Chicago, IL – March 12, 2024 – Zacks Equity Research Deckers Brands DECK as the Bull of the Day and Havertys HVT as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Coterra Energy CTRA, Cheniere Energy LNG and Chesapeake Energy CHK.
Here is a synopsis of all five stocks:
Deckers Brands has been crushing it with two big brands: UGG and HOKA. This Zacks Rank #1 (Strong Buy) is expected to grow earnings by 38.6% in fiscal 2024.
Deckers Brands is a global footwear, apparel and accessories company with retail and online stores. Its portfolio of brands includes UGG, HOKA, Teva, Sanuk and Koolaburra.
On Feb 1, 2024, Deckers reported its fiscal third quarter 2024 results and posted a huge earnings beat. Deckers reported $15.11, blowing by the Zacks Consensus of $11.40 by $3.71, or 32.5%.
It was a record on earnings, up 44% from a year ago.
This was Decker's 9th consecutive earnings beat.
Additionally, it has only had one earnings miss in the last 5 years, which included the difficult time for retailers during the pandemic when countries were on lock downs and stores were closed.
That's impressive.
It was a record quarter for revenue as well, jumping 16% to $1.56 billion from $1.35 billion a year ago.
Sales were hot both domestically, rising 15.6% to $1.048 billion from $906.8 million a year ago, and internationally, which gained 16.7% to $511.9 million from $438.8 million.
Deckers two biggest brands saw strong sales increases. UGG rose 15.2% in the holiday quarter to $1.07 billion from $930.4 million a year ago. HOKA grew 21.9% to $429.3 million from $352.1 million.
Teva sales fell 16.2% to $25.6 million from $30.5 million and Sanuk sales also decreased 28.9% to $4 million from $5.6 million. But both of these brands are small compared to the two juggernauts of UGG and HOKA.
Gross margin rose to 58.7% from 53%.
Additionally, in another sign that the supply chain has normalized, Deckers inventories fell to $539 million from $723.4 million a year ago.
Deckers has beat on earnings and raised full year guidance three quarters in a row. The company now expects earnings to range from $26.25 to $26.50, about 36% above last year's earnings of $19.37.
Analysts are even more bullish. 11 estimates have been revised higher in the last 60 days for fiscal 2024 which has pushed up the Zacks Consensus to $26.85. This is above the company's guidance range but given that it has raised that range 3 quarters in a row, analysts are believing they will likely exceed the range again.
That is earnings growth of 38.6% above fiscal 2023.
Analysts are bullish on fiscal 2025 too. 11 estimates have been revised for next year in the last 2 months as well. That has pushed up the Zacks Consensus to $29.71 from $26.78 during that time. That's another 10.6% earnings growth.
Investors have piled into Deckers over the last year, which has pushed the stock to new all-time highs. Over the last 5 years, it has even outperformed the popular Invesco QQQ ETF.
Shares are not cheap. It now trades with a forward P/E of 34.
But Deckers has a lot of cash on hand with $1.65 billion at the end of the third fiscal quarter 2024.
It also is shareholder friendly. While it doesn't pay a dividend, it has a massive ongoing share repurchase program.
In the third fiscal quarter, it bought $99.7 million in shares at a weighted average price of $507.95. As of Dec 31, 2023, there was $1.046 billion remaining on the stock repurchase authorization.
But shares are now over $900. Is Deckers still buying shares this quarter or has it moved to the sidelines? Be sure to tune into the fiscal fourth quarter earnings report to find out.
For investors looking for a top consumer company with big growth, Deckers should be on your short list.
Havertys is facing headwinds in 2024 from a slow housing market and inflation. This Zacks Rank #5 (Strong Sell) is expected to see earnings decline by the double digits in 2024. The pandemic furniture buying surge is definitely over.
Havertys is a full-service home furnishings retailer with 124 showrooms in 16 Southern and Midwest states. It has been in business since 1885.
On Feb 21, 2024, Havertys reported its fourth quarter 2023 results and missed on the Zacks Consensus by $0.06. Earnings were $0.89 versus the consensus of $0.95.
Sales fell 24.9% to $210.7 million while comparable store sales also decreased 25.5%.
Gross profit margin, however, rose to 62.4% from 57% last year.
For the full year, sales and earnings were also challenged. Consolidated sales fell 17.7% to $862.1 million. Comparable store sales fell 18.4%.
Gross profit margin for the year was 60.7% compared to 57.7% in 2022.
"Higher interest rates and record low housing sales and inflation combined with prior years' outsized sales results have generated challenging headwinds," said Clarence H. Smith, CEO.
Havertys gave expected gross profit margins for 2024 to be between 59.5% and 60%.
The analysts are bearish on 2024. 2 estimates have been cut in the last 30 days. The 2024 Zacks Consensus has been slashed to $2.45 from $3.40 during that time.
That's an earnings decline of 24.6% as Havertys made $3.25 in 2023.
It would mark the second year in a row of an earnings decline, after the surge in furniture sales during the pandemic.
Havertys shares peaked in 2021 when everyone was buying new couches, outdoor furniture and desks for work-from-home during the pandemic. Home sales surged. When you buy a new house, you buy furniture.
Year-to-date shares are down 10% but they haven't completely broken down. Here's the 5-year chart.
Shares are cheap, with a forward P/E of 13.7.
Havertys is also shareholder friendly. It paid out $16.1 million in special cash dividends and $19.1 million in quarterly dividends last year. It also bought 227,000 shares of common stock for $6.9 million.
The company has no funded debt and cash and cash equivalents of $127.8 million as of Dec 31, 2023.
Havertys has paid a cash dividend in each year since 1935. It's annual dividend currently yields 3.7%.
But given the headwinds in the furniture industry, investors interested in furniture retailers like Havertys might want to wait for improvement in the housing market, and the earnings outlook, before diving in.
The U.S. Energy Department's weekly inventory release showed that natural gas supplies decreased largely as expected. The neutral inventory numbers notwithstanding, futures settled with a loss week over week, overwhelmed by excessive supply and insipid weather-related demand.
In fact, the market hasn't been kind to natural gas, with the commodity recently hitting fresh three-and-a-half-year lows due to worries about record output and concerns about a growing glut. At this time, we advise investors to focus on stocks like Coterra Energy and Cheniere Energy.
Stockpiles held in underground storage in the lower 48 states fell 40 billion cubic feet (Bcf) for the week ended Mar 1, almost matching the guidance of a 41 Bcf withdrawal, per a survey conducted by S&P Global Commodity Insights. The decrease compared with the five-year (2019-2023) average net shrinkage of 93 Bcf and last year's decline of 72 Bcf for the reported week.
The latest draw puts total natural gas stocks at 2,334 Bcf, which is 280 Bcf (13.6%) above the 2023 level and 551 Bcf (30.9%) higher than the five-year average.
The total supply of natural gas averaged 105.8 Bcf per day, down 2 Bcf per day on a weekly basis due to a slump in dry production and lower shipments from Canada.
Meanwhile, daily consumption fell to 108.4 Bcf from 111.3 Bcf in the previous week, mainly reflecting weakness in residential/commercial usage and a lower power burn triggered by an increase in temperatures in the Northeast and Atlantic Coast.
Natural gas prices fell last week against the as-expected inventory decrease backdrop. Futures for April delivery ended Friday at $1.81 on the New York Mercantile Exchange, down some 1.6% from the previous week's closing.
Investors should know that natural gas realization has been under pressure from strong production, an elevated level of stockpiles and tepid weather-related demand. It's worth mentioning that the current inventory levels are well above the year-ago figure and the five-year average. The bearish sentiment surrounding the commodity even prompted shale producers Chesapeake Energy and others to hit the breaks on new drilling.
CHK announced a reduction in its drilling rigs so as to lower volume. The company decided to cut this year's gas production expectations by around 20%. Chesapeake's plans rippled through the market, with Appalachian Basin-focused EQT following on. The explorer and producer of natural gas said that it will lower its daily output by 1 Bcf to combat the supply glut in the U.S. market. According to EQT, the revised plan took effect in late February and will continue at least through March. This will likely reduce net production by 30-40 Bcf, per the company. While these production cut announcements temporarily sent natural gas prices higher, they have failed to galvanize the market.
As is the norm with natural gas, changes in temperature and weather can lead to price swings. With a mild winter so far and forecasts turning warmer, usage of the commodity to generate electricity has taken a hit.
Having said that, there are signs of curtailment in U.S. production. According to energy services provider Baker Hughes, the U.S. natural gas rig count — a pointer to where production is headed — is down nearly 25% from last year. Industry observers believe this could set the stage for a pullback in near-term drilling and supplies.
Meanwhile, a stable demand catalyst in the form of continued strong LNG feedgas deliveries is supporting natural gas. As a matter of fact, LNG shipments for export from the United States have been elevated for months, reaching record levels due to environmental reasons and Europe's endeavor to move away from its dependence on Russian natural gas supplies due to the war in Ukraine.
The upshot of all of these factors — the natural gas market — remains an oversupplied one. As it is, it endured a torrid year in 2023, with prices tumbling more than 40%, briefly breaking below the $2 threshold for the first time since 2020. Now, it has again tumbled below that psychological mark.
Based on several factors, the space is currently quite unpredictable and spooked by sudden changes in weather and production patterns. As such, investors are clueless about what to do. As of now, the lingering uncertainty over the fuel means that they should preferably hold on to fundamentally strong stocks like Coterra Energy and Cheniere Energy.
Coterra Energy: It is an independent upstream operator primarily engaged in the exploration, development and production of natural gas. Headquartered in Houston, TX, the firm owns some 183,000 net acres in the gas-producing Marcellus Shale of the Appalachian Basin. The Zacks Rank #3 (Hold) company churned out an average of 2,262.7 million cubic feet on a daily basis from these assets in 2023.
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Coterra beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters and missed in the other, the average being 9.3%. Valued at around $19.9 billion, CTRA has risen 7.7% in a year.
Cheniere Energy: Being the first company to receive regulatory approval to export LNG from its 2.6 billion cubic feet per day Sabine Pass terminal, Cheniere Energy enjoys a distinct competitive advantage.
Cheniere Energy's expected EPS growth rate for three to five years is currently 25.8%, which compares favorably with the industry's growth rate of 21.7%. This #3 Ranked natural gas exporter has a trailing four-quarter earnings surprise of roughly 64.7%, on average. LNG shares have edged up 0.6% in a year.
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Chesapeake Energy Corporation (CHK) : Free Stock Analysis Report
Deckers Outdoor Corporation (DECK) : Free Stock Analysis Report
Cheniere Energy, Inc. (LNG) : Free Stock Analysis Report
Haverty Furniture Companies, Inc. (HVT) : Free Stock Analysis Report
Coterra Energy Inc. (CTRA) : Free Stock Analysis Report
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