For Immediate Release
Chicago, IL – October 14, 2024 – Zacks Equity Research shares Lands' End, Inc. LE as the Bull of the Day and SM Energy Co. SM as the Bear of the Day. In addition, Zacks Equity Research provides analysis on The Williams Companies Inc. WMB, Kinder Morgan Inc. KMI and Enbridge Inc. ENB.
Here is a synopsis of all five stocks:
Bull of the Day:
Lands' End, Inc. is in the middle of a big turnaround. This Zacks Rank #1 (Strong Buy) is expected to grow earnings by 346.7% in fiscal 2024.
Lands' End is a digital retailer of apparel, swimwear, outerwear, accessories, footwear, home products and uniforms. It sells online at landsend.com, at company-operated stores, third-party license agreements and through third-party distribution channels.
It also offers products to businesses and schools through the Outfitters distribution channel.
Lands' End Beat in the Fiscal 2024 Second Quarter
On Sep 5, 2024, Lands' End reported its fiscal second quarter 2024 results and beat the Zacks Consensus by 80%. Earnings were a loss of $0.02 versus the Zacks Consensus of a loss of $0.10.
Gross Merchandise Value ("GMV") rose mid-single digits compared to the year ago period.
However, revenue fell to $211.3 million from $218.7 million in the second quarter of fiscal 2023.
Gross profit, however, rose 8.8% to $151.9 million from $139.6 million last year.
Gross margin increased 470 basis points to 47.9% from 43.2% in the second quarter of fiscal 2023. The improvement in gross margin was driven by newness across the channels, lower promotional activity, reduction in clearance inventory and improved supply chain costs.
Inventories Plunge 21%
High inventories have plagued many retailers the last two years but Lands' End has been working to reduce it. It saw a sixth consecutive quarter of improvement in inventory in the second quarter, as it fell 21% to $312 million as of Aug 2, 2024 compared to $396.1 million as of July 28, 2023.
It has been selling out of some items this summer and fall, which indicates better management of inventory. It no longer has to be as promotional without all of the inventory.
The company had cash and cash equivalents of $25.6 million as of Aug 2, 2024, compared to $26.6 million as of July 28, 2023.
Lands' End is Bullish About Fiscal 2024
Land's End liked what it saw in the second quarter. It gave an earnings range of $0.29 to $0.48 for the fiscal year.
As a result, the analysts also had to raise estimates. 1 was revised higher for fiscal 2024 in the last 60 days. That pushed the Zacks Consensus up to $0.37 from $0.30.
That is in the middle of the company's guidance range. But it is also earnings growth of 346.7% as the company lost $0.15 last year.
Fiscal 2025 is also looking good with the Zacks Consensus at $0.58. That's further earnings growth of 56.8%.
Lands' End Shares Soar in 2024
With a turnaround in sight, the Street has piled into the stock. It's up 81.1% year-to-date and is easily beating a red-hot S&P 500.
Lands' End isn't cheap, however. It's trading at 43.4x forward earnings.
But traders are looking to the future, which is that higher Zacks Consensus for earnings next year. This holiday season will be key, as well.
If you're looking for a retailer with growth, Lands' End should be on your short list.
Bear of the Day:
SM Energy Co. is facing falling energy prices as the end of 2024 approaches. Analysts are cutting earnings estimates on this Zacks Rank #5 (Strong Sell) as a result.
SM Energy is an independent energy company which explores and produces crude oil, natural gas and NGLs in Texas and Utah. It has a market cap of $5.2 billion.
Analysts Cut SM Energy's Earnings Estimates in the Last Month
With energy companies which explore and produce crude oil, the price of oil plays a big factor in earnings. Most of these companies are unhedged on oil, which means they have not paid to make sure they get a certain price per barrel.
They are rolling with the market, on the belief that oil prices will remain higher.
But oil prices have come down from around $80 a barrel to $70 to $75.
As a result, 2 earnings estimates have been cut on SM Energy over the last month for 2024 and 3 estimates have been cut for 2025.
Although, interestingly, although oil remains depressed in the $70 to $75 range, one estimate has been raised in the last week for both 2024 and 2025.
But the Zacks Rank looks at the agreement between analysts and more have been cutting than raising.
The Zacks Consensus Estimates Have Fallen
In the last 30 days, the 2024 Zacks Consensus Estimate has fallen to $7.06 from $7.57 as the earnings estimates have been cut. But that is still earnings growth of 19.9% as the company made just $5.89 last year.
The 2025 Zacks Consensus Estimate has also fallen to $8.03 from $9.50 over the last month. But that is also another 13.8% growth if the 2024 earnings holds up around the consensus.
Here's what the earnings looks like on the price and consensus chart. It's fallen, but it's not plunging year-over-year either.
Shares of SM Energy Underperforming in 2024 But It's Cheap
The energy stocks have struggled in 2024. Year-to-date, SM Energy is underperforming the S&P 500 but it's still up on the year.
SM Energy is dirt cheap, however.
It has a forward P/E of just 6.5. Any stock trading under 10x Is a value stock.
SM Energy also has a price-to-book (P/B) ratio of 1.4. A P/B ratio under 3.0 indicates value.
SM Energy is shareholder friendly. In June 2024, the company's board raised the fixed quarterly dividend 11%, as of Q4 2024. It is currently yielding 1.6%. It also authorized a $500 million share repurchase program which is good until the end of 2027.
SM Energy will report third quarter 2024 earnings on Oct 31, 2024, after the close.
Investors might want to wait for crude prices to rise before considering an energy play. SM Energy is one to keep on the watch list for changes to the Zacks Rank.
Additional content:
3 Pipeline Stocks to Thrive in a Volatile Energy Market: WMB, KMI, ENB
The oil-energy sector is marked by significant uncertainty, with many companies highly vulnerable to sharp fluctuations in oil and natural gas prices. The extreme volatility in oil prices since the COVID-19 pandemic is a clear example. On April 20, 2020, the price of West Texas Intermediate crude dropped to an unprecedented low of negative $36.98 per barrel before skyrocketing to $123.64 by March 8, 2022, as global economies began to reopen.
Despite this volatility, investors need not shy away from the sector entirely. Midstream energy companies like The Williams Companies Inc., Kinder Morgan Inc. and Enbridge Inc. have proven their ability to weather market fluctuations. These companies are well-positioned for long-term growth, even in a challenging energy landscape. The oil price data is sourced from the U.S. Energy Information Administration.
Can Midstream Players Combat Energy Market Volatility?
Unlike the business of upstream and downstream energy companies, operations of midstream energy players like the companies mentioned above have significantly lower exposure to oil and gas price volatility.
Midstream companies' pipeline and storage assets are secured under long-term take-or-pay contracts. These contracts ensure that shippers pay for the capacity reserved, whether they utilize it or not, which provides a steady stream of revenue. This structure allows companies to generate stable earnings insulated from fluctuations in the volume and prices of oil and natural gas transported, thereby offering significant stability to their bottom line.
Therefore, it's an opportune moment for investors to keep an eye on companies within the midstream energy space.
3 Midstream Stocks in the Spotlight: WMB, KMI, ENB
WMB's Leadership in Natural Gas Transport
The Williams Companies generates stable fee-based earnings since it transports one-third of the natural gas consumed in the United States. Having ownership and operating interests in pipeline networks spanning 33,000 miles, WMB transports natural gas from the prolific basins in the United States to the end market. The leading midstream player is thus well-positioned to gain from rising clean energy demand since the transported natural gas is used for generating electricity, heating rooms and cooking.
KMI: Shaping the Landscape of Natural Gas Infrastructure
Kinder Morgan's stable business model is reflected in its natural gas transportation activities. Its pipeline networks transport roughly 40% of the commodity produced in the United States. Throughout North America, KMI's pipeline network is spread over 79,000 miles, transporting natural gas, gasoline, crude oil, carbon dioxide and more, securing long-term, stable, fee-based earnings.
Enbridge's Project Backlog Drives Growth
Enbridge is well-regarded for its low-risk business model, offering stable and predictable cash flows. This stability is largely due to long-term contracts that provide consistent fee-based revenues, continuously generating wealth for shareholders. The midstream energy giant enhances its cash flows with a robust pipeline of secured midstream projects worth C$24 billion, scheduled to come online through 2028.
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7 Best Stocks for the Next 30 Days
Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."
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See them now >>Williams Companies, Inc. (The) (WMB) : Free Stock Analysis Report
SM Energy Company (SM) : Free Stock Analysis Report
Enbridge Inc (ENB) : Free Stock Analysis Report
Kinder Morgan, Inc. (KMI) : Free Stock Analysis Report
Lands' End, Inc. (LE) : Free Stock Analysis Report
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