Chicago, IL - December 14, 2015- Zacks Equity Research highlights Vera Bradley ( VRA ) as the Bull of the Day and North American Energy Partners ( NOA ) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Yum! Brands, Inc. ( YUM ), McDonald's Corp. ( MCD ) and Shake Shack Inc. ( SHAK ).
Here is a synopsis of all five stocks:
Vera Bradley ( VRA ) is a designer, producer, marketer and retailer of stylish and functional accessories, including handbags, and travel & leisure items for women. It is well known for its stylish designs with distinctive and colorful fabrics and trims.
Founded over 30 years ago by Patricia R. Miller and Barbara Bradley, the company is now headquartered in Fort Wayne, Indiana. It started trading publicly on October 21, 2010. The company sells its products directly as well as through independent retailers and third party e-commerce sites.
Strong Quarterly Results and Guidance
The company reported its Q3 results on December 9. Net revenues were up slightly to $126.7 million from $125.2 million in the same quarter a year ago.Net income came in at $0.27 per share, up from $0.21 per share in the same quarter of 2014 and way ahead of the Zacks Consensus Estimate of $0.20.
According to the company, they eliminated their hyper-promotions of 60% to 70% off and also pared back their promotional days by about 50% during the quarter.
For the current quarter, the company expects revenues of $151 million to $155 million compared to $152.6 million, a year ago and a gross profit percentage of 58.3% to 58.7% compared to 52.4%. They expect EPS in the range of 40 cents to 43 cents, better than the street estimate of 39 cents. They said they will continue to pull back on promotional levels.
The company also announced a repurchase plan of up to an additional $50 million of its shares in the next two years.
Shares soared about 45% after the earnings report but have declined slightly since then as some investors booked profits after the surge.
Analysts have raised their estimates after stronger-than-expected results. Zacks Consensus Estimates for the current and next year are now $0.82 per share and $0.85 per share, up from $0.73 and $0.80 respectively, before the report.
As OPEC and non-OPEC members continue to produce oil in record volumes despite weak global demand, oil glut is expected to persist in 2016, creating a very challenging environment for energy and related industries.
About the Company
Founded in 1953 and headquartered in Edmonton, Canada, North American Energy Partners ( NOA ) is the corporate parent of North American Construction Group (NACG) and all of the NACG companies. They provide mining and heavy construction services to large oil, natural gas, and resource companies, specializing in the Canadian oil sands region.
They are one of the largest providers of heavy construction and mining services in western Canada and maintain one of the largest independently owned equipment fleets in the region.
Disappointing Q3 Results
Revenue for the quarter was CAD 66.8 million, down from CAD 134.7 million reported a year ago. Gross profit was $7.4 million, or 11% of revenue, down from gross profit of $16.8 million, or 12.5% of revenue reported last year.
Net loss for the quarter was $2.1 million or $0.07 per share, compared to last year's net income of $4.8 million, or $0.13 per share. Results were way short of the Zacks Consensus Estimates.
According to the company, customers cut back deeply on seasonal construction projects during the quarter. They expect the challenging environment to continue for the next several quarters before a recovery starts. Additionally, the newly elected government has implemented an increase in provincial corporate tax and stated an intention to review royalties paid by Alberta's oil and gas industry. This has created a very uncertain situation for the company's clients and their spending plans.
Challenging Environment for Oil Services Companies
Many energy services companies, including this one, are now trading at very attractive valuations after the steep sell-off in recent months. While these companies may regain investor interest once oil shows signs of bottoming out, it is safer to stay away from these for the time being.
Yum Brands Discusses China Business Spinoff
Yum! Brands, Inc. ( YUM ), in its recent annual conference, discussed details about the previously announced spinoff of its China business.
Yum! Brands - Post Split
The company stated that post separation, each of the two companies - Yum! Brands and Yum! China - is expected to return about 15% per year to shareholders through earnings growth and dividends. This compares favorably with Yum! Brands' current earnings growth projection of 10%.
The company added that it plans to return about $6.2 billion to shareholders between the date of announcement of the separation (Oct 20, 2015) and the expected completion of the split by the end of next year.
Post separation, Yum! China will hold exclusive rights to the KFC, Pizza Hut and Taco Bell brands in China and will also have the provision to add new brands. The company will be able to triple its unit count in the long term and with almost no debt and substantial free cash flow, it is expected to deliver strong growth.
The new Yum! Brands is likely to be 96% franchised by the end of 2017. The company will have provision to triple its unit count in the long term with strong growth from the emerging markets. Also, it will receive a license fee of 3% of sales generated in China through KFC, Pizza Hut and Taco Bell. The company will, however, not get any fees initially for new units opened in China.
Yum! Brands - 2015 & 2016 Projections
Yum! Brands continues to expect 2015 earnings growth to be flat to low-single-digit.
The company expects to deliver 10% growth in operating profits in 2016. This comprises 10% growth each from China and KFC divisions, 5% from its Pizza Hut division and 6% from its Taco Bell division.
Yum! Brands expect currency to impact operating profits by 2%. Meanwhile, it expects an extra week next year to add 1.5% to the profits.
Yum! Brands - China Division Sales, Nov 2015
The company stated that November same store sales declined about 3% at its China division. This includes about 1% decline in KFC and 9% decline in Pizza Hut Casual Dining.
Yum! Brands reaffirmed that the China division is expected to witness same sales growth of 0%-4% for the fourth quarter. While the KFC division is expected to grow, the Pizza Hut Casual Dining division is expected to record same store decline.
Zacks Rank and Stocks to Consider
Currently, Yum! Brands holds a Zacks Rank #4 (Sell). Some better-ranked stocks worth considering from the restaurant space are McDonald's Corp. ( MCD ) and Shake Shack Inc. ( SHAK ), which sport a Zacks Rank #1 (Strong Buy).
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