Monthly Archives: February 2017

Iconix Brand Group: Zacks’Play

Iconix Brand Group (ICONFree Report) is a Zacks Rank #5 (Strong Sell) and it is the Bear of the Day.  Let’s take a look at why the stock is the Bear of the Day and if there are some trends that might help investors avoid other stocks that could become a Zacks Rank #5 (Strong Sell).

Description

ICON is a brand management company.  The Company’s brand portfolio includes brands, such as Candie’s, Bongo, Joe Boxer, Rampage, Mudd, London Fog, Mossimo, Ocean Pacific/OP, Danskin/Danskin Now, Rocawear/Roc Nation, Cannon, Royal Velvet, Fieldcrest, Charisma, Starter, Waverly, Ecko Unltd/Mark Ecko Cut & Sew, Zoo York, Umbro, Lee Cooper, Strawberry Shortcake and Artful Dodger, and interests in Material Girl, Peanuts, Ed Hardy, Truth or Dare, Modern Amusement, Buffalo, Nick Graham Hydraulic and PONY brands.

Recent Earnings

It isn’t too often that a Bear of the Day has a good earnings history.  Usually I see a bunch of misses but ICON has 3 straight beats of the Zacks Consensus Estimate.  That is pretty good.

Estimates

Estimate revision are the key to the Zacks Rank.  As estimates fall, so does the Rank.  The current quarter estimates is at $0.14, but that is down from $0.19 about 90 days ago.  The current year estimate of $1.11 is down 2 cent from about 90 days ago as well.  Both of those items don’t help, but the real issue here is the move in 2017 estimates.

The 2017 Zacks Consensus Estimate moved from $1.08 to $1.00 in the last thirty days.  That move lower is what has pushed this stock down to a Zacks Rank #5 (Strong Sell).

Footwear

I have been seeing some weakness across most of retail over the last month or so.  Investors would be wise to “kick” the tires of stocks that are slated to report soon.  Skechers (SKXFree Report) is a Zacks Rank #4 (Sell) and it could report soon.  Given the issues other retailers have faced, this one might be another spot to avoid.

Iconix Brand Group, Inc. Price and Consensus

Iconix Brand Group, Inc. Price and Consensus | Iconix Brand Group, Inc. Quote

Zacks’ Top 10 Stocks for 2017

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KLA-Tencor: Zacks’ Bull of the Day Play

KLA-Tencor (KLACFree Report) recently beat the Zacks Consensus Estimate and then guided Wall Street higher which has sent estimate higher.  This has caused the Zacks Rank to move up to a Zacks Rank #1 (Strong Buy) and today it is the Bull of the Day.

The last several months have been very good ones to the semiconductor stocks.  It looks like there is evidence that the run will continue if not pick up speed.  Other high profile names have seen renewed interest from analysts as Artificial Intelligence, Autonomous Driving, and 3-D Virtual Reality concepts begin to move from beta into the mainstream.   This is all good news for the chip industry.

Description

KLAC is a semiconductor capital equipment company, they make the equipment that will help the chip companies make their chips.

Follow Brian Bolan on Twitter @BBolan1

Recent Earnings

KLA Tencor (KLACFree Report) beat the Zacks Consensus Estimate of $1.41 by $0.11 in posting earnings of $1.52.  That translates into a positive earnings surprise of 7.8% marking the 10th straight beat of the Zacks Consensus Estimate.

Guidance called for revenue of between $860M – $920M when the consensus estimate was calling for $849M.  As the aggressive growth stock strategist at Zacks, this is what I love to see.  Also on the call, management noted that they expect CY17 gross margin to be a “couple hundred basis points” better than previously expected.

It world of beating and raising this stock has higher revenues and higher margins.  Usually, when that happens you see higher multiples.  Speaking of multiples, KLAC trades at 15.6x forward estimates and over the last two years the stock has traded between 13.2x and 17.8x.  This tells me that the stock could go as high as $109 (17.8*6.17) if it trades at the high end of the range over the last two years.

Room For Upgrades For KLAC

One thing that I like to see is a stock that has room for future catalysts.  KLAC has three brokerages that have “Hold” or equivalent ratings on the stock.  Instinet is by far the most bearish of the three with a price target of $78 and a neutral rating.  Stifel Nicolaus has a hold and a price target of $83. A few days after the most recent report Deutsche Bank reiterated their “Hold” on the stock and increased their price target from $78 to $85.

Goldman Sachs, Cowen and Company, Credit Suise, B. Riley and Needham all have KLAC at either “Buy” or “Strong Buy” or the equivalent.  Of those, B. Riley is the most bullish with a $106 price target and Needham is just a dollar behind at $105.

The Big Tell For KLAC

Over the years I have picked up on the lingo for chip stocks.  At first I learned all about book to bill and after that the focus became backlog.  More recently I have picked up an even bigger tell than a stock with records billings or record backlog.  The phrase that pays is “design wins.”

During the most recent conference call management spoke the phrase that pays when talking to 3D NAND.  If there is anything that is as good as a design win, I have yet to know what it is.  This ensures some high margin business over the next 6 to 18 months, and that alone should have the multiple for this stock increasing.

Future Catalysts

Nvidia (NVDAFree Report) is reporting earnings after the close on Feb 9 and Wall Street is looking for revenues of $2.1B and EPS of $0.98.  This chip maker has been soaring of late and it recently received a price target increase from $115 to $124 by RBC Capital Markets.  A strong report from this company could lift shares of stocks in the entire industry.

KLAC will be speaking that the Goldman Sachs Technology and Internet Conference on February 15.  This conference will be broadcast over the web with Bren Higgins the CFO speaking with the covering analyst at Goldman Sachs.  There could be a short Q&A session as well.  You can listen to the call at 11 AM PST here.

KLA-Tencor Corporation Price, Consensus and EPS Surprise

KLA-Tencor Corporation Price, Consensus and EPS Surprise | KLA-Tencor Corporation Quote

Now, which stocks should you sell?

As a Zacks Rank #1 Strong Buy, this Bull of the Day deserves consideration. But today there are 220 Zacks Rank #5 Strong Sells that demand even more urgent attention. If any of these are lurking in your portfolio, they should be removed immediately. Since 1988, such stocks have actually performed more than 11X worse than the S&P 500. See all Zacks Strong Sells and Strong Buys absolutely free >>.

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NVIDIA Corporation (NVDA) – free report >>

KLA-Tencor Corporation (KLAC) – free report >>

Mattell Inc.: Zacks’ Bear of the Day Play

Cyclical companies look to one specific month or at times one quarter to make the majority of their sales for the entire year.  While this can be nerve wracking for management, these time periods tend to see huge volumes, and can be extremely profitable for the company.  But when merchants slow their buying trends, the company’s input costs increase, and customers reduce their buying activity, margins and revenues get crushed.  This is what happened to Mattel Inc.(MATFree Report) , our Zacks Bear of the Day.

This Zacks Ranked #5 (Strong Sell) company designs, manufactures, and markets a broad variety of family products on a worldwide basis through both sales to retailers and direct to consumers. Mattel’s business is dependent in great part on its ability each year to redesign, restyle and extend existing core products and product lines, to design and develop innovative new products and product lines, and successfully market those products and product lines.

Recent Earnings Results

On January 25th the company posted Q4 16 earnings results where missed both the Zacks consensus earnings and revenue expectations.  The company saw year over year declines in several key areas; worldwide net sales -4%, worldwide gross sales -3%, reported operating income -4%, reported EPS -14.8%, net cash flows from operating activities -19.7%, and gross margins fell by 240 basis points.  On a regional view, the company saw year over year declines; net sales North America -2%, net sales International -8%, and gross sales North America -1%, gross sales International -6%.

Management’s Take

According to Christopher Sinclair, Chairman and CEO, “Our results were negatively impacted by a number of industry-wide challenges, including a significant U.S. toy category slowdown in the holiday period, and increased forex headwinds. And while our sales at retail remained strong, the slowdown triggered elevated retail promotional activity and decreased shipping, all of which had a significant impact on our gross margin.”

Price and Earnings Consensus Graph

As you can see in the price and earnings estimate graph below, 2017 estimates and current stock price have sharply declined.

Mattel, Inc. Price and Consensus

Mattel, Inc. Price and Consensus | Mattel, Inc. Quote

Declining Earnings Estimates

Due to the poor earnings report, earnings estimates for Q1 17, Q2 17, FY 17 and FY 18 have all seen declines over the past 7 days; Q1 17 fell from -$0.07 to -$0.13, Q2 17 slipped from $0.04 to $0.02, FY 17 dropped from $1.71 to $1.43, and FY 18 moved lower from $1.90 to $1.68.

Bottom Line

Mattel, has missed expectations in three out of the last four holiday quarters.  While management has had recent success in stabilizing their core brands, this holiday miss makes the 2017 story a bit murky.  Further, due to the deceleration in retail sell-through in December, retailers limited their orders which caused inventories to increase for Mattel.  This extra inventory will weigh on 2017 sales.

If you are inclined to invest in the Toys/Games/Hobbies segment, you would be best served to wait for a better entry point as every member of the segment has a Zacks Rank #3 (Hold) or lower.

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Logitech Intl: Zacks’ Bull of the Day Play

The tech sector is significantly impacted by corporate spending cycles.  Dependent on the company’s current and near term outlook, management will decide either to purchase new tech items, or wait another quarter or even a year to make the purchases.  Yet one tech company has been able to buck these cycles and post double digit gains in almost every product they sell during a challenging consumer spending environment.  That company is Logitech International (LOGIFree Report) , and they are our Zacks Bull of the Day.

This Zacks Rank #1 (Strong Buy) company designs, manufactures and markets innovative peripherals that provide people with easy access to the digital world. The Company’s product family includes Internet video cameras, mice and trackballs, keyboards, audio and telephony products, interactive gaming devices and 3D controllers.

Recent Earnings Results

Last week Logitech posted Q3 17 earnings results where they easily beat bot the Zacks consensus earnings and revenue estimates.  On a year over year basis, the company saw gains in retail sales +12%, total revenues +7%, GAAP operating income +41%, non-GAAP operating income +34%, and cash flows from operations rose by 55%.  Further, the company saw their mobile speakers, PC gaming, and video collaboration segments grow by more than +20%.  Lastly, from an international perspective, revenues improved by +18% in Europe, +7% in the Americas, and +14% in Asia Pacific.

Management’s Take

According to Bracken Darrell, President and CEO, “This Q3, our results exceeded expectations and were outstanding, with broad-based growth across all our regions and almost all product categories. We delivered both the highest retail revenue and the highest non-GAAP gross margin in Logitech’s 35-year history. Our strategy is working, and we are just at the beginning of our path to deliver what we’re capable of. We have significantly raised our outlook on the back of this performance.”

Due to the impressive quarterly results, management increased their guidance for FY 2017; management expects retail sales to grow between +12% to 13% (above their previous guidance between +8% to +10%), and now expects that non-GAAP operating income in a range of $225 to $230 million (above their previous guidance between $195 to $205 million).

Price and Earnings Consensus Graph

As you can see below, LOGI’s stock price has taken off since the second half of 2016.  Further, you can see that FY 2017 estimates are above their current price.

Logitech International S.A. Price and Consensus

Logitech International S.A. Price and Consensus | Logitech International S.A. Quote

Increasing Estimates

Due to the strong quarter and subsequent raise in guidance, earnings estimates have jumped up for Q4 17, FY 17 and FY 18 over the past 7 days.  Q4 17 improved from $0.09 to $0.12, FY 17 rose from $0.88 to $1.12, and FY 18 jumped up from $1.00 to $1.18.

Bottom Line

Even with a challenging consumer spending environment, Logitech was able to outperform all expectations in Q3 17, and now they expect to do even better next quarter.

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New York & Company: Zacks’ Bear of the Day Play

New York & Company, Inc. (NWYFree Report) is struggling to stay alive in a tough apparel retail environment. This Zacks Rank #5 (Strong Sell) expects to report negative same store sales for the important holiday quarter.

New York & Company operates 483 stores in 41 states specializing in women’s fashion apparel and accessories. It also operates a website at nyandcompany.com.

Disappointing Fourth Quarter Results

On Jan 10, New York & Company provided preliminary results for its holiday quarter and the fourth quarter. For the 9 weeks ending on Dec 31, comparable store sales fell about 1.7%.

For the full quarter, sales were expected to be down in the low single-digit percentage range.

That’s an operating loss of $2.5 million to a loss of $4.5 million.

The company blamed soft traffic and the highly promotional environment. 70% off sales were not uncommon at many apparel retailers during the holiday period.

The bright spots continue to be the success of the Eva Mendes Collection and dresses. But it saw weakness in woven and knit tops, denim and jewelry. Its eCommerce business is also growing.

It believes that fourth quarter markdowns will allow it to start the spring season “clean.”

Can It Survive?

New York & Company is heavily mall based. Its usually located next to or near Express (EXPRFree Report) and others like Wet Seal and the Limited, both of which are in financial trouble. The Limited, which also specializes in women’s apparel and accessories, recently closed all of its stores and said it would sell only online.

New York & Company said it had $80 million cash on hand at the end of the year versus $60 million a year ago.

But earnings continue to drop. It lost $0.04 a year last year and analysts expect it to lose another $0.14 in fiscal 2016.

One estimate has been lowered for fiscal 2016 in the last 30 days.

Shares Sink Over the Last 5 Years

It’s not a good time to own the apparel retailers and New York & Company is no exception.

If you look at the 5-year chart, it doesn’t look real positive for investors.

There’s nothing on the horizon that suggests the story is about to get better for these apparel specialty retailers.

If you must own a company in this space, you might want to consider going bigger with Gap (GPSFree Report) . It’s a Zacks Rank #2 (Buy) and has some brands, like Athleta, in the athleisure area, which are performing well.

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Cree: Zacks’ Bull of the Day Play

Cree, Inc. (CREEFree Report) is cashing in on the Internet of things. This Zacks Rank #1 (Strong Buy) recently beat the Zacks Consensus Estimate for the second quarter in a row.

Cree makes LED lighting systems and bulbs, blue and green LED chips, high-brightness LEDs, lighting-class power LEDs, power-switching devices and RF devices.

Second Beat in a Row

On Jan 24, Cree reported its fiscal second quarter 2017 results and beat on the Zacks Consensus Estimate by a penny. Earnings were $0.09 versus the consensus of $0.08. It was the second consecutive beat in a row.

Its combined revenue, including discontinued operations, was $401 million, an 8% decrease compared to the combined revenue of $436 million in the second quarter of fiscal 2016. But it was an 8% increase over the fiscal first quarter of 2017.

It settled a key patent infringement and false advertising lawsuit with Feit Electric which added to earnings in the quarter.

The company is optimistic about the fiscal year saying, “the fundamentals in our business have improved over the last several quarters, and we remain focused on building a larger and more valuable LED lighting company by bringing better light to our customers.”

Estimates Rise for the Full Year

The analyst was bullish on the company after its conference call as the Zacks Consensus Estimate for the full fiscal year 2017 jumped to $0.41 from $0.15 before the earnings call.

Cree has been in a turnaround mode for several quarters. This is just a continuation down that path.

Is a Breakout Coming?

Cree has been trading in a narrow trading range for months and hasn’t managed to break out to a 1-year high let alone a 2-year high.

But it has picked up momentum in recent months. This recent earnings report also added fuel to the shares.

Cree isn’t cheap though. It’s trading with a forward P/E of 67.6.

You’re buying Cree for its growth story though. Earnings estimates have made a turnaround for 2017. Earnings are now expected to grow 5% this year.

For investors looking for a stock in technology and semiconductors, Cree is one to keep on your short list.

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Brinker International: Zacks’ Bear of the Day Play

I have always been a fan of Chili’s, a restaurant subsidiary of Brinker International (EATFree Report) . I have viewed it as the best of that category of restaurants, thanks in large part to those great bottomless chips and Presidente margaritas.

But many times, even if you think a company’s product is solid, it doesn’t make for a great investment. That is arguably the case for Brinker, as it appears as though few people agree with me about Chili’s, at least if we look to the company’s most recent earnings report.

EAT in Focus

In Brinker’s most recent earnings release, the company posted earnings of 71 cents per share which missed estimates, as analysts were expecting 75 cents per share in profits from the company instead. Quarterly revenues were also lower, while comps and margins were also unfavorable.

While this wasn’t a great report, the especially concerning part was the guidance from the company. EAT is now looking for earnings of between $3.05 and $3.15 which is a sharp cut from previous guidance, and below the estimate at the time which was $3.33/share.

So, thanks to this weak report—which now makes two straight misses for EAT—analysts have been slashing estimates for the company. Six estimates have gone lower in the past week for the current quarter compared to zero higher, while we have seen eight estimates go lower in the past week for the current year compared to zero higher.

 

Brinker International, Inc. Price, Consensus and EPS Surprise

Brinker International, Inc. Price, Consensus and EPS Surprise | Brinker International, Inc. Quote

 

These kinds of cuts are bringing the expected full year earnings trend for EAT down to a nearly 13 percent earnings decline year-over-year, while a poor industry rank isn’t helping matters either. With figures like these and the overall trend in the company, we can’t be surprised that EAT now has a Zacks Rank #5 (Strong Sell) which is why we are looking for more sluggish trading from Brinker in the near term.

Other Choices

Though the restaurant segment has a pretty weak rank overall, but there are still some solid choices in the group. One that stands out is definitely Dave & Buster’s (PLAYFree Report) . This company currently has a Zacks Rank #1 (Strong Buy), while it has a solid fundamental score as well.

Best of all though, the company has a nice track record in terms of earnings estimate revisions to the upside, while Dave & Buster’s has seen an impressive history of beating earnings estimates as well. So, if you are looking for a restaurant stock to kick-off February, give PLAY a closer look and consider avoiding EAT, at least until Brinker can turn things around and get back to a growth stage.

 

More Stocks to Sell. Now.
Beyond our Bear Stock of the Day, today’s list of 220 Zacks Rank #5 Strong Sells demand even more urgent attention. If any are lurking in your portfolio or Watch List, you should consider removing them immediately. Many appear to be sound investments but, since 1988, such stocks have actually performed more than 11X worse than the S&P 500.

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Rockwell Automation: Zacks’ Bull of the Day Play

The industrial and automation industry has been on fire as of late as investors cycle back into the production side of the economy. This has allowed the industry to post market beating performances and move up into top 33% rank territory as well.

However, one name stands out as an extremely strong candidate in the near term, Rockwell Automation (ROKFree Report) , thanks to its recent earnings beat, and its sluggish performance in the last few sessions. This combination could make for an excellent time for investors to jump into this name before others realize what a strong story is taking place in this often overlooked industry player.

Why ROK Now

Rockwell Automation recently reported earnings and the company thoroughly crushed estimates. In fact, ROK beat estimates by over 20% in its most recent quarter, and is posting an average surprise of about 8% in the past four quarters as well.

So, the company is coming off of one of its most impressive earnings reports in more than a year, but it doesn’t appear to be done just yet. ROK has seen surging earnings estimates in recent days, suggesting that the company could see a continuation of its recent and impressive earnings performance.

In just the past week, Rockwell has seen nine estimates go higher for the current year compared to zero lower, while it is sporting a 7:0 ratio in terms of estimates up vs. estimates down in the next year time frame too.

But it isn’t just the number of estimates moving higher, as the company has seen an impressive magnitude shift for the consensus estimate as well. In just the past week, the consensus estimate has moved from $6.07/share to $6.22/share for the full year, and then $6.56/share to $6.78/share for the next year time frame.

 

Rockwell Automation, Inc. Price, Consensus and EPS Surprise

Rockwell Automation, Inc. Price, Consensus and EPS Surprise | Rockwell Automation, Inc. Quote

 

No wonder Rockwell Automation has been able to earn itself a Zacks Rank #1 (Strong Buy), and why the company is looking like a solid choice after its decline in the past few sessions.

Bottom Line

ROK is in an in-focus industry that looks to benefit from the current economic climate, as well as an investor emphasis on companies linked to the production world. And with its recent stats in earnings and a solid outlook, it definitely has potential to be a strong performer in the months ahead as well.

So, consider taking a closer look at this industrial name in a top-notch industry. The recent price action could make for an excellent entry point as this company—and others in the segment—remain top choices for investors looking to take a more industrial tilt in their portfolios this year.

Zacks’ Top 10 Stocks for 2017
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