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Best Buy, Ollie's Bargain Outlet, CME Group and Intercontinental Exchange highlighted as Zacks Bull and Bear of the Day
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For Immediate Release
Chicago, IL – September 10, 2021 – Zacks Equity Research Shares of Best Buy Co., Inc. (BBY - Free Report) as the Bull of the Day, Ollie’s Bargain Outlet Holdings, Inc. (OLLI - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on CME Group Inc. (CME - Free Report) and Intercontinental Exchange, Inc. (ICE - Free Report) .
Best Buy is a Zacks Rank #1 (Strong Buy) that is a popular electronics retailer. The company specializes in consumer electronics, home office products, entertainment software, communication, food preparation, wellness, heath, security, appliances and related services.
After a big move in 2020, the stock has been trading sideways all year. However, a recent earnings beat and some positive news should bring bullish investors back for another run.
About the Company
Best Buy operates through two business segments, with the biggest being Domestic Operations (93% of Q222 total revenues). This segment comprises all store, call center and online operations, operating under the brand names Best Buy, bestbuy.com, Best Buy Direct, Best Buy Express, Best Buy Mobile, Geek Squad, Magnolia Audio Video and Pacific Sales.
The International Operations (7% of Q222 total revenues) segment consist of all store, call center and online operations in Canada under the brand names Best Buy, Best Buy Mobile, bestbuy.ca and Geek Squad.
The company has over 61,000 full time employees and is headquartered in Richfield, Minnesota. Best Buy used to be known as Sound of Music, which was founded in 1966. As of January 30, 2021, it had 1,126 large-format and 33 small-format stores.
Best Buy has a market cap of $27 Billion and has Zacks Style Scores of "A" in Growth and Value. The stock has a Forward PE of 11 and a 2.5% dividend, making it a favorite for value investors.
Q2 Earnings
In late August the company reported a Q2 earnings beat of 56%. This was the fifteenth straight EPS beat, a winning streak since their last miss in 2017.
Revenue also came in above expectations and Best Buy guided Q3 revenues to $11.4-11.6 billion v the $10.5 billion expected. The company affirmed their share buyback of at least $2.5 billion and saw SSS up 20% year over year.
Online sales were down 21% year over year, but this number was skewed due to COVID last year.
Management commented that they expect comparable sales to be flat to down versus last year, or a high single digit decline.
Supply Chain Issues
Like many companies, Best Buy is seeing supply chain issues and shortages. Management commented that they see less of a promotional environment because of this, but product availability did improve in Q2. Some price increases have been pushed to consumers and the company expects more promotions in the back half of the year as we head into the holidays.
Estimates
Despite the challenges, estimates are ticking higher across most time frames.
Over the last month, estimates for the current quarter have been raised by 30%, from $1.41 to $1.83. For the current year, we have seen jump of 15% in that same time frame.
In addition to estimates, some analysts have taken their price targets higher since earnings. DA Davidson reiterated their Buy, but lifted their target from $125 to $135. JPMorgan also lifted their target to $122 from $118.
Other News
Since earnings, Best Buy has had some exciting news. While the headlines have not influenced the stock much, the news show the initiative the company is taking to grow.
In October the company will be launching an E-transportation category online and some stores. A new lineup of electric transportation, which is already available online, will allow consumers to shop e-bikes, scooters, mopeds and accessories.
Best Buy also announced a partnership with Amazon in which it will carry a new lineup of Fire TV devices and the first ever Amazon built TVs. Picture a TV version of your Alexa.
The Technicals
Best Buy is trading over 100% higher from the COVID lows. So it is no wonder that 2021 has been a tough year of sideways trading action. While the stock is up 10% for the year, its well off the highs of $128.57 made back in April.
Investors are now looking at support levels as the bulls continue to be patient.
The stock recently broke its 50-day and 200-day moving averages, which both sit around the $113 area. A move back above these levels would be a good sign, but the $108 level is very important. Buyers continue to come in at that level, which is the 61.8% retracement from the March lows to April highs.
If the stock can get some momentum back, look for a run to $135.
Bottom Line
Earnings looked great, but there might be some hurdles this quarter with the supply chain. The stock continues to consolidate while the company gets through this environment. However, the back half of the year looks solid, with estimates shooting higher.
For a value investor, this stock offers a great opportunity with a nice dividend. For a trader, long against that $108 support level offers a good risk/reward.
Ollies Bargain Outlet is a Zacks Rank #5 (Strong Sell) that is a value retailer of brand name merchandise at low prices. The company offers products under Ollie's, Ollie's Bargain Outlet, Good Stuff Cheap, Ollie's Army, Real Brands Real Cheap!, Real Brands! Real Bargains!, Sarasota Breeze, Steelton Tools, American Way and Commonwealth Classic
The stock has pulled back significantly after reporting a miss on EPS. Investors are now scratching their head and wondering if it's time to buy more or let the stock settle.
More About OLLI
Ollie's was founded in 1982 and is headquartered in Harrisburg, PA. As of January 30, 2021, it operated 388 stores in 25 states in the eastern half of the United States. Ollies employs 4400 people and has a market cap just under $5 billion.
The company offers housewares, bed and bath, food, floor coverings, health and beauty aids, books and stationery, toys, and electronics; and other products, including hardware, candy, clothing, sporting goods, pet and lawn, and garden products.
The stock has a Zacks Style Score of "A" in Growth. However, the stock is rated "C" in Value and "F" in Momentum.
Q2 Earnings
In late August, the company reported Q2 earnings, seeing a 9% miss. Revenue also came in below expectations and the company stressed uncertainties regarding the pace of the economic recovery. For that reason, the company didn't guide for fiscal 2021.
Additionally, Ollies reported Same Store Sales down 28% and lower margins of 13%. Management commented that they expect Q3 SSS growth of 5-7% on a two-year stack basis. The company is seeing supply chain issues, but remains confident in the ability to drive growth and shareholder value in the future.
The stock was smashed after EPS, falling from $83 to $66 overnight. The reasoning behind the aggressive selling had to do with the second half of 2021 and the sales/margin guidance.
While the stock has rallied, estimates are falling, which will likely keep the bulls away short term.
Estimates
Over the last 30 days, analysts have taken down Ollie's numbers. For the current quarter, estimates have fallen 13%, from $0.55 to $0.48. For the current year, numbers have fallen by 6%.
Despite the numbers heading lower, price targets remain above current trading levels. However, a number of analysts took their targets lower, such as Pacific Crest. The firm kept their Overweight rating, but lowered their targets to $95 from $105.
The Technicals
The stock fell below all moving averages after the earnings report and put in new 2021 lows. Investors could eye the $60 level as a potential spot to buy long-term. This is the 61.8% retracement drawn from COVID lows to 2020 highs.
In Summary
Ollie's is having some short-term issues that the market punished them for. Looking at earnings estimates, it seems like the trouble could persist into year's end. This would keep the stock down around current levels and potentially give long-term investors an opportunity around the $60 level.
Additional content:
ICE or CME: Which Securities & Exchanges Stock Has an Edge?
The Zacks Securities and Exchanges industry is poised to gain from increased volatility that drives transactions and hence volumes. Thus, the players should benefit from higher trading volumes, product expansion, and increased adoption of a greater number of crypto assets with increased interest across the entire cryptoeconomy.
The industry has gained 17.3% year to date, compared with the Finance sector's rise of 20.4% and the Zacks S&P 500 composite's rally of 21.7%.
The industry players facilitate trading across a diverse range of products in multiple asset classes through electronic marketplaces. Thus, they strive to maintain a compelling and diversified product portfolio that fuels transaction and clearing fees, a major component of the top line of the companies.
These players are also intensifying focus on ramping up non-trading revenue base, which includes market technology, listing and information revenues, thus infusing dynamism in business profile.
The adoption of technological advancements to improve trading decisions while reducing trading inefficiencies, cyber threats and human errors bodes well for operational efficiency. The adoption of technology should lower transaction-based expenses and drive profits.
The industry participants are continually pursuing strategic mergers and acquisitions to penetrate untapped markets, provide new products or services and enhance the value of their platform and the existing trade-related operations to increase domestic market share as well as expand globally.
The industry's earnings estimate for 2021 has moved 24.7% higher over the past eight months, reflecting analysts' optimism surrounding the industry's performance.
Here we focus on two players from the industry – CME Group and Intercontinental Exchange with a market capitalization of $69.9 billion and $67.4 billion, respectively. Both carry a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Before putting them on the weighing scale, let's see what strategies they follow to drive growth.
CME Group boasts the largest futures exchange in the world in terms of trading volume as well as notional value traded. Its efforts to expand futures products in emerging markets, non-transaction related opportunities, OTC offerings, cross-sell through alliances, strong global presence, and solid liquidity should drive growth.
This year, CME Group has already migrated BrokerTec to U.S. Treasury benchmarks trading and EU government bond and repo markets onto Globex. It is also progressing well with the integration of business into Globex and is on track with the achievement of expense synergies. It aims $200 million run-rate synergies by the end of 2021. Also, the company mentioned the extension of the exclusive NASDAQ futures license through 2029, which will provide it seamless access to the NASDAQ product suite to its clients.
On the other hand, Intercontinental Exchange is a leading global operator of regulated exchanges, clearing houses, and listings venues, and a provider of data services for commodity, financial, fixed income, and equity markets. Its compelling portfolio, a broad range of risk management services, and solid capital position strengthen its growth trajectory.
The company is poised to benefit from accelerated digitization taking place in the US residential mortgage industry. Last September, it bought mortgage-software firm Ellie Mae to boost its mortgage business and execute well in a $10 billion addressable market. The buyout will also help realize run-rate cost synergies of $50 million to $65 million by the end of the third year. Continued strength in the pricing and analytics business should boost its data revenues.
Price Performance
CME Group has gained 6.4% year to date while Intercontinental Exchange has gained 3.8% over the same time frame. CME Group thus has an edge over Intercontinental Exchange in this respect.
Return on Equity (ROE)
Intercontinental Exchange with a return on equity of 13.2% exceeds CME Group's ROE of 8.3% and the industry average of 12.8%.
Dividend Yield
Intercontinental Exchange dividend yield of 1.9% tops CME Group's 1.1% as well as the industry's average of 1%.
Debt-to-Equity
CME Group's debt-to-equity ratio of 12.9 is lower than the industry average of 50.6 as well as Intercontinental Exchange's reading of 66.9.
Earnings Surprise History
Intercontinental Exchange outpaced expectations in three of the four trailing quarters, delivering an earnings surprise of 2.70%, on average. CME Group surpassed estimates in three of the last four reported quarters, with the average surprise being 1.57%.
Growth Projection
Intercontinental Exchange's earnings are expected to grow 8.2% in the current year. Comparatively, CME Group's earnings are expected to decline 1% over the same time frame. Hence, Intercontinental Exchange's higher growth rate implies a greater potential for capital appreciation.
Bottom Line
Intercontinental Exchange appears to be comparatively better positioned than CME Group in terms of ROE, dividend yield, earnings surprise history, and growth projection. However, CME Group holds an advantage when it comes to price performance and leverage.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Best Buy, Ollie's Bargain Outlet, CME Group and Intercontinental Exchange highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – September 10, 2021 – Zacks Equity Research Shares of Best Buy Co., Inc. (BBY - Free Report) as the Bull of the Day, Ollie’s Bargain Outlet Holdings, Inc. (OLLI - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on CME Group Inc. (CME - Free Report) and Intercontinental Exchange, Inc. (ICE - Free Report) .
Here is a synopsis of all four stocks:
Bull of the Day:
Best Buy is a Zacks Rank #1 (Strong Buy) that is a popular electronics retailer. The company specializes in consumer electronics, home office products, entertainment software, communication, food preparation, wellness, heath, security, appliances and related services.
After a big move in 2020, the stock has been trading sideways all year. However, a recent earnings beat and some positive news should bring bullish investors back for another run.
About the Company
Best Buy operates through two business segments, with the biggest being Domestic Operations (93% of Q222 total revenues). This segment comprises all store, call center and online operations, operating under the brand names Best Buy, bestbuy.com, Best Buy Direct, Best Buy Express, Best Buy Mobile, Geek Squad, Magnolia Audio Video and Pacific Sales.
The International Operations (7% of Q222 total revenues) segment consist of all store, call center and online operations in Canada under the brand names Best Buy, Best Buy Mobile, bestbuy.ca and Geek Squad.
The company has over 61,000 full time employees and is headquartered in Richfield, Minnesota. Best Buy used to be known as Sound of Music, which was founded in 1966. As of January 30, 2021, it had 1,126 large-format and 33 small-format stores.
Best Buy has a market cap of $27 Billion and has Zacks Style Scores of "A" in Growth and Value. The stock has a Forward PE of 11 and a 2.5% dividend, making it a favorite for value investors.
Q2 Earnings
In late August the company reported a Q2 earnings beat of 56%. This was the fifteenth straight EPS beat, a winning streak since their last miss in 2017.
Revenue also came in above expectations and Best Buy guided Q3 revenues to $11.4-11.6 billion v the $10.5 billion expected. The company affirmed their share buyback of at least $2.5 billion and saw SSS up 20% year over year.
Online sales were down 21% year over year, but this number was skewed due to COVID last year.
Management commented that they expect comparable sales to be flat to down versus last year, or a high single digit decline.
Supply Chain Issues
Like many companies, Best Buy is seeing supply chain issues and shortages. Management commented that they see less of a promotional environment because of this, but product availability did improve in Q2. Some price increases have been pushed to consumers and the company expects more promotions in the back half of the year as we head into the holidays.
Estimates
Despite the challenges, estimates are ticking higher across most time frames.
Over the last month, estimates for the current quarter have been raised by 30%, from $1.41 to $1.83. For the current year, we have seen jump of 15% in that same time frame.
In addition to estimates, some analysts have taken their price targets higher since earnings. DA Davidson reiterated their Buy, but lifted their target from $125 to $135. JPMorgan also lifted their target to $122 from $118.
Other News
Since earnings, Best Buy has had some exciting news. While the headlines have not influenced the stock much, the news show the initiative the company is taking to grow.
In October the company will be launching an E-transportation category online and some stores. A new lineup of electric transportation, which is already available online, will allow consumers to shop e-bikes, scooters, mopeds and accessories.
Best Buy also announced a partnership with Amazon in which it will carry a new lineup of Fire TV devices and the first ever Amazon built TVs. Picture a TV version of your Alexa.
The Technicals
Best Buy is trading over 100% higher from the COVID lows. So it is no wonder that 2021 has been a tough year of sideways trading action. While the stock is up 10% for the year, its well off the highs of $128.57 made back in April.
Investors are now looking at support levels as the bulls continue to be patient.
The stock recently broke its 50-day and 200-day moving averages, which both sit around the $113 area. A move back above these levels would be a good sign, but the $108 level is very important. Buyers continue to come in at that level, which is the 61.8% retracement from the March lows to April highs.
If the stock can get some momentum back, look for a run to $135.
Bottom Line
Earnings looked great, but there might be some hurdles this quarter with the supply chain. The stock continues to consolidate while the company gets through this environment. However, the back half of the year looks solid, with estimates shooting higher.
For a value investor, this stock offers a great opportunity with a nice dividend. For a trader, long against that $108 support level offers a good risk/reward.
Bear of the Day:
Ollies Bargain Outlet is a Zacks Rank #5 (Strong Sell) that is a value retailer of brand name merchandise at low prices. The company offers products under Ollie's, Ollie's Bargain Outlet, Good Stuff Cheap, Ollie's Army, Real Brands Real Cheap!, Real Brands! Real Bargains!, Sarasota Breeze, Steelton Tools, American Way and Commonwealth Classic
The stock has pulled back significantly after reporting a miss on EPS. Investors are now scratching their head and wondering if it's time to buy more or let the stock settle.
More About OLLI
Ollie's was founded in 1982 and is headquartered in Harrisburg, PA. As of January 30, 2021, it operated 388 stores in 25 states in the eastern half of the United States. Ollies employs 4400 people and has a market cap just under $5 billion.
The company offers housewares, bed and bath, food, floor coverings, health and beauty aids, books and stationery, toys, and electronics; and other products, including hardware, candy, clothing, sporting goods, pet and lawn, and garden products.
The stock has a Zacks Style Score of "A" in Growth. However, the stock is rated "C" in Value and "F" in Momentum.
Q2 Earnings
In late August, the company reported Q2 earnings, seeing a 9% miss. Revenue also came in below expectations and the company stressed uncertainties regarding the pace of the economic recovery. For that reason, the company didn't guide for fiscal 2021.
Additionally, Ollies reported Same Store Sales down 28% and lower margins of 13%. Management commented that they expect Q3 SSS growth of 5-7% on a two-year stack basis. The company is seeing supply chain issues, but remains confident in the ability to drive growth and shareholder value in the future.
The stock was smashed after EPS, falling from $83 to $66 overnight. The reasoning behind the aggressive selling had to do with the second half of 2021 and the sales/margin guidance.
While the stock has rallied, estimates are falling, which will likely keep the bulls away short term.
Estimates
Over the last 30 days, analysts have taken down Ollie's numbers. For the current quarter, estimates have fallen 13%, from $0.55 to $0.48. For the current year, numbers have fallen by 6%.
Despite the numbers heading lower, price targets remain above current trading levels. However, a number of analysts took their targets lower, such as Pacific Crest. The firm kept their Overweight rating, but lowered their targets to $95 from $105.
The Technicals
The stock fell below all moving averages after the earnings report and put in new 2021 lows. Investors could eye the $60 level as a potential spot to buy long-term. This is the 61.8% retracement drawn from COVID lows to 2020 highs.
In Summary
Ollie's is having some short-term issues that the market punished them for. Looking at earnings estimates, it seems like the trouble could persist into year's end. This would keep the stock down around current levels and potentially give long-term investors an opportunity around the $60 level.
Additional content:
ICE or CME: Which Securities & Exchanges Stock Has an Edge?
The Zacks Securities and Exchanges industry is poised to gain from increased volatility that drives transactions and hence volumes. Thus, the players should benefit from higher trading volumes, product expansion, and increased adoption of a greater number of crypto assets with increased interest across the entire cryptoeconomy.
The industry has gained 17.3% year to date, compared with the Finance sector's rise of 20.4% and the Zacks S&P 500 composite's rally of 21.7%.
The industry players facilitate trading across a diverse range of products in multiple asset classes through electronic marketplaces. Thus, they strive to maintain a compelling and diversified product portfolio that fuels transaction and clearing fees, a major component of the top line of the companies.
These players are also intensifying focus on ramping up non-trading revenue base, which includes market technology, listing and information revenues, thus infusing dynamism in business profile.
The adoption of technological advancements to improve trading decisions while reducing trading inefficiencies, cyber threats and human errors bodes well for operational efficiency. The adoption of technology should lower transaction-based expenses and drive profits.
The industry participants are continually pursuing strategic mergers and acquisitions to penetrate untapped markets, provide new products or services and enhance the value of their platform and the existing trade-related operations to increase domestic market share as well as expand globally.
The industry's earnings estimate for 2021 has moved 24.7% higher over the past eight months, reflecting analysts' optimism surrounding the industry's performance.
Here we focus on two players from the industry – CME Group and Intercontinental Exchange with a market capitalization of $69.9 billion and $67.4 billion, respectively. Both carry a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Before putting them on the weighing scale, let's see what strategies they follow to drive growth.
CME Group boasts the largest futures exchange in the world in terms of trading volume as well as notional value traded. Its efforts to expand futures products in emerging markets, non-transaction related opportunities, OTC offerings, cross-sell through alliances, strong global presence, and solid liquidity should drive growth.
This year, CME Group has already migrated BrokerTec to U.S. Treasury benchmarks trading and EU government bond and repo markets onto Globex. It is also progressing well with the integration of business into Globex and is on track with the achievement of expense synergies. It aims $200 million run-rate synergies by the end of 2021. Also, the company mentioned the extension of the exclusive NASDAQ futures license through 2029, which will provide it seamless access to the NASDAQ product suite to its clients.
On the other hand, Intercontinental Exchange is a leading global operator of regulated exchanges, clearing houses, and listings venues, and a provider of data services for commodity, financial, fixed income, and equity markets. Its compelling portfolio, a broad range of risk management services, and solid capital position strengthen its growth trajectory.
The company is poised to benefit from accelerated digitization taking place in the US residential mortgage industry. Last September, it bought mortgage-software firm Ellie Mae to boost its mortgage business and execute well in a $10 billion addressable market. The buyout will also help realize run-rate cost synergies of $50 million to $65 million by the end of the third year. Continued strength in the pricing and analytics business should boost its data revenues.
Price Performance
CME Group has gained 6.4% year to date while Intercontinental Exchange has gained 3.8% over the same time frame. CME Group thus has an edge over Intercontinental Exchange in this respect.
Return on Equity (ROE)
Intercontinental Exchange with a return on equity of 13.2% exceeds CME Group's ROE of 8.3% and the industry average of 12.8%.
Dividend Yield
Intercontinental Exchange dividend yield of 1.9% tops CME Group's 1.1% as well as the industry's average of 1%.
Debt-to-Equity
CME Group's debt-to-equity ratio of 12.9 is lower than the industry average of 50.6 as well as Intercontinental Exchange's reading of 66.9.
Earnings Surprise History
Intercontinental Exchange outpaced expectations in three of the four trailing quarters, delivering an earnings surprise of 2.70%, on average. CME Group surpassed estimates in three of the last four reported quarters, with the average surprise being 1.57%.
Growth Projection
Intercontinental Exchange's earnings are expected to grow 8.2% in the current year. Comparatively, CME Group's earnings are expected to decline 1% over the same time frame. Hence, Intercontinental Exchange's higher growth rate implies a greater potential for capital appreciation.
Bottom Line
Intercontinental Exchange appears to be comparatively better positioned than CME Group in terms of ROE, dividend yield, earnings surprise history, and growth projection. However, CME Group holds an advantage when it comes to price performance and leverage.
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.