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The Honest Company, Inc. HNST reported solid third-quarter 2024 results, wherein both top and bottom lines beat the Zacks Consensus Estimate and increased year over year.

The Honest Company reported impressive double-digit revenue growth, hitting an all-time high in sales, alongside a significant expansion in gross margin. The company's strategic focus on its transformation pillars, brand maximization, margin enhancement and operating discipline has been key to its success. The better-than-expected third-quarter results led management to raise its 2024 guidance.

The Honest Company’s Quarterly Performance: Key Insights

The Honest Company posted breakeven quarterly earnings, which beat the Zacks Consensus Estimate of a loss of 3 cents per share. The bottom line increased from a loss of 9 cents reported in the year-ago quarter.

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

The Honest Company, Inc. Price, Consensus and EPS Surprise

The Honest Company, Inc. price-consensus-eps-surprise-chart | The Honest Company, Inc. Quote

Total revenues rose 15.2% year over year to $99.2 million due to an increase in wipes revenues of $9.9 million, an increase in baby personal-care revenues of $2.3 million, an increase in diaper revenues of $1.8 million and an increase in baby apparel revenues of $1.5 million. This was partly offset by a decline in skincare and color cosmetics revenues of $2.7 million. The top line beat the consensus estimate of $93 million.

Gross profit rose 41.1% year over year to $38.4 million. This growth was related to cost savings, including lower transportation, product and fulfillment expenses and sales volume growth. The gross margin expanded 710 basis points (bps) to 38.7%, with approximately 400 bps related to supply chain cost reductions and 300 bps related to product cost reductions.

The company’s operating expenses increased 8.9% year over year to $38.3 million. As a percentage of revenues, operating expenses decreased 221 bps year over year. The company continues to demonstrate strong expense control, with selling, general and administrative expenses reduced 441 bps as a percentage of revenues, partially offset by increased investment in retail marketing to drive brand maximization pillar.

Adjusted EBITDA was $7.1 million against a loss of $1.1 million reported in the same period last year. This marks the company’s fourth consecutive quarter of positive adjusted EBITDA. The adjusted EBITDA margin was 7.1%.

HNST ended the third quarter with household penetration reaching 6.7%.

HNST’s Financial Health Snapshot

The Honest Company concluded the quarter with cash and cash equivalents of $53.4 million and stockholders’ equity of $133.9 million. The company reported no debt on its balance sheet as of Sept. 30, 2024.

In the first nine months ended Sept. 30, 2024, the company’s net cash provided by operating activities was $18.4 million.

Sneak Peek Into HNST’s 2024 Outlook

For 2024, HNST anticipates a high single-digit percentage growth in revenues from 2023. The company had earlier guided mid to high single-digit percentage growth.

HNST now anticipates adjusted EBITDA in the range of $20-$22 million, an increase from the previous guidance of $15-$18 million. This marks a significant turnaround from the adjusted EBITDA loss of $11.2 million reported in 2023.

Gross margin is expected in the range of 37-38%, benefiting from cost savings in both product costs and supply chain efficiencies.

This Zacks Rank #3 (Hold) stock has gained 41.6% in the past three months against the industry’s decline of 2.2%.

Stocks to Consider

The Gap, Inc. GAP operates as an apparel retail company, which offers apparel, accessories and personal care products for men, women and children, currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for The Gap’s current fiscal-year sales and earnings indicates growth of 0.5% and 31.5%, respectively, from the year-ago quarter’s reported numbers. GAP has a trailing four-quarter average earnings surprise of 142.8%.

Abercrombie & Fitch Co. ANF, through its subsidiaries, operates as an omnichannel retailer, which offers an assortment of apparel, personal care products and accessories for men, women and kids, currently carrying a Zacks Rank #2. ANF has a trailing four-quarter average earnings surprise of 28%.

The consensus estimate for Abercrombie’s current financial-year sales and earnings indicates growth of 13% and 64.2%, respectively, from the year-ago period’s reported figures.

Foot Locker, Inc. FL, operates as a footwear and apparel retailer, currently carrying a Zacks Rank #2. FL has a trailing four-quarter average earnings surprise of 40.8%.

The Zacks Consensus Estimate for Foot Locker’s current financial-year earnings indicates growth of 5.6% from the year-ago period’s reported figures.

Zacks Investment Research

BrightView Holdings, Inc. BV posted fourth-quarter fiscal 2024 results, wherein the top line declined year over year but surpassed the Zacks Consensus Estimate. The bottom line increased year over year but lagged the Consensus Estimate.

However, the company’s fourth-quarter results confirm fiscal 2024 as a breakthrough year, highlighting continued business transformation. The One BrightView culture is gaining momentum, positioning the company for fiscal 2025 to be another record-setting year.

BrightView Holdings, Inc. Price, Consensus and EPS Surprise

BrightView Holdings, Inc. price-consensus-eps-surprise-chart | BrightView Holdings, Inc. Quote

More on BV’s Q4 Results

This leading commercial landscaping services company posted adjusted quarterly earnings of 30 cents per share, showcasing an improvement from 19 cents in the year-ago period. However, the metric missed the Zacks Consensus Estimate of 31 cents per share.

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

Total revenues of $728.7 million slightly surpassed the Zacks Consensus Estimate of $728 million and decreased 2% year over year. The decline was due to a drop in Maintenance Services revenues, partially offset by an increase in Development Services revenues.

The gross profit decreased 1.9% year over year to $182.1 million. We note that the gross margin is 25%, flat year over year.

Adjusted EBITDA increased almost 3.5% year over year to $105.2 million. Also, as a percentage of total revenues, the metric rose 70 basis points (bps) to 14.4%. The increase was driven by a $12.1 million rise in Development Services EBITDA, partially offset by a decline in Corporate EBITDA due to the disposal of corporate assets in the previous year.

BrightView’s Q4 Revenue Insights by Segments

In the fourth quarter, revenues for the Maintenance Services Segment declined 6.6% year over year to $486.5 million compared to the Zacks Consensus Estimate of $500 million. This decrease was due to a shortfall in core commercial landscape services, driven by strategic reductions in non-core business areas and, to a lesser extent, a reduction in ancillary services.

The segment’s adjusted EBITDA margin increased by 110 basis points to 16.8%, compared to 15.7% in 2023. This margin improvement was the result of lower overhead costs from the company’s cost management efforts, along with strategic reductions in non-core businesses.

Revenues for the Development Services Segment rose 8.6% year over year to $244.1 million, exceeding the Zacks Consensus Estimate of $229.8 million, due to higher project volumes. Also, the adjusted EBITDA margin improved by 390 basis points to 16.9% from 13% in the prior year. These gains in adjusted margin were driven by the revenue increase.

BV’s Financial Health Snapshot

BrightView ended the quarter with cash and cash equivalents of $140.4 million, long-term debt of $802.5 million and total shareholders’ equity of $1.28 billion.

Net cash provided by operating activities for the fiscal year ended Sept. 30, 2024, was $205.6 million. Free cash flow rose by $65.1 million for the fiscal year, reaching $145.3 million, up from $80.2 million in the previous year. Capital expenditures were $78.4 million in fiscal 2024.

BrightView’s Fiscal 2025 Outlook

For fiscal 2025, the company anticipates total revenues in the range of $2.75 to $2.84 billion. The company reported total revenues of $2.78 billion in fiscal 2024. Adjusted EBITDA is expected to be between $335 and $355 million compared with $324.7 million reported in fiscal 2024, while free cash flow is projected to range from $40 to $60 million.

Shares of this Zacks Rank #3 (Hold) company have increased 23.7% in the past three months as compared with the industry’s growth of 4.5%.

Key Picks

Some better-ranked stocks are 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 (Strong Buy) Rank 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 64.2% and 13%, respectively, from the fiscal 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 the North American 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 the 2023 figures. 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

Quarterly financial reports play a vital role on Wall Street, as they help investors see how a company has performed and what might be coming down the road in the near-term. And out of all of the metrics and results to consider, earnings is one of the most important.

We know earnings results are vital, but how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these earnings surprises.

Now that we know how important earnings and earnings surprises are, it's time to show investors how to take advantage of these events to boost their returns by utilizing the Zacks Earnings ESP filter.

The Zacks Earnings ESP, Explained

The Zacks Earnings ESP is more formally known as the Expected Surprise Prediction, and it aims to grab the inside track on the latest analyst estimate revisions ahead of a company's report. The idea is relatively intuitive as a newer projection might be based on more complete information.

Now that we understand the basic idea, let's look at how the Expected Surprise Prediction works. The ESP is calculated by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, with the percentage difference between the two giving us the Zacks ESP figure.

When we join a positive earnings ESP with a Zacks Rank #3 (Hold) or stronger, stocks posted a positive bottom-line surprise 70% of the time. Plus, this system saw investors produce roughly 28% annual returns on average, according to our 10 year backtest.

Most stocks, about 60%, fall into the #3 (Hold) category, and they are expected to perform in-line with the broader market. Stocks with a #2 (Buy) and #1 (Strong Buy) rating, or the top 15% and top 5% of stocks, respectively, should outperform the market, with Strong Buy stocks outperforming more than any other rank.

Should You Consider Abercrombie & Fitch?

Now that we understand what the ESP is and how beneficial it can be, let's dive into a stock that currently fits the bill. Abercrombie & Fitch (ANF) earns a #2 (Buy) right now and its Most Accurate Estimate sits at $2.43 a share, just 13 days from its upcoming earnings release on November 26, 2024.

ANF has an Earnings ESP figure of +4.59%, which, as explained above, is calculated by taking the percentage difference between the $2.43 Most Accurate Estimate and the Zacks Consensus Estimate of $2.32. Abercrombie & Fitch is one of a large database of stocks with positive ESPs. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.

ANF is one of just a large database of Retail and Wholesale stocks with positive ESPs. Another solid-looking stock is Sprouts Farmers (SFM).

Sprouts Farmers is a Zacks Rank #1 (Strong Buy) stock, and is getting ready to report earnings on February 27, 2025. SFM's Most Accurate Estimate sits at $0.71 a share 106 days from its next earnings release.

The Zacks Consensus Estimate for Sprouts Farmers is $0.69, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +3.39%.

ANF and SFM's positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.

Find Stocks to Buy or Sell Before They're Reported

Use the Zacks Earnings ESP Filter to turn up stocks with the highest probability of positively, or negatively, surprising to buy or sell before they're reported for profitable earnings season trading. Check it out here >>

Zacks Investment Research

Tractor Supply Company TSCO seems to be in a good spot, thanks to its sturdy business strategies. The company is reaping the benefits from its Life Out Here Strategy and the Neighbor’s Club membership program. Its ‘ONETractor’ strategy, which is aimed at connecting stores and online shopping, appears encouraging too. Shares of this leading rural retail farm and ranch store chain have gained 32.6% year to date against the industry’s 3.1% decline.

Recently, Tractor Supply revealed that it had agreed to acquire Allivet, which is a privately-held leading online pet pharmacy. This buyout will complement and reinforce the company’s portfolio of companion animals, equestrian and livestock customers. The deal will also enable TSCO to introduce a low-cost pet and animal pharmacy solution for the 37-million Neighbor’s Club members.

The new deal brings a key opportunity to gain share of wallet with the club members, about 75% of whom are pet owners. The deal will also strengthen the company’s product and services offering, extend its overall addressable market by $15 billion and solidify relationship between the companies.

TSCO’s Growth Strategies in Detail

Given the changing consumer trends, Tractor Supply is focused on integrating its physical and digital operations to offer consumers a seamless shopping experience. The company’s omnichannel investments include curbside pickup, same day and next-day delivery, a re-launched website and new mobile app. Management aims at leveraging AI technologies to boost search, redesign checkout and add a new refreshed homepage on personalization.

TSCO is significantly enhancing its Neighbor's Club offering. As the company continues to make investments in the program, it has been seeing strong growth in customer counts and customer retention. In the third quarter of 2024, the Neighbor's Club comp sales surpassed the company’s overall sales. Tractor Supply has reached an all-time high on its sales penetration, recording membership of more than 37 million members.

The company is also focused on improving personalization capabilities, mainly its customer data platform. Its live goods performance also bodes well. Digital sales continued to outperform, with double-digit growth in the third quarter of 2024. The company has been making major improvements in search and checkout. It has been accelerating its digital capabilities, which has been leading to higher customer engagement and conversion rate improvement.

Regarding its store-growth initiatives, Tractor Supply is persistently focused on the expansion of its store base and the incorporation of technological advancements to boost traffic and drive the top line. In the third quarter, TSCO introduced 16 flagship stores, bringing the year-to-date count to 54. Management intends to continue its store-opening initiatives in 2024.

Project Fusion is the company’s state-of-the-art space productivity program built to enrich customer experience in the mature store base. It currently has 45% of the chain in its Project Fusion layout and more than 550 garden centers. Such store investments target higher market share and boost productivity across the existing and new stores. Addition of product categories, greater ease of shopping and modern services enables the company to serve its customers efficiently.

Factors Hindering TSCO’s Growth

Tractor Supply has been reeling under higher depreciation and amortization along with the costs related to the opening of a distribution center. Also, cost inflation is concerning. During the third quarter, selling, general and administrative (SG&A) expenses, including depreciation and amortization, as a percentage of sales, expanded 119 basis points (bps) year over year. In dollar terms, the metric rose 6.2%.

The higher SG&A expense rate resulted from growth investments, which comprised the onboarding of a new distribution center, lapping a one-time depreciation cost benefit in the last year and modest deleveraged fixed costs. The new distribution center was nearly a 25-bps headwind on SG&A for the quarter. Further, the operating income was down 4.8% year over year, with the operating margin declining 63 bps to 9.4% in the reported quarter. In addition, a tepid retail sales environment is concerning.

Conclusion

TSCO has been taking cost-saving initiatives to tackle cost issues. Analysts seem quite optimistic about the company. The Zacks Consensus Estimate for 2024 sales and earnings per share (EPS) is currently pegged at $14.9 billion and $10.24, respectively. These estimates indicate corresponding growth of 2.5% and 1.5% year over year. The consensus estimate for 2025 sales and EPS is presently pegged at $15.7 billion and $11, respectively, indicating a year-over-year increase of 5.1% and 7.4%. Tractor Supply currently carries a Zacks Rank #3 (Hold).

Key Picks

We have highlighted three better-ranked stocks, namely Boot Barn BOOT, Abercombie ANF and Deckers DECK.

Boot Barn, a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The company has a trailing four-quarter earnings surprise of 6.8%, on average.

The Zacks Consensus Estimate for Boot Barn’s current financial-year sales indicates growth of 13.9% from the year-ago figure.

Abercrombie, a leading casual apparel retailer, currently carries a Zacks Rank of 2 (Buy). ANF delivered an earnings surprise of 16.8% in the last reported quarter.

The consensus estimate for Abercrombie’s current financial-year sales indicates growth of 13% from the year-ago figure.

Deckers, a footwear and accessories dealer, currently carries a Zacks Rank of 2. DECK delivered an average earnings surprise of 41.1% in the trailing four quarters.

The Zacks Consensus Estimate for Deckers’ current financial-year sales indicates growth of 13.7% from the year-ago figure.

Zacks Investment Research

First Watch Restaurant Group, Inc. FWRG has entered into an agreement to acquire 15 franchise-owned locations and one restaurant under construction in North and South Carolina for a total of $49 million.

The transaction is expected to close by mid-April 2025, subject to customary closing conditions, and will be funded with a combination of cash and borrowings from the company’s credit facility.

The company views strategic acquisitions of franchise-operated restaurants as a key component of its long-term growth and value-creation strategy. The addition of these 16 restaurants and its development rights will strengthen First Watch Restaurant’s corporate presence in the East Coast.

This acquisition is part of First Watch Restaurant’s ongoing expansion strategy. Since May 2023, the company has acquired 45 franchised restaurants through six transactions, significantly increasing its presence across key markets. The company’s continued expansion highlights its strong growth in the daytime dining sector.

This move will also open up new territories for organic growth in the future. First Watch Restaurant expects these restaurants to perform at levels similar to its company-owned locations, generating strong unit volumes and restaurant-level operating profit margins.

Shares of FWRG moved up 1.7% and 1.2% during yesterday’s trading session and after-hours, respectively.

FWRG Expands Presence With Franchise Acquisition

Investors looking for opportunities in the restaurant sector should pay attention to FWRG's strategic acquisitions, as these position the company for long-term growth and value generation in a competitive market.

On April 15, 2024, the company completed the acquisition of 21 franchise-owned restaurants in North Carolina for $75 million. This transaction supports First Watch Restaurant’s strategy to strengthen its market presence and drive continued growth.

In the third quarter of 2024, the company opened nine new system-wide restaurants across eight states. This brings the total number of system-wide restaurants to 547, including 466 company-owned and 81 franchise-owned locations, as of Sept. 29, 2024, across 29 states.

Shares of the company have gained 24.7% in the past year compared with the Zacks Retail – Restaurants industry’s growth of 13.4%. The company is benefiting from new restaurant openings and increased focus on strategic franchise acquisitions.

In the fourth quarter, the company expects to open 23 new restaurants. First Watch Restaurant aims to grow the size of its system by 10% or more annually. The company is currently managing more than 120 projects in its development pipeline. Many of these projects are planned for opening in 2025 and 2026.

FWRG’s Zacks Rank & Key Picks

FWRG currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the Zacks Retail-Wholesale sector have been discussed below.

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.

It has a trailing four-quarter earnings surprise of 28%, on average. The stock has risen 111.3% in the past year. The Zacks Consensus Estimate for ANF’s fiscal 2024 sales and earnings per share (EPS) implies growth of 13% and 63.9%, respectively, from the year-ago levels.

Brinker International, Inc. EAT currently flaunts a Zacks Rank of 1. It has a trailing four-quarter earnings surprise of 12.1%, on average. The stock has risen 245.7% in the past year.

The Zacks Consensus Estimate for EAT’s fiscal 2025 sales and EPS indicates a rise of 8% and 32.4%, respectively, from the year-ago numbers.

El Pollo Loco Holdings, Inc. LOCO currently sports a Zacks Rank #1. It has a trailing four-quarter earnings surprise of 26.1%, on average. Shares of LOCO have gained 57.9% in the past year.

The Zacks Consensus Estimate for LOCO’s 2024 sales and EPS indicates a rise of 0.7% and 16.9%, respectively, from the year-ago numbers.

Zacks Investment Research

Shares of Deckers Outdoor Corporation DECK have experienced a surge over the past year. The stock has rallied 69%, comfortably outpacing the Zacks Retail-Apparel and Shoes industry’s modest 25.3% growth. The company’s impressive growth can be attributed to its strategic emphasis on expanding brand presence and strengthening direct-to-consumer (DTC) channels.

The company’s commitment to innovation in product development and a strong focus on international market expansion have enabled it to outperform both the broader Retail-Wholesale sector and the S&P 500 index, which grew 35.8% and 36%, respectively, during the same period. Closing at $177.08 on yesterday, DECK stock is moving toward its 52-week high of $184.48 attained on June 3, 2024.

Deckers has shown solid upward momentum, currently trading above both its 200-day and 50-day simple moving averages (SMA), which are key indicators of price stability and long-term bullish trends. In yesterday’s trading session, DECK surpassed its 200-day SMA of $153.16 and 50-day SMA of $158.57. This technical strength, coupled with continued momentum, signals positive market sentiment and growing investor confidence in DECK's financial health and growth potential.