For Immediate Release
Chicago, IL – August 30, 2019 – Zacks Equity Research Shares of Decker Brands DECK as the Bull of the Day, Lear Corporation LEA as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Alphabet GOOGL, Tesla TSLA and Baidu BIDU.
Here is a synopsis of all five stocks:
Bull of the Day:
Decker Brands is proving its not just about UGGs anymore. This Zacks Rank #1 (Strong Buy) is hitting on all cylinders as it recently raised full year guidance.
Deckers Brands designs, manufactures and distributes footwear, apparel and accessories. It's most prominent brand is UGG, but it also owns Koolaburra, HOKA ONE ONE, Teva and Sanuk.
It's products are sold around the world in department and specialty stores as well as company-owned and operated retail stores. Deckers also operates an online store at deckers.com.
Another Beat in the Fiscal First Quarter
On July 25, Deckers reported fiscal first quarter 2020 results and again blew by the Zacks Consensus Estimate, this time by 41.7%.
Earnings were a loss of $0.67 versus the consensus of a loss of $1.15.
It was the tenth earnings beat in a row which is an impressive streak given the struggles of some retailers.
In the quarter, sales jumped 10.5% to $276.8 million versus $250.6 million in the year ago period.
UGG remains its largest brand as sales rose 1.5% to $138.5 million, up from $136.5 million a year ago.
But HOKA ONE ONE continues to be on fire as sales jumped 69.2% to $79.5 million from $47 million a year ago.
Teva and Sanuk both saw year-over-year sales declines of 4.3% and 23.5%, respectively. Sanuk sales fell to $18.7 million from $24.4 million.
Wholesale sales were also up 10.7% to $196.6 million from $177.6 million a year ago.
Deckers Raised Full Year Guidance
Even though it only gave full year guidance for the first time last quarter, Deckers is already raising it based on the strong first quarter results.
The sales forecast was raised to $2.1 billion to $2.125 billion from $2.095 billion to $2.120 billion.
Earnings are expected to be in the range of $8.40 to $8.60, up from prior guidance of $8.20 to $8.40.
5 analysts raised their estimates after the report, pushing the Zacks Consensus up to $8.65 from $8.45. That's higher than the company's guidance range but it still means an earnings decline of 2.2% from a year ago as it made $8.84 last year.
Fiscal 2021 is looking upbeat as well, with 4 analysts raising and pushing the Zacks Consensus up to $9.47 from $9.28, or an earnings gain of 9.5%.
Bear of the Day:
Lear Corporation is facing the global slowdown in the auto industry. This Zacks Rank #5 (Strong Sell) recently cut its full year guidance.
Lear makes seating and electrical and electronic systems for every major automaker in the world. It is headquartered in Michigan and has employees in 39 countries.
A Miss in the Second Quarter
On July 26, Lear reported its second quarter 2019 results and missed on the Zacks Consensus by 4 cents.
Earnings were $3.78 versus the Zacks Consensus of $3.82.
Sales fell 10% to $5 billion from $5.6 billion in the year ago quarter. Excluding the impact of foreign exchange and the Xevo acquisition, sales were down 6.7%.
In the second quarter, global vehicle production was down more than 7% compared to 2018 with China falling 17% and Europe declining 7%.
Lear's results are going to be impacted by the global trends.
Lear Cuts Guidance
Lear didn't mince words in July. It said it was facing a challenging macroeconomic and industry environment which does not look like it will end soon.
It cut its full year sales guidance to a range of $19.8 billion to $20.3 billion from its prior forecast of $20.9 billion to $21.7 billion.
Analysts also cut their 2019 and 2020 full year earnings estimates.
9 estimates were cut in the last 60 days for 2019 pushing the Zacks Consensus down to $14.98 from $17.45 just 2 months ago.
That's an earnings decline of 17.8% as Lear made $18.22 in 2018.
9 estimates were also cut in the last 60 days for 2020 pushing the Zacks Consensus down to $15.88 from $18.97. Analysts see a little bit of growth moving forward as that's earnings growth of 6%.
It's been tough to be a shareholder over the last year as they have sunk 34.5%.
But they now trade with a forward P/E of only 7.
And the company is shareholder friendly with a dividend yielding 2.8% as well as a share buyback program which began in early 2011.
In the second quarter, the company repurchased $162 million and still has $1.3 billion remaining in the program which goes through Dec 31, 2021. It will reflect 16% of its total market capitalization at current prices.
Is China a Threat to U.S. Autonomous Vehicle Dominance?
The buzz around autonomous vehicles is continuing to snowball as global tech majors are upping their game to take advantage of the burgeoning prospects.
Per an Allied Market Research report, the global autonomous vehicle market is expected to reach $556.67 billion by 2026 at a CAGR of 39.47% from 2019 to 2026.
The long-term prospects are much more alluring. Per a McKinsey research autonomous vehicles are expected to contribute about 66% of the passenger-kilometers traveled in 2040, generating $1.1 trillion in mobility services revenues and $0.9 trillion in sales that year.
U.S. Leading the Race
The United States is leveraging its first mover advantage in the autonomous vehicle market. Notably, California opened its public roads for testing driverless vehicles way back in 2014. This enabled U.S. developers like Alphabet division Waymo to test millions of miles in the state alone.
Major companies like Tesla have taken several initiatives, including partnering with global automakers to strengthen their footprint in the market.
In June this year, Apple acquired a self-driving shuttle firm, Drive.ai, to boost its expertise in neural networks, which play an important role in developing software for driverless vehicles.
Moreover, Tesla’s current fleet of vehicles now represents partial automation, which the company aims to fully convert into self-driving platforms.
Per Modor Intelligence, the U.S. autonomous car market is expected to witness a CAGR of about 46.39% between 2019 and 2024.
China: A Potential Challenger?
Chinese developers like Baidu are catching up fast with their U.S. counterparts. Baidu is the leading tester in China, having covered about 87,000 miles in testing in Beijing last year. However, this is considerably less than a typical month for Waymo.
China’s policymakers believe that the autonomous vehicles industry is crucial for the country to be successful in its strategy to transform into an AI-led economy by 2030. The government is targeting large-scale adoption of early-stage vehicles in 2020, and expects 10% of all new vehicles sold by 2030 to be fully autonomous.
Earlier this month, it was revealed that China is testing autonomous vehicles in a dedicated highway in east Shandong.
Recently, Chinese autonomous-driving company Pony.ai partnered with Toyota to expedite the development and deployment of self-driving vehicles. The pilot cars are likely to start operating on public roads in Beijing and Shanghai in September 2019, leveraging Pony.ai’s autonomous driving system in Lexus RX vehicles.
The competition for dominating the autonomous vehicle market is set to heat up between the U.S. and China-based companies in the backdrop of the trade war.
However, China needs to optimize autonomous vehicle decision algorithms to suit its complex and chaotic traffic environment. This could delay the adoption of Chinese autonomous cars by two to three years compared to the United States. The first applications of autonomous vehicles in complex traffic might begin in the next five years, but mass adoption is expected to occur only after 2027.
Nevertheless, China’s efforts in the autonomous vehicles market pose serious threat to the United States’ dominance.
Notably, in a KPMG index to measure the level of preparedness for autonomous vehicles, China currently holds the 20th position among 25 countries, whereas the United States ranks fourth.
Alphabet currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
While Apple, Baidu and Toyota carry a Zacks Rank #3 (Hold), Tesla carries a Zacks Rank #4 (Sell).
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