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Beacon Roofing Supply, Inc. BECN has expanded its market reach by launching its no-cost digital tool, Beacon PRO+, in Canada.
Many U.S. roofing contractors use Beacon PRO+ to manage their business and sales process anywhere and anytime. This convenient tool allows customers to find optimized product descriptions and specifications for their area and order templates, thus enabling a complete and accurate order.
Contractors in Canada can avail of the Beacon PRO+ in English and French, thereby enabling them to stand out from competitors with responsiveness and efficient planning. The revolutionary digital platform is on the job 24/7, making business transactions faster for Canadian contractors.
BECN stock gained 1.3% during the trading hours and 0.5% in the after-hours on Monday, post the announcement.
BECN’s Focus on Ambition 2025 Plan
Beacon has been intently focusing on several strategic initiatives to drive its long-term ambition of growing and enhancing customer experience, expanding its top line and margin and boosting value for customers, suppliers, employees and shareholders. To add value to the aforementioned expectations, the company is currently focusing on delivering the expected targets through the Ambition 2025 plan.
Expanding its digital platforms and market penetration is one of the key elements of Beacon’s Ambition 2025 plan. It continues to drive growth and enhance margins through its digital initiatives. In the second quarter of 2024, the company’s digital sales rose nearly 22% year over year and reached approximately 26% of residential sales, underscoring contractors’ growing demand for digital tools. Furthermore, during the said time, sales through the digital platform boosted customer loyalty, increased basket sizes and enhanced margins by approximately 150 basis points compared with offline channels.
Shares of this publicly traded distributor of residential and non-residential roofing materials gained 10.1% in the past year compared with the Zacks Building Products - Retail industry’s 21.1% growth. Various external factors like weather and weaker storm demand along with ongoing macroeconomic uncertainties might have been impacting the stock’s performance. Nonetheless, the focus on fulfilling the Ambition 2025 plan through the necessary strategic efforts positions BECN well for growth in the near term.
BECN’s Zacks Rank & Key Picks
Beacon currently carries a Zacks Rank #3 (Hold).
Here are some better-ranked stocks from the Zacks Retail-Wholesale sector.
Abercrombie & Fitch Co. ANF currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
ANF has a trailing four-quarter earnings surprise of 28%, on average. The stock has surged 164.5% in the past year. The Zacks Consensus Estimate for ANF’s fiscal 2024 sales and earnings per share (EPS) indicates growth of 13.1% and 63.4%, respectively, from the year-ago period’s levels.
Boot Barn Holdings, Inc. BOOT currently sports a Zacks Rank of 1. BOOT has a trailing four-quarter earnings surprise of 7.1%, on average. The stock has gained 80.6% in the past year.
The consensus estimate for BOOT’s fiscal 2025 sales and EPS indicates growth of 11.6% and 10.7%, respectively, from the year-ago period’s levels.
Sprouts Farmers Market, Inc. SFM currently sports a Zacks Rank of 1. SFM has a trailing four-quarter earnings surprise of 12%, on average. The stock has risen 161.7% in the past year.
The Zacks Consensus Estimate for SFM’s 2024 sales and EPS indicates a rise of 9.6% and 18.7%, respectively, from the year-ago period’s levels.
Zacks Investment Research
For Immediate Release
Chicago, IL – September 17, 2024 – Zacks Equity Research shares Sprouts Farmers Market SFM as the Bull of the Day and Tenaris TS as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Berkshire Hathaway Inc.’s (BRK.B), NVR, Inc. NVR and Lennar Corp. LEN.
Here is a synopsis of all five stocks:
Bull of the Day:
Sprouts Farmers Market, a Zacks Rank #1 (Strong Buy), provides natural and organic food products primarily in the United States. Shares of the healthy grocer are widely outperforming the market this year with the backing of a leading industry group. The stock is hitting a series of 52-week highs and displaying relative strength as buying pressure accumulates in this top-ranked stock.
SFM stock is part of the Zacks Foods – Natural Foods Products industry group, which currently ranks in the top 29% out of more than 250 Zacks Ranked Industries. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform the market over the next 3 to 6 months, just as it has consistently over the past year.
Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
Company Description
Sprouts Farmers Market boasts a unique grocery model, offering a variety of fresh produce, meats, seafood, dairy, vitamins, and other supplements. Founded in 1943, the Phoenix-based grocer operates more than 400 stores in 23 states.
The company’s focus on product innovation and expansion of private label offerings bodes well for the future. The organic foods provider has witnessed a remarkable surge in e-commerce sales this year, expanding its digital footprint through key partnerships with Uber Eats, DoorDash, and Instacart.
An aggressive expansion plan to open 35 new stores in 2024 underscores its confidence in long-term growth. Sprouts has invested heavily to improve operational efficiencies, highlighted by its Fresh Item Management Technology which deploys computer-assisted ordering methods.
Earnings Trends and Future Estimates
The top-ranked company has put together an impressive earnings history, surpassing earnings estimates in each of the past twenty consecutive quarters. Back in July, Sprouts reported second-quarter earnings of $0.94/share, a 22.1% surprise over the $0.77/share consensus estimate.
The grocer has delivered a trailing four-quarter average earnings surprise of nearly 12%. Consistently beating earnings estimates is a recipe for success and bolsters the bullish case.
SFM shares received a boost as analysts covering the company have been increasing their third-quarter earnings estimates lately. For the current quarter, earnings estimates have risen 8.7% in the past 60 days. The Q3 Zacks Consensus EPS Estimate now stands at $0.75/share, reflecting a potential growth rate of 15.4% relative to the year-ago period.
Let’s Get Technical
SFM stock has advanced more than 100% this year alone. This is the kind of stock we want to include in our portfolio – one that is trending well and receiving positive earnings estimate revisions.
Only stocks that are in extremely powerful uptrends are able to witness this type of price move. SFM shares broke out to a series of all-time highs back in August, even as the general market pulled back. Stocks that hold up well through periods of volatility tend to lead the next leg higher.
Notice how both the 50-day (blue line) and 200-day (red line) moving averages are sloping up. The stock has been widely outperforming the major indices, indicating a prolonged period of relative strength. With both strong fundamental and technical indicators, SFM stock is poised to continue its outperformance.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, Sprouts Farmers Market has recently witnessed positive revisions. As long as this trend remains intact (and SFM continues to deliver earnings beats), the stock will likely continue its bullish run into the end of this year and beyond.
Bottom Line
A promising combination of accelerating growth and momentum metrics bodes well for SFM shareholders, as the trend appears set to continue in the quarters ahead.
Backed by a top industry group and impressive history of earnings beats, it’s not difficult to see why this company is a compelling investment. Robust fundamentals combined with an appealing technical outlook certainly justify adding shares to the mix. The future looks bright for this highly-ranked, leading stock.
Bear of the Day:
Tenaris is a global manufacturer and supplier of steel pipe products and associated services to the oil and gas, energy, and related industries. The company produces and sells seamless and welded steel tubular products such as steel casings, which sustain the walls of oil and gas wells during and after drilling.
Based in Luxembourg, Tenaris also manufactures and distributes steel line pipes to transport crude oil and natural gas from wells to refineries, storage tanks and distribution centers. In addition, the company provides premium joints and couplings for use in high pressure or high temperature environments, as well as coiled tubing for oil drilling and subsea pipelines.
The Zacks Rundown
Tenaris, a Zacks Rank #5 (Strong Sell) stock, is a component of the Zacks Steel – Pipe and Tube industry group, which currently ranks in the bottom 26% out of approximately 250 Zacks Ranked Industries. As such, we expect this industry group as a whole to underperform the market over the next 3 to 6 months, just as it throughout the year.
Candidates in the bottom tiers of industries can often be intriguing short candidates. While individual stocks have the ability to outperform even when included in a lackluster industry, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much more difficult.
Along with many other steel-related stocks, TS shares have been struggling this year while the general market returned to new heights. The stock is hitting a series of lower lows and represents a compelling short opportunity as we head deeper into the latter half of the year.
Recent Earnings Misses & Deteriorating Outlook
Tenaris has fallen short of earnings estimates in four of the past eight quarters. Back in July, the company reported second-quarter earnings of $0.59/share, missing the $0.97/share Zacks Consensus estimate by -39.2%. Consistently falling short of earnings estimates is a recipe for underperformance, and TS is no exception.
CEO Paolo Rocca stated during the Q2 earnings call that despite high levels of oil and gas production in the United States, drilling activity has decreased, resulting in “reduced overall demand for pipes.” He also touched on the company’s outlook in other regions.
“The change in the government in Mexico and the uncertainties surrounding the policy for the energy sector are limiting drilling investment in the country. In Argentina, the necessary stabilization of the macroeconomic environment is delaying investment in drilling and the development of infrastructure in Vaca Muerta. This factor will affect our sales and results in the second half, when we expect that our sales volume will be 10% to 15% below those of the first half.”
Tenaris has been on the receiving end of negative earnings estimate revisions as of late. Looking at the current quarter, analysts have slashed estimates by -19.44% in the past 60 days. The Q3 Zacks Consensus Estimate is now $0.58/share, reflecting negative growth of -36.3% relative to the prior year.
Falling earnings estimates are a huge red flag and need to be respected. Negative growth year-over-year is the type of trend that bears like to see.
Technical Outlook
As illustrated below, TS stock is in a sustained downtrend. Notice how the stock has made a series of lower lows, widely underperforming the major indices. Also note that shares are trading below downward-sloping 50-day (blue line) and 200-day average (red line) moving averages – another good sign for the bears.
TS stock has experienced what is known as a “death cross,” whereby the stock’s 50-day moving average crosses below its 200-day moving average. The stock would have to make an outsized move to the upside and show increasing earnings estimate revisions to warrant taking any long positions. Shares have fallen nearly 17% this year alone.
Final Thoughts
A deteriorating fundamental and technical backdrop show that this stock is not set to make its way to new highs anytime soon. The fact that TS is included in one of the worst-performing industry groups provides yet another headwind to a long list of concerns. A history of earnings misses and falling future earnings estimates will likely serve as a ceiling to any potential rallies, nurturing the stock’s downtrend.
Potential investors may want to give this stock the cold shoulder, or perhaps include it as part of a short or hedge strategy. Bulls will want to steer clear of TS until the situation shows major signs of improvement.
Additional content:
Mortgage Rates Are Falling: A Boon for 2 Warren Buffett Stocks
Warren Buffett-led Berkshire Hathaway Inc.’s portfolio hasn’t fared badly against the S&P 500’s return amid a higher interest rate environment. However, Buffett hopes for interest rate cuts like several market pundits as it would jack up the share price of two of his beloved housing stocks NVR, Inc. and Lennar Corp. Here’s why –
Freddie Mac Report: U.S. Mortgage Rates Drop
According to Freddie Mac, for the week ending Sept. 12, the 30-year fixed-rate mortgage slipped to its lowest level since February 2023. The rate on the 30-year loan averaged 6.2%, down from the four-week and 52-week averages of 6.34% and 6.93%, respectively. The 30-year mortgage rate hovered around the 7% mark for most of the year, but since late July, it has begun to cool off and has fallen since then.
The 15-year fixed mortgage average rate was 5.27%, down from the four-week and 52-week averages of 5.47% and 6.21%, respectively, a positive development for aspiring homeowners, added Freddie Mac. Mortgage rates in the United States have continued to soften over the past year.
Why Are Mortgage Rates Falling?
An increase in expectations of a much-awaited interest rate cut in the Federal Reserve’s September policy meeting is pushing the yields on long-term bonds lower leading to a drop in mortgage rates.
The Fed is expected to trim interest rates as price pressures ebb toward the central bank’s 2% target. The interest rate cut would be the first one since March 2020, when the Fed slashed rates to boost economic growth derailed due to the pandemic. The interest rates have remained elevated for the past 14 months, waiting for economic conditions to improve.
According to the CME FedWatch Tool, around 59% of market participants expect the Fed to trim interest rates by 50 basis points in the upcoming policy meeting. Nearly 41% of traders are pricing in a quarter-point interest rate cut.
Drop in Mortgage Rates to Boost 2 Warren Buffett Stocks
The steady decline in mortgage rates on interest rate cut expectations should increase new home purchases, and boost homebuilders’ bottom line. Thus, two of Warren Buffett’s homebuilders, NVR and Lennar,are expected to see an increase in their stock prices.
After giving away his stake in D.R. Horton, Inc. DHI, the Oracle of Omaha hung onto these housing stocks as they would benefit from urbanization and a strong brand value. Berkshire Hathawayhas roughly $100 million of NVR shares and around $26 million of Lennar shares as of the company’s latest 13F filing, citing a CNBC article.
Key NVR Tailwinds: Increase in New Orders, Very Strong ROE
NVR’s profit margin is expected to improve as the company has witnessed an increase in new orders. In the second quarter, NVR’s new orders increased by 3% to 6,067 units from 5,905 units a year ago.
NVR has proficiently generated profits as the company’s return on equity (ROE) is 38.5%, more than the Building Products - Home Builders industry’s 18.3%. An ROE of more than 20% is usually considered very strong.
NVR’s expected earnings growth rate for the next five years is 7.6%. Its shares have gained 33.9% so far this year.
Key LEN Tailwinds: Dynamic Pricing Model, Lower Debt
Lennar is well-positioned to gain from its dynamic pricing model, which helps the company set prices based on demand trends and ever-changing market scenarios. This, in turn, aids Lennar in improving cash flow and return on inventory.
Lennar has a debt-to-equity of 8.3%, less than the industry’s 15.4%, a tell-tale sign that the company has less debt on its balance sheet than its peers, and can operate more efficiently in the long run.
LEN’s expected earnings growth rate for the next five years is 7.8%. Its shares have gained 24.7% year to date.
Fear Not, If the Fed Doesn’t Cut Rates
In the worst-cum-worst situation, if the Fed doesn’t cut interest rates, shares of NVR and Lennar would still scale upward, thanks to the presidential election in November. Kamala Harris, a Democratic nominee wants to boost construction activity and provide financial assistance to first-time home buyers.
Moreover, millennials are about to settle into a family life leading to increased demand for houses, a blessing for NVR and Lennar. Both stocks have a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
https://www.zacks.com
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Zacks Investment Research
Zumiez Inc. ZUMZ has demonstrated strong upward momentum, consistently trading above both its 200-day and 100-day simple moving averages (SMA), which are important indicators of price stability and long-term bullish trends. As of Friday, ZUMZ was trading at $22.44, which surpassed both its 200-day SMA of $19.36 and its 100-day SMA of $21.51, highlighting a continued uptrend.
SMA is a key tool in technical analysis used to assess price trends by smoothing out short-term fluctuations, offering a clearer view of the stock's longer-term direction. This technical strength, along with the stock's sustained momentum, reflects positive market sentiment and investor confidence in Zumiez's financial health and growth prospects.
The company has seen a substantial 36.2% jump in its stock price over the past year compared with the Zacks Retail-Apparel and Shoes industry’s 27.2% growth. Also, it outpaced the broader Retail-Wholesale sector's 24.2% growth and the S&P 500 index's 25.7% rise over the said period. Currently, ZUMZ is trading 28.5% below its 52-week high of $31.37, reached on Sept. 6, 2024.
From a valuation perspective, Zumiez’s shares present an attractive opportunity, trading at a discount relative to industry benchmarks. With a forward 12-month price-to-sales ratio of 0.47, which is below the five-year median of 0.58 and the industry’s average of 1.12, the stock offers value for investors seeking exposure to the sector. Moreover, ZUMZ’s current Value Score of A bodes well.
Zumiez Gains on Customer-Centric Focus, Cost Management
Zumiez’s strategic emphasis on a customer-centric business model, strong brand partnerships and careful cost management drove positive results in the second quarter of fiscal 2024. The company has invested in advanced technology to improve the shopping experience across all channels, enhancing its logistics and omnichannel capabilities, which has further solidified its competitive position.
In the second quarter, total sales grew 8.1% year over year to $210.2 million, primarily fueled by the strength of the North American market, where sales rose 10.4%. Comparable sales increased 3.6%, supported by higher average unit retail prices and a greater number of units sold per transaction. The early back-to-school season also played a role, contributing around 530 basis points to net sales growth.
Zumiez’s private label brands, which made up 23% of sales in fiscal 2023, continue to capture market share, appealing to value-conscious consumers. With plans to expand its private-label offerings in 2024, the company is well-positioned for sustained revenue growth. Gross profit improved to $71.8 million in the second quarter. The gross margin was 34.2%, up 250 basis points from the previous year, due to reduced store occupancy and distribution costs, among other factors.
In Europe, Zumiez has shifted from rapid store expansion to existing store productivity optimization, with a strategic push toward full-price selling. This change has already improved merchandising margins in the region. Additionally, the company has been closing underperforming stores in North America while expanding in key markets globally, alongside initiatives to optimize labor and reduce logistics costs to enhance long-term profitability.
ZUMZ’s International Sales Under Pressure
Despite strong results in North America, Zumiez's international sales, particularly in Europe, declined 2.6% year over year to $33.9 million in the second quarter, with a 7.6% drop in international comparable sales. The shift to full-price selling in a tough retail environment has pressured growth, raising concerns about the company's ability to improve performance in key international markets. Continued weakness is likely to impact overall revenue growth.
Zumiez Q3 & Fiscal 2024 Guidance
Nonetheless, Zumiez remains optimistic about its third-quarter and full-year performance. The company forecasts third-quarter sales to be between $221 million and $225 million, reflecting a 2-4% year-over-year increase, with comparable sales up 12.1% through Sept. 2. Despite macroeconomic uncertainties, it anticipates low single-digit sales growth for fiscal 2024, driven by stable revenue and ongoing cost efficiencies, supporting positive operating margins.
Final Thoughts
Investors should consider ZUMZ as a promising stock due to its strong technical performance and positive financial outlook. The company's ability to trade above key moving averages, along with consistent growth in North American sales and expansion in private label offerings, positions it well for growth.
While international sales, particularly in Europe, remain a challenge, Zumiez’s strategic focus on cost management, efficiency improvements and omnichannel capability expansion provides a solid foundation for sustained profitability. Trading at a discount relative to industry benchmarks and with a strong Value Score, ZUMZ offers an attractive opportunity for investors seeking both stability and growth potential. The company currently carries a Zacks Rank #3 (Hold).
Key Picks
Some better-ranked stocks are Boot Barn Holdings, Inc. BOOT, Abercrombie & Fitch Co. ANF and Steven Madden, Ltd. SHOO.
Boot Barn operates as a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Boot Barn’s fiscal 2025 earnings and sales indicates growth of 10.7% and 11.6%, respectively, from the fiscal 2024 reported figures. BOOT has a trailing four-quarter average earnings surprise of 7.1%.
Abercrombie is a specialty retailer of premium, high-quality casual apparel. It sports a Zacks Rank of 1 at present. ANF delivered a 16.8% earnings surprise in the last reported quarter.
The consensus estimate for Abercrombie’s fiscal 2025 earnings and sales indicates growth of 63.4% and 12.6%, respectively, from the fiscal 2024 reported levels. ANF has a trailing four-quarter average earnings surprise of 28%.
Steven Madden designs, sources, markets and sells fashion-forward name-brand and private-label footwear. It currently has a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Steven Madden’s 2024 earnings and sales indicates growth of 6.9% and 12.6%, respectively, from the year-ago actuals. SHOO has a trailing four-quarter average earnings surprise of 9.5%.
Zacks Investment Research
Steven Madden, Ltd. SHOO is currently trading at a notably low price-to-earnings (P/E) multiple, which is below the Zacks Shoes and Retail Apparel industry and broader Consumer Discretionary averages. SHOO's forward 12-month P/E ratio is 16.20, lower than the industry average of 21.78 and the sector average of 17.27.
The stock is undervalued compared with its industry peers, thereby offering compelling value to investors looking for exposure to the retail apparel sector. Furthermore, SHOO's Value Score of A underscores its appeal as a potential investment.
SHOO gained 45.6% against the industry’s sharp 15.4% decline in the past year. The company’s strategic approach, along with its market expansion and product diversification endeavors, has helped it outperform the broader sector and the S&P 500 index, which grew 8.5% and 25.7%, respectively, during the same period. Closing at $45.76 on Monday, Steven Madden’s stock is currently trading 3% below its 52-week high of $47.24, attained on July 31, 2024.
Moreover, technical indicators are supportive of Steven Madden’s strong performance. The stock is trading above both its 50-day and 200-day moving averages, thus indicating robust upward momentum and price stability. This technical strength reflects positive market perception and confidence in the company’s financial health and prospects.
SHOO's Strategic Growth Driven by Diversification, Expansion
Steven Madden has successfully implemented a strategic approach to drive growth across multiple segments, with a strong emphasis on its direct-to-consumer (DTC) business and international markets. The company's expansion beyond footwear into categories such as handbags and apparel, along with investments in digital capabilities, resulted in substantial revenue gains across these segments during the second quarter. The acquisition of Almost Famous has further strengthened Steven Madden's apparel offerings, contributing to the its robust growth trajectory.
The wholesale segment delivered strong results, with revenues increasing 22.5% year over year to $385.3 million in the second quarter. Notably, wholesale accessories and apparel revenues surged 86%, showcasing the company’s successful diversification beyond its core footwear segment. Excluding the Almost Famous acquisition, wholesale revenues grew 8.2% while accessories and apparel revenues rose 29.8%.
The DTC segment also displayed resilience, with revenues increasing 6.4% year over year to $136.4 million. Comparable DTC sales grew 4.1%, driven by strong product assortments and effective inventory management, which minimized the need for promotional discounts.
In addition to product diversification, Steven Madden has been aggressively expanding its international presence, identifying it as a key long-term growth driver. International revenues grew 13% year over year in the second quarter, with the EMEA region emerging as a standout performer. The company expects EMEA revenues to grow more than 20% in 2024.
Steven Madden's Financial Strength and Promising Outlook
Steven Madden's second-quarter financials highlight its strong fiscal health and prudent capital management. As of June 30, 2024, the company held $180.5 million in cash and cash equivalents, along with $11.8 million in short-term investments, demonstrating a solid liquidity position. Notably, it had no outstanding debt, reflecting its careful financial stewardship.
The repurchase of $38.2 million in common stock, including shares acquired through employee stock award settlements, underscores the company’s confidence in its valuation and its commitment to returning value to shareholders. Additionally, the approval of a 21-cent quarterly dividend, payable on Sept. 23, 2024, to shareholders of record as of Sept. 13, further reinforces its strong financial footing and shareholder-friendly policies.
Looking ahead, Steven Madden is well-positioned to capitalize on growth opportunities in both domestic and international markets. The recovery in the U.S. wholesale footwear business is a positive sign of inventory normalization and improved relationships with key retail partners. The company expects 2024 revenues to increase in the band of 11-13% from 2023, with adjusted earnings per share (EPS) projected to be in the range of $2.55-$2.65 compared with $2.30 in 2023.
Conclusion
Investors should consider Steven Madden stock due to its strong financial position, strategic growth initiatives and attractive valuation. The company's focus on expanding its product offerings, particularly in apparel and accessories, coupled with its successful international expansion, positions it well for continued growth.
In addition, SHOO's strong liquidity, debt-free balance sheet and commitment to returning value to shareholders through stock buybacks and dividends further enhance its appeal. With a Zacks Rank #2 (Buy), the stock is well-positioned for long-term growth and value creation, making it an attractive investment opportunity.
Other Key Picks
Other top-ranked stocks are Boot Barn Holdings, Inc. BOOT, Abercrombie & Fitch Co. ANF and Deckers Outdoor Corporation DECK.
Boot Barn operates as a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Boot Barn’s fiscal 2025 earnings and sales indicates growth of 10.7% and 11.6%, respectively, from the fiscal 2024 reported figures. BOOT has a trailing four-quarter average earnings surprise of 7.1%.
Abercrombie is a specialty retailer of premium, high-quality casual apparel. It sports a Zacks Rank of 1 at present. ANF delivered a 16.8% earnings surprise in the last reported quarter.
The consensus estimate for Abercrombie’s fiscal 2025 earnings and sales indicates growth of 63.4% and 12.6%, respectively, from the fiscal 2024 reported levels. ANF has a trailing four-quarter average earnings surprise of 28%.
Deckers is a leading designer, producer and brand manager of innovative, niche footwear and accessories. It currently has a Zacks Rank of 2.
The Zacks Consensus Estimate for Deckers’ fiscal 2025 earnings and sales indicates growth of 8.4% and 11.5%, respectively, from the year-ago actuals. DECK has a trailing four-quarter average earnings surprise of 47.2%.
Zacks Investment Research
Sprouts Farmers Market, a Zacks Rank #1 (Strong Buy), provides natural and organic food products primarily in the United States. Shares of the healthy grocer are widely outperforming the market this year with the backing of a leading industry group. The stock is hitting a series of 52-week highs and displaying relative strength as buying pressure accumulates in this top-ranked stock.
SFM stock is part of the Zacks Foods – Natural Foods Products industry group, which currently ranks in the top 29% out of more than 250 Zacks Ranked Industries. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform the market over the next 3 to 6 months, just as it has consistently over the past year:
This industry is also showing favorable characteristics as we can see below:
Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
Company Description
Sprouts Farmers Market SFM boasts a unique grocery model, offering a variety of fresh produce, meats, seafood, dairy, vitamins, and other supplements. Founded in 1943, the Phoenix-based grocer operates more than 400 stores in 23 states.
The company’s focus on product innovation and expansion of private label offerings bodes well for the future. The organic foods provider has witnessed a remarkable surge in e-commerce sales this year, expanding its digital footprint through key partnerships with Uber Eats, DoorDash, and Instacart.
An aggressive expansion plan to open 35 new stores in 2024 underscores its confidence in long-term growth. Sprouts has invested heavily to improve operational efficiencies, highlighted by its Fresh Item Management Technology which deploys computer-assisted ordering methods.
Earnings Trends and Future Estimates
The top-ranked company has put together an impressive earnings history, surpassing earnings estimates in each of the past twenty consecutive quarters. Back in July, Sprouts reported second-quarter earnings of $0.94/share, a 22.1% surprise over the $0.77/share consensus estimate.
The grocer has delivered a trailing four-quarter average earnings surprise of nearly 12%. Consistently beating earnings estimates is a recipe for success and bolsters the bullish case.
SFM shares received a boost as analysts covering the company have been increasing their third-quarter earnings estimates lately. For the current quarter, earnings estimates have risen 8.7% in the past 60 days. The Q3 Zacks Consensus EPS Estimate now stands at $0.75/share, reflecting a potential growth rate of 15.4% relative to the year-ago period.
Let’s Get Technical
SFM stock has advanced more than 100% this year alone. This is the kind of stock we want to include in our portfolio – one that is trending well and receiving positive earnings estimate revisions.
Only stocks that are in extremely powerful uptrends are able to witness this type of price move. SFM shares broke out to a series of all-time highs back in August, even as the general market pulled back. Stocks that hold up well through periods of volatility tend to lead the next leg higher.
Image Source: StockCharts
Notice how both the 50-day (blue line) and 200-day (red line) moving averages are sloping up. The stock has been widely outperforming the major indices, indicating a prolonged period of relative strength. With both strong fundamental and technical indicators, SFM stock is poised to continue its outperformance.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, Sprouts Farmers Market has recently witnessed positive revisions. As long as this trend remains intact (and SFM continues to deliver earnings beats), the stock will likely continue its bullish run into the end of this year and beyond.
Bottom Line
A promising combination of accelerating growth and momentum metrics bodes well for SFM shareholders, as the trend appears set to continue in the quarters ahead.
Backed by a top industry group and impressive history of earnings beats, it’s not difficult to see why this company is a compelling investment. Robust fundamentals combined with an appealing technical outlook certainly justify adding shares to the mix. The future looks bright for this highly-ranked, leading stock.
Zacks Investment Research
** Organic food retailer Sprouts Farmers Market's SFM.O shares rise ~4.96% to $107.16
** Evercore ISI upgrades stock to "outperform" from "in line", as SFM benefits from expanding demand for organic and fresh products from health-conscious consumers
** Brokerage raises stock PT to $120 from $96
** 3 of 16 analysts rate stock "buy" or higher, 13 "hold"; their median PT is $102- LSEG data
** Including session moves, stock more than doubled YTD
(Reporting by Prakhar Srivastava in Bengaluru)
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