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Target and Burlington have been highlighted as Zacks Bull and Bear of the Day
Read MoreHide Full Article
For Immediate Release
Chicago, IL – March 15, 2022 – Zacks Equity Research shares Target (TGT - Free Report) as the Bull of the Day and Foot Locker, Inc. (FL - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Lockheed Martin (LMT - Free Report) , General Dynamics (GD - Free Report) and BAE Systems (BAESY - Free Report) Here is a synopsis of all five stocks:
Target is a Zacks Rank #1 (Strong Buy) that operates as a general merchandise retailer in the United States. The company provides a variety of goods such as household essentials, groceries, electronics, toys and apparel.
The company is coming off an earnings beat earlier this month. The stock surged higher after the report, but has since come in because of geopolitical risks that have weakened the broader market.
Despite all the negatives out there, the stock is well off its 2022 lows, which is better than most stocks can claim. Because of this, investors should consider Target as place to hide in a weak market. While the relative strength is a plus, the long-term earnings power could give investors a huge opportunity at current trading levels.
More About the Company
Target was originally founded in 1902 and headquartered in Minneapolis, Minnesota. It has over 2,000 stores and 450,000 employees.
Target currently has a market cap of $96 billion and has Zacks Style Scores of "B" in Value and Growth, as well as an "A" in Momentum. The Forward PE is 14 and the company pays a 1.7% dividend.
Q4 Earnings
Target reported EPS earlier this month seeing a surprise to the upside of 11.5%. EPS came in at $3.19 v the $2.86 expected. This was the 13th straight beat for the company, who hasn't missed since 2018.
Revenues came in a little light, with Target seeing $30.6B v the $31.5B expected. Lower than expected holiday sales is the reason for the miss on revenues.
Despite lower sales, Target saw improved margins and stronger guidance. The company said that Q1 Same Store Sales operating margins "will be favorable in relation to historical performance, but well below its first quarter 2021 rate of 9.8%". Additionally, FY22 will see high-single digit growth with operating margins 8% or higher.
Year over year comparable traffic was up 8.1%, while digital sales saw a 9.2% increase y/y.
After earnings, a lot of the analyst commentary focused on improving margins and a positive outlook.
Raymond James commented: "The company's investments into supply chain, private-label, and omnichannel distribution have positioned it well to continue to gain further market share over the coming years."
Stifel was impressed with the robust e-commerce growth of 9.2%. The firm sees Target sustaining its pandemic share gains and has a Buy rating and a $280 price target on the stock.
Estimates
With those price targets going higher, earnings estimates are jumping as well. Over the last 60 days, estimates are trending upwards across all time frames.
For the current quarter, we have seen estimates raised by 13%, from $2.71 to $3.06. For the current year, we have seen a 9% move higher in that same time frame. And numbers are also moving 9% higher for next year.
Analysts are citing same-day services as a point of differentiation for Target relative to its peers. This is an important catalyst to its digital media business and a catalyst for future sales growth.
The Technicals
The stock took off in the back half of 2020, moving from the $100 area to a high of $268.98 in late 2021. Target saw only minor pullbacks during that bull run, but is now going through its biggest drawdown since COVID began.
Since hitting highs in November, the stock saw a 30% pullback before rallying about 25% off the 2022 lows. It is still trading about 25% off its 2021 highs, trading near the $200 level.
TGT is below all its moving averages, with the 50-day moving average at $215 recently acting as a major resistance level. Investors might want to look for the gap fill at $200 if the market continues to be weak. If the market sees a serious sell-off, the halfway back retracement is at $175 and the 61.8% Fibonacci retracement is $157.
A clear bullish signal would be the break of the 50-day MA, which could bring a short-term opportunity to the 200-day at $237.
Bottom Line
Target is separating itself from the retailers and businesses that thrived during the pandemic. The key for Target is sustaining that momentum it built over the last two years.
Looking at recent earnings, the only hiccup seems to be holiday sales, which weren't as strong as expected. Despite supply chain and inflation issues, the guidance looks good and the long-term outlook positive. If Target can hit the bullseye on EPS later this year, expect shares to rally into 2023.
Burlington is a Zacks Rank #5 (Strong Sell) that operates as a retailer of branded apparel products in the United States. The company deals in more than just coats, offering ladies sportswear, menswear, youth apparel, footwear, accessories, toys, gifts, baby furniture, home, and beauty products
The stock is well off its 2021 highs, dropping over 40% since August. While some of that downfall is due to market weakness, there is more to the story, which includes its first earnings miss since the second quarter of 2020.
About the Company
Burlington operates over 800 stores in 45 states and Puerto Rico. The company was founded in 1972 and is headquartered in Burlington, New Jersey.
Burlington is valued at $13 billion and has a Forward PE of 27. The company holds a Zacks Style Score of "A" in Growth, but "D" in both Value and Momentum. The company pays no dividend.
Q4 Earnings
Earnings were out in early March, which surprised to the downside by 21%. This was the first miss in seven quarters, which resulted in the stock dropping about 15% overnight.
Burlington reported $2.53 v the $3.22 expected and missed on revenues. Same Store Sales were up 6%, while margins came in at 39.8% or -230 basis points below 2019 levels.
The company did announce they would be adding $500M to their share buyback plan, which is about 3% of the market cap.
However, the comps over the last two months of the quarter were very negative and weighed on shares. Management cited Omicron and warmer weather as reasons for traffic deceleration. But the quarter also brought lower spend per visit by customers, which some analysts attribute to management missteps.
While analysts seem positive on the longer-term story, the company will have issues in the short run. Analysts are lowering estimates aggressively, citing customer traffic, supply constraints, inflation and margins.
For the current quarter, we have seen a drop over the last 30 days from $1.92 to $0.66, or 65%. For the current year, estimates have fallen 24% over that same time frame, from $9.55 to $7.27.
Technical Take
Burlington was trading at $250 before COVID and plunged to $105 at the height of the panic. From there, the stock went on a bull run to $357.
Moving averages are well above current trading levels, with the 200-day MA at $284. The 50-day MA has been sold on every up move and currently resides at $230.
Investors now find themselves below the pre-COVID trading level and the key $200 mark. This level is the 61.8% retracement from COVID lows to 2021 highs. A failure to hold this level could bring more sellers as the stock trends to the $150 area.
Longer term, $150 is likely a good support zone as it was in 2018-19. Until then investors might want to avoid the stock until the earnings story is remedied.
In Summary
Burlington's short-term issues signal a caution flag to those investors looking to buy the dip. There might be some more downside and given the current market weakness, there is no sense stepping in at current levels.
Additional content:
U.S. OKs $200M Military Aid to Ukraine: Defense Stocks to Benefit
The U.S. administration announced on Mar 12 that President Biden had sanctioned up to $200 million in military aid for Ukraine following the latter's request for more defense equipment from America so that it can defend itself against the heavy shelling by Russia. In particular, this security aid includes dispatch of additional small tanks, anti-tank and anti-aircraft weapons to Ukraine.
This authorization news is expected to once again boost aerospace-defense stocks, which have already been rallying over the past two weeks, buoyed by the Russia-Ukraine conflict. So, if you have a keen interest in U.S. defense stocks, you may keep a close watch on Lockheed Martin , General Dynamics, and BAE Systems as these are expected to gain from the latest development.
U.S. Defense Stocks Link to Russia-Ukraine Crisis
Russia hurled its first round of missiles targeting Ukrainian cities on Feb 24, thereby officially starting a hostile conquest in the 21st century following the Taliban's invasion in Afghanistan last year. However, the conflict between Russia and Ukraine dates back centuries, with the latest discord commencing in 2014, when anti-government protests toppled the then Ukrainian government and Russia annexed Crimea. Following this a war-like situation developed in the eastern part of Ukraine between the local military and Russia-backed separatist rebels.
Although a bunch of peace accords in 2014 and 2015 simmered down the tension between these two nations, it was short-lived, as is evident from the latest invasion made by Russia in Ukraine. It is imperative to mention here that America has been assisting Ukraine both economically and in terms of defense ever since the latter declared its independence from the Soviet Union more than 30 years ago.
Since 2014, the United States has committed more than $5.6 billion in total assistance to Ukraine, including security and non-security assistance. In 2021 alone, America committed over $650 million in security assistance to this nation.
Moreover, the United States committed over $3 billion in training and equipment to help Ukraine preserve its territorial integrity, secure its borders, and improve interoperability with NATO.
Coming to the latest security aid of $200 million, "the total U.S. security assistance to Ukraine is more than $1.2 billion since January 2021," as tweeted by the White House. Obviously, this additional military aid opens avenues for U.S. defense stocks to win contracts for supplying their combat-proven equipment to Ukraine.
Stocks to Gain
The aforementioned discussion brings the spotlight on the following U.S. defense stocks that have already established a strong presence in Ukraine and are thus expected to benefit from the latest military aid announcement.
Lockheed Martin is the manufacturer of Javelin anti-armor systems, which form an integral part of the security assistance package offered by the Biden administration to Ukraine. At least 280 Russian armored vehicles have been destroyed with the Javelin missile, out of 300 shots fired, journalist Jack Murphy said in an article quoting a U.S. Special Operations official. Such a success rate for this weapon is expected to boost contract wins for Lockheed from Ukraine in the coming days, thereby pushing up LMT's revenues.
The company has a long-term earnings growth rate of 5.7%. The Zacks Consensus Estimate for 2022 earnings indicates growth of 18.4% from the 2021 reported figure.
General Dynamics builds combat tanks like Abrams. Interestingly, amid the rising threat from Russia against Ukraine, The U.S. Department of State cleared the sale of 250 M1A2 Abrams SEPv3 tanks and other military equipment, estimated at almost $6 billion, to Poland, in a bid to corner Russia. Such a huge contract will boost GD's revenues and pave the way for more contract wins.
The company has a long-term earnings growth rate of 9.6%. The Zacks Consensus Estimate for 2022 earnings implies growth of 4.9% from the 2021 reported figure.
BAE Systems manufactures M88 heavy vehicles that are utilized for recovery and evacuation missions in combat. The aforementioned $6 billion defense equipment sales to Poland include the supply of 26 M88 recovery vehicles. This should boost BAESY's revenues and poise it well for more contract wins.
The company has a long-term earnings growth rate of 5.3%. The Zacks Consensus Estimate for 2022 earnings implies growth of 22.3% from the 2021 reported figure.
Just Released: Zacks Top 10 Stocks for 2022
In addition to the investment ideas discussed above, would you like to know about our 10 top buy-and-hold tickers for the entirety of 2022?
Last year's 2021Zacks Top 10 Stocks portfolio returned gains as high as +147.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don't miss your chance to get in on these long-term buys
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/performancefor information about the performance numbers displayed in this press release.
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Target and Burlington have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – March 15, 2022 – Zacks Equity Research shares Target (TGT - Free Report) as the Bull of the Day and Foot Locker, Inc. (FL - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Lockheed Martin (LMT - Free Report) , General Dynamics (GD - Free Report) and BAE Systems (BAESY - Free Report) Here is a synopsis of all five stocks:
Bull of the Day:
Target is a Zacks Rank #1 (Strong Buy) that operates as a general merchandise retailer in the United States. The company provides a variety of goods such as household essentials, groceries, electronics, toys and apparel.
The company is coming off an earnings beat earlier this month. The stock surged higher after the report, but has since come in because of geopolitical risks that have weakened the broader market.
Despite all the negatives out there, the stock is well off its 2022 lows, which is better than most stocks can claim. Because of this, investors should consider Target as place to hide in a weak market. While the relative strength is a plus, the long-term earnings power could give investors a huge opportunity at current trading levels.
More About the Company
Target was originally founded in 1902 and headquartered in Minneapolis, Minnesota. It has over 2,000 stores and 450,000 employees.
Target currently has a market cap of $96 billion and has Zacks Style Scores of "B" in Value and Growth, as well as an "A" in Momentum. The Forward PE is 14 and the company pays a 1.7% dividend.
Q4 Earnings
Target reported EPS earlier this month seeing a surprise to the upside of 11.5%. EPS came in at $3.19 v the $2.86 expected. This was the 13th straight beat for the company, who hasn't missed since 2018.
Revenues came in a little light, with Target seeing $30.6B v the $31.5B expected. Lower than expected holiday sales is the reason for the miss on revenues.
Despite lower sales, Target saw improved margins and stronger guidance. The company said that Q1 Same Store Sales operating margins "will be favorable in relation to historical performance, but well below its first quarter 2021 rate of 9.8%". Additionally, FY22 will see high-single digit growth with operating margins 8% or higher.
Year over year comparable traffic was up 8.1%, while digital sales saw a 9.2% increase y/y.
Target Corporation price-eps-surprise | Target Corporation Quote
Analysts Focus on Long Term Outlook
After earnings, a lot of the analyst commentary focused on improving margins and a positive outlook.
Raymond James commented: "The company's investments into supply chain, private-label, and omnichannel distribution have positioned it well to continue to gain further market share over the coming years."
Stifel was impressed with the robust e-commerce growth of 9.2%. The firm sees Target sustaining its pandemic share gains and has a Buy rating and a $280 price target on the stock.
Estimates
With those price targets going higher, earnings estimates are jumping as well. Over the last 60 days, estimates are trending upwards across all time frames.
For the current quarter, we have seen estimates raised by 13%, from $2.71 to $3.06. For the current year, we have seen a 9% move higher in that same time frame. And numbers are also moving 9% higher for next year.
Analysts are citing same-day services as a point of differentiation for Target relative to its peers. This is an important catalyst to its digital media business and a catalyst for future sales growth.
The Technicals
The stock took off in the back half of 2020, moving from the $100 area to a high of $268.98 in late 2021. Target saw only minor pullbacks during that bull run, but is now going through its biggest drawdown since COVID began.
Since hitting highs in November, the stock saw a 30% pullback before rallying about 25% off the 2022 lows. It is still trading about 25% off its 2021 highs, trading near the $200 level.
TGT is below all its moving averages, with the 50-day moving average at $215 recently acting as a major resistance level. Investors might want to look for the gap fill at $200 if the market continues to be weak. If the market sees a serious sell-off, the halfway back retracement is at $175 and the 61.8% Fibonacci retracement is $157.
A clear bullish signal would be the break of the 50-day MA, which could bring a short-term opportunity to the 200-day at $237.
Bottom Line
Target is separating itself from the retailers and businesses that thrived during the pandemic. The key for Target is sustaining that momentum it built over the last two years.
Looking at recent earnings, the only hiccup seems to be holiday sales, which weren't as strong as expected. Despite supply chain and inflation issues, the guidance looks good and the long-term outlook positive. If Target can hit the bullseye on EPS later this year, expect shares to rally into 2023.
Bear of the Day:
Burlington is a Zacks Rank #5 (Strong Sell) that operates as a retailer of branded apparel products in the United States. The company deals in more than just coats, offering ladies sportswear, menswear, youth apparel, footwear, accessories, toys, gifts, baby furniture, home, and beauty products
The stock is well off its 2021 highs, dropping over 40% since August. While some of that downfall is due to market weakness, there is more to the story, which includes its first earnings miss since the second quarter of 2020.
About the Company
Burlington operates over 800 stores in 45 states and Puerto Rico. The company was founded in 1972 and is headquartered in Burlington, New Jersey.
Burlington is valued at $13 billion and has a Forward PE of 27. The company holds a Zacks Style Score of "A" in Growth, but "D" in both Value and Momentum. The company pays no dividend.
Q4 Earnings
Earnings were out in early March, which surprised to the downside by 21%. This was the first miss in seven quarters, which resulted in the stock dropping about 15% overnight.
Burlington reported $2.53 v the $3.22 expected and missed on revenues. Same Store Sales were up 6%, while margins came in at 39.8% or -230 basis points below 2019 levels.
The company did announce they would be adding $500M to their share buyback plan, which is about 3% of the market cap.
However, the comps over the last two months of the quarter were very negative and weighed on shares. Management cited Omicron and warmer weather as reasons for traffic deceleration. But the quarter also brought lower spend per visit by customers, which some analysts attribute to management missteps.
Burlington Stores, Inc. price-consensus-chart | Burlington Stores, Inc. Quote
Estimates
While analysts seem positive on the longer-term story, the company will have issues in the short run. Analysts are lowering estimates aggressively, citing customer traffic, supply constraints, inflation and margins.
For the current quarter, we have seen a drop over the last 30 days from $1.92 to $0.66, or 65%. For the current year, estimates have fallen 24% over that same time frame, from $9.55 to $7.27.
Technical Take
Burlington was trading at $250 before COVID and plunged to $105 at the height of the panic. From there, the stock went on a bull run to $357.
Moving averages are well above current trading levels, with the 200-day MA at $284. The 50-day MA has been sold on every up move and currently resides at $230.
Investors now find themselves below the pre-COVID trading level and the key $200 mark. This level is the 61.8% retracement from COVID lows to 2021 highs. A failure to hold this level could bring more sellers as the stock trends to the $150 area.
Longer term, $150 is likely a good support zone as it was in 2018-19. Until then investors might want to avoid the stock until the earnings story is remedied.
In Summary
Burlington's short-term issues signal a caution flag to those investors looking to buy the dip. There might be some more downside and given the current market weakness, there is no sense stepping in at current levels.
Additional content:
U.S. OKs $200M Military Aid to Ukraine: Defense Stocks to Benefit
The U.S. administration announced on Mar 12 that President Biden had sanctioned up to $200 million in military aid for Ukraine following the latter's request for more defense equipment from America so that it can defend itself against the heavy shelling by Russia. In particular, this security aid includes dispatch of additional small tanks, anti-tank and anti-aircraft weapons to Ukraine.
This authorization news is expected to once again boost aerospace-defense stocks, which have already been rallying over the past two weeks, buoyed by the Russia-Ukraine conflict. So, if you have a keen interest in U.S. defense stocks, you may keep a close watch on Lockheed Martin , General Dynamics, and BAE Systems as these are expected to gain from the latest development.
U.S. Defense Stocks Link to Russia-Ukraine Crisis
Russia hurled its first round of missiles targeting Ukrainian cities on Feb 24, thereby officially starting a hostile conquest in the 21st century following the Taliban's invasion in Afghanistan last year. However, the conflict between Russia and Ukraine dates back centuries, with the latest discord commencing in 2014, when anti-government protests toppled the then Ukrainian government and Russia annexed Crimea. Following this a war-like situation developed in the eastern part of Ukraine between the local military and Russia-backed separatist rebels.
Although a bunch of peace accords in 2014 and 2015 simmered down the tension between these two nations, it was short-lived, as is evident from the latest invasion made by Russia in Ukraine. It is imperative to mention here that America has been assisting Ukraine both economically and in terms of defense ever since the latter declared its independence from the Soviet Union more than 30 years ago.
Since 2014, the United States has committed more than $5.6 billion in total assistance to Ukraine, including security and non-security assistance. In 2021 alone, America committed over $650 million in security assistance to this nation.
Moreover, the United States committed over $3 billion in training and equipment to help Ukraine preserve its territorial integrity, secure its borders, and improve interoperability with NATO.
Coming to the latest security aid of $200 million, "the total U.S. security assistance to Ukraine is more than $1.2 billion since January 2021," as tweeted by the White House. Obviously, this additional military aid opens avenues for U.S. defense stocks to win contracts for supplying their combat-proven equipment to Ukraine.
Stocks to Gain
The aforementioned discussion brings the spotlight on the following U.S. defense stocks that have already established a strong presence in Ukraine and are thus expected to benefit from the latest military aid announcement.
Lockheed Martin is the manufacturer of Javelin anti-armor systems, which form an integral part of the security assistance package offered by the Biden administration to Ukraine. At least 280 Russian armored vehicles have been destroyed with the Javelin missile, out of 300 shots fired, journalist Jack Murphy said in an article quoting a U.S. Special Operations official. Such a success rate for this weapon is expected to boost contract wins for Lockheed from Ukraine in the coming days, thereby pushing up LMT's revenues.
The company has a long-term earnings growth rate of 5.7%. The Zacks Consensus Estimate for 2022 earnings indicates growth of 18.4% from the 2021 reported figure.
General Dynamics builds combat tanks like Abrams. Interestingly, amid the rising threat from Russia against Ukraine, The U.S. Department of State cleared the sale of 250 M1A2 Abrams SEPv3 tanks and other military equipment, estimated at almost $6 billion, to Poland, in a bid to corner Russia. Such a huge contract will boost GD's revenues and pave the way for more contract wins.
The company has a long-term earnings growth rate of 9.6%. The Zacks Consensus Estimate for 2022 earnings implies growth of 4.9% from the 2021 reported figure.
BAE Systems manufactures M88 heavy vehicles that are utilized for recovery and evacuation missions in combat. The aforementioned $6 billion defense equipment sales to Poland include the supply of 26 M88 recovery vehicles. This should boost BAESY's revenues and poise it well for more contract wins.
The company has a long-term earnings growth rate of 5.3%. The Zacks Consensus Estimate for 2022 earnings implies growth of 22.3% from the 2021 reported figure.
Just Released: Zacks Top 10 Stocks for 2022
In addition to the investment ideas discussed above, would you like to know about our 10 top buy-and-hold tickers for the entirety of 2022?
Last year's 2021Zacks Top 10 Stocks portfolio returned gains as high as +147.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don't miss your chance to get in on these long-term buys
Access Zacks Top 10 Stocks for 2022 today >>
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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/performancefor information about the performance numbers displayed in this press release.