Mixed earnings reports, Fed fear, and weak Chinese economic data helped sink stocks for a second consecutive week.
The S&P 500 fell 1% this week after finishing little changed at 2,132.55 today, while the Dow Jones Industrial Average declined 0.6% this week after advancing 39.44 points, or 0.2%, to 18,138.38. The Nasdaq Composite dropped 1.5% this week after finishing little changed at 5,214.16 today.
Evercore ISI’s Dennis DeBusschere and team try to tie all the fears together:
Although economic activity in the U.S. and globally has slowed from its 2015 pace, stronger economic data over the past month has translated into the outperformance of cyclical sectors globally and has helped drive the equity risk premium (ERP) lower, maintaining the level of PEs despite the backup in 10yr yields. However, the increased likelihood that the Fed will raise rates in 2016, moderation in U.S. labor market demand and concerns over the pace of global economic growth are headwinds for risk-on factor, low earnings quality stocks and cyclicals sector outperformance. The burden on fiscal stimulus to support global economic growth prospects and cyclical factors continues to increase if the U.S. labor market continues to moderate. Although Yellen has gone to great pains to reduce the importance of the Fed DOTS, even after noting that the neutral rate (r*) is likely to be much lower than previously thought, the Fed is still calling for a funds rate of 2% by January of 2 019 with the market only pricing in 1%. If the FOMC raises rates in December and signals that they expect two to three hikes next year as Krishna expects, cyclical factors and sectors are likely to come under pressure unless the outlook for growth and inflation improves materially.
Top Quality Stocks To Buy For 2017: Smith & Wesson Holding Corporation(SWHC)
Smith & Wesson Holding Corporation manufactures and sells firearm products in the United States and internationally. The company operates in two segments, firearms and accessories. It offers handguns, including revolvers and pistols; long guns, such as sporting, bolt action, and single shot rifles; hunting rifles; black powder firearms; handcuffs and restraints; and firearm-related products and accessories. The company sells its products under the Smith & Wesson, M&P, Thompson/Center Arms, Caldwell Shooting Supplies, Wheeler Engineering, Tipton Gun Cleaning Supplies, Frankford Arsenal Reloading Tools, Lockdown Vault Accessories, Hooyman Premium Tree Saws, BOG-POD, and Golden Rod Moisture Control brands. It also provides metal processing and finishing services comprising tooling, forging, heat treating, finishing, plating, plastic injection molding, and engineering support services to third-party customers; and licensing of tra demarks to third parties. The company serves gun enthusiasts; collectors; hunters; sportsmen; competitive shooters; individuals desiring home and personal protection; law enforcement and security agencies and officers; and military agencies. Smith & Wesson Holding Corporation sells its products through distributors; federal, state, and municipal law enforcement agencies and officers; government and military agencies; businesses; retailers; and consumers. It also operates Websites; and an online retail store that sells hunting and shooting accessories, branded products, apparel, and related shooting supplies. The company was founded in 1852 and is based in Springfield, Massachusetts.
- [By Ben Levisohn]
Shares of Smith & Wesson (SWHC) are soaring after the gun maker beat earnings forecasts and provided optimistic guidance. Wunderlich’s Rommel Dionisio has the details:
Smith & Wesson (SWHC) reported another quarterly beat in 4Q, and surprisingly for a company which has recently under-promised and over-delivered to a significant degree, introduced initial FY17 and 1Q guidance well above current consensus forecasts. Successful recent new firearm product introductions, impressive growth in the recently acquired accessories segment, and stronger than expected gross margin drove 4Q upside, and these factors carry solid fundamental momentum into FY17. Especially given important near-term catalysts, we reiterate our Buy rating and maintain our price target of $32, derived by applying a trailing-year peer average EV/EBITDA multiple of 10x on current years estimates.
What are those catalysts you might ask? Dionisio continues:
We foresee two potential near-term catalysts for the stock. First, the U.S. Army is expected to select three finalists for its landmark handgun contract sometime around August, and we view S&W as the potential front-runner for this contract. Second, the firearms market could see another re-acceleration in demand trends in response to last weeks incident in Orlando, similar to the sharp surge in demand, particularly in handguns, seen just after the Paris and San Bernadino incidents late last year.
Wedbush analyst James Hardiman agrees:
Smith & Wesson shares should benefit from not only a sizeable 4Q beat but also a view among investors that the solid guidance given on Thursday is beatable given what is assumed to be a surge in demand in coming months following the Orlando tragedy. Beyond a short term bump in these shares, however, SWHC faces exceedingly difficult comparisons, and so investors will be watching closely beyond a strong 1Q for signs of sustainable momentum durin
Top Quality Stocks To Buy For 2017: Duluth Holdings Inc.(DLTH)
Duluth Holdings Inc., incorporated on October 29, 1986, is a lifestyle brand of men’s and women’s casual wear, workwear and accessories sold through the Company’s own direct and retail channels. The Company operates through two segments: direct and retail. The Company’s product assortment includes shirts, pants, underwear, outerwear, footwear, accessories and hard goods. The Company offers a range of products, such as its Longtail T shirts, Buck Naked underwear and Fire Hose work pants. The Company offers products under its Duluth Trading brand name. The Company also offers Duluthflex Ballroom jeans. The Company owns and operates a distribution center in Belleville, Wisconsin, which is approximately 115,000 square feet of production and warehouse space.
The Company’s direct channel reaches customers through its Website and catalogs. The Company’s Website, www.duluthtrading.com, serves as a storefront for its product assortment. The Company offers its new and existing customers the ability to shop across multiple platforms and devices, including mobile devices, tablets and desktop computers. The Company publishes approximately 40 catalog issues and distributes over 50 million copies. The Company produces separate catalogs for its men’s and women’s product offerings.
The Company’s retail stores allow it to reach customers that prefer to shop in a brick and mortar setting. The Company’s stores range in size from 6,000 to 11,000 selling square feet. The Company’s retail stores also provide ancillary marketing benefits, such as brand visibility in high traffic areas. Customers can also return products purchased online at its retail stores and can buy certain Duluth Trading-branded products not available in the store at the registers or in-store kiosks and have them shipped directly to their homes.
- [By Monica Gerson] Related DLTH After-Hours Recap: CarMax, Wynn, Relypsa, ConAgra, Ruby Tuesday & More Earnings Scheduled For April 7, 2016 Duluth Holdings' (DLTH) CEO Stephanie Pugliese on Q4 2015 Results – Earnings Call Transcript (Seeking Alpha) Related GPS After-Hours Recap: CarMax, Wynn, Relypsa, ConAgra, Ruby Tuesday & More Gap Comps Down 6% In March; Shares Plunge Difficult March Comparisons Were Too High For Retailers To Beat (Seeking Alpha)
Some of the stocks that may grab investor focus today are:
- [By Lisa Levin]
Duluth Holdings Inc (NASDAQ: DLTH) shares were also up, gaining 23 percent to $21.94 as the company reported upbeat results for its fourth quarter on Thursday.
Best Construction Material Stocks To Buy For 2017: Cott Corporation(COT)
Cott Corporation, incorporated on December 31, 2006, along with its subsidiaries, is engaged in the production of beverages on behalf of retailers, brand owners and distributors. The Company operates through four segments: DSS; Cott North America; Cott United Kingdom (Cott U.K.), and All Other, which includes its Mexico segment, Royal Crown International (RCI) segment and other miscellaneous expenses.
The Company is engaged in home and office bottled water and office coffee services distribution in the United States. The Company has approximately 60 beverage manufacturing, production, distribution and fruit processing facilities, including over 50 in North America, which include approximately 30 combined production and distribution facilities, over eight in the United Kingdom and approximately one in Mexico, and over one manufacturing facility in Columbus, Georgia that supplies its manufacturing plants. The total square footage of its beverage manufacturing, p roduction, distribution and fruit processing facilities is approximately 6.3 million square feet in North America, over 1.2 million square feet in the United Kingdom and approximately 0.3 million square feet in Mexico.
The Company’s brands in North America and the United Kingdom include Cott and Red Rain. In the United States, its brands include Stars & Stripes, Vess, Vintage, So Clear, Shanstar, Harvest Classic, Chadwick Bay, Exact, Alhambra, Belmont Springs, Deep Rock, Hinckley Springs, Sparkletts, Crystal Springs, Kentwood Springs, Mount Olympus, Standard Coffee and Javarama. In the United Kingdom, its brands include Emerge, Red Rooster, MacB, Carters, Calypso, Mr. Freeze, Jubbly, Suso, Cafe Nueva and Ben Shaws. The Company also operates under the brand names Stars & Stripes in Mexico and RC mark in various formats in 120 countries and territories outside of North America.
The DSS segment provides direct-to-consumer products, suc h as bottled water, coffee, brewed tea, water dispensers, co! ffee and tea brewers, and filtration equipment. The DSS segment accounted for 1.4% of its total net revenue, as of January 2, 2016.
The Company’s traditional business consists of its Cott North America, Cott U.K. and All Other segments. Its traditional business produces products, including carbonated soft drinks (CSDs), shelf stable juice and juice-based products, clear, still and sparkling flavored waters, energy drinks and shots, sports drinks, new age beverages, ready-to-drink teas, liquid enhancers, freezables, ready-to-drink alcoholic beverages, hot chocolate, coffee, malt drinks, creamers/whiteners, cereals and beverage concentrates, directly or through third-party manufacturers. Its traditional business accounted for 18.9% of the Company’s total revenue, as of January 2, 2016.
The Company competes with Coca-Cola, Pepsi, Nestle Waters North America, Dr. Pepper Snapple, Welch’s, Ocean Spray, Nestle, and Mott’s.
- [By Dan Moskowitz]
Cott (NYSE: COT ) produces and sells over 200 different types of beverages in over 50 countries, and it implements a highly effective strategy. Cott is what is known as a Fast Follower, which makes it unique to other beverage companies.
Top Quality Stocks To Buy For 2017: Timken Company (The)(TKR)
The Timken Company engineers, manufactures, and markets bearings, transmissions, gearboxes, and chain and related products worldwide. It operates in two segments: Mobile Industries and Process Industries. The Mobile Industries segment offers a portfolio of bearings, seals, lubrication devices, and systems, as well as power transmission components, engineered chain, augers, and related products and maintenance services to original equipment manufacturers (OEMs) of off-highway equipment for the agricultural, construction, and mining markets. It also provides parts to on-highway vehicles, including passenger cars, light trucks, and medium- and heavy-duty trucks, as well as rail cars and locomotives; power transmission systems and flight-critical components for civil and military aircraft, which comprise bearings, helicopter transmission systems, rotor-head assemblies, turbine engine components, gears, and housings; and offers aft ermarket products and services, including complete engine overhaul, aerospace bearing repair, component reconditioning, and replacement parts. This segment sells it parts through a network of authorized automotive and heavy-truck distributors to individual end users, equipment owners, operators, and maintenance shops. The Process Industries segment supplies industrial bearings and assemblies; power transmission components, including gears and gearboxes; and couplings, seals, lubricants, chains, and related products and services to OEMs and end-users in various industries. It also supports aftermarket sales and service needs through its network of authorized industrial distributors; and offers repair and service for bearings and gearboxes, as well as electric motor rewind, repair, and services to end users. In addition, this segment manufactures precision bearings, complex assemblies, and sensors for manufacturers of health and critical motion control equipment. The Timken Co mpany was founded in 1899 and is headquartered in North Cant! on, Ohio.
- [By Mike Deane]
On Thursday, Timken Co. (TKR) announced that its board of directors has approved a plan to separate the company’s steel business from its bearing and power transmission business.
The separation will create two publicly-traded companies, with the steel company anticipating annual revenue of $1.7 billion, and the bearing and power transmission company having estimated annual revenue of $3.4 billion.
The company anticipates that the split of TKR will be tax-free for all shareholders, and expects the separation to be completed within 12 months.
TKR’s shares were up $1.79, or 3.06%, at market close on Thursday. YTD, the stock is up more than 19%.
- [By Shauna O’Brien]
Jefferies announced on Monday that it has raised its price target on The Timken Company (TKR).
The firm has increased its price target on TKR from $65 to $73. This new price target suggests a 16% upside from the stock’s current price of $61.55.
Analyst Stephen Volkmann noted: “We are increasing our estimates and price target based on the anticipation of a more aggressive share repurchase program over the next year.”
“With strong cash flow generation, untapped balance sheet liquidity and potential upside from a cyclical recovery we believe there is additional value for shareholders that has yet to be recognized,” added the analyst.
Looking ahead, the firm has raised its outlook for the third quarter from 90 cents to 92 cents per share. For FY2013, earnings estimates have been increased from $3.70 to $3.75 per share. FY2014 estimates have been raised from $4.30 to $4.60 per share.
Timken shares were mostly flat during Monday morning trading. The stock is up 29% YTD.