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Tesla, Cherokee, Kohl's, Target And Walmart Highlighted As Zacks Bull And Bear Of The Day

By Zacks Investment ResearchStock MarketsDec 27, 2017 08:15PM ET
www.investing.com/analysis/tesla-cherokee-kohls-target-and-walmart-highlighted-as-zacks-bull-and-bear-of-the-day-200276354
Tesla, Cherokee, Kohl's, Target And Walmart Highlighted As Zacks Bull And Bear Of The Day
By Zacks Investment Research   |  Dec 27, 2017 08:15PM ET
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For Immediate Release

Chicago, IL – Dec 28, 2017 – Zacks Equity Research highlights Tesla (NASDAQ:TSLA) as the Bull of the Day and Cherokee Inc. (NASDAQ:CHKE) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on the Kohl’s (NYSE:KSS) , Target (NYSE:TGT) , and Walmart (NYSE:WMT) .

Here is a synopsis of all five stocks:

Bull of the Day:

The broader auto industry is drastically changing, from companies like Tesla redefining what it means to own a luxury vehicle to Silicon Valley tech giants like Uber helping create new sectors like ride-hailing.

In particular, the auto parts manufacturing space has experienced a surge in demand, with sales rising and vehicle production ramping up over the last few years. This industry will also likely get a boost from the increased focus on autonomous and electric vehicle technology, as well as demand for fuel efficiency components.

One auto space company that has seen its stock rise in 2017 is Dana Incorporated (DAN).

Sitting at a Zacks Rank #1 (Strong Buy), Dana provides technology driveline, sealing, and thermal-management products. The company is headquartered in Maumee, Ohio, and its operating segments include Light Vehicle Driveline Technologies, Commercial Vehicle Driveline Technologies, Off-Highway Driveline Technologies, and Power Technologies.

Strong Third Quarter Earnings

Last quarter, Dana reported third-quarter results that beat estimates on both the top and bottom lines.

Earnings of 59 cents beat the Zacks Consensus of 56 cents per share and soared 20% year-over-year.

Revenues of $1.83 billion also beat our consensus estimate, and grew 32% from the prior-year period. This increase was driven in part by recent acquisitions, while stronger market demand and new business generated 21% organic sales growth.

Raised Guidance for Fiscal 2017

As a result, Dana raised key financial guidance across all of its business units for fiscal 2017.

Sales are now expected between $7 billion and $7.2 billion, while diluted adjusted EPS should fall in the range of $2.30 and $2.50 per share.

Adjusted EBITDA is projected between $820 million and $850 million, and adjusted EBITDA as a percent of sales should now be 11.7% to 11.9%.

Dana is also forecasting cash flow from operations of $530 million to $570 million.

Growth Estimates Have Improved

Dana’s strong Q3 earnings and raised guidance have helped improved the auto parts manufacturer’s growth estimates.

For the current year, the company expects earnings to increase over 26%, with revenues rising about 22% in the same time frame. Five analysts have revised their estimates upward in the last 60 days compared to none lower.

This bullish earnings outlook is stretching into next year as well. The Zacks Consensus has jumped from $2.58 to $2.72 per share in the past 60 days, and sales are expected to increase roughly 6.8% next year as well.

Shares are Surging

DAN has had a pretty impressive run in 2017, and year-to-date, the stock has returned well over 68% compared to the S&P 500’s return of about 18%.

Dana is currently trading with a forward P/E of 13.18.

And it’s not just DAN right now either. Automotive-Original Equipment is an overall strong industry, and sits in the top 18% of all industries that we cover.

Even among this impressive landscape, Dana is a standout at the moment. Thanks to its strong performance and smart international expansion strategies—it hopes to further its presence in China in the coming years—DAN looks to be an intriguing opportunity for investors.

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Bear of the Day:

Cherokee Inc. is one of those names in the retail industry that you’ve likely seen in the aisles of stores like Kohl’s, Target, and Walmart.

The company has an extensive brand portfolio, including its namesake Cherokee, Tony Hawk, Hi-Tec, Everyday California, Liz Lange Maternity, 900 Tony Hawk, Point Cove, Carole Little, and Sideout, among others.

The broader retail sector is hot right now—U.S. year-end holiday retail sales rose 4.9% compared to the same period last year—but the Zacks Rank #5 (Strong Sell) Cherokee, unfortunately, is a retailer that has yet to rebound.

Big Third Quarter Miss

Last quarter, Cherokee reported a loss per share of 5 cents, missing the Zacks Consensus Estimate of 7 cents per share and representing a negative earnings surprise of 171.43%.

Non-GAAP net loss for the quarter was $740,000 compared to non-GAAP net income of $5.6 million in the prior-year period.

Revenues came in at $11 million, just beating our consensus and were comprised of royalty revenues and indirect product sales; royalty revenues were $7.9 million.

Adjusted EBITDA was $928,000 for the quarter compared to $1.6 million in the year ago period.

Cherokee also said that it had cash and cash equivalents of $4.6 million as of Oct.28, 2017.

Adjusted Outlook

As a result, Cherokee adjusted its previously issued guidance for fiscal 2018.

The company now expects gross profit to be in the range of $34 million to $37 million, with adjusted EBITDA between $6 million and $9 million.

Cherokee also provided guidance for its fiscal 2019. It expects gross profit in the range of $34 million and $39 million, with adjusted EBITDA between $7 million and $11 million.

Earnings in Decline

Cherokee’s bottom line is in a slump at the moment, and this decline doesn’t seem to be going away any time soon.

For the current quarter, earnings are expected to decrease over 53%, with sales slumping almost 37% in the same time frame.

The rest of fiscal 2018 doesn’t look too bright either; earnings are projected to tumble in the triple digits from the prior year, and the Zacks Consensus now sits at -$0.10, down from $0.10 just 30 days ago.

However, Cherokee’s earnings are anticipated to rebound in fiscal 2019, growing 50% year-over-year.

Shares Down on the Year

Shares of Cherokee have fallen over 80% year-to-date compared to the S&P 500’s return of about 18%,

Cherokee has no P/E, since it is currently a loss-making company, but its P/S of 0.55 comes in below its industry average of 1.1.

In its third quarter earnings report, Cherokee CEO Henry Stupp said that the company is making “meaningful” progress in its key business and financial initiatives, as well as amending its loan agreement with Cerberus.

He also said that the retailer is working to identify opportunities to improve its operating and financial performance, especially reducing expenses and growing cash flow.

If Cherokee can execute these growth objectives smartly and efficiently, the company’s profit slump could come to an end.

For investors looking for an apparel stock with more growth potential, they may want to consider athleisure giant Lululemon (LULU), a Zacks Rank #1 (Strong Buy) company that anticipates 21.2% earnings growth for the current quarter.

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About the Bull and Bear of the Day

Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Strong Stocks that Should Be in the News

Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has more than doubled the market from 1988 through 2016. Its average gain has been a stellar +25% per year. See these high-potential stocks free >>

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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.



Tesla Inc. (TSLA): Free Stock Analysis Report

Wal-Mart Stores, Inc. (WMT): Free Stock Analysis Report

Target Corporation (TGT): Free Stock Analysis Report

Kohl's Corporation (KSS): Free Stock Analysis Report

Cherokee Inc. (CHKE): Free Stock Analysis Report

Original post
Tesla, Cherokee, Kohl's, Target And Walmart Highlighted As Zacks Bull And Bear Of The Day
 
Tesla, Cherokee, Kohl's, Target And Walmart Highlighted As Zacks Bull And Bear Of The Day

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