For Immediate Release
Chicago, IL – December 06, 2016 – Zacks Equity Research highlights Western Digital (NASDAQ:WDC) (NASDAQ:WDC – Free Report) as the Bull of the Day and Shoe Carnival (LON:CCL) (NASDAQ:SCVL – Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on BASF (OTCMKTS:BASFY –Free Report),Tilly’s (NYSE:TLYS –Free Report) and Big 5 Sporting Goods (NASDAQ:BGFV – Free Report).
Here is a synopsis of all five stocks:
Western Digital (NASDAQ:WDC – Free Report) develops, manufactures, and sells data storage devices and solutions worldwide. The company's hard drives are designed for the desktop PC market and the high-end hard drive market and, recently, for the emerging market for hard drives specially designed for audio-visual applications, such as new video recording devices. The company was founded in 1970, is based in Irvine, California and now has over 72,000 employees. The stock is the Bull of the Day after it recently became a Zacks Rank #1 (Strong Buy).
Western Digital has a market cap of $18 Billion with a Forward PE of 12. The stock sports Zacks Style Scores of “B” in Value and “C” in both Growth and Momentum. The company sits in an industry ranked 15 out of 265 (Top 6%) of the Zacks Industry Rank.
Last quarter’s earnings have put a charge into the stock. Since the report back in October analysts have been raising estimates and price targets. Moreover, the company has an analyst day this week, which have investors excited that the stock could head to $80.
Shoe Carnival (NASDAQ:SCVL – Free Report) is a high volume, value-oriented retailer of family footwear. The company provides various dress, casual, and athletic footwear products for men, women, and children; and accessories, including socks, belts, shoe care items, handbags, jewelry, scarves, and wallets.The stock is the Bear of the Day after it recently became a Zacks Rank #5 (Strong Sell) because of a poor earnings report last week.
Shoe Carnival has a market cap of $500 million with a forward PE of 18. The company was founded in Evansville, Indiana in 1978 and has 412 stores as of August 31st 2016. The stock sports a Zacks Style Score of “A” in value, but “D” in Growth.
The low growth is the problem for the stock price and after the recent EPS report that took the stock down 15%, investors are starting to run away. It doesn’t help that the company sits in an industry ranked 198 out of 265 (Bottom 25%) of the Zacks Industry Rank.
Q3 Earnings
The company reported Q3 earnings on November 28th, with EPS coming inline. However, revenue came in a little weak as the company missed by $1.5 million. The real issue was the guidance to fiscal year 2016. The company slashed expectations and now sees $1.46-$1.51 versus the expected $1.59.
November same store sales were down 3.3% and gross margin fell to 29.9% form 30.1% year over year. Same store sales was a big disappointment, forcing the company to guide Q4 down to -1% versus the +1% expected.
CEO Clifton E. Sifford had some comments on the quarter:
“Our third quarter operating results were below our expectations due to slower sales of seasonal merchandise in the second half of the quarter... We generated a comparable store sales increase in athletic merchandise in each month of the quarter, although this was offset by a high-single digit comparable store sales decline in our boot categories.... The slow sales of boots and other seasonal merchandise continued through November. While we achieved high-single digit comparable store sales increases in our athletic categories in November, the decline in sales of boots and other seasonal merchandise resulted in a comparable store sales decline of 3.3% for November. We now expect our fourth quarter comparable stores sales to range from a decrease of 1% to an increase of 1%. We will accelerate our promotional activity on seasonal merchandise with the goal of driving sales and ending the season with inventories in-line with our plan.”
Stock Reaction
The stock was trading over $30 a share, but earnings sent it down to $26, right where the 200-day moving average resides. There has been a bounce since, but investors need to be cautious with the 200-day. If it fails, expect lower prices.
Additional content:
Snoozing While Rome Is Burning
Lately, it seems to me, government events take a front seat. Global macro data takes a back seat.
Equity traders continue to read striking political headlines, one after another. Primary government actors are falling and rising across the globe in 2016.
However, equity traders seem to take each political event in stride. One after another, a shock vote has been eventually shrugged off. At the same time, traders playing other global markets --namely currencies -- are not sanguine.
This Global Week Ahead should be no exception. Don’t expect stock traders to notice anything but the money printing fun -- coming gratis the ECB’s Mario Draghi. He speaks to us on Thursday. Expect FX traders to be wide-awake -- acting on all headlines.
Over the weekend, Italians emphatically said NO to government reforms. Prime Minister Matteo Renzi stepped down on Monday. His proposed constitutional reforms included a Senate amendment to weaken its influence.
Exhibit A: The main trading action was in Italian debt, and secondarily, the euro. Equities took that Italian decision in stride.
In the U.K., the sitting government’s appeal against a lower court decision requiring a parliamentary vote to trigger EU Brexit begins on Monday. The president of the U.K. Supreme Court warned us of “threats of serious violence and unpleasant abuse” against those who brought this case.
Expect the U.K. pound to move on that decision! Equities? Maybe hit the snooze button again.
On Thursday in the Global Week Ahead, traders should expect the ECB’s Mario Draghi to extend its 80 billion per month asset purchase program by 6 more months.
Europe and the USA remain divided by relative macroeconomic weakness and strength. The Eurozone has a 9.8% unemployment rate. The USA has a 4.6% unemployment rate. In the Eurozone, there is also little to no consumer inflation. Mr. Draghi wants to see “sustained” increases in the CPI to get comfortable about the path up in underlying wages.
What of the ECB decision? Perhaps global equity traders wake up then!
Before the U.S. market opens on Thursday, the latest Chinese trade data gets released. This data should show a pickup in exports for NOV and confirm an improvement in global demand from the USA and Europe.
Look even further ahead. There’s another big political event later this month.
Japan’s Prime Minister Shinzo Abe will make a historic visit to Pearl Harbor in Hawaii. He will remember the dead of WWII alongside outgoing U.S. President Barack Obama. This will be the first sitting Japanese PM to visit Pearl Harbor in the 75 years since that war began. It follows up on President Obama’s historic visit to Hiroshima.
All of us in stocks should remember this from Pearl Harbor. Not all political events can be shrugged off so easily.
Top Zacks #1 Rank (STRONG BUY) Stocks—
BASF (OTCMKTS: BASFY – Free Report): This is the big $79 billion market cap German-based and European trading diversified chemicals company. It gets a Zacks #1 Rank and a Zacks VGM score of A.
Tilly’s (NYSE:TLYS – Free Report): This is a small $420 million market cap West Coast retail apparel and shoe company. Surfers will know this name well. The shares get both a Zacks #1 Rank and a Zacks VGM score of A.
Big 5 Sporting Goods (NASDAQ:BGFV – Free Report): Tis the season to talk up retail stocks. Here’s another West Coast small cap name, with $400 million in market cap. This sporting goods stock garnered a Zacks #1 Rank and a Zacks VGM score of A. There’s a 3.3% annual dividend to collect here too.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
About the Bull and Bear of the Day
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WESTERN DIGITAL (WDC): Free Stock Analysis Report
SHOE CARNIVAL (SCVL): Free Stock Analysis Report
BASF SE (DE:BASFN) (BASFY): Free Stock Analysis Report
TILLYS INC (TLYS): Free Stock Analysis Report
BIG 5 SPORTING (BGFV): Free Stock Analysis Report
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