GIL or KTB: Which Is the Better Value Stock Right Now?

Dividend investing has been a popular choice among investors. This strategy focuses on companies that not only pay dividends but also consistently increase them over time. This approach offers a unique blend of income and growth potential, appealing to a broad range of investors, from those seeking steady income to those aiming for long-term capital appreciation. Additionally, the strategy can provide a sense of security in times of market uncertainty or downturns.

Stocks with a strong history of year-over-year dividend growth form a healthy portfolio with a greater scope of capital appreciation than simple dividend-paying stocks or those with high yields. We have selected five dividend growth stocks — InterDigital, Inc. IDCC, Greenbrier Companies Inc. GBX, Leidos Holdings Inc. LDOS, ResMed Inc. RMD and Kontoor Brands KTB — which could be solid choices for your portfolios.

Why Dividend Growth Strategy?

Stocks that have a strong history of dividend growth belong to mature companies, which are less susceptible to large swings in the market and thus act as a hedge against economic or political uncertainty as well as stock market volatility. At the same time, these offer downside protection with their consistent increase in payouts.

Additionally, these stocks have superior fundamentals that make dividend growth a quality and promising investment for the long term. These include a sustainable business model, a long track of profitability, rising cash flows, good liquidity, a strong balance sheet and some value characteristics. Further, a history of strong dividend growth indicates that a dividend increase is likely in the future.

Although these stocks do not necessarily have the highest yields, they have outperformed for a longer period than the broader stock market or any other dividend-paying stock.

As a result, picking dividend growth stocks appears as a winning strategy when some other parameters are also included.

5-Year Historical Dividend Growth greater than zero: This selects stocks with a solid dividend growth history.

5-Year Historical Sales Growth greater than zero: This represents stocks with a strong record of growing revenues.

5-Year Historical EPS Growth greater than zero: This represents stocks with a solid earnings growth history.

Next 3-5 Year EPS Growth Rate greater than zero: This represents the rate at which a company’s earnings are expected to grow. Improving earnings should help companies sustain dividend payments.

Price/Cash Flow less than M-Industry: A ratio less than M-industry indicates that the stock is undervalued in that industry and that an investor needs to pay less for better cash flow generated by the company.

52-Week Price Change greater than S&P 500 (Market Weight): This ensures that the stock appreciated more than the S&P 500 over the past year.

Top Zacks Rank: Stocks having a Zacks Rank #1 (Strong Buy) and 2 (Buy) generally outperform their peers in all types of market environments.

Growth Score of B or better: Our research shows that stocks with a Growth Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best upside potential.

These few criteria narrowed down the universe from more than 7,700 stocks to just seven.

Here are five of the seven stocks that fit the bill:

Delaware-based InterDigital is a pioneer in advanced mobile technologies that enable wireless communications and capabilities. The company engages in designing and developing a wide range of advanced technology solutions, which are used in digital cellular, and wireless 3G, 4G and IEEE 802-related products and networks. IDCC’s earnings estimates for this year have risen a whopping $3.17 over the past 30 days. It has an estimated earnings growth rate of 46.59%

InterDigital currently sports a Zacks Rank #1 and has a Growth Score of B. You can see the complete list of today’s Zacks #1 Rank stocks here.

Oregon-based Greenbrier is a leading supplier of transportation equipment and services to the railroad and related industries. The company’s earnings estimates for the fiscal year ending in August 2025 have grown 80 cents over the past 30 days. It has an estimated growth rate of 4.8%.

Greenbrier flaunts a Zacks Rank #1 and has a Growth Score of A at present.

Delaware-based Leidos Holdings is a global science and technology leader that serves the defense, intelligence, civil and health markets. Its earnings estimates for this year have increased 93 cents over the past 30 days. The company has an estimated earnings growth rate of 35.5%.

Leidos Holdings presently sports a Zacks Rank #1 and has a Growth Score of B.

California-based ResMed holds a major position as a designer, manufacturer and distributor of generators, masks and related accessories for the treatment of sleep-disordered breathing and other respiratory disorders worldwide. The stock saw a positive earnings estimate revision of 20 cents over the past 30 days for the fiscal year (ending June 2025) and has an expected earnings growth rate of 20.2%.

ResMed currently flaunts a Zacks Rank #1 and has a Growth Score of B.

Greensboro-based Kontoor Brands is an apparel company that designs, manufactures and distributes products. The company's brand consists of Wrangler, Lee, and Rock & Republic. The company saw a positive earnings estimate revision of a couple of cents over the past 30 days for this year, with projected growth of 13.1%.

Presently, Kontoor Brands has a Zacks Rank #2 and a Growth Score of B.

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The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.

Zacks Investment Research

Shoe Carnival, Inc. SCVL reported third-quarter fiscal 2024 results, wherein the top line lagged the Zacks Consensus Estimate and bottom line surpassed the same. Both metrics declined year over year.

The company witnessed weak performance, with lower adjusted gross profit and operating income, although these were partially offset by synergies from the Rogan’s acquisition and reduced SG&A expenses. Progress was made on the store rebanner strategy, with several Shoe Carnival stores converted to Shoe Station. For the full fiscal 2024, the company has revised its sales guidance, expecting modest growth despite the calendar shift and a shorter fiscal year.

Shoe Carnival, Inc. Price, Consensus and EPS Surprise

Shoe Carnival, Inc. price-consensus-eps-surprise-chart | Shoe Carnival, Inc. Quote

More on SCVL’s Q3 Results

Shoe Carnival reported adjusted earnings per share of 71 cents, which beat the Zacks Consensus Estimate of 61 cents. However, the bottom line declined from adjusted earnings of 80 cents per share reported in the year-ago quarter.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Net sales amounted to $306.9 million, down 4.1% year over year. Also, the top line missed the consensus estimate of $311 million. This decline reflects the effects of a retail calendar shift, which moved approximately $20 million of net sales out of the fiscal third quarter of 2024 compared with the previous year. Comparable store sales declined 4.1% year over year in the quarter under review.

Shoe Carnival’s Margin & Cost Details

Adjusted gross profit decreased 6% year over year to $110.6 million. The adjusted gross margin of 36.1% contracted 70 basis points (bps) year over year. This decrease was due to higher merchandise margins and leverage in buying, distribution, and occupancy costs associated with operating more stores, as well as the deleveraging effect of reduced net sales during the quarter due to the retail calendar shift.

Adjusted selling, general and administrative expenses decreased 4.5% year over year to $85.7 million. The decrease was primarily attributed to lower selling costs at Shoe Carnival and Shoe Station banner stores, which more than offset the costs associated with operating the recently acquired Rogan’s stores during the quarter.

As a percentage of net sales, selling, general and administrative expenses declined 10 bps year over year to 28%. Moreover, the company realized synergies within Rogan’s during the fiscal third quarter of 2024 and is ahead of schedule in integrating the acquired operations.

Adjusted operating income decreased 10.9% year over year to $24.9 million. As a percentage of net sales, this metric declined 60 bps year over year to 8.1%. This decline was primarily due to lower net sales resulting from the calendar shift, partially offset by growth from the Rogan’s acquisition and associated synergies, as well as reduced SG&A expenses.

SCVL’s Store Update

As of Nov. 21, 2024, the company reached a milestone of 431 stores, consisting of 361 Shoe Carnival, 42 Shoe Station stores and 28 Rogan’s locations. In the fiscal third quarter, one new Shoe Station store was opened in Tennessee, marking the brand's entry into a new market.

The company made progress on its store banner growth strategy during the quarter, with seven Shoe Carnival stores converted to Shoe Station stores. In total, 10 stores have now been rebannered. The company plans to rebanner 25 more Shoe Carnival stores to Shoe Station stores in the first half of fiscal 2025.

Shoe Carnival’s Financial Health Snapshot

The company ended the quarter with cash and cash equivalents of $77.2 million, a long-term portion of operating lease liabilities of $317.7 million and total shareholder’s equity of $635.7 million.

As of Nov. 21, 2024, the company had $50 million available for future share repurchases. SCVL did not engage in any share repurchase activity during the quarter.

SCVL’s Fiscal 2024 Outlook

Following the third-quarter results, the company has updated its guidance range for fiscal 2024. Net sales are now projected to be between $1.20 billion and $1.23 billion, revised from the prior range of $1.23 billion-$1.25 billion, representing growth of 2% to 4.5% compared with fiscal 2023. The company remains on track for Rogan’s acquisition to generate over $80 million in net sales for fiscal 2024. Gross margin is expected to remain consistent with fiscal 2023. Gross margin was 35.8% in fiscal 2023.

SG&A, as a percentage of net sales, is anticipated to increase by approximately 30 basis points compared with fiscal 2023, slightly improved from the previous guidance of a 40-basis-point increase.

GAAP earnings per share (EPS) remains forecasted in the range of $2.55-$2.70, while adjusted EPS is expected to be between $2.60 and $2.75. In fiscal 2023, GAAP EPS was $2.68 and adjusted EPS was $2.70.

The company informed that fiscal 2024 comprises 52 weeks compared with 53-week fiscal 2023. This, combined with the retail calendar shift, is expected to reduce fiscal fourth-quarter 2024 net sales by approximately $20 million compared with the prior-year period, with an estimated negative impact of 10 cents on EPS.

Shares of this Zacks Rank #4 (Sell) company have lost 23.3% in past three months compared with the industry’s decline of 5.6%.

Key Picks

We have highlighted three better-ranked stocks, namely, Abercrombie & Fitch Co. ANF, Gildan Activewear Inc. GIL and Steven Madden, Ltd. SHOO.

Abercrombie is a specialty retailer of premium, high-quality casual apparel. It carries a Zacks Rank of 2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

ANF delivered a 16.8% earnings surprise in the last reported quarter.

The Zacks Consensus Estimate for Abercrombie’s fiscal 2025 earnings and sales indicates growth of 64.8% and 13.4%, respectively, from fiscal 2024 reported levels. ANF has a trailing four-quarter average earnings surprise of 28%.

Gildan is a manufacturer and marketer of premium quality branded basic activewear for sale principally in the wholesale imprinted activewear segment of North America’s apparel market. It currently carries a Zacks Rank #2.

The consensus estimate for Gildan’s current financial-year earnings and sales indicates growth of 15.6% and 1.5%, respectively, from figures of 2023. GIL has a trailing four-quarter average earnings surprise of 5.4%.

Steven Madden designs, sources, markets, and sells fashion-forward name-brand and private-label footwear. It currently has a Zacks Rank of 2.

The Zacks Consensus Estimate for Steven Madden’s 2024 earnings and sales indicates growth of 8.2% and 13.4%, respectively, from the year-ago actuals. SHOO has a trailing four-quarter average earnings surprise of 9.8%.

Zacks Investment Research

For those looking to find strong Consumer Discretionary stocks, it is prudent to search for companies in the group that are outperforming their peers. Atour Lifestyle Holdings Limited Sponsored ADR (ATAT) is a stock that can certainly grab the attention of many investors, but do its recent returns compare favorably to the sector as a whole? By taking a look at the stock's year-to-date performance in comparison to its Consumer Discretionary peers, we might be able to answer that question.

Atour Lifestyle Holdings Limited Sponsored ADR is one of 270 individual stocks in the Consumer Discretionary sector. Collectively, these companies sit at #6 in the Zacks Sector Rank. The Zacks Sector Rank considers 16 different groups, measuring the average Zacks Rank of the individual stocks within the sector to gauge the strength of each group.

The Zacks Rank is a successful stock-picking model that emphasizes earnings estimates and estimate revisions. The system highlights a number of different stocks that could be poised to outperform the broader market over the next one to three months. Atour Lifestyle Holdings Limited Sponsored ADR is currently sporting a Zacks Rank of #2 (Buy).

The Zacks Consensus Estimate for ATAT's full-year earnings has moved 11.9% higher within the past quarter. This shows that analyst sentiment has improved and the company's earnings outlook is stronger.

Based on the latest available data, ATAT has gained about 48.7% so far this year. At the same time, Consumer Discretionary stocks have gained an average of 12.7%. This shows that Atour Lifestyle Holdings Limited Sponsored ADR is outperforming its peers so far this year.

Kontoor Brands (KTB) is another Consumer Discretionary stock that has outperformed the sector so far this year. Since the beginning of the year, the stock has returned 40.3%.

For Kontoor Brands, the consensus EPS estimate for the current year has increased 0.6% over the past three months. The stock currently has a Zacks Rank #2 (Buy).

Looking more specifically, Atour Lifestyle Holdings Limited Sponsored ADR belongs to the Leisure and Recreation Services industry, which includes 31 individual stocks and currently sits at #22 in the Zacks Industry Rank. On average, stocks in this group have gained 20.1% this year, meaning that ATAT is performing better in terms of year-to-date returns.

Kontoor Brands, however, belongs to the Textile - Apparel industry. Currently, this 20-stock industry is ranked #68. The industry has moved -17.3% so far this year.

Atour Lifestyle Holdings Limited Sponsored ADR and Kontoor Brands could continue their solid performance, so investors interested in Consumer Discretionary stocks should continue to pay close attention to these stocks.

Zacks Investment Research