The Zacks Analyst Blog Highlights: Tiffany, Restoration Hardware Holdings, Hanesbrands, U.S. Steel and Martin Marietta
For Immediate Release
Chicago, IL – July 01, 2014 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Tiffany & Co. (TIF-Free Report), Restoration Hardware Holdings, Inc. (RH-Free Report), Hanesbrands Inc. (HBI-Free Report), U.S. Steel (X-Free Report) and Martin Marietta (MLM-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Monday’s Analyst Blog:
GDP Falters: 3 Retail Stocks to Power Your Portfolio
Who doesn’t like a positive return from ones portfolio, particularly when the economy does not show favorable signs or the market mood is indecisive? Investors exercise extra caution while choosing their portfolio but surety of return is not guaranteed every time.
Here, we will discuss 3 retail stocks that can enrich your portfolio in an economy which is still undergoing recovery. The third and final data for real gross domestic product (GDP) revealed a 2.9% decline in the first quarter of 2014, thus taking away some sheen from the economy, which had barely started to look stronger.
Market watchers believe that the contraction stemmed from an inclement weather condition that locked consumers indoors, hampered production and construction activities, and led to soft home and auto sales. Consumer spending, which accounts for over two-third of the U.S. economic activity, also grew a moderate 1% in the quarter, down from the 3.1% jump anticipated.
However, economists believe that the softness in the first quarter was only temporary. They are hopeful that a much favorable weather condition now, an improving labor market, recovery in the housing market and surging demand, will translate into strength in the U.S. economy as the year progresses.
Scaling down of the bond buying campaign for the fifth time to $35 billion, rising consumer confidence (85.2 in June 2014 from 82.2 in May 2014) and unemployment rate standing at its 5-year low of 6.3%, hint at a rebounding economic activities. Thus we turn our attention to the Retail/Wholesale sector which remains a lucrative investment opportunity.
3 Prominent Picks
We suggest investing in Tiffany & Co. (TIF-Free Report), the renowned jewelry maker. This Zacks Rank #1 (Strong Buy) stock has amassed a year-to-date return of roughly 9.4%, and is expected to witness earnings growth of 14.7% in fiscal 2014 and 13.4% in fiscal 2015.
Though the stock looks a bit pricey with a forward P/E (price-to-earnings) multiple of 23.49x, it should not disappoint investors given the company's long-term expected earnings growth of 13.6%. This New York-based company had registered an average positive earnings surprise of 15.2% over the trailing four quarters.
Restoration Hardware Holdings, Inc. (RH-Free Report), a home furnishings retailer, is another stock to bet on. This Zacks Rank #1 (Strong Buy) stock has amassed a year-to-date return of 37.2% and has a long-term earnings growth rate of 28.6%. Shares of this Corte Madera, CA based company trades at a forward P/E of 38.81x, which is expensive but attractive from an earnings growth perspective. The company had registered an average positive earnings surprise of 37.0% over the trailing four quarters.
Another stock that investors may look forward to is Hanesbrands Inc. (HBI-Free Report), a designer and manufacturer of basic apparel in the United States. Shares of this Zacks Rank #2 (Buy) company trades at a forward P/E of 19.72x, a marginal discount to the industry average of 20.00x, and have amassed a year-to-date return of 42.4%.
This Winston-Salem, NC-based company had registered an average positive earnings surprise of 17.9% over the trailing four quarters, and has a long-term earnings growth rate of 12.8% that makes it look attractive. The company is expected to witness earnings growth of 27.4% in 2014 and 10.0% in 2015.
Bottom Line
We believe that the above stocks which boast strong fundamentals and growth prospects are capable of satisfying investors' search for market winners. A solid rank indicates favorable estimate revisions by analysts who are optimistic on the future of these companies.
U.S. Steel Removed in S&P 500 Shake-Up
U.S. Steel (X-Free Report) is being removed from the S&P 500 effective after the close on Jul 1. The benchmark index will add NC-based construction materials maker Martin Marietta (MLM-Free Report) in its roster in place of the nation’s largest steel maker by volumes.
U.S. Steel, which is in the steel-making business for more than 110 years, will replace Martin Marietta in the S&P MidCap 400 list. The Pittsburgh-based steel maker’s current market capitalization (of roughly $3.8 billion) makes it more befitting for the mid-cap market space.
U.S. Steel’s shares, which closed at $26.02 last Friday, slipped around 1.2% in extended trading. The company has seen its shares sag around 11.5% so far this year versus a roughly 7% gain for the S&P 500.
U.S. Steel, once the country’s first billion-dollar corporation, was founded in 1901 by J.P. Morgan and other legendary businessmen through the merger of Federal Steel Company with the Carnegie Steel Company and other steel and iron businesses with an authorized capitalization of $1.4 billion.
U.S. Steel, which remains beset by weak steel market fundamentals, posted losses in each of the last five years on weak demand. It was ousted from the Dow Jones Industrial Average in 1991.
The U.S. market is seeing surging imports of steel products. This, in addition to the oversupply, is further pressurizing prices and prospects of steel producers including U.S. Steel.
Oversupply in the industry has put pressure on steel prices as Chinese steel production has outpaced demand. The low costs of production in China enable the local producers to sell their product at cheaper rates, leading to an industry-wide price decline, hurting margins and earnings power of U.S. Steel in the process.
While healthy automotive demand, aggressive cost management and increased cokemaking capabilities are expected to benefit U.S. Steel, it is exposed to certain near-term operational challenges.
U.S. Steel, a Zacks Rank #3 (Hold) stock, is expected to face raw material cost (primarily for purchased scrap and energy) pressure and delivery issues as well as maintenance outages in the near term.
Moreover, bad weather-related logistic bottlenecks are expected to affect production and shipments in second-quarter 2014, leading to a loss in the company’s flat-rolled segment.
U.S. Steel’s European division is also expected to see weaker results in the quarter.
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
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