For Immediate Release
Chicago, IL – December 8, 2021 – Zacks Equity Research Shares of Lowe’s Companies, Inc.
LOW
as the Bull of the Day, Ollie’s Bargain Outlet Holdings, Inc.
OLLI
as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Toyota Motor Corporation
TM
, Tesla, Inc.
TSLA
and The Goodyear Tire & Rubber Company
GT
.
Here is a synopsis of all five stocks:
Bull of the Day
:
Based in Mooresville, NC,
Lowe’s Companies
is a leading home improvement retailer, with operations primarily in the U.S. and Canada. The company offers services and products for homeowners, renters, and commercial business customers; Lowe’s has also been enhancing its professional offerings for contactors and other builders.
Q3 Earnings Impress Wall Street
Revenue grew by 2.7% to $22.9 billion last quarter, building on the explosive growth recorded in Q3 2020, while Lowe’s reported diluted earnings of $2.73 per share, up 37.9% compared to the prior-year period.
Comparable store sales increased 2.2% year-over-year, with inflation and big-ticket sales (like appliances and flooring) resulting in a 9.7% increase in the average ticket.
Operating margin expanded 240 basis points to 12.2%, demonstrating Lowe’s overall efficiency.
CEO Marvin Ellison attributed the momentum to the return of DIY projects. “After Labor Day, we saw an increase in DIY demand on the weekends as travel activity slowed down and children returned to school. As a result, consumers were once again spending more time on projects in their homes,” he said on the earnings conference call.
Management expects these sales trends to continue into Q4 now that the weather is getting colder and people are spending more time at home. Lowe’s anticipates revenue to hit $95 billion (vs. previous estimate of $92 billion) and operating profit margin to increase to 12.4% (vs. previous estimate of 12.2%) for the holiday quarter.
Year-to-date, shares of LOW have soared roughly 20%, which is above the S&P 500’s almost 25% gain. Earnings estimates have been rising too, and Lowe’s is a Zacks Rank #1 (Strong Buy) stock right now.
For fiscal 2021, 12 analysts have revised their bottom-line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up 62 cents to $11.91 per share. Earnings are expected to jump more than 34% compared to the prior year period. Fiscal 2022 looks strong too; 12 analysts have upped their outlook as well, and our consensus estimate has increased 78 cents to $12.60 per share.
Even throughout this year’s economic reopening, it’s become clear that the home is now an even more essential place for people; we’re still choosing to exercise at home, entertain at home, and work from home, and this kind of consumer behavior will only continue to benefit companies like Lowe’s.
Plus, Lowe’s is a Dividend King, having raised its dividend for 59 straight years. Shares currently yield 1.3% on an annual basis.
If you’re an investor searching for a home improvement stock to add to your portfolio, make sure to keep LOW on your shortlist.
Bear of the Day
:
Based in Harrisburg, PA,
Ollie’s Bargain Outlet
is a popular discount retailer that sells a wide range of products under the Ollie’s, Ollie’s Army, and Good Stuff Cheap, among others. As of this past May, the company operates 360 outlets in 25 states.
Q3 Earnings Miss Expectations
Shares of OLLI dived 20% last Friday following weaker-than-expected Q3 results.
Both Ollie’s top and bottom line lagged the consensus estimate. The retailer earned $0.34 per share on revenue of $383.5 million compared to expectations of $0.47 per share and revenue of $410.1 million.
Total sales were down 7.5% year-over-year.
On a two-year basis, comparable store sales were down 1.3% but slumped 15.5% versus the third-quarter period of 2020.
Gross profit slid 11% while gross margin shrunk by 160 basis points due to a rise in supply chain costs, higher import and trucking costs, and increased wage rates in the distribution centers.
But, Ollie’s opened 18 new stores during the quarter, bringing its total count to 426 stores throughout 29 states; store count grew 10.6% year-over-year.
Ollie’s now expects revenue to fall between $1.76 billion and $1.77 billion for fiscal 2021, down from $1.80billion reported in fiscal 2020. The company also anticipates fourth-quarter comps to be flat to down 2% compared to fiscal 2019.
Bottom Line
OLLI is now a Zacks Rank #5 (Strong Sell).
Five analysts have cut their full year earnings outlook over the past 60 days. Ollie’s bottom line is expected to decline about 23.7% year-over-year, and the consensus estimate has fallen 26 cents to $2.41 per share for fiscal 2021. Next year’s earnings consensus has dropped as well, but Wall Street expects earnings to increase by over 7% to $2.59 per share.
Shares have been volatile so far in 2021. Year-to-date, OLLI has fallen 37% compared to the S&P 500’s gain of almost 25%.
While CEO John Swygert and the rest of Ollie’s management team are still bullish about the company’s growth opportunities, as well as its ability to secure quality inventory for next year, business may still be rocky for the time being.
Supply chain challenges that have plagued the company this year don’t look to be easing in time for the holiday quarter. Until management is sure those issues are behind it, potential investors may want to wait on the sidelines until the near-term outlook improves.
Additional content:
Toyota (TM) to Build 1st U.S. Battery Plant in North Carolina
Toyota Motor
recently announced its decision to build the first battery factory in the United States in North Carolina to bring its electric vehicle (EV) supply chain to the country.
The Japan-based automaker plans to invest $1.29 billion in the battery plant, to be named Toyota Battery Manufacturing, North Carolina (TBMNC). The facility is expected to create 1,750 new jobs and use 100% renewable energy to make the batteries. The production is anticipated to commence in 2025.
TBMNC will initially have four production lines, each capable of manufacturing battery packs for around 200,000 cars annually. Toyota eventually aims to add two more lines, with the goal to rev up the total production capacity to battery packs sufficient for 1.2 million vehicles per year.
The auto biggie chose North Carolina for the plant location. It offers the appropriate conditions for this investment, including a developed infrastructure, a high-quality education system, and access to a skilled workforce. Further, North Carolina’s Economic Investment Committee has approved a $438.7-million tax incentive package to encourage Toyota to build a factory in the state.
With the aggravating climate-change concerns, automakers across the globe have been revving up their EV efforts in order to roll out more environmentally friendly vehicles on the road. The development of batteries used to power EVs has become crucial in order to decarbonize the global economy. Global automakers have enhanced their investments in battery production as they compete with the EV behemoth
Tesla
.
Amid this changing scenario, Toyota has also been a pioneer in the mass production of solid-state batteries, revolutionizing the EV space.
The latest investment decision forms part of Toyota’s wider commitment to investing $3.4 billion (380 billion yen) for automotive battery development and production in the United States through 2030. Moreover, the latest project is expected to help Toyota advance its climate goals to achieve carbon neutrality sustainably. Also, the investment is expected to usher in an era of more affordable EVs for U.S. consumers.
Toyota’s Electrification Strides
Toyota has been the king of hybrid vehicles since the introduction of its popular Prius compact vehicle. It has also been investing in fuel-cell vehicles like the Mirai and sells the UX300e in Europe and China. However, the auto giant has been relatively slower in the adoption of EVs into its line-up and has no pure-electric offerings at the moment.
Nonetheless, the automaker is set to roll out its first all-electric line-up next year in an attempt to quell criticism that it has been slow to shift to electric cars. It also plans to build about 70 hybrid or electric models by 2025, of which 15 will be fully electric. It targets to sell 8 million partially or fully electrified vehicles by 2030. About 2 million will be battery-powered cars and fuel-cell vehicles, while the other 6 million will be gasoline-electric hybrids or plug-in hybrids.
Further, to cater to the surging demand for clean energy vehicles in the United States, this Zacks Rank #3 (Hold) company envisions EVs to account for nearly 70% of its U.S. sales by 2030, up from almost 25% currently. The company expects to sell as many as 1.8 million electrified vehicles in the United States by 2030, including the zero-emission models.
This September, TM earmarked more than $13.5 billion for investment in battery development and production through 2030. It also intends to slash the cost of its batteries by 30-50%. It anticipates achieving this goal by working on the raw materials used to produce batteries and the way the battery cells are structured. It also plans to optimize the power consumption of these batteries by 30%, starting with its upcoming compact SUV model — Toyota bZ4X — unveiled recently, where “bZ” stands for “beyond zero,” highlighting Toyota’s goal to become carbon neutral by 2050. It aims to set up a total of 70 EV battery lines by 2030, capable of producing 200-gigawatt hours of battery power.
Auto Companies to Focus On
A few better-ranked stocks in the auto space include Tesla and
Goodyear Tire
, which flaunt a Zacks Rank of 1 (Strong Buy). You can see
the complete list of today’s Zacks #1 Rank stocks here.
Tesla has an expected earnings growth rate of 166.96% for the current year. The Zacks Consensus Estimate for its current-year earnings has been revised upward by 6 cents over the last 30 days.
Tesla beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missing once. TSLA has a trailing four-quarter earnings surprise of 25.38%, on average. Its shares have rallied 57.3% over the past year.
Harley-Davidson has an expected earnings growth rate of 34.92% for the current quarter. The Zacks Consensus Estimate for its current-year earnings has been revised upward by 2 cents over the last 30 days.
Harley-Davidson beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missing once. HOG has a trailing four-quarter negative earnings surprise of 138.45%, on average. Its shares have dropped around 4.2% over the past year.
Goodyear has an expected earnings growth rate of 196.86% for the current year. The Zacks Consensus Estimate for its current-year earnings has been revised upward by 42 cents over the last 30 days.
Goodyear beat the Zacks Consensus Estimate for earnings in the last four quarters. GT has a trailing four-quarter earnings surprise of 228.45%, on average. Its shares have rallied 100.5% over the past year.
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