even spills over into next year, where six analysts revised their estimates lower over the last 60 days. The Zacks Consensus now sits at $3.74 for fiscal 2018, down from $4.24.

Additional content:

21st Century Fox Stocks Surge After Disney Deal

Shares of 21st Century Fox surged on Thursday morning after the entertainment giant’s highly anticipated deal with the Walt Disney Company became official.

The companies announced in a joint statement Thursday that they entered into a definitive agreement that will see Disney acquire a substantial amount of 21st Century Fox’s assets, including the Twentieth Century Fox television and film studios. The deal, which also includes international TV businesses and cable offerings, is worth $52.4 billion in stock.

Disney will also officially acquire FX Networks, National Geographic, Fox Sports Regional Networks and Fox Networks Group International. Furthermore, Star India, U.K. TV power Sky plc, Fox’s 30% stake in streaming giant Hulu, and a few other assets, are also set to fall under Disney’s umbrella.

Notably left out of the deal are Fox News; Fox Business; the main Fox Broadcasting network; and 21st Century Fox’s popular cable sports channels FS1, FS2 and the Big Ten Network. Fox will retain these assets in a newly listed company, which will be spun off to its shareholders.

As part of the deal, Disney will also take on roughly $13.7 billion of 21st Century Fox’s debt. This brings the total value of the planned transaction to $66.1 billion. Current 21st Century Fox shareholders are scheduled to receive 0.2745 shares of Disney for every 21st Century Fox share they hold.

Disney’s Wins?

Disney made this deal to try to bolster its arsenal of entertainment assets as the race to provide consumers with the most content heats up. By joining the array of Fox’s filmed entertainment assets with Disney’s content, the new company should be better positioned to entice customers with a planned over-the-top, direct-to-consumer platform.

“The deal will also substantially expand our international reach, allowing us to offer world-class storytelling and innovative distribution platforms to more consumers in key markets around the world,” Disney CEO Robert Iger said in a statement.

The newly strengthened Disney also takes a controlling interest in Hulu and inches closer to a sports stranglehold, even as ESPN struggles, with the acquisition of Fox’s 22 regional sports networks (also read: Is Disney the Real Winner in a Deal With 21st Century Fox?).

What’s more, Disney boosts its international reach with powerful new international cable assets that could help it distribute more of the company’s content worldwide, which could eventually lead to the creation of more Disney stores and theme parks.

Disney also pointed directly to the company’s ability to merge Fox’s Marvel assets, which include X-Men and Deadpool, with its widely popular and revenue generating Marvel Cinematic Universe.

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.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performancefor information about the performance numbers displayed in this press release.



Walt Disney Company (The) (DIS): Free Stock Analysis Report

British Sky Broadcasting Group (LON:SKYB) PLC (SKYAY): Free Stock Analysis Report

Twenty-First Century Fox, Inc. (FOXA): Free Stock Analysis Report

Urban Outfitters, Inc. (URBN): Free Stock Analysis Report

The Goodyear Tire & Rubber Company (GT): Free Stock Analysis Report

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