Yahoo Finance La-Z-Boy and Winnebago have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – June 26, 2024 – Zacks Equity Research shares La-Z-Boy LZB as the Bull of the Day and Winnebago Industries WGO as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Eli Lilly and Co. LLY, Novo Nordisk NVO and Biogen BIIB.
Here is a synopsis of all five stocks.
Bull of the Day:
La-Z-Boy is a Zack Rank #1 (Strong Buy) that is one of the world's leading residential furniture producers, marketing furniture for every room of the home.
The La-Z-Boy brand is a household name synonymous with comfort and quality, which has recently reported its Q4 results. The quarter highlighted its resilient performance and strategic outlook despite a challenging macroeconomic environment.
For investors eyeing opportunities in the home furnishings sector, La-Z-Boy stands out with its solid execution and forward-thinking strategies.
About the Company
La-Z-Boy was founded in 1927, has a market cap of $1.6 billion, and employs over 10,000.
The company operates through its Wholesale and Retail segments. The Wholesale segment manufactures and imports a range of upholstered and wooden furniture, distributing these products to La-Z-Boy Furniture Galleries, Comfort Studio locations, and other retailers. Meanwhile, the Retail segment sells these products directly to consumers through its own stores and e-commerce platform Joybird, which also specializes in custom upholstered furniture.
The stock has a Zacks Style Score of “A” in Value and Momentum. It sports a Style Score of “C” in Growth and has a Forward PE of 12.
Q1 Earnings
On June 17th, LZB reported a 40% EPS beat for Q4 earnings. The company saw earnings of $0.95 per share, just shy of last year's $0.99 per share. Similarly, revenues were $554 million, slightly below the $561 million reported in the same quarter last year.
While these y/y figures might suggest a slowdown, a deeper dive reveals a more robust underlying performance. A key factor to consider is the impact of the $300 million backlog in delivered sales from FY2023, which if adjusted for, places La-Z-Boy’s sales performance on par with the previous year. This adjustment underscores the company’s ability to maintain steady sales in a volatile market.
For the first quarter of Fiscal 2025, La-Z-Boy expects delivered sales between $475 million and $495 million, with a non-GAAP operating margin in the range of 6-7%. While the first quarter is typically the slowest due to seasonality and the company's annual plant shutdown, La-Z-Boy’s guidance reflects a disciplined approach to managing expectations and preparing for seasonal variations.
Looking forward, La-Z-Boy’s “Century Vision” strategy is poised to drive growth and strengthen its market position. The plan includes opening 12 to 15 new La-Z-Boy Furniture Galleries stores in the second half of Fiscal 2025, which is expected to boost sales and expand market reach.
Estimates Rising
Earnings estimates are trending higher since reporting EPS, with analysts focusing on earnings growth over the next year.
Over the last 7 days, estimates for the current quarter have gone up by only 3%, from $0.60 to $0.62.
However, for the current year analysts have taken numbers from $2.80 to $3.13. This is a 12% move higher over the last 7 days.
For next year we see a similar trend, with estimates going up over 14% for that same timeframe, moving from $2.95 to $3.37.
The Technical Take
Before earnings the stock was trading near 2024 lows, clinging to the 200-day MA at $34. The earnings release brought in aggressive buying, taking the stock up to $41 overnight.
However, the stock has pulled back since that initial move, and investors should be watching for support levels to enter.
The halfway back mark, or 50% retracement from the earnings move is $37.25. The 61.8% retracement is $36.40, which is lined up with the 21-day MA.
Investors could eye the $36.40-$37 “buy zone” for entry points and risk a move below the 200-day MA at $34.50.
In Summary
La-Z-Boy’s strategic vision, combined with its operational resilience and market outperformance, makes it a compelling choice for investors. The company’s proactive approach to navigating industry challenges and its commitment to expanding its retail footprint position it well for future growth.
For investors seeking stability and potential growth in the home furnishings sector, La-Z-Boy represents a solid opportunity.
Bear of the Day:
Winnebago Industries is a Zacks Rank #5 (Strong Sell) that manufactures and sells recreation vehicles and marine products primarily for use in leisure travel and outdoor recreation activities.
The stock has taken another leg lower after an earnings report and is challenging 2023 lows. With earnings disappointing and estimates headed lower, investors should be cautious at current levels.
About the Company
Winnebago is headquartered in Eden Prairie, MN, and was founded in 1958. The company employs over 6,000 people and operates through three segments: Towable RV, Motorhome RV, and Marine.
WGO is valued at $1.5 billion and has a Forward PE of 12. The stock holds Zacks Style Scores of “A” in Value, but D in Momentum. The stock pays a dividend of 2.3%.
Q3 Earnings
On June 20th, Winnebago reported an earnings miss of 13%. Revenues came in below expectations and gross margins were down 180 basis points from last year.
Adjusted EBITDA was off 39% from last year as revenues were down across most categories year over year:
- Motorhome Revenues were -20% y/y
- Motorhome Backlog was -55.7% y/y
- Towable Revenues were +0.6% y/y
- Towable Backlog was -35.1% y/y
Management acknowledges the challenging market conditions but remains focused on the long-term profitability and customer satisfaction of premium brands.
However, analysts and investors do not seem so optimistic, with both estimates and the stock headed lower.
Earnings Estimates
Since earnings were reported there has been a significant drop in earnings estimates.
Over the last 7 days, analysts have lowered numbers for the current quarter from $1.67 to $1.11. This is a drop of 33% that was due to the Q3 earnings release.
For the next quarter, estimates have fallen to $1.18 from $1.45, or 19%.
For the current year, numbers have dropped 13%, going from $5.02 to $4.37
This downtrend has been occurring for some time and when looking at next year you can see evidence of that. Over the last 60 days, estimates for 2025 have dropped from $7.05 to $5.98, or 15%. During that time frame, the stock had fallen almost 20%.
Technical Take
The stock has now dropped to levels not seen since late 2022. If the $50 level is taken out, you could see some panic and a move to the $43 area, which was the 2022 low.
The company pays a 2.3% dividend which could give the stock support in the low $40s. However, a turnaround in the stock should not be expected with moving averages turning sharply lower.
The 50-day MA is at $60.50 and the $200-day is at $64. The bulls and the company have a lot of work to do before the stock chart starts to look attractive again.
In Summary
Winnebago’s price action started to look good after the company reported earnings back in March. However, this was short-lived and the stock has plummeted over the last three months.
Investors should stay away until both the fundamental and technical pictures improve. For those interested in the space, a better option might be Thor Industries. While the stock is also in a downtrend, THO is a Zacks Rank #3 (Hold) that is coming off a 13% EPS beat.
Additional content:
Is Eli Lilly (LLY) a Buy on Sleep Apnea Treatment?
Eli Lilly and Co. has seen unparalleled success with tirzepatide, a dual GIP and GLP-1 receptor agonist, which is marketed as Mounjaro for type II diabetes and Zepbound for obesity.
Mounjaro was launched in mid-2022, while Zepbound was launched in November 2023. Despite a short time on the market, Mounjaro and Zepbound have become key top-line drivers for Lilly, with demand for weight loss drugs rising rapidly. Tirzepatide is also being developed for other indications, including obstructive sleep apnea (OSA) and metabolic dysfunction-associated steatohepatitis.
Recent data from clinical studies on OSA have shown that tirzepatide has reduced sleep apnea events in people with obesity.
New Encouraging Data From Sleep Apnea Study
On Friday, Lilly announced detailed data from the SURMOUNT-OSA phase III study evaluating tirzepatide for the treatment of moderate-to-severe OSA in adults with obesity, with and without positive airway pressure (PAP) therapy. In the study, patients with OSA and obesity experienced about 30 fewer disruptive events every hour of sleep, while 51.5% of patients using the PAP machines achieved disease resolution. Based on data from these studies, Lilly has filed a regulatory application to the FDA seeking approval of tirzepatidefor the treatment of moderate-to-severe OSA and obesity. It will file applications to other regulatory bodies in the coming weeks.
If approved for expanded use in OSA, sales of tirzepatide will increase further. Analysts expect tirzepatide to generate around $25 billion in peak sales.
The GLP-1 segment is an important class of drugs for multiple cardiometabolic diseases and is gaining significant popularity. GLP-1 drugs work by mimicking the hormone GLP-1, resulting in weight loss, lowering hemoglobin A1c and reducing cardiovascular risks.
The only other large drugmaker to have generated such phenomenal returns, also gaining from the GLP-1 segment’s popularity, is Novo Nordisk. The stock has risen 459% in the past five years, mainly on the success of its drug semaglutide, a direct competitor to Lilly’s tirzepatide medicines. Semaglutide is approved as Ozempic pre-filled pen and Rybelsus oral tablet for type II diabetes and as Wegovy injection for weight management. Despite supply challenges, Wegovy is seeing strong prescription trends and is generating impressive revenues and profits for Novo Nordisk.
New Drugs & Pipeline Success
In the past couple of years, Lilly has received approvals for several new drugs and witnessed pipeline and regulatory success.
Other than Mounjaro and Zepbound, Lilly gained approvals for some new drugs in the past year. These included Omvoh for ulcerative colitis and BTK inhibitor Jaypirca for mantle cell lymphoma and chronic lymphocytic leukemia. Lilly expects its new drugs, Mounjaro, Omvoh, Zepbound, Ebglyss and Jaypirca, to contribute significantly to its top line in 2024.
A key asset in Lilly’s pipeline is donanemab for early Alzheimer’s disease, which is under review with the FDA. Earlier this month, an FDA committee assessing the safety and effectiveness of donanemab voted 11-0 unanimously recommending its approval. The Peripheral and Central Nervous System Drugs Advisory Committee said that the benefits of donanemab outweighed the risks despite some safety concerns. The FDA is expected to give its decision later this year.
Donanemab will be the second drug on the market to treat Alzheimer's disease if approved. Biogen and its Japan-based partner Eisai’s Leqembi was the first therapy approved by the FDA for early Alzheimer’s disease in the United States in July 2023. The Centers for Medicare & Medicaid Services has also granted broad reimbursement to Biogen/Eisai’s Leqembi under Medicare plans. Leqembi is also approved in China and Japan. Regulatory applications seeking approval of Leqembi are under review in Europe.
Lilly believes donanemab can generate blockbuster sales.
Stock Price & Rising Estimates
The stock is trading at a premium to the industry.
However, Lilly’s stock has gone up by more than 700% in the past five years mainly due to its solid pipeline potential, particularly its obesity drugs.
Year to date, Lilly’s stock has risen 53.2% compared with an increase of 20.9% for the industry. The stock has also outperformed the sector as well as the S&P 500.
Estimates for Lilly’s 2024 earnings have moved up from $12.52 to $13.57 and from $18.50 to $19.24 for 2025 over the past 60 days.
Conclusion
Lilly has consistently reported strong revenues and profits and dealt well with expiring patents and increasing competition. Lilly’s revenue growth is being driven by higher demand for drugs like Mounjaro, Verzenio, Jardiance, Taltz and others. Incremental contribution for new drugs, rapid pipeline progress in areas like obesity, diabetes and Alzheimer’s and regular M&A activity will keep the stock afloat.
Lilly is a great stock to have in one’s portfolio based on its strong overall financial performance and robust drug pipeline. Those who already own this Zacks Rank #3 (Hold) stock should continue to retain it. Consistently rising earnings estimates clearly highlight analysts’ optimistic outlook for further growth. Though LLY currently trades at a premium to the industry, any major dip in the stock’s price can be used as an opportunity to buy it for long-term gains.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Biogen Inc. (BIIB) : Free Stock Analysis Report
Novo Nordisk A/S (NVO) : Free Stock Analysis Report
Eli Lilly and Company (LLY) : Free Stock Analysis Report
La-Z-Boy Incorporated (LZB) : Free Stock Analysis Report
Winnebago Industries, Inc. (WGO) : Free Stock Analysis Report
