Chicago, IL – May 19, 2025 – Zacks Equity Research shares Philip Morris International PM as the Bull of the Day and United Parcel Service UPS asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on DICK'S Sporting Goods, Inc. DKS and Foot Locker, Inc. FL.
Here is a synopsis of all four stocks:
Zacks Rank #1 (Strong Buy) stock Philip Morris International is an international manufacturer and seller of cigarettes, e-cigarettes, heated tobacco products, and oral nicotine products in over 180 countries. In early 2008, Philip Morris International was spun off from the Altria Group. The company built the foundation of its business on its premium cigarette brand category with its well-known Marlboro, Parliament, and Virginia Slim Brands. While the cigarette category continues to make up the lion's share of Philip Morris's business, it is rapidly expanding its non-cigarette businesses and becoming a more diverse brand.
Instead of sitting back and relying on its legacy core business of cigarettes, Philip Morris has realized that as consumers learn more about the dangers of lung cancer and become more health-conscious, they are looking for smoke-free options. Philip Morris' most successful foray into the smoke-free business is Zyn, an oral nicotine pouch that benefits from the move away from traditional tobacco.
Zyn has benefited from its virality on the social media platform TikTok and has grown to own roughly three-quarters of the tobacco pouch market. Not only are the pouches seen as "cool," but many younger consumers are flocking to them because they eliminate the most harmful way of nicotine delivery – smoking. In addition, while it can be addictive, nicotine has also been shown to have positive traits, such as the fact that it can increase focus. Shipments of Zyn have more than quintupled over the past five years, with growth expected to continue.
Though Philip Morris does not produce the high double-digit earnings growth seen in many growth stocks, the company makes up for it with its steadiness and consistency. Over the past three quarters, EPS grew +14%, +14%, and +13% year-over-year. In addition, annual earnings have grown consistently over the past three years.
PM's steadiness goes beyond its fundamentals and translates to its price action. Shares have a beta of 0.14, meaning they are far less volatile than the S&P 500 Index. Nevertheless, PM has performed better than 95% of S&P 500 stocks.
PM has beaten Zacks Consensus Analyst Estimates in nineteen of the past twenty quarters.
Assuming the trend continues, that's good news for PM shareholders because consensus estimates suggest double-digit EPS growth into 2026. Meanwhile, the company has very low costs and a healthy cash stack.
Philip Morris is strategically evolving beyond its traditional cigarette business, exemplified by the remarkable success of its "Zyn" oral nicotine patch business.
Based in Atlanta, Zacks Rank #5 (Strong Sell) stock United Parcel Service is the world's largest express carrier and package delivery company. Founded in 1907, UPS provides specialized transportation and logistics services in the United States and internationally. The company offers a range of supply chain solutions, such as freight forwarding, customs brokerage, fulfillment, returns, financial transactions, and repairs. UPS transports millions of packages each business day across the globe. In 2024, the company delivered 22.4 million packages per day on average.
E-commerce juggernaut Amazonis UPS's largest customer by far in terms of volume and revenue. Unfortunately for UPS, UPS Amazon deliveries are also some of the least profitable sides of the business, with tiny margins. Facing a dilemma, UPS management decided earlier this year to cut its Amazon delivery volume by more than 50% by the end of next year. While the bold move may reduce UPS's reliance on Amazon and increase margins, it will be near-impossible to fill the gigantic volume void any time soon, leaving shareholders with more questions than answers.
Geopolitical uncertainty, global trade concerns, and poor consumer sentiment continue to contribute to the economic slowdown and slowing demand for UPS in Asia and Europe. With all the uncertainty, UPS forward guidance forecasts that revenue will be lower in 2025 in 2024.
UPS is the largest employer of members of the "Teamsters" union. After a strike, UPS was forced to increase full-time workers' pay significantly by $7.50 per hour. This deal has hurt the company's profitability dramatically, and when the agreement ends in 2028, UPS is likely to have to increase pay even more or face another strike.
Relative weakness is another major red flag for UPS. Year-to-date, shares are down 19.7% while the S&P 500 Index is down only 3.4%. In other words, UPS shares fell in tandem with the market but failed to recover with it.
UPS faces significant headwinds as it navigates a complex landscape marked by a significant shift in its Amazon relationship, persistent weakness in key international markets, and increasing labor costs.
DICK'S Sporting Goods, Inc. is acquiring another big athletic footwear retailer Foot Locker, Inc.. Will this impact Dick's Sporting Goods' focus and business alignment? Should you consider buying DKS stock now? Let's find out –
Dick's Sporting Goods, recently, decided to acquire Foot Locker for almost $2.4 billion. In the buyout deal, Foot Locker shareholders may receive $24 in cash or 0.1168 shares of Dick's common stock in place of each share held. The cash offer is 66% higher than Foot Locker's 60-day average price.
Dick's Sporting Goods plans to finance the deal through a combination of new debt and cash. Both parties expect the transactions to be completed by mid-2025. The acquisition is expected to boost earnings per share (EPS) in the first full fiscal year after closing and generate $100-125 million in cost synergies in the medium term, added Dick's Sporting Goods.
Dick's Sporting Goods chairman Ed Stack stated that the merger would enable both athletic footwear retailers to unlock growth and strengthen their position among shoe enthusiasts. The acquisition of Foot Locker would consolidate Dick's Sporting Goods' market position in the footwear industry, providing the company with the capability to perform on a larger scale. Lest we forget, Foot Locker had around 2,400 stores in 26 countries by the end of last year.
Dick's Sporting Goods agreed to buy Foot Locker at a high price, causing Foot Locker's shares to soar 85% on Thursday, its largest increase ever. And why not? Foot Locker received a significant payout, a silver lining for the company whose shares had plummeted 70% since reaching a high of $79.20 on Dec. 8, 2016.
Over the last three fiscal years, Foot Locker's revenue growth was lackluster, with earnings falling from $7.77 in fiscal January 2022 to $1.37 by the end of January this year. Foot Locker's market share is also shrinking. And these challenges unnerved Dick's Sporting Goods investors, causing a 14.6% drop in DKS share price on Thursday.
While Dick's Sporting Goods has increased market share, improved profitability, and thrived in a tariff environment, acquiring a struggling retailer has dampened investor enthusiasm. Understandably, Dick's plans to expand its footwear business, which made up 28% of total sales in fiscal 2024. But acquiring a stressed company at a high price has fueled doubts about Dick's Sporting Goods' future. It may decrease the return on capital and heighten balance sheet risk for the company.
Investors are feeling uneasy about Dick's Sporting Goods' beaten-down Foot Locker acquisition amid uncertain macroeconomic conditions and elevated selling, general, and administrative expenses. Therefore, new entrants should avoid betting on Dick's Sporting Goods stock for now. However, existing stakeholders may consider holding onto it as there are potential growth opportunities if management gets the synergy right.
Dick's Sporting Goods, anyhow, is seeing strong top-line growth, increase in comparable store sales, and transaction growth. For now, Dick's Sporting Goods has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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United Parcel Service, Inc. (UPS) : Free Stock Analysis Report
Philip Morris International Inc. (PM) : Free Stock Analysis Report
Foot Locker, Inc. (FL) : Free Stock Analysis Report
DICK'S Sporting Goods, Inc. (DKS) : Free Stock Analysis Report
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