For Immediate Release
Chicago, IL – December 21, 2021 – Zacks Equity Research Shares of Chico's FAS, Inc. CHS as the Bull of the Day, Realogy Holdings Corp. RLGY as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Apartment Income REIT Corp. AIRC, Coty Inc. COTY and U.S. Gold Corp. USAU.
Here is a synopsis of all five stocks:
Bull of the Day:
Chico's FAS recently reported its best third quarter since 2016 as apparel demand returned. This Zacks Rank #1 (Strong Buy) is expected to grow revenue by 37.7% in fiscal 2021.
Chico's is a fashion retailer which operates 1,279 stores in the US and sells merchandise through 59 international franchise locations in Mexico and 2 domestic franchise airport locations.
It operates 3 brands that focus on women's fashion: Chico's, White House Black Market and Soma.
A Big Beat in the Fiscal Third Quarter
On Nov 30, Chico's reported its fiscal third quarter results and beat the Zacks Consensus Estimate by $0.21. It reported $0.18 versus the Zacks Consensus of a loss of $0.03.
It was Chicago's best third quarter performance since 2016 as sales rose 29% year-over-year.
Chico's brand comparable sales were up 23.3%, White House Black Market (WHBM) was up 33.4% and Soma was up 30.2% year-over-year.
Soma continued its comparable sales string of quarters up double digits. It's comp was up 43.5% from 2019, which was a pre-pandemic quarter.
Gross margin rate improved to 40.7%, the highest third quarter level since 2014 as low inventories meant further full priced sales.
Chico's has been investing in influencer and digital marketing. Its total customer count rose 8%, and the average age was significantly younger than the prior year, indicating that a new customer is finding Chico's brands.
Analysts Raise Full Year Earnings Estimates
Despite supply chain issues that all retailers are having to end 2021, the analysts were still bullish on Chico's holiday quarter and full year 2021.
2 estimates were raised in the last 30 days for Fiscal 2021, pushing the Zacks Consensus Estimate up to $0.37 from $0.18.
That's earnings growth of 111.9% as Chico's saw a loss of $3.11 last year as the pandemic hit hard.
One analyst has also raised fiscal 2022's earnings, pushing the Zacks Consensus up to $0.45. That's another 23% earnings growth next year.
Chico's Shares Sink: Are They on Sale?
Despite the rising estimates, the Street has decided to dump the shares. They have fallen nearly 29% in the last month.
Yet, they are trading with a forward P/E of just 12.9 and a P/S ratio of just 0.3.
If you're looking for a cheap retailer to add to your portfolio in 2022, which also has growing brands, Chico's is one that should be on your short list.
Bear of the Day:
Realogy is still cashing in on the pandemic real estate craze. However, analysts have been cutting full year estimates on this Zacks Rank #5 (Strong Sell) over the last 2 months.
Were they simply too bullish?
Realogy offers residential real estate services across the United States including brokerage, relocation and title and settlement businesses. It also has a mortgage joint venture.
Realogy's brands include many well-known in the real estate industry such as Better Homes and Gardens Real Estate, Century 21, Coldwell Banker, Coldwell Banker Commercial, Corcoran, ERA and Sotheby's International Realty.
A Miss in the Third Quarter
On Oct 28, Realogy reported its third quarter results and missed on the Zacks Consensus Estimate by $0.09. Earnings were $0.99 versus the consensus of $1.08.
Revenue rose 15% to $2.2 billion.
Combined closed transaction volume rose 12% year-over-year, which was higher than the 9% year-over-year market volume growth reported by the National Association of Realtors.
Owned brokerage agent count rose 5% compared to last year, which was the 5th consecutive quarter of growth. Realogy continue to maintain strong retention levels.
Analysts Cut 2021 and 2022 Earnings Estimates
Despite the gain in revenue in the third quarter, the analysts were bearish on full year earnings over the last 60 days.
2 estimates were cut for 2021 in the last 2 months. That has pushed the Zacks Consensus Estimate down to $2.98 from $3.44 during that time.
That's still earnings growth of 48.3% as Realogy made just $2.01 in 2020.
But analysts were also cutting for 2022, which has pushed the 2022 Zacks Consensus Estimate down to $2.59 from $3.04 in the last 60 days.
That's a decline of 13.3%.
Shares Fall From Recent Highs
Shares of Realogy are up 20.8% year-to-date, but have fallen 7.4% over the past 3 months.
They are dirt cheap, with a forward P/E of just 5.3.
Realogy has had $458 million in free cash flow through Sep 30, 2021 and repaid $435 million of debt in the third quarter.
Investors interested in real estate companies should keep Realogy on their wish list for when the earnings estimates start turning around.
Additional content:
Add These 3 Inflation-Proof Stocks to Your Portfolio
The Fed recently decided to implement a more aggressive monetary policy in the near term. It has decided to slowly do away with its bond purchases and hike interest rates next year. The Fed took this decision to counter the threat of inflationary pressure on the recovering economy. And why not? Prices of vital goods and services have now touched the highest level in decades.
An increase in prices doesn't bode well for the broader stock market. However, real estate investment trusts (REITs), consumer staples as well as gold mining companies stand to benefit from a surge in inflation. Therefore, it is prudent for investors to invest in stocks like Apartment Income REIT, Coty and US Gold Corp.
Increase in Inflation – A Concern for Investors
The Fed's preferred inflation measure or the personal consumption expenditures (PCE) index is projected to jump 5.7% on a year-over-year basis in November or the fastest since 1982, per data compiled by Bloomberg, citing a yahoo finance article. The core PCE is also expected to climb upward.
Notably, such high projections are consistent with other inflation data that have been released in recent times. Per the Bureau of Labor Statistics, November's consumer price index (CPI) jumped 6.8% year over year, as mentioned in a MarketWatch article. In fact, consumer prices in the United States were at their highest since 1982 and they rose for the sixth consecutive month.
Price increases were across the board, with gasoline, grocery store, car, apparel, home furnishing, and airline prices climbing last month. Prices increased due to the disparity between demand and supply. While there was strong demand for goods, manufacturers had to deal with supply constraints.
Watch Out for Stocks That Benefit from a Rise in Inflation
The rise in inflation did make investors anxious. With inflation increasing, bond yield is positioned to stay elevated, thereby diminishing the allure of growth-oriented stocks. But investors shouldn't be disappointed. After all, an increase in inflation tends to be good for certain stocks. For instance, property prices increase with an uptick in inflation. Landlords can also charge more as property value increases. Thus, real estate can be purchased through an indirect investment in REITs.
Similarly, companies that belong to the consumer staples sector have higher pricing power and are unperturbed by an increase in inflation. At the same time, gold doesn't lose its sheen at times of higher inflation. In fact, gold can be purchased by buying gold mining stocks.
3 Best Choices
We have, thus, highlighted three stocks from the aforementioned areas that are worth an investment now.
Apartment Income REIT primarily focuses on the management and ownership of apartment communities, particularly in the United States. Apartment Income REIT currently has a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for its next-year earnings has moved up 3.1% over the past 60 days. Apartment Income REIT's expected earnings growth rate for the next year is 7.9%. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Coty engages in the manufacture and distribution of beauty products, including body and skincare items, fragrances, etc. Coty sells its products through departmental stores, drug stores and duty-free shops. Coty, at present, has a Zacks Rank #1. The Zacks Consensus Estimate for its next-year earnings has moved up 26.7% over the past 60 days. Coty's expected earnings growth rate for the next year is 52%.
US Gold is known for exploring gold, copper, and zinc deposits, to name a few. US Gold holds an interest in gold exploration projects in Nevada and Idaho. US Gold, as of now, has a Zacks Rank #2. The Zacks Consensus Estimate for its next-year earnings has moved up 33.3% over the past 60 days. US Gold's expected earnings growth rate for the next year is 17%.
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Chico's FAS, Inc. (CHS) : Free Stock Analysis Report
Coty (COTY) : Free Stock Analysis Report
Realogy Holdings Corp. (RLGY) : Free Stock Analysis Report
US Gold Corp (USAU) : Free Stock Analysis Report
Apartment Income REIT Corp. (AIRC) : Free Stock Analysis Report
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