Dj Mccormick & Corporate Inc. Stock Falls Friday, Underperforms Market

BJ’s Wholesale Club Holdings, Inc. BJ reported its third-quarter fiscal 2024 results, showcasing mixed performance. While revenues fell short of the Zacks Consensus Estimate, earnings surpassed expectations. Both metrics improved year over year, supported by decent comparable club sales growth.

The Marlborough, MA-based company achieved a significant milestone by growing its membership base to 7.5 million members and announced its first membership fee hike in seven years. BJ’s unveiled a new $1 billion share repurchase program, underscoring its commitment to shareholder value.

Strong pricing strategies, innovative merchandise initiatives and advancements in digital solutions positively influenced the quarter’s performance. Building on these factors, management raised its fiscal 2024 guidance.

Shares of this Zacks Rank #3 (Hold) company rose 8.3% during the trading session yesterday. In the past six months, the stock has advanced 11.5% against the industry’s decline of 1%.

BJ’s Third-Quarter Insights

BJ’s Wholesale Club reported adjusted earnings of $1.18 per share, which came ahead of the Zacks Consensus Estimate of 91 cents and increased from the $1.00 reported in the year-ago period.

See the Zacks Earnings Calendar to stay ahead of market-making news.

This operator of membership warehouse clubs generated total revenues of $5,099.4 million, which grew 3.5% from the year-ago quarter’s level but missed the consensus mark of $5,126 million. Net sales increased 3.4% to $4,984.4 million, while membership fee income jumped 8.4% to $115 million.

Total comparable club sales during the quarter under discussion rose 1.5% year over year. Excluding the impact of gasoline sales, comparable club sales jumped 3.8%, led by robust traffic, and fared better than our estimate of a 2% increase. Markedly, digitally enabled comparable sales advanced 30% during the quarter.

BJ's Wholesale also expanded its footprint by opening three new clubs and four new gas stations during the quarter. The company expects to operate more than 250 clubs by the end of fiscal 2024.

BJ's Wholesale Club Holdings, Inc. Price, Consensus and EPS Surprise

BJ's Wholesale Club Holdings, Inc. price-consensus-eps-surprise-chart | BJ's Wholesale Club Holdings, Inc. Quote

A Look at BJ’s Margins

The gross profit rose to $975.5 million from $902.5 million in the year-ago period. The merchandise gross margin rate, which excludes gasoline sales and membership fee income, expanded 20 basis points from the year-ago quarter’s level owing to efficient cost management.

The operating income increased 15.1% year over year to $229.4 million, while the operating margin, as a percentage of total revenues, rose 50 basis points to 4.5%. We note that adjusted EBITDA improved 13.5% to $308.3 million during the quarter, while the adjusted EBITDA margin expanded 50 basis points to 6%.

Selling, general and administrative (SG&A) expenses rose 5.2% from the year-ago quarter to $733.6 million. This reflects higher labor and occupancy costs stemming from new club and gas station openings in addition to other investments to drive strategic priorities. As a percentage of total revenues, SG&A expenses deleveraged 20 basis points to 14.4%. We had anticipated SG&A expenses to deleverage 40 basis points.

BJ’s Wholesale Financial Snapshot

BJ’s Wholesale Club ended the quarter with cash and cash equivalents of $33.9 million. The long-term debt amounted to $398.7 million, while stockholders’ equity was $1,762.2 million.

Net cash provided by operating activities and adjusted free cash flow totaled $206.8 million and $18.8 million, respectively, for the 13 weeks ended on Nov. 2, 2024. As part of its share repurchase program, the company bought back 679,499 shares worth $58.2 million in the quarter.

Recently, BJ’s board of directors approved a new share repurchase program, authorizing the repurchase of up to $1 billion worth of shares, with the program set to expire in January 2029.

BJ to Hike Membership Fee

BJ’s Wholesale Club announced its first membership fee increase in seven years, set to take effect on Jan. 1, 2025. The annual fee for the Club membership will rise by $5 to $60, while the Club+ membership will see a $10 increase to $120.

The company also introduced a new perk for Club+ members, including BJ’s One+ Mastercard cardholders. Starting Jan. 1, 2025, these members will receive two free same-day deliveries on eligible orders of $50 or more during each membership year.

Here is What BJ Guided

Following the results, BJ’s Wholesale Club updated its fiscal 2024 guidance. The company now anticipates fourth-quarter comparable club sales, excluding gasoline sales, to increase between 2.5% and 3% year over year, resulting in full-year growth of 2.3% to 2.4%. Merchandise gross margins for fiscal 2024 are expected to remain approximately flat compared to the prior year.

Management guided fourth-quarter adjusted earnings per share between 78 cents and 88 cents, bringing the full-year adjusted earnings in the range of $3.90-$4.00 per share.

The current projection reflects an upgrade from the company’s earlier guidance issued on Aug. 22, 2024, which had anticipated fiscal 2024 comparable club sales growth at the high end of a 1%-2% range and adjusted earnings per share leaning toward the lower end of the $3.75-$4.00 range.

Don’t Miss These Solid Bets

Sprouts Farmers SFM, which is engaged in the retailing of fresh, natural and organic food products, currently sports a Zacks Rank #1 (Strong Buy). SFM has a trailing four-quarter earnings surprise of 15.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Sprouts Farmers’ current financial-year sales and earnings implies growth of 12.2% and 29.6%, respectively, from the year-ago reported numbers.

McCormick & Company MKC is a global food company that manufactures, markets and distributes spices, condiments, seasoning mixes and other flavoring products. It currently carries a Zacks Rank #2 (Buy). MKC has a trailing four-quarter earnings surprise of 13.8%, on average.

The Zacks Consensus Estimate for McCormick & Company’s current financial-year sales and earnings suggests growth of around 0.6% and 8.2%, respectively, from the year-ago reported numbers.

Freshpet FRPT, which manufactures, distributes and markets natural fresh meals and treats for dogs and cats, currently carries a Zacks Rank #2. FRPT has a trailing four-quarter earnings surprise of 144.5%, on average.

The Zacks Consensus Estimate for Freshpet’s current financial-year sales and earnings implies growth of 27.3% and 224.3%, respectively, from the year-ago reported numbers.

Zacks Investment Research

Sprouts Farmers Market, Inc. SFM shares have gained 48.7% in the past three months, surpassing the industry and the broader S&P 500 index’s growth of 28.1% and 6.4%, respectively. This strong performance underscores the company’s solid business strategies and market positioning.

The post-election Wall Street rally has come to a halt as investors reassess the economy’s health and gauge the Federal Reserve’s pace of future rate cuts. The uncertainty has seen markets turn volatile over the past week, with all three major indexes retreating from their new record highs.

Given this situation, cautious investors looking for a steady income and safeguarding their capital may look to hold or buy dividend-paying stocks. Four such stocks are Churchill Downs Incorporated CHDN, La-Z-Boy Incorporated LZB, McCormick & Company, Incorporated MKC and Assurant, Inc. AIZ.

Inflation Rises Halting Wall Street Rally

Stocks rallied for two weeks after Donald Trump’s victory in the U.S. Presidential election, with the Dow and S&P 500 hitting news milestones. The Dow closed above $44,000 for the first time early last week, while the S&P 500 crossed the 6,000 mark. The tech-heavy Nasdaq also hit an individual high.

However, investors’ sentiment took a hit after the release of fresh data, which showed that inflation rose in October. The consumer price index (CPI) rose 0.2% month over month in October and 2.6% on a year-over-year basis. October’s monthly inflation reading was up 0.2% from September. Core CPI, which excludes the volatile food and energy costs, rose 0.3% month over month and 3.3% from the year-ago levels.

Stocks have pulled back from their previous highs due to increasing worries about the economy’s stability. While inflation has eased significantly in the past year, it remains above the Fed's 2% target, which may lead the central bank to reconsider its plans for future rate cuts.

The current market volatility is also being driven by concerns that the Federal Reserve may slow the pace of its rate cuts going forward. Since September, the Fed has slashed interest rates by 75 basis points, bringing its benchmark rate to a range of 4.5-4.75%. However, last week, Federal Reserve Chairman Jerome Powell said that the central bank does not need to "hurry" into cutting rates as long as the economic data supports such a move.

4 Stocks That Announced Dividend Hikes

Given this situation, investing in dividend-paying stocks would be a smart decision. These companies have stable operations and consistently pay out dividends, staying profitable due to their reliable business models. In a volatile market, companies that offer high dividend payouts generally perform better than those that don't pay dividends.

Churchill Downs Incorporated

Churchill Downs Incorporated the world's most legendary racetrack, has conducted Thoroughbred racing and presented America's greatest race, the Kentucky Derby. CHDN has Five racetracks; Six casinos; Big Fish Games, the world's largest distributor of casual games; The country's leading online wagering business, TwinSpires.com; A video poker business, A multi-state network of off-track betting facilities; and a collection of racing-related data, totalisator and telecommunication Churchill Downs presently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

On Nov. 20, Churchill DownsInc. announced that its shareholders would receive a dividend of $0.41 a share on Jan. 3, 2025. CHDN has a dividend yield of 0.28%. Over the past five years, Churchill DownsInc. has increased its dividend six times, and its payout ratio at present sits at 7% of earnings.Check Churchill Downs Incorporated’s dividend history here.

La-Z-Boy Incorporated

La-Z-Boy Incorporated is one of the world's leading residential furniture producers, marketing furniture for every room of the home. LZB’s Upholstery segment companies are La-Z-Boy and England. The Casegoods segment consists of three brands: American Drew, Hammary and Kincaid. La-Z-Boy Incorporated has a Zacks Rank #3.

On Nov. 19, La-Z-Boy declared that its shareholders would receive a dividend of $0.22 a share on Dec. 16, 2024. LZB has a dividend yield of 1.89%. Over the past five years, La-Z-Boy has increased its dividend seven times, and its payout ratio at present sits at 27% of earnings.Check La-Z-Boy Incorporated’s dividend history here.

McCormick & Company, Incorporated

McCormick & Company, Incorporated is a leading manufacturer, marketer and distributor of spices, seasonings, specialty foods and flavors to the entire food industry across the entire globe. MKC’s key sales, distribution and production facilities are located in North America and Europe.

On Nov. 19, McCormick & Company announced that its shareholders would receive a dividend of $0.45 a share on Jan. 13, 2025. MKC has a dividend yield of 2.23%. Over the past five years, McCormick & Companyhas increased its dividend six times, and its payout ratio at present sits at 56% of earnings.Check McCormick & Company’s dividend history here.

Assurant, Inc.

Assurant, Inc is a global provider of risk management solutions in the housing and lifestyle markets, protecting where people live and the goods they buy. AIZ operates in North America, Latin America, Europe and Asia Pacific. Assurant was incorporated as a Delaware corporation in 2004.

On Nov. 19, Assurant declared that its shareholders would receive a dividend of $0.80 a share on Dec. 30, 2024. AIZ has a dividend yield of 1.31%. Over the past five years, Assurant has increased its dividend six times, and its payout ratio at present sits at 18% of earnings.Check Assurant’s dividend history here.

Zacks Investment Research

Tyson Foods, Inc. TSN is currently trading at a forward 12-month price-to-earnings (P/E) ratio of 17.51, higher than the industry average of 16.08. This premium valuation reflects the market's confidence in the company's potential to deliver strong profit growth. However, it remains to be seen if the company can report results that justify such a premium.

Shares of Tyson Foods have lagged in recent months, with a modest gain of 0.4% over the past three months, compared to the industry’s growth of 1.2% and the S&P 500’s increase of 6.4%. While a high valuation and the stock's recent underperformance suggest caution, the company's key growth strategies may appeal to investors.

Current Challenges for Tyson Foods

Tyson Foods, like many other global companies, faces ongoing macroeconomic uncertainties that could impact demand for protein products. Volatile currency movements, fluctuating commodity prices and potential slowdowns in consumer spending pose risks to both international and domestic operations.

The company has been grappling with challenges in its Beef segment, with profitability heavily impacted by compressed spreads and tight cattle supplies. For fiscal 2025, the United States Department of Agriculture (“USDA”) projects domestic protein production for beef to decline nearly 2% year over year. Tyson Foods expects a loss between $400 million and $200 million for the Beef segment in the fiscal, mirroring fiscal 2024 results.

In the fourth quarter of fiscal 2024, profitability in the Beef segment remained constrained despite a 4.6% revenue increase. While Tyson Foods has implemented operational efficiencies, such as reducing costs and improving yields, approximately 85% of the segment's performance remains dictated by uncontrollable market dynamics, including cattle availability and pricing volatility. These persistent headwinds signal continued difficulty in achieving a meaningful recovery in the Beef segment.

Tyson Foods' Pork segment also faces challenges stemming from pricing pressures and a constrained market environment. The segment saw a 3.7% decline in revenues during the fourth quarter, attributed to lower pricing on dropped credit items. While Tyson Foods has made strides in optimizing its pork network and expanding its portfolio with seasoned and marinated products, the broader market conditions and pricing constraints could negate these operational gains, potentially stalling momentum in this segment.

Despite delivering an adjusted operating income (AOI) increase of $270 million year over year in fiscal 2024, driven by improved operational execution and healthier herd dynamics, the company anticipates flat profitability for fiscal 2025, with AOI projected between $100 million and $200 million. This limited upside reflects the risk of tightening spreads and challenges in maintaining margins in a competitive protein market.

TSN’s Growth Strategy on Track

Tyson Foods’ diversified protein portfolio enables the company to navigate market cycles effectively. While beef and pork face near-term challenges, the strong performance of chicken and prepared foods underscores the resilience of the company’s multi-protein approach. The company also plans to expand its international footprint by improving capacity utilization and aligning operations with regional market needs, diversifying its growth avenues. Tyson Foods’ multi-channel, multi-protein strategy is central to its long-term resilience and growth, allowing it to capitalize on different market opportunities as they arise.

Tyson Foods' growth strategy is anchored in three key pillars: operational excellence, customer and consumer obsession and sustainability. Operational excellence is achieved through continuous improvement initiatives that enhance productivity and efficiency across all segments, supported by a robust supply-chain optimization strategy. The second pillar, customer and consumer obsession, drives Tyson Foods’ commitment to understanding and responding to evolving consumer preferences.

Tyson Foods’ focus on sustainability underscores its commitment to ethical sourcing and responsible production practices, addressing the increasing consumer demand for sustainable food options. Together, these pillars position Tyson Foods for continued growth and resilience in the competitive protein market.

Tyson Foods exhibited a significant turnaround in fiscal 2024, with adjusted operating income (AOI) of $1.8 billion, nearly doubling from fiscal 2023. In the fourth quarter of fiscal 2024, the company’s AOI soared considerably to $512 million from the $236 million reported in the year-ago period. The adjusted earnings per share (EPS) increased from 37 cents to 92 cents in the quarter, marking the strongest quarterly performance in eight quarters. Improved operational efficiency and disciplined cost management led to the upside, keeping the company well-positioned for the future.

What to Expect From TSN?

Tyson Foods’ fiscal 2025 guidance anticipates flat to slightly declining net sales, with volume growth in prepared foods and chicken likely to be offset by declines in beef and pork. Beef volumes are particularly vulnerable to supply constraints, and pork could face challenges from tighter spreads despite operational improvements. This stagnant volume growth outlook may deter investor confidence in the company’s ability to drive top-line expansion.

However, the fiscal 2025 AOI is envisioned in the $1.8-$2.2 billion band, suggesting nearly 10% growth at the midpoint, driven by strength in prepared foods and chicken. This optimistic outlook is further reinforced by operational excellence, strategic brand focus and robust free cash flow generation.

Reflecting the positive sentiment around Tyson Foods, analysts have revised their estimates upward. The Zacks Consensus Estimate for the current and next fiscal year earnings per share have increased in the past seven days. These estimates suggest year-over-year growth rates of 12.9% and 22.8%, respectively.

Investors’ Guide to TSN Stock

Tyson Foods’ strong profit growth potential, driven by its diversified protein portfolio and strategic initiatives, looks somewhat shadowed by challenges in key segments like Beef and Pork. While operational efficiencies and sustainability efforts bolster TSN’s long-term growth prospects, near-term headwinds need attention. Investors will need to weigh Tyson Foods' robust strategic framework and operational improvements against ongoing market uncertainties to determine whether its premium valuation is justified. The company currently carries a Zacks Rank #3 (Hold).

Top Three Consumer Staple Picks

Ingredion Incorporated INGR manufactures and sells sweeteners, starches, nutrition ingredients and biomaterial solutions derived from wet milling and processing corn and other starch-based materials. The company currently sports a Zacks Rank #1 (Strong Buy). INGR has a trailing four-quarter earnings surprise of 9.5%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Ingredion’s current financial year’s earnings indicates growth of 12.5% from the year-ago reported number.

Freshpet Inc. FRPT manufactures, distributes and markets natural fresh meals and treats for dogs and cats. It currently carries a Zacks Rank #2 (Buy). FRPT has a trailing four-quarter earnings surprise of 144.5%, on average.

The Zacks Consensus Estimate for Freshpet’s current financial-year sales and earnings indicates growth of 27.3% and 224.3%, respectively, from the prior-year reported levels.

McCormick & Company MKC, which manufactures, markets and distributes spices, seasoning mixes, condiments and other flavorful products, currently carries a Zacks Rank #2. MKC has a trailing four-quarter earnings surprise of 13.8%, on average.

The Zacks Consensus Estimate for McCormick’s current fiscal-year sales and earnings indicates growth of 0.6% and 8.2%, respectively, from the prior-year reported levels.

Zacks Investment Research