Moody's Ratings Downgrades Container Store's Cfr To Caa3, Outlook Remains Negative

GigaCloud Technology Inc. GCT will report its third-quarter 2024 results on Nov. 7, after the bell.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

The Zacks Consensus Estimate for earnings in the to-be-reported stands at 67 cents, indicating 13.6% growth from the year-ago reported quarter. The consensus estimate for revenues is pegged at $279.4 million, implying 56.8% year-over-year growth. There has been no change in analyst estimates or revisions lately.

The company has an impressive earnings surprise history. Earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and lagged once, with an average earnings surprise of 40.4%.

GigaCloud Technology Inc. Price and EPS Surprise

GigaCloud Technology Inc. price-eps-surprise | GigaCloud Technology Inc. Quote

GCT’s Lesser Chance of Q3 Earnings Beat

Our proven model doesn’t conclusively predict an earnings beat for GCT this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

GCT has an Earnings ESP of 0.00% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

All Round Healthy Business Should be GCT’s Driver in Q3

We expect that the significant year-over-year improvement in the company’s top line in the to-be-reported quarter will be driven by an increase in both service and product revenues. The consensus estimate for service revenues is pegged at $84.7 million, indicating 64.6% year-over-year growth. The consensus mark for product revenues is pegged at $149.7 million, indicating 18.2% year-over-year growth.

GCT Stock in Correction Phase

GCT has rallied 25.4% year to date while plummeting 42.8% in the past six months and 16.2% in the past month. These price dynamics suggest that the stock is in a correction phase.

For Immediate Release

Chicago, IL – November 5, 2024 – Zacks Equity Research shares Vertiv Holdings Co. VRT as the Bull of the Day and The Container Store Group, Inc. TCS as the Bear of the Day. In addition, Zacks Equity Research provides analysis on KB Home KBH, Toll Brothers Inc. TOL and Taylor Morrison Home Corp. TMHC.

Here is a synopsis of all five stocks:

Bull of the Day:

Vertiv Holdings Co. is an artificial intelligence (AI) stock that's soared 120% YTD and 940% in the past five years, blowing away the Tech sector during both stretches. Wall Street has fallen in love with Vertiv's ability to grow no matter what companies eventually dominate AI.

Vertiv helps the computing power needed to drive the modern economy (data centers, AI, and more) run as smoothly as possible around the clock.

Vertiv is a picks-and-shovels AI and data center company working with Nvidia to help solve critical, behind-the-scenes challenges facing the rapid expansion of AI and its sustained growth.

Vertiv posted another beat-and-raise quarter on October 23, driven by "robust underlying demand" for its critical digital infrastructure products and services across its entire "AI-enabling portfolio of power, thermal, IT systems, infrastructure solutions and services."

The Bull Case for Vertiv Stock

Vertiv operates in the background of big tech and AI, supporting the constant expansion and the day-to-day operations of data centers, communication networks, and beyond. Vertiv's hardware, software, analytics, and ongoing services portfolio is focused on power, cooling, and IT infrastructure.

Vertiv's business has never been more critical and in demand. The enormous expansion of data centers requires massive amounts of high-performance computing power that operates at peak performance 24/7.

Vertiv has partnered with the current titan of AI, Nvidia (NVDA), to help solve future data center efficiency and cooling challenges.

The picks-and-shovels AI and data center company posted a beat-and-raise third quarter on October 23. "Robust underlying demand for our critical digital infrastructure products and services" fueled its most recent quarter, according to Vertiv CEO Giordano Albertazzi.

Vertiv's AI-Boosted Growth Outlook

Vertiv grew its revenue by 19% in the third quarter and its adjusted earnings by 46%. The company's organic orders climbed ~37% over the trailing 12 months. Vertiv was "very encouraged by the acceleration of liquid cooling revenue" last quarter as more of its long-term pipelines grow.

Vertiv is bullish about its outlook across its entire portfolio, fueled by the rapid acceleration of AI spending. Nvidia, Meta, Alphabet, and tons of other companies are going all in on AI and Vertiv is prepared to ride that mega-trend for as long as it lasts.

Vertiv's earnings estimates climbed since its Q3 release, extending its impressive run of upward revisions over the last two years.

VRT's improving bottom-line outlook helps it earn a Zacks Rank #1 (Strong Buy) and it has topped our EPS estimates for seven quarters running.

Vertiv is projected to grow its adjusted earnings per share (EPS) by 52% in FY24 and 30% in FY25 to climb from $1.77 a share in 2023 to $3.50 per share next year. Vertiv's strong earnings growth outlook comes on top of its 230% expansion last year.

On the revenue front, Vertiv is projected to boost its sales by 14% in 2024, adding roughly $1 billion to the top-line. VRT is expected to follow up its 2024 growth with 16% stronger sales next year to pull in $9.08 billion vs. $6.86 in 2023.

Time for Traders and Long-Term Investors to Buy VRT Stock?

Vertiv stock has soared over 940% in the last five years to crush Tech's 135%, Meta's (META) 190%, and Alphabet's (GOOGL) 160%. VRT shares have jumped 630% in the past two years and 120% YTD—blowing away Meta's 60% 2024 run and Alphabet's 22%.

Vertiv stock has easily surpassed its highly-ranked Computers – IT Services industry over the past year, up 170% vs. 22%. Vertiv has pulled back slightly from its October records and trades 17% below its average Zacks price target.

VRT's recent pullback has cooled off the stock, taking Vertiv from heavily overbought RSI levels (a widely-tracked technical indicator focused on momentum) to below neutral.

VRT is trading slightly below its 21-day moving average. Any pullback to Vertiv's 50-day might offer traders a nice near-term entry point. That said, long-term investors shouldn't attempt to time stocks exactly since it can leave them on the sidelines as they march higher and higher.

On the valuation front, VRT trades at a 20% discount to its highs at 31.7X forward 12-month earnings.

Vertiv stock offers 14% value compared to its highly-ranked Computers - IT Services industry despite its huge outperformance. Vertiv has climbed 300% in the past three years to blow away its industry's 5% decline.

Why Wall Street Loves Vertiv Stock

Vertiv's proven behind-the-scenes portfolio benefits directly from the rapid expansion of data centers, AI, and other growth-focused technology investments like cryptocurrencies and bitcoin.

Given this simple backdrop, it is no wonder that all 12 brokerage recommendations Zacks has for Vertiv are "Strong Buys."

Bear of the Day:

The Container Store Group, Inc. stock has plummeted over 85% in 2024 alongside its tumbling earnings outlook.

The Container Store Group's recent drop is part of a massive decline over the last roughly 10 years that was only interrupted a few times.

The Container Store Group 101

The Container Store Group is a retail giant focused on containers, as its name suggests. The company is focused on what it calls organizing solutions, custom spaces, and in-home services, aiming to "transform lives through the power of organization."

The Container Store Group's revenue has dropped off a cliff in the last few years after climbing between FY14 to FY22, capped off by strong covid-based growth. TCS's revenue is projected to drop -10% in its FY24 and another -3% next year.

The company in early October received a financial lifeline from Bed Bath & Beyond owner Beyond. TCS said on Oct. 15 that it entered into agreement with Beyond, Inc. to invest $40 million in The Container Store Group, Inc. through a preferred equity transaction.

The deal came roughly five months after The Container Store said it was launching a strategic review of its business. The Container Store Group said in August it would stop providing financial guidance as it evaluated strategic alternatives amid a challenging environment.

The company reported an adjusted Q2 FY24 loss of -$3.23 a share on October 29, falling well shy of our Zacks estimate. The Container Store Group's earnings outlook has dropped since its recent release, helping it land a Zacks Rank #5 (Strong Sell).

The Bottom Line on The Container Store Group Stock

The Container Store Group is projected to post an adjusted loss of -$6.36 per share in its FY24 and -$7.90 in its FY25. TCS stock has lost most of its value over the past decade.

It is likely wise for investors to stay away from The Container Store Group stock until it proves a viable turnaround is possible in the near future.

Additional content:

3 Homebuilder Stocks to Buy Now on Construction Spending Rebound

The U.S. construction is trying to stage a steady comeback as price pressure and borrowing rates continue to ease. September saw a modest rise in construction spending. However, it hit a four-month high, indicating that the sector is recovering from its earlier lows.

Residential construction, which had largely been responsible for driving construction spending in the past, saw an uptick in September, fueling overall spending on construction. Homebuilder confidence is also rising fast, with building permits and housing starts jumping in a sign that the homebuilding market can once again boost the construction sector.

Given this situation, investing in homebuilder stocks like KB Home, Toll Brothers Inc. and Taylor Morrison Home Corp. would be a wise decision. Each of these stocks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Construction Spending Jumps in September

The Commerce Department said on Friday that construction spending rose 0.1% month over month in September to $12.5 trillion, the highest level since May. This exceeded economists' expectations of construction spending to remain flat in September.

Year over year, construction spending jumped 4.6%. In the first nine months of the year, construction spending totaled $1.6 trillion, up 7.3% from the year-ago figure of $1.5 trillion. Also, the Commerce Department upwardly revised the September figure to 0.1% from a 0.1% decline.

Construction spending indicates the amount of money the government and private enterprises allocate to various projects, including housing and infrastructure like highways. Increased spending on construction means a rise in overall economic activity.

Spending on residential construction projects jumped 0.2% to $913.6 billion. Non-residential construction rose 0.1% to $740 billion. Public construction spending rose 0.5% to $141 billion.

Housing Market to Help Homebulder Stocks

The Housing Market Index (HMI) from the National Association of Home Builders (NAHB) and Wells Fargo shows that confidence among U.S. homebuilders for new single-family homes rose to 41 in September, up from 39 in the previous month.

The boost in sentiment is attributed to a drop in mortgage rates, which have reached their lowest point since February. The 30-year fixed mortgage rate is now 6.7%, compared with 7.18% a year earlier. Although mortgage rates peaked at 7.76% in October 2023, they have since decreased significantly.

Declining mortgage rates are making homebuilders spend more on construction activity. Housing starts for privately owned homes rose 9.6% in August, reaching an annualized rate of 1.356 million, surpassing the expected increase of 2.9%. Also, residential building permits, which serve as a gauge for construction activity, increased by 4.9% in August compared with the previous month, reaching an annualized rate of 1.475 million units.

The Federal Reserve cut interest rates by 50 basis points in September, easing price pressure and borrowing rates. Market participants are now hopeful about a 25-basis point rate cut in November, which would further help the homebuilding and overall construction sector.

Homebuilder Stocks With Upside Potential

KB Home

KB Home is a well-known homebuilder in the United States and one of the largest in the state. KBH's Homebuilding operations include building and designing homes that cater to first-time, move-up and active adult homebuyers on acquired or developed lands. KB Home also builds attached and detached single-family homes, townhomes and condominiums.

KB Home's expected earnings growth rate for the next year is 20.1%. The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the past 90 days. KBH presently carries a Zacks Rank #2.

Toll Brothers

Toll Brothers builds single-family detached and attached home communities, master-planned luxury residential resort-style golf communities, and urban low, mid, and high-rise communities, principally on the land it develops and improves. TOL operates in Arizona, California, Florida, Delaware, Maryland, Pennsylvania and South Carolina. Toll Brothers offers homes under two segments, namely Traditional Home Building Product and City Living.

Toll Brothers' expected earnings growth rate for the current year is 17.6%. The Zacks Consensus Estimate for current-year earnings has improved 3.6% over the past 90 days. Toll Brothers presently has a Zacks Rank #2.

Taylor Morrison Home

Taylor Morrison Home is a homebuilder and land developer engaged in building single-family detached and attached homes for first-time buyers, move-up families, and luxury and active adult customers. TMHC operates under the Taylor Morrison brand, Monarch brand and Darling Homes brand. Taylor Morrison Home operates in Arizona, California, Colorado, Florida and Texas.

Taylor Morrison Home's expected earnings growth rate for next year is 11%. The Zacks Consensus Estimate for current-year earnings has improved 4.5% over the past 90 days. THMC currently sports a Zacks Rank #1.

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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/performancefor information about the performance numbers displayed in this press release.

Zacks Investment Research

The Container Store Group, Inc. TCS stock has plummeted over 85% in 2024 alongside its tumbling earnings outlook.

The Container Store Group’s recent drop is part of a massive decline over the last roughly 10 years that was only interrupted a few times.

The Container Store Group 101

The Container Store Group is a retail giant focused on containers, as its name suggests. The company is focused on what it calls organizing solutions, custom spaces, and in-home services, aiming to “transform lives through the power of organization.”

The Container Store Group’s revenue has dropped off a cliff in the last few years after climbing between FY14 to FY22, capped off by strong covid-based growth. TCS’s revenue is projected to drop -10% in its FY24 and another -3% next year.

U.S. stocks traded higher toward the end of trading, with the Dow Jones index gaining around 0.1% on Wednesday.

The Dow traded up 0.07% to 42,262.68 while the NASDAQ fell 0.05% to 18,703.09. The S&P 500 also fell, dropping, 0.03% to 5,831.09.

Check This Out: Top 3 Tech And Telecom Stocks Which Could Rescue Your Portfolio For October

Leading and Lagging Sectors

Communication services shares rose by 1.8% on Wednesday.

In trading on Wednesday, information technology shares fell by 0.9%.

Top Headline

On Wednesday, Eli Lilly and Co posted worse-than-expected third-quarter earnings and lowered 2024 guidance.

The U.S. pharma giant reported third-quarter revenue of $11.44 billion, up 20% year over year, but it missed the consensus of $12.10 billion. The company reported an adjusted EPS of $1.18, compared to $0.10 from a year ago and missing the consensus of $1.45.

Eli Lilly said it sees fiscal year 2024 sales of $45.4 billion—$46 billion, compared to prior guidance of $45.4 billion—$46.6 billion and consensus of $46.24 billion. Eli Lilly lowered its 2024 adjusted EPS guidance to $13.02-$13.52 versus prior guidance of $16.10-$16.60 and consensus of $13.47, driven by the acquired IPR&D charges incurred in Q3.

Equities Trading UP

• Tharimmune, Inc. shares shot up 79% to $3.61 after the company announced it received EMA feedback on its TH104 clinical program. The design and main features of the proposed Phase 2 study were deemed acceptable and general guidance was also provided for a future Phase 3 study.
• Shares of Omnicell, Inc. got a boost, surging 31% to $52.47 after the company reported better-than-expected third-quarter financial results and raised its FY24 guidance above estimates.
• Reddit, Inc. shares were also up, gaining 44% to $117.36 after the company reported better-than-expected third-quarter financial results and issued fourth-quarter revenue guidance above estimates.

Equities Trading DOWN

• SRIVARU Holding Limited shares dropped 55% to $0.0304 after the company announced it upsized its $6.8 million public offering.
• Shares of The Container Store Group, Inc. were down 37% to $5.27 following second-quarter results.
• Applied DNA Sciences, Inc. was down, falling 39% to $0.1938 after the company announced the pricing of a registered direct offering of 20,312,500 shares at $0.32 per share. The company also announced a concurrent private placement.

Commodities

In commodity news, oil traded up 2.3% to $68.75 while gold traded up 0.7% at $2,799.70.

Silver traded down 1% to $34.095 on Wednesday, while copper rose 0.1% to $4.3640.

Euro zone

European shares closed lower today. The eurozone's STOXX 600 dipped 1.25%, Germany's DAX fell 1.13% and France's CAC 40 slipped 1.10%. Spain's IBEX 35 Index fell 0.68%, while London's FTSE 100 fell 0.73%.

Asia Pacific Markets

Asian markets closed mostly lower on Wednesday, with Japan's Nikkei 225 gaining 0.96%, Hong Kong's Hang Seng Index dipping 1.55%, China's Shanghai Composite Index falling 0.61% and India's BSE Sensex falling 0.53%.

Economics

• Pending home sales in the U.S. surged by 7.4% from the previous month in September, compared to a 0.6% gain in August.
• The U.S. economy grew by an annualized 2.8% in the third quarter, from 3% in the second quarter.
• Private businesses in the U.S. hired 233K workers to their payrolls in October compared to a revised 159K gain in September.
• Crude oil inventories in the U.S. declined by 0.515 million barrels in the week ended October 25, compared to a 5.474 million gain in the prior week and versus market estimates of a 2.3 million gain.

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• Jim Cramer Says Buy CrowdStrike Stock, Calls This Aerospace Manufacturer A ‘High Speculative’ Stock

© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

The Container Store Group, Inc. TCS posted second-quarter fiscal 2024 results, wherein the top line missed the Zacks Consensus Estimate and declined year over year. The company posted a wider-than-expected loss per share and declined year over year.

However, TCS witnessed sequential improvement in the second quarter of fiscal 2024, with Custom Spaces outperforming based on the customer demand and orders placed. Nonetheless, the company still reported year-over-year growth in undelivered orders to customers.

On Oct. 15, 2024, TCS and Beyond, Inc. announced a strategic partnership aimed at enhancing customer experience through the Bed Bath & Beyond and The Container Store brands. Despite a challenging environment, the company is optimistic about the long-term potential of a new partnership with Beyond.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

Container Store (The) Price, Consensus and EPS Surprise

Container Store (The) price-consensus-eps-surprise-chart | Container Store (The) Quote

Analyzing TCS’ Quarterly Performance

Container Store reported an adjusted loss of $3.23 per share, wider than the Zacks Consensus Estimate loss of 5 cents per share. Moreover, the figure declined 30.4% from earnings of 11 cents per share in the year-ago quarter.

Net sales of $196.6 million decreased drastically by 10.5% from $219.7 million reported in the prior-year quarter, including a positive 20-basis-point impact of foreign exchange. The metric missed the Zacks Consensus Estimate of $198 million. The company’s comparable store sales (comps) fell 12.5%. Comps for the general merchandise categories declined 18.7%, contributing 1,200 basis points (bps) impact on comps. Meanwhile, comps for Custom Spaces declined 1.5%, impacting comps by 50 bps. Online sales also declined 13.7% on a year-over-year basis.

Segment-wise, net sales in the Container Store retail unit came in at $186.8 million, down 10.4% year over year.

Elfa International AB's third-party (“Elfa”) net sales declined by 12.9% to $9.8 million, with a more substantial 16.2% decrease when excluding the impact of foreign currency translation. This decline was attributable to a decrease in sales within the Nordic markets.

Adjusted EBITDA totaled $3.9 million compared with $17 million reported a year ago.

As of Sept. 28, 2024, the TCS store count was 103 compared with 98 in the prior-year quarter. In the second quarter of fiscal 2024, the company opened one new store and closed another. It envisions opening two more new stores and expects to close one store for the rest of the fiscal year.

TCS’ Margin & Costs Details

The company’s gross profit decreased 13.9% year over year to $109 million. The gross margin contracted 210 bps to 55.5% in the fiscal second quarter. The Container Store retail business’ gross margin declined 260 bps to 54.3%, driven by higher promotional activity and adverse product and service mix, partially offset by lower freight costs. The gross margin at Elfa’s business expanded by 250 bps due to higher prices to customers.

Selling, general, and administrative (“SG&A”) expenses fell 3.7% to $105.2 million. SG&A, as a percentage of net sales, increased 380 bps to 53.5% due to the deleveraging of fixed costs related to the lower sales and increased marketing spending in this reported quarter.

TCS’ Financial Snapshot

The company ended the quarter with cash equivalents of $66.1 million, long-term debt of $229.8 million, and shareholders’ equity of $132.8 million. In the first six months of fiscal 2024, Container Store Group provided $4.7 million in cash for operating activities. It did not repurchase shares during the fiscal second quarter.

Shares of this Zacks Rank #5 (Strong Sell) company have declined 52.8% in the past three months compared with the industry’s growth of 14%.