Chicago, IL – March 19, 2024 – Zacks Equity Research shares Abercrombie & Fitch Co. ANF as the Bull of the Day and Noodles & Company NDLS as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Micron Technology MU, FactSet Research Systems FDS and Progress Software PRGS.
Here is a synopsis of all five stocks.
Abercrombie & Fitch Co. is back in favor with consumers after posting a strong holiday quarter. This Zacks Rank #1 (Strong Buy) is expected to continue to build on recent momentum by growing earnings by the double digits in fiscal 2024.
Abercrombie & Fitch is a specialty retailer of apparel and accessories for men, women and kids. Founded in 1892, Abercrombie & Fitch consists of 5 global brands including Hollister, Gilly Hicks, Abercrombie & Fitch, abercrombie kids and Social Tourist.
It operates 760 stores across North America, Europe, Asia and the Middle East as well as e-commerce sites.
On Mar 6, 2024, Abercrombie & Fitch reported its fiscal fourth quarter and full year fiscal 2023 results and beat on the Zacks Consensus for the fourth quarter in a row.
Earnings were $2.97 versus the Zacks Consensus of $2.81, for a beat of $0.16.
It was driven by Abercrombie brands which saw comparable sales jump 28% in the quarter with Hollister brands, which includes Gilly Hicks, up 6%. Comparables were up 16% company-wide in Q4. Comparable sales are one of the key metrics for retailers.
For the full year, comparables were up 13% company-wide with Abercrombie brands up 23% and Hollister up 4%.
For the full year, net sales were up 16% to $4.28 billion from $3.7 billion a year ago.
Also for the full year, gross profit rose 600 basis points to 62.9% driven by 340 basis points of higher average unit retail and 300 basis points from lower freight costs and higher raw materials. This was partially offset by 30 basis points from the adverse impact of exchange rates.
As of Feb 3, 2024, inventories also fell 7% to $469 million. Falling inventories is a good sign as many retailers had seen them soar 2 years ago when supply chain issues hit hard.
Cash and equivalents also rose to $901 million from $518 million a year ago.
Abercrombie & Fitch gave a bullish outlook for fiscal 2024 as it expects momentum to continue. It expects net sales growth in the range of 4% to 6%, which includes the negative impact of about $50 million due to the extra 53rd reporting week in fiscal 2023.
It expects the Abercrombie brands to continue to outperform the Hollister brands and for the Americas to continue to lead geographic performance.
It also expects the year-over-year growth rate to be higher in the first half of the year, partially due to the calendar shifts from the 53rd week in 2023.
And the analysts are equally as bullish. 5 estimates have been revised higher for fiscal 2024 since the earnings report. That has pushed the Zacks Consensus up to $7.31 from $6.51 in the last 30 days.
That's earnings growth of 16.4% in fiscal 2024 as the company earned $6.28 in fiscal 2023.
The Street has caught onto the bullish story with Abercrombie & Fitch. The shares are up 402% over the last year, easily beating the S&P 500 up 30.3% during that same time.
Is it too hot to handle?
Abercrombie trades with a forward P/E of just 17.2, which is below the average of the S&P 500.
For investors looking for a retail stock with strong momentum and attractive valuations, Abercrombie & Fitch should be on your short list.
Noodles & Company had a tough 2023 as sales slowed. This Zacks Rank #5 (Strong Sell) is expected to see negative earnings in 2024 as it tries a menu reboot.
Noodles & Company operates 470 restaurants across the United States serving noodle dishes from Wisconsin Mac & Cheese to better-for-you Zoodles.
On Mar 7, Noodles & Company reported fourth quarter and fiscal year 2023 results and missed on earnings by $0.06. Earnings were a loss of $0.07 compared to the Zacks Consensus which was looking for a loss of $0.01.
Comparable restaurant sales fell 4.2% system-wide in the fourth quarter, including a 4.3% decrease for company-owned restaurants and a 3.6% decrease for franchise restaurants. Comparable sales are a key restaurant metric.
Revenue fell 8.9% to $124.3 million from $136.5 million a year ago, however, the prior year had a 53rd week in the fourth quarter. Adjusting for that extra week, revenue fell just $3.1 million, or 2.4%.
For the full year, 18 new company-owned restaurants opened and 6 closed. At the end of 2023, Noodles & Company had 380 company-owned and 90 franchise restaurants.
The company plans several initiatives to turn it around in 2024 including a multi-phase menu transformation and leveraging its digital capabilities including the Noodles app and rewards program.
On Mar 7, 2024, Noodles & Company also announced that Drew Madsen, who had been interim CEO, would become permanent CEO effective Mar 6, 2024. He would also continue to be a member of the Board of Directors.
He had been interim CEO as of Nov 2023 and a board member since Sep 2017.
Noodles & Company is looking for 2024 comparable restaurant sales growth of flat to +3%.
The analysts, however, are bearish on earnings growth. 2 estimates have been cut in the last 30 days for 2024, with 1 cut in the last week.
The 2024 Zacks Consensus Estimate has fallen to a loss of $0.30 from a loss of $0.12 in the last 30 days. This is an earnings decline of 172.7% as the company lost $0.11 last year.
Shares of Noodles & Company have fallen over the last year and are now trading under $2.00. It has a market cap of just $81 million.
As of Jan 2, 2024, the company had cash and cash equivalents of $3 million and outstanding debt of $82.2 million. As of Jan 2, 2024, it had $39.9 million available for future borrowings under its revolving credit facility.
For investors interested in the restaurant stocks, you might want to wait until the initiatives are put into place and the earnings start to turn around before jumping in.
Micron Technology is likely to beat expectations when it reports second-quarter fiscal 2024 results after market close on Mar 20.
The company projects a fiscal second-quarter adjusted loss of 28 cents per share (+/- 7 cents). The Zacks Consensus Estimate for the bottom line is pegged at a loss of 27 cents per share, significantly narrower than the year-ago quarter’s loss of $1.91.
Meanwhile, Micron estimates revenues of $5.3 billion (+/- $200 million). The consensus mark for revenues is pegged at $5.33 billion, which suggests a 44.4% increase from the year-earlier period’s revenues of $3.69 billion.
The company’s earnings surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while missing on one occasion, the average surprise being -41.6%.
Micron Technology, Inc. price-eps-surprise | Micron Technology, Inc. Quote
Micron’s overall second-quarter performance is likely to have benefited from the robust demand for its memory chips used for graphic processing unit (GPU)-enabled artificial intelligence (AI) servers. Datacenter operators are enhancing their capabilities by integrating generative AI and large language models using GPUs. As memory is at the heart of GPU-enabled AI servers, the trend is likely to have boosted Micron’s top-line performance in the to-be-reported quarter.
An improving supply-demand environment is also expected to have aided the company’s second-quarter performance. Substantial customer inventory adjustments across end markets weighed on Micron’s financial performance for several quarters. However, the company witnessed improved supply-demand in the first quarter, which resulted in higher pricing for DRAM and NAND.
The Zacks Consensus Estimate for DRAM revenues is pegged at $3.89 billion for the second quarter, which indicates a year-over-year increase of 42.9%. The consensus mark for NAND revenues stands at $1.39 billion, which implies a whopping 56.6% surge from the year-ago quarter.
Nonetheless, the aforementioned positive factors are likely to have been partially offset by the negative impact of soft consumer spending due to inflationary pressure and growing concerns over the global economic slowdown. Softened consumer spending has resulted in weak memory chip demand from the smartphone and personal computer end markets.
Additionally, the memory chip maker’s heavy dependence on China is a headwind due to the ongoing tit-for-tat trade spat between the United States and China. Additionally, a higher mix of lower-margin NAND and a minimal decline in manufacturing costs are expected to have strained margins.
Our proven model predicts an earnings beat for Micron this earnings season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat, which is the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate (-21 cents per share) and the Zacks Consensus Estimate (-27 cents), is +23.29%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Zacks Rank: MU carries a Zacks Rank #2.
Per our model, FactSet Research Systems and Progress Software have the right combination of elements to post an earnings beat in their upcoming releases.
FactSet Research is slated to report second-quarter fiscal 2024 results on Mar 21. The company has a Zacks Rank #2 and an Earnings ESP of +0.59% at present. The company’s earnings beat the Zacks Consensus Estimate thrice in the trailing four quarters while missing on one occasion, the average surprise being 1.7%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for FDS’ second-quarter earnings is pegged at $3.83 per share, which suggests an increase of 0.8% from the year-ago quarter’s earnings of $3.80. FactSet Research’s quarterly revenues are estimated to soar 6.4% year over year to $547.9 million.
Progress Software carries a Zacks Rank #3 and has an Earnings ESP of +0.44%. The company is scheduled to report first-quarter fiscal 2024 results on Mar 26. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 13.1%.
The Zacks Consensus Estimate for PRGS’ fourth-quarter earnings is pegged at $1.14 per share, which indicates a year-over-year decrease of 4.2%. The consensus mark for revenues stands at $181.8 million, which calls for a year-over-year rise of 9.8%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report
Micron Technology, Inc. (MU) : Free Stock Analysis Report
FactSet Research Systems Inc. (FDS) : Free Stock Analysis Report
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Noodles & Company (NDLS) : Free Stock Analysis Report
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