Ralph Lauren Corporation owns some of the most recognizable brands in retail including Polo by Ralph Lauren, Ralph Lauren Collection, Black Label, Blue Label, Lauren by Ralph Lauren, Denim & Supply Ralph Lauren, Chaps and Club Monaco.

The company operates 388 stores itself, including 116 Ralph Lauren stores, 59 Club Monaco stores and 213 Polo factory stores and has international licensing partners to operate stores overseas.

Ralph Lauren Beat in the Fiscal Fourth Quarter of 2013

On May 23, Ralph Lauren reported fiscal fourth quarter and full year 2013 results. and beat the Zacks Consensus once again. It has an amazing earnings surprise track record, beating every quarter for the last five years. Only one "meet" in 2011 keeps it from having a completely perfect track record.

Fourth quarter revenue rose 1% to $1.6 billion with retail sales growing 7% to $804 million. The full year saw record revenue which also rose just 1% to $6.9 billion. It discontinued the American Living line in Fiscal 2013 and closed stores in Greater China as it retools its strategy there. It will be opening up a flagship Ralph Lauren in Asia in fiscal 2014.

Why is it a Zacks #5?

With all this good news, why is the stock a Zacks Rank #5 (Strong Sell)? The company gave disappointing guidance. Full year revenue guidance was for an increase of 4% to 7% when the analysts were looking for over 8%.

Margins are also expected to contract as the company invests in ecommerce and new retail stores this year. While the longer term story still looks solid, fiscal 2014 will be a tough comparison with the record-setting fiscal 2013.

8 estimates out of 11 have been cut in the last 30 days for Fiscal 2014. That has sent the Zacks Consensus tumbling to $8.75 from $9.30 just 30 days ago. That is earnings growth of just 7.8%.

With so many of the analysts in agreement that 2014 could be rocky, and sharply cutting their estimates, the stock has fallen to a Strong Sell.

If you're looking for a luxury retailer without Ralph Lauren's issues, take a look at Michael Kors (KORS). It is a Zacks Rank #2 (Buy). It's expected to grow earnings 30% this fiscal year.

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Zacks Investment Research ]]> Tue, 18 Jun 2013 10:30:01 GMT Calavo Growers (CVGW) recently reported a big second quarter earnings miss despite strong top-line growth thanks to a significant decline in the gross profit margin.

This prompted analysts to revise their estimates lower going forward, sending the stock to a Zacks Rank #5 (Strong Sell).

With shares trading at a lofty 20x forward earnings, investors should consider waiting for earnings momentum to turn around before establishing a position here.

Calavo Growers, Inc. distributes avocados, prepared avocado products, and other perishable food products to food distributors, produce wholesalers, supermarkets, and restaurants. The company obtains avocados primarily from California, Mexico, and Chile. It was founded in 1924 and has a market cap of $401 million.

Second Quarter Results

Calavo Growers reported its fiscal 2013 second quarter results on June 5. Earnings per share came in at 19 cents, significantly below the Zacks Consensus Estimate of 39 cents. It was the company's second straight earnings miss.

Net sales rose 20% year-over-year to $166.4 million as Calavo packed and sold 40% more fresh avocado units. However, the company offered discounts in many cases, which led to a significant decline in the gross profit margin. For instance, gross profit declined from 10.6% in the second quarter last year to just 6.9% of net sales in the same quarter this year.

Estimates Fall

Following the Q2 miss, analysts revised their estimates significantly lower for both 2013 and 2014. This sent the stock to a Zacks Rank #5 (Strong Sell).

The 2013 Zacks Consensus Estimate is now $1.24, down from $1.50 just 30 days ago. The 2014 consensus is down from $1.68 to $1.51 over the same period. You can see this negative earnings momentum in the company's 'Price & Consensus' chart:

Another bearish signal for Calavo Growers is the Zacks Industry Rank. The 'Agriculture Operations' industry ranks in the bottom 5% of all industries at 253 of out 265.

Premium Valuation

Despite the negative earnings momentum, shares of Calavo Growers still trade at a premium valuation. The 12-month forward P/E ratio is 20, above its 10-year median of 16 and well above the industry median of 10. Its price to tangible book ratio of 4.7 is also well above its peers and its historical median.

The Bottom Line

Given declining earnings estimates and premium valuation, investors should consider waiting for the earnings momentum of this avocado company to turn around before establishing a position.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.

 
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Zacks Investment Research ]]> Mon, 17 Jun 2013 05:06:01 GMT

Sometimes you can have a good company that finds its stock a bit ahead of itself, which is what I think we are seeing here in Barnes Group, today’s Bear of the Day.

If you are not familiar, Barnes Group B (Zacks Rank #5) is an international aerospace and industrial manufacturing and services provider, serving a wide range of end markets and customers. The products and services provided by the company are used in far-reaching applications that provide transportation, communication, manufacturing and technology to the world.

Many of their products are highly engineered, high quality (high price) products for those industries.  In a world that is seeing slowing growth on the downswing rather than on the rise, I am concerned that the 50% rise in share price and 19 times earnings multiple might be a little rich.  I have no doubt the company will continue to sell its components, but their growth looks questionable in the second quarter. 

Barnes generates roughly 20% of its sales in Europe, 18% in Asia and 62% in the Americas.

Last Earnings Report
Barnes Group reported Q1 adjusted earnings per share of 40 cents, up roughly 25% year over year in late April; the results fell 11.1% short of the Zacks Consensus Estimate for 45 cents.

Revenue in the quarter grew 18.3% year over year, primarily due to healthy performance in the Industrial segment. The impact of revenue increase was, to a large extent, negated by 10.8% and 61.2% increase in cost of sales and selling and administrative expenses, respectively. Operating income grew a mere 1.4% while operating margin fell 150 basis points.

Of bigger concern was Barnes’ anticipation of recording income tax charges to the tune of $20 million in the current quarter and the company’s cash flows are expected to be negatively impacted by $13 million related to an unfavorable tax ruling.

Earnings Trajectory
While the stock price has been moving higher, analysts’ expectations have been doing the opposite. 

Most of the analysts that cover moved estimates lower since their last earnings report, with the current quarter’s results dropping from 54 cents to the current 46 cents.  FY2013 estimates also came down 11.2% from $2.14 per share to $1.90.

Barnes is expected sales to decrease 1.42% for FY2013, but for earnings to increase 12% on cost cuts and efficiency.  Given their tax situation, margin issues and declining economic conditions, I wonder if they will be able to meet those expectations. 

Barnes has missed earnings expectations 3 of the last 4 quarters by an average of 4% and yet the shares continue to outperform. 

While Barnes is still a great company, its Zacks Rank of 5 (Strong Sell) coupled with the negativity amongst analysts makes it a little risky for my blood.  If you are looking for a unique industrial company, you might check out Graco Inc. GGG (Zacks Rank #1) or Colfax Corp. CFX (Zacks Rank #2).

Jared A Levy is one of the most highly sought after traders in the world and a former member of three major stock exchanges. That is why you will frequently see him appear on Fox Business, CNBC and Bloomberg providing his timely insights to other investors. He has written and published two tomes, “Your Options Handbook” and “The Bloomberg Visual Guide to Options”.  You can discover more of his insights and recommendations through his two portfolio recommendation services:

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Yet while the sector outlook might be very promising, not all companies look to ride this wave higher. In particular, Crocs (CROX) could be one company that misses out on this consumer boom, and gives back some of its gains from earlier in the year.  

Crocs in Focus

Crocs is a Colorado-based company, best known for its unique footwear, although the company also makes a number of accessories as well. While its shoes might be ubiquitous, the firm isn’t exactly in a number of portfolios as it has a market cap of less than $1.5 billion and is well within the small cap range.

Arguably, the best days are long past for this once high flying company, as the stock was once at $35/share, roughly double its current share price. It appears as if the trend has passed Crocs by and that investors have moved on to other names in the broad consumer market that are still ‘in’.

Analysts seem to agree with this assessment too, as expected earnings growth comes in slightly negative for the full year period. This includes a roughly -20% EPS growth rate for the next quarter time frame, and a --0.3% for 2013.

Furthermore, pretty much all analysts are in agreement on this poor story, as all have lowered their estimates in the past sixty days for both the current quarter and current year figures. The overall consensus has also declined significantly as a result of these revisions, suggesting that it isn’t looking good for Crocs in either the near term or longer time periods.

Thanks to this, Crocs currently has a dreaded Zacks Rank of 5 or Strong Sell, meaning that it is likely to underperform other stocks in the next one to three month period. The stock also has an ‘Underperform’ Zacks Recommendation, meaning that the outlook isn’t any better for longer time periods, and that investors should stay far away from this company’s stock.

Better Choices?

Instead of the lowly-ranked Crocs, investors would be wise to consider any number of highly-ranked names in the consumer space. There are even plenty in the same industry of textile-apparel, so there should be no shortage of choices.

In particular, investors might want to consider the top Ranked Hanesbrands (HBI) for exposure. This stock has moved from a Zacks Rank of 2 to a Zacks Rank of 1 in the past week, and its double digit earnings growth projection for this year suggests that it might be a better way to play a surging consumer than the floundering Crocs.

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About the Company

Structured as Master Limited Partnership (MLP), NuStar Energy (NS) is one of the largest asphalt refiners and marketers and independent terminal and petroleum liquids pipeline operators in the country.

Headquartered in San Antonio, NuStar currently owns 8,491 miles of pipeline, 89 terminal and storage facilities, with operations in the US, Canada, UK, Mexico and the Netherlands.

The partnership has three operating segments, but about 96% of operating income comes from Storage and Pipeline segments

Disappointing Results and Guidance

NuStar  reported its first quarter 2013 results on April 24, 2013. Net income for the quarter came in at $13.3 million, or $0.17 per unit, compared to $16.0 million, or $0.23 per unit, in the prior-year quarter.

The management provided downbeat guidance for the second quarter mainly due to weak results in the asphalt joint venture.

Downwards Revisions

Due to disappointing results and downbeat guidance, quarterly and annual estimates have been revised sharply downwards in the past few weeks by analysts.

Zacks consensus estimate for the current quarter now stands at $0.33 per share versus $0.52 per share, 60 days ago, while the full-year consensus estimate is $1.75 per share now, down from $2.09 per share.

The Bottom Line

Though the company is trying to minimize its reliance on margin-based operations and increase it fee-based operations; our near-term concerns relate to the slowdown in demand for refined products and as well as cost overruns on expansion projects. Further, NuStar’s exposure to asphalt business exposes it to volatility in commodity prices.

NS is currently Zacks Rank # 5 (Strong Sell) stock and it has a longer-term recommendation of “Neutral”, thus we think investors should avoid this stock for the time being.

Better Play

Investors looking for exposure to the industry could look at Delek Logistics Partners (DLK) or Summit Midstream Partners (SMLP); both are Zacks rank#1 (Strong Buy) stocks and also have longer-term Zacks recommendation of “Outperform”. 

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Not only did net income decline by 10.2% due to higher expenses, the company also warned about future investment-related expenses due to Japanese yen fluctuations that would further drag down their margins.

Plus, they are in the process of selling their Pharmaceuticals division, which is profitable and will create more uncertain expenses during the divestiture process this month.

Here's a visual of the dramatic drop in analysts estimates since the company's April 26 report, after which it slipped to a Zacks #5 Rank (Strong Sell)...

Regulation, Tax, and Cost Headwinds

The medical-technology excise tax of 2.3% has started to weigh on the bottom line from the second quarter of fiscal 2013. The tax will be a part of the SG&A expense and is expected to be approximately $25 million per quarter.

Moreover, increased investment-related expenses related to emerging markets growth is likely to keep margins under pressure going forward. The company's net income from continuing operations dropped 10.2% in the second quarter of fiscal 2013 due to higher expenses, which dampened solid sales growth.

Covidien is slated to spin-off its Pharmaceutical unit at the end of Jun 2013. The Pharma business is performing well on the back of new products and is contributing significantly to the top line. Following its divestment, Covidien will be left with only the Medical Devices and Supplies businesses.

Although the divestment will allow the company to focus on high-margin surgical products, uncertainty looms over the growth prospects of these two businesses, given the current difficult healthcare environment.

Path of Least Resistance

At $64, COV is trading about $2 below where it was when it earned a Zacks #5 Rank on May 9. After a gap lower to $62 in the aftermath of its last quarterly report, the stock climbed back above $66 but has met steady selling pressure there.

And the whole Medical Products industry group is under pressure with a Zacks Industry Rank of 171 out of 265 industries, with 72 companies including competitor Baxter (BAX).

Trading over 17 times forward estimates, COV looks poised to at least test the $61-62 support area if not lower into the high $50s. Until the earnings estimate story turns around, this one should be hands off for a while.

Kevin Cook is a Senior Stock Strategist with Zacks.com
 
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Zacks Investment Research ]]> Tue, 11 Jun 2013 08:44:01 GMT Bridgepoint Education (BPII) Has put together a number of positive earnings surprises and that stock has risen to a Zacks Rank #4 (Sell). It is the Bull of the Day.

Super Run Up

The stock has run up quite dramatically over the past six weeks. The stock is up more than 20% since the start of May, but at the same time, earnings estimates have been moving in the opposite direction.

Company Description

Bridgepoint Education provides postsecondary education services. Its academic institutions, Ashford University and University of the Rockies offer associate's, bachelor's, master's, and doctoral programs in the disciplines of business, education, psychology, social sciences, and health sciences. The company was formerly known as TeleUniversity, Inc. and changed its name to Bridgepoint Education, Inc. in February 2004. Bridgepoint Education, Inc. was founded in 1999 and is headquartered in San Diego, California.

Not So Good Earnings History

Looking to the earnings history, I see a stock that has missed the number in two of the last three reports and posted an earnings meet in the other instance. The September 2012 quarter came in 17% below expectations and the following quarter was a negative earnings surprise of 3.3%.

Estimates Trend Lower

Estimates for BPI have slid over the past several months. The Zacks Consensus Estimate for 2013 stood at $2.21 in August of 2012. Over the next several months estimates moved from that level to $2.13 in October, to $1.55 In December, to $1.28 in April down to the $0.98 level that analysts are currently calling for. That is a dramatic decrease.

The 2014 Estimates have also been dropping. The Zacks Consensus Estimate was $1.42 in February and has ripped lower to $1.01 in April and down to $0.61, where it sits today.

The glaring indication of troubling times to come is apparent when you see that estimates for 2014 are lower than the current year.

Valuation

The valuation picture for BPI is one that looks good at first glance, with a trailing PE of 6x and forward multiple of 13x, both measures are well below the industry average. The price to book of 1.3x is also less than half the 3.0x industry average. But the devil is in the details here, with revenue declining 18.5% in 2013 and expected to be 8.6% lower again in 2014. EPS is also declining at a 57% rate for 2013 and 38% for 2014 compared to an industry average increase of 5% in 2013 and 13% in 2014. So the valuation is moving lower as the company slips behind the industry rate of growth of earnings.

The Chart

The chart for BPI looks pretty good right now, but the 20%+ move from the start of May to the $13 level the stock is currently at is simply not supported by the fundamentals. With estimates moving lower, investors will see that this is a stock they do not want to hold in their portfolio's until the earnings turnaround.

Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor in charge of the Zacks Home Run Investor service, a Buy and Hold service where he recommends the stocks in the portfolio.

Brian is also the editor of Breakout Growth Trader a trading service that focuses on small cap stocks and also carries a risk limiting strategy. Subscribers get daily emails along with buy, and sell alerts.

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To read this article on Zacks.com click here. ]]> Tue, 11 Jun 2013 08:44:01 GMT Bridgepoint Education (BPII) Has put together a number of positive earnings surprises and that stock has risen to a Zacks Rank #4 (Sell). It is the Bull of the Day.

Super Run Up

The stock has run up quite dramatically over the past six weeks. The stock is up more than 20% since the start of May, but at the same time, earnings estimates have been moving in the opposite direction.

Company Description

Bridgepoint Education provides postsecondary education services. Its academic institutions, Ashford University and University of the Rockies offer associate's, bachelor's, master's, and doctoral programs in the disciplines of business, education, psychology, social sciences, and health sciences. The company was formerly known as TeleUniversity, Inc. and changed its name to Bridgepoint Education, Inc. in February 2004. Bridgepoint Education, Inc. was founded in 1999 and is headquartered in San Diego, California.

Not So Good Earnings History

Looking to the earnings history, I see a stock that has missed the number in two of the last three reports and posted an earnings meet in the other instance. The September 2012 quarter came in 17% below expectations and the following quarter was a negative earnings surprise of 3.3%.

Estimates Trend Lower

Estimates for BPI have slid over the past several months. The Zacks Consensus Estimate for 2013 stood at $2.21 in August of 2012. Over the next several months estimates moved from that level to $2.13 in October, to $1.55 In December, to $1.28 in April down to the $0.98 level that analysts are currently calling for. That is a dramatic decrease.

The 2014 Estimates have also been dropping. The Zacks Consensus Estimate was $1.42 in February and has ripped lower to $1.01 in April and down to $0.61, where it sits today.

The glaring indication of troubling times to come is apparent when you see that estimates for 2014 are lower than the current year.

Valuation

The valuation picture for BPI is one that looks good at first glance, with a trailing PE of 6x and forward multiple of 13x, both measures are well below the industry average. The price to book of 1.3x is also less than half the 3.0x industry average. But the devil is in the details here, with revenue declining 18.5% in 2013 and expected to be 8.6% lower again in 2014. EPS is also declining at a 57% rate for 2013 and 38% for 2014 compared to an industry average increase of 5% in 2013 and 13% in 2014. So the valuation is moving lower as the company slips behind the industry rate of growth of earnings.

The Chart

The chart for BPI looks pretty good right now, but the 20%+ move from the start of May to the $13 level the stock is currently at is simply not supported by the fundamentals. With estimates moving lower, investors will see that this is a stock they do not want to hold in their portfolio's until the earnings turnaround.

Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor in charge of the Zacks Home Run Investor service, a Buy and Hold service where he recommends the stocks in the portfolio.

Brian is also the editor of Breakout Growth Trader a trading service that focuses on small cap stocks and also carries a risk limiting strategy. Subscribers get daily emails along with buy, and sell alerts.

Follow Brian Bolan on twitter at @BBolan1

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Zacks Investment Research ]]> Mon, 10 Jun 2013 08:17:01 GMT Although the U.S. economy has seen some decent figures on the industrial production front, many investors remain lukewarm at best about the materials sector. Part of the reason for this is because many other markets—such as China and Europe—are still facing extremely sluggish conditions, which is curtailing demand for a variety of materials.

This trend has been especially apparent in the steel market, as a number of key producers have found it to be incredibly difficult to grow earnings or even revenues in this lethargic environment. In particular, this gloomy situation has been terrible news for the once-giant U.S. Steel Company (X).

U.S. Steel in Focus

U.S. Steel is still the country’s largest domestically owned integrated steel producer, though its glory days have since long past. Now, the company is a mere shell of its former self, struggling to remain profitable in the face of extreme levels of foreign competition.

This terrible trend is especially apparent when investors look at the earnings estimate picture for the company. Estimates have fallen like a stone for all time periods we follow, with the consensus now projecting a full year loss for U.S. Steel of about $1.31/share.

This represents an incredible slide, as just two months ago the consensus was at (a positive) 99 cents/share. Current quarter figures are equally depressing; the consensus from two months ago was at $0.41/share, while the current figure comes in at -$0.79/share.

Now, analysts are expecting triple digit earnings contractions in terms of year-over-year figures for both the current quarter and current year estimates. Meanwhile, all of the estimates for the current quarter and current year time frames have gone down, suggesting universal agreement among analysts for X’s bearish outlook.

Better Plays?

Given all this bad news, investors shouldn’t be surprised to note that U.S. Steel has earned itself the dreaded Zacks Rank #5 (Strong Sell), meaning that it may be likely to underperform other stocks. This would continue a long trend for U.S. Steel, suggesting that investors may want to look elsewhere for investments.

While the steel space is pretty poorly ranked, there are a few top Ranked stocks in the sector which could be great plays for some high risk investors out there. Currently, two firms have a Zacks #1 Rank in this steel market; Kobe Steel (KBSTY) and Shiloh Industries (SHLO).

Both of these firms appear to be better positioned than U.S. Steel, and both of the companies are looking for solid earnings growth this year when compared to the prior full year period. Plus KBSTY and SHLO have seen their Rank move from a #3 to a #1 in the past week, suggesting that now might be the time to get in on these as opposed to the lackluster U.S. Steel.

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With shares trading at a premium to their historical medians on both a forward P/E and a price/sales basis, investors should consider waiting to bid on this stock until its earnings momentum turns around.

Sotheby's is one of the largest global auctioneers of fine art, decorative art, and jewelry. It operates under three segments: Auction, Finance, and Dealer. Through its predecessors, Sotheby's has been in the auction business since 1744 and is the oldest company listed on the New York Stock Exchange.

First Quarter Results

Sotheby's delivered disappointing first quarter results on May 9. Earnings per share came in at a loss of 33 cents, well below the Zacks Consensus Estimate of -12 cents, and well below a loss of -16 cents in the same quarter last year. The first quarter has historically been slow for Sotheby's due to the seasonal nature of the art auction market.

Total revenues declined -3% to $101.7 million, which also missed the Zacks Consensus Estimate of $117.0 million. This was due in large part to a decline in the auction commission margin to 15.0% from 18.1% in the same quarter last year.

Estimates Fall

Following the Q1 miss, analysts revised their estimates meaningfully lower for both 2013 and 2014. This sent the stock to a Zacks Rank #5 (Strong Sell).

The 2013 Zacks Consensus Estimate is now $1.83, down from $2.21 just 30 days ago. The 2014 consensus is down from $2.54 to $2.28 over the same period.

Another bearish signal for Sotheby's is the Zacks Industry Rank. The 'Auction/Valuation Services' industry ranks 256 of out 265.

Premium Valuation

Despite the negative earnings momentum, shares of Sotheby's still trade at a premium valuation. The 12-month forward P/E ratio is 19, above its 10-year median of 18x. And its price to sales ratio of 3.4 is also above its historical multiple of 2.7.

The Bottom Line

Given declining earnings estimates and premium valuation, investors may want to wait to bid on this auctioneer until its earnings momentum turns around.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.

 
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Zacks Investment Research ]]>