G-III, SMART, Boeing, Spirit and Heico highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – April 5, 2019 – Zacks Equity Research G-III Apparel Group GIII as the Bull of the Day, SMART Global Holdings SGH as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Boeing Company BA, Spirit AeroSystems Holdings, Inc. SPR and Heico Corp. HEI.
Here is a synopsis of all five stocks:
Bull of the Day:
G-III Apparel Group is a leading manufacturer and distributor of apparel and accessories under licensed, owned, and private-label brands. Its extensive brand portfolio includes DKNY, Donna Karan, Calvin Klein, Tommy Hilfiger, Vince Camuto, Guess?, Jessica Simpson, Cole Haan, Karl Lagerfeld, and many others.
Better-Than-Expected Q4 Results
Non-GAAP earnings of 55 cents blew past the Zacks Consensus Estimate of 44 cents per share. Revenues came in at $767 million, just missing our consensus estimate but growing 7% year-over-year.
And for the full year, sales grew 10% to $3.1 billion, while EPS hit $2.75 per diluted share, which is more than twice last year’s $1.25 per share profit. Fiscal 2019 ended up being a record year for G-III.
Morris Goldfarb, the company’s Chairman and CEO, pointed to G-III’s five “power brands†that drove its record profits: DKNY, Donna Karan, Calvin Klein, Tommy Hilfiger, and Karl Lagerfeld.
“This was also a transformative year for us as it was the first full year in which products for DKNY and Donna Karan were created and developed by us,†he continued. “In this ever-changing retail landscape, our consistent execution positions us to be a global provider of fashion product. With the current power brands we have today, we believe we can continue to achieve significant organic growth opportunities over the next several years.â€
Year-to-date, shares of GIII are up 50% compared to the S&P 500’s gain of almost 16%.
Along with strong Q4 results, G-III provided strong guidance for fiscal 2020.
The company expects EPS between $3.18 and $3.28 per share, with revenues of $3.3 billion. And for the current quarter, G-III should report earnings of 13 cents to 23 cents per share on revenues of roughly $650 million.
Estimates, thus, have been rising lately too, pushing the stock towards a Zacks Rank #1 (Strong Buy).
For the current fiscal year, the company’s earnings are expected to grow about 15.4% year-over-year. Five analysts have revised their estimates upwards in the past 60 days, and the Zacks Consensus Estimate has moved sixteen cents higher from $3.14 to $3.30 during the same time frame (which sits above the company’s current guided range).
2021 looks pretty strong too, and earnings are expected to grow almost 11%; next year’s consensus estimate sits at $3.66 per share, with two upward revisions in the last 60 days.
If you’re an investor looking for an apparel stock to add to your portfolio, make sure to keep GIII on your shortlist.
Bear of the Day:
Headquartered in Newark, California, SMART Global Holdings designs, manufactures, and supplies electronic subsystems to original equipment manufacturers (OEMs), and engages primarily in the computer, industrial, networking, telecommunications, and aerospace and defense markets. SMART Global operates throughout the U.S., Europe, Asia, and Latin America.
Disappointing Q2 Earnings
While earnings of 77 cents per share beat the Zacks Consensus Estimate of 75 cents, EPS declined considerably from the year-ago quarter; Q2 2018 earnings were $1.64 per share.
Revenues of $304 million missed our consensus estimate and declined 3.2% year-over-year due to weakness in the company’s Brazil business. Net sales in SMART Global’s Brazil segment fell 29.5% year-over-year to $147.1 million on a “worsening price environment†for smartphone and PC commodity memory products.
However, SGH’s specialty memory segment saw sales increase nearly 10% from the year-ago quarter to $115.6%. And to its acquisition of Penguin Computing last summer, the company’s specialty compute and storage solutions segment posted sales of $41.3 million.
On top of these weak results was a weak outlook for SGH’s third quarter. SMART Global expects net sales between $260 million and $270 million and adjusted earnings in the range of 34 cents and 38 cents per share. Analysts were projected EPS of 90 cents per share on revenues near $332 million.
Analysts have since turned bearish on SMART Global, with four cutting estimates in the last 60 days for the current fiscal year. Earnings are expected to decline 43% for the year, and the Zacks Consensus Estimate has dropped over one dollar during that same time period from $4.63 to $3.61 per share.
This sentiment has stretched into 2020, though the shifting tide hasn’t been as dramatic. Earnings could see growth of around 6%, but our consensus estimate has dropped significantly in the past two months.
SGH is now a Zacks Rank #5 (Strong Sell).
Shares of the specialty memory leader have fallen almost 27% since January. In comparison, the S&P 500 is up almost 16% year-to-date.
3 Defense Stocks to Add to Your Portfolio Now
U.S. defense stocks have been riding high ever since President Trump entered the Oval Office.
Impressively, the Zacks Aerospace sector, which includes the U.S. defense biggies, has gained 18.1% in 2019 so far compared with the S&P 500’s increase of 14.3%.
Let us now discuss in brief the growth catalysts that will continue to drive U.S. defense stocks’ rally as the year progresses.
A Solid Budget for Fiscal 2020
Trump proposed defense spending of $750 billion last month for fiscal 2020. This new plan reflects a solid 5% increase from the nation’s existing defense budget. No doubt, on approval, this budget would significantly boost the profit of U.S. defense biggies.
Notably, the proposed budget provisions $165 billion for Overseas Contingency Operations (OCO) (as reported by CNN), an account that pays for military operations overseas in places like Afghanistan, Syria and Iraq. If approved, this would mark a striking increase from the 2019 budget, which sought $69 billion for that operational account. As major U.S. defense companies continue to expand their international presence, such a significant increase in OCO provision will certainly boost their businesses across the globe.
Prospective Mergers
Last year, the U.S. defense space witnessed a number of notable mergers and acquisitions like that of Northrop with Orbital ATK and United Technologies with Rockwell Collins. This is because companies are trying to enhance their portfolio to reap the benefits of expanding defense budget and survive amid cutthroat competition. Keeping up with this trend, L3 Technologies is all set to merge with Harris Corp. Such mergers should further strengthen the U.S. defense space, attracting more contracts from across the world.
Solid Q1 Earnings Picture
As of Apr 3, companies in the Zacks Aerospace sector are expected to record annual earnings growth of 4.5% on sales growth of 8.6% in Q1. Such encouraging quarterly estimates set the stage for the addition of defense stocks to one’s portfolio.
Our Choices
President Trump’s huge defense spending proposal and ever-growing geopolitical tensions and America’s defense resolve should lead to gains for defense stocks in 2019.
In this context, we have selected four defense stocks that are expected to gain from these factors. These four stocks carry a Zacks Rank #1 (Strong Buy) or 2 (Buy) and have outperformed the S&P 500. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Boeing Company
Boeing’s earnings estimates for 2019 indicate an annual improvement of 25.6% while that for sales shows 9.5% growth. It sports a Zacks Rank #1. Shares of Boeing have risen 19.3% this year so far.
Spirit AeroSystems Holdings, Inc.
Spirit AeroSystems’ earnings estimates for 2019 indicate an annual improvement of 20.8%, while that for sales shows 12.6% growth. It sports a Zacks Rank #1. Shares of Spirit AeroSystems have risen 22.2% this year so far.
Heico Corp.
Heico’s earnings estimates for 2019 indicate an annual improvement of 18.2% while that for sales shows 10.4% growth. It carries a Zacks Rank #2. Shares of Heico have risen 26.3% this year so far.
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