Chicago, IL – December 13, 2023 – Zacks Equity Research shares Abercrombie & Fitch Co. (ANF) as the Bull of the Day and Schneider National, Inc. SNDR as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Pilgrim's Pride Corp. PPC, The Kraft Heinz Co. KHC and Ingredion Inc. INGR.
Here is a synopsis of all five stocks:
Abercrombie & Fitch Co. is hitting the retail sweet spot with teens and 20-somethings. This Zacks Rank #1 (Strong Buy) recently raised its full year sales growth target.
Abercrombie & Fitch is a specialty retailer of apparel and accessories for men, women and children. It operates 750 stores under 5 brands, including Abercrombie & Fitch, abercrombie kids, Hollister, Gilly Hicks and Social Tourist, in North America, Europe, Asia and the Middle East. It also operates e-commerce sites for each of those brands.
On Nov 21, 2023, Abercrombie & Fitch reported its fiscal third quarter 2023 results and crushed the Zacks Consensus by 60.5%. Earnings were $1.83 versus the consensus of just $1.14. It was the third big beat in a row.
Net sales jumped 20% to $1.1 billion year-over-year with the Abercrombie brands were up 30% and the Hollister brands gained 11%. Hollister gains were due to back-to-school assortment which resonated with the teen customer.
By segment, sales were up 22% in the Americas, 14% in EMEA and 13% in APAC.
Comparable sales, an important metric for retailers, were also strong, up 16% from last year. Comps were up 26% at Abercrombie brands and 7% at Hollister.
Inventory, which had been an issue last year as the supply chain was still in flux, is lower this year. Inventories as of Oct 28, 2023, fell 20% to $595 million compared to Oct 29, 2022.
Gross profit was up 570 basis points to 64.9% from last year due to 250 basis points from year-over-year AUR growth, about 200 basis points from lower freight costs and 200 basis points due to lower inventory write downs. However, the benefits were partially offset by 80 basis points in higher raw material costs.
As of Oct 28, 2023, Abercrombie had cash and equivalents of $649 million, up from $257 million as of Oct 29, 2022.
With the holiday season in full swing, Abercrombie is feeling confident its assortment is resonating. It expects net sales growth to be up low double-digits compared to the year ago quarter, to $1.2 billion. That includes the benefit of 375 basis points from the 53rd financial reporting week.
Operating margin is forecast in the range of 12% to 14% compared to 7.7% in Q4 2022 driven by higher gross profit rate on lower freight costs and higher AURs.
After a third big beat in a row, the analysts are feeling bullish about the full year. 6 estimates have been revised higher since the earnings report, including 1 in the last week, for fiscal 2024. The Zacks Consensus has jumped to $5.74 from $4.43 during that time.
That is huge growth compared to last year of 2196% as the company only made $0.25 in fiscal 2023.
Analysts expect the good times to continue, with 6 estimates higher for fiscal 2025 in the last 30 days as well. It has pushed the Zacks Consensus up to this year's level, at $5.75.
What recession? Abercrombie is one of the hottest stocks of 2023, with shares up 253% year-to-date to new 5-year highs. That is crushing the return of the S&P 500 and ranks up there with NVIDIA's return this year.
Yet, the stock is still cheap, with a forward P/E of just 14.2. It doesn't pay a dividend.
For those looking for a red-hot retailer with rising earnings estimates, Abercrombie should be on your short list.
Schneider National, Inc. is just trying to make it through this down cycle in the freight industry. This Zacks Rank #5 (Strong Sell) is expected to see earnings fall 46.2% this year.
Schneider National provides surface transportation and logistics solutions in North America. It has been in business for 88 years. Schneider provides truckload, intermodal, and logistics services throughout the US, Canada and Mexico.
On Nov 2, 2023, Schneider reported its third quarter 2023 earnings and missed big on the Zacks Consensus. Earnings were just $0.20 versus the Zacks Consensus of $0.38. That's a 47.4% miss.
The company didn't mince words about the quarter.
"Our enterprise experienced year over year declines in revenue and earnings in the third quarter, a period which we believe represents the most challenging phase of this prolonged freight recession," said Mark Rourke, President and Chief Executive Officer of Schneider.
"Our results were driven by ongoing price pressures primarily in our network businesses, as well as other headwinds such as fuel, bad debt, and lower equipment gains," he added.
Operating revenues fell 19% to $1.352 billion from $1.675 billion a year ago.
Truckload revenues (excluding fuel surcharge) fell 6% to $535.3 million year-over-year driven by unfavorable pricing in network, partially offset by the impact of organic dedicated growth and M&M Transport revenues.
Intermodal took a big hit, as revenues (excluding fuel surcharge) fell 21% to $263 million year-over-year drive by lower revenue per order and volume.
Logistics also struggled, with revenues (excluding fuel surcharge) falling 30%, or $138.2 million, to $326 million compared to third quarter of 2022. It was driven by decreased revenue per order, which Schneider says continues to be unfavorably impacted by lower market prices, and lower brokerage volumes which decreased 11% year over year.
Given the difficult market conditions, it's not a surprise that Schneider cut its full year earnings guidance to a range of $1.40-$1.45 from its prior guidance of $1.75 to $1.90.
As a result, the analysts cut their earnings estimates for both this year and next.
7 estimates were lowered in the last 60 days pushing the 2023 Zacks Consensus down to $1.42 from $1.81. That's now within the new guidance range but it means earnings are expected to decline 46.2% as the company made $2.64 last year.
The analysts were equally as bearish on 2024. 7 estimates were also cut for next year which pushed the Zacks Consensus down to $1.77 from $2.24. But that's an earnings increase of 25% given the cuts to 2023.
Given the bearishness, it's not surprising that the shares have sold off in the last 3 months and are down 12.7% during that time. Year-to-date they are up 2.7%, however.
Are they cheap? Schneider trades with a forward P/E of 16.9. It also has a price-to-sales (P/S) ratio of just 0.8. A P/S ratio under 1.0 usually indicates a company is undervalued.
Schneider also has a price-to-book (P/B) ratio of 1.4. A P/B ratio under 3.0 can indicate that there is value.
The company is also shareholder friendly. It pays a dividend, currently yielding 1.5%. It also started a $150 million stock repurchase program in Feb 2023. As of Sep 30, 2023, it had repurchased $50.6 million year-to-date.
Investors interested in trucking and logistics, may want to wait on the sidelines for indications that the recovery in trucking is on its way before diving in.
Standing in the final month of 2023, we note that food stocks have fared decently well, showing resilience amid the hurdles associated with inflation. The combination of strong brand presence and effective pricing strategies has enabled food companies to navigate the uncertainties of a volatile economic landscape.
As 2023 approaches its finale, we have identified some food stocks that stand out as enticing opportunities for investors looking to indulge in the potential for further growth.
The overall inflationary environment has affected consumers' purchasing power, influencing the volumes of many companies in the food industry. While the higher cost of inputs has been posing challenges to margins, the trend has been moderating now. Despite being no exception to the inflationary environment, food stocks have showcased a remarkable ability to withstand the headwinds.
Noteworthy is the role of robust pricing strategies that some food companies have adopted to weather the storm. Consumers' loyalty to specific brands, coupled with companies' steadfast commitment to innovation, has emerged as a driving force. For instance, companies have capitalized on the growing consumer preference for healthy and nourishing food by innovating in the organic products sector. The emphasis on expanding plant-based alternatives has particularly benefited companies offering meat products, which form a significant portion of consumers' staple baskets.
These upsides, along with efforts to strengthen manufacturing capacities and solidify portfolio, have been working well for a number of food companies, placing them well for further growth. Their ability to adapt to changing consumer preferences and market dynamics has proven to be a recipe for success.
In light of this, we present three enticing picks from the realm of food stocks, each flaunting a favorable Zacks Rank #1 (Strong Buy) or 2 (Buy). Notably, these stocks have witnessed share price increases in the past three months, defying declines experienced by their respective industries.
Investors can count on meat products companyPilgrim's Pride Corp.. The company's focus on key customers is a pathway for refining its portfolio and creating competitive advantages. Apart from this, Pilgrim's Pride has been steadily augmenting the marketing support of its brands as it expands and enters new regions. PPC also resorts to frequent supply-chain improvements to enhance efficiency and reduce costs.
The company producing, processing, marketing and distributing fresh, frozen, and value-added chicken and pork products currently sports a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here.
The consensus mark for 2024 earnings per share (EPS) suggests growth of 62.4% from the year-ago period. The Zacks Consensus Estimate for Pilgrim's Pride's 2024 EPS has increased from $2.10 to $2.48 in the past 60 days. Shares of PPC have gained 5% in the past three months, comfortably outpacing the industry's decline of 7.3%.
The Kraft Heinz Co. is also worth a shot. The Zacks Rank #2 company has been benefiting from strength in its three key pillars — Foodservice, Emerging Markets and U.S. Retail Grow platforms. Further, this consumer-packaged food and beverage company has been on track with its transformation plan, as part of which AGILE@SCALE's strategy has been noteworthy. The strategy has been helping The Kraft Heinz Company enhance its agile expertise and capabilities via partnerships with technology giants and cutting-edge innovators.
KHC has been undertaking strategic pricing initiatives to improve its performance. The consensus mark for The Kraft Heinz Company's sales and EPS for 2024 suggests growth of 0.7% and 1.5%, respectively, from the year-ago period figures. The Zacks Consensus Estimate for KHC's 2024 EPS has risen by a penny to $3.01 over the past 30 days. Shares of the company have gained 10.9% in the past three months against the industry's decline of 0.5%.
Another delicacy from the same industry is Ingredion Inc., which rose 8.6% in the past three months. The company, which produces and sells sweeteners, starches, nutrition ingredients and biomaterial solutions, presently boasts a Zacks Rank of 2. The Zacks Consensus Estimate for INGR's 2024 EPS has increased by a penny in the past 60 days to $9.74.
The consensus mark for 2024 sales and EPS suggests growth of 3.5% and 6.1%, respectively, from the year-ago period figures. Ingredion Incorporated looks well-positioned, thanks to its market and product diversity, along with its robust business model. An efficient approach to product pricing, a favorable customer mix, and a focus on driving operational excellence and productivity have been aiding the company in battling cost inflation. Ingredion Incorporated's focus on Driving Growth Roadmap bodes well.
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Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report
Pilgrim's Pride Corporation (PPC) : Free Stock Analysis Report
Ingredion Incorporated (INGR) : Free Stock Analysis Report
Kraft Heinz Company (KHC) : Free Stock Analysis Report
Schneider National, Inc. (SNDR) : Free Stock Analysis Report
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