The Zacks Analyst Blog Highlights: American Eagle Outfitters, Express, BJ's Restaurants and Burlington Stores
Zacks Equity Research
Updated
For Immediate Release
Chicago, IL – April 06, 2016 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include American Eagle Outfitters, Inc. (AEO), Express Inc. (EXPR), BJ's Restaurants, Inc. (BJRI) and Burlington Stores, Inc. (BURL).
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Here are highlights from Tuesday’s Analyst Blog:
4 Best Growth Stocks in the Retail Sector
We always try to strike gold when it comes to selecting stocks. However, global economic headwinds, yet-to-recover Chinese economy, muted growth in the Euro zone and fluctuating commodity prices are leaving us perplexed about which stocks to bank on. The U.S. stock market also displayed a sluggish performance at the start of the year owing to fears of overseas turmoil and plunging oil prices. Although the market has recouped much of the losses, it is yet to breathe a sigh of relief.
Coming to the facts, global markets are still trying hard to make their way out of the woods, while on the domestic turf investors have somehow digested the discouraging retail sales data for February and a downward revision to January retail sales point. (Read: 5 Great Stocks to Buy Despite Weak Retail Sales ). Just when investors thought that their roller-coaster ride was about to end, the recent consumer spending data again rung the alarm bell, making them skeptical about prospects of the U.S. economy that otherwise seemed to be on track.
The Commerce Department unveiled that consumer spending, which accounts for over two-thirds of U.S. economic activity, inched up 0.1% in February. This, however, was not the end as it revised the January spending data to a 0.1% gain from solid 0.5% growth reported earlier. Market experts cited that consumer spending, which is yet to pick up steam, might prove to be a hurdle in the path of economic growth. The economy expanded 1.4% during the fourth quarter of 2015.
Looking at the aforementioned factors, you would either want to be absolutely sure when it comes to investment activities or stay away from the market until things begin to improve. But is everything so dull? Certainly not! There are positive commentaries indicating that the economy is on a recovery mode and the “Retail Sector” still holds the baton.
According to recent Conference Board data, the Consumer Confidence Index increased to 96.2 in March from the February reading of 94.0. A gradual recovery in the housing market as well as the manufacturing sector coupled with an improving labor market is playing a major role in lifting buyers’ confidence. With the unemployment rate hovering around 5% and total nonfarm payroll employment increasing by 215,000 last month – of which retail employment increased 48,000 – job prospects look better.
As reported in February, the National Retail Federation projects retail sales to increase 3.1% in 2016, which is higher than the 10-year average sales growth of 2.7%. Non-store sales are expected to improve in the band of 6–9%.
The above discussion surely highlights the overall macro-economic scenario and the hidden sentiments, but leaves us clueless when it comes to identifying stocks. Let’s delve deeper to find the undiscovered gems which would help us create an optimum portfolio.
Where to Aim?
It is quite apparent that the market has witnessed a slew of events and to fetch higher returns amid such an investment climate is a difficult task. Well, now there are two choices in front of you; either be a mute spectator and wait for a convincing economic environment, or be a front-runner and winner by identifying stocks that have the potential to outperform even when market conditions are not congenial.
Enter “Growth Stocks”. These stocks are capable of generating substantial and sustainable better-than-average cash flows. Additionally, both their top and bottom line are expected to increase at a rate, higher than the industry. By their nature, growth stocks tend to have higher volatility risk, and rarely issue dividends or pay smaller dividends. However, these stocks tend to produce higher returns, and they typically reinvest their capital into further growth opportunities (acquisitions or expansion projects), compounding the future growth potential.
We have identified 4 Retail-Wholesale Stocks based on their favorable Zacks Rank – Zacks Rank #1 (Strong Buy) or #2 (Buy) + Growth Style Score of “A” based on Zacks' new Style Score System. A stock with such a combination has incredible potential in the near term. A favorable rank indicates positive estimate revisions by analysts who are optimistic on the future performance of companies.
4 Retail Growth Picks
American Eagle Outfitters, Inc. (AEO), retailer of apparel and accessories, is a solid bet, with a Zacks Rank #1 and a Growth Score of “A”. The Pittsburgh, PA-based company delivered an average positive earnings surprise of 15.8% over the trailing four quarters, and has a long-term earnings growth rate of 10%. The company is expected to witness earnings growth of 12.8% in fiscal 2016 and 9.3% in fiscal 2017. The Zacks Consensus Estimate too has been trending up over the past 60 days.
We also suggest investing in Express Inc. (EXPR), with a Zacks Rank #1, long-term earnings growth rate of 15% and a Growth Score of “A”. This Columbus, OH-based specialty apparel and accessories retailer delivered an average positive earnings surprise of 33.5% over the trailing four quarters. It is expected to witness earnings growth of 16.6% in fiscal 2016 and 7.8% in fiscal 2017. The Zacks Consensus Estimate too has been on the rise over the past 30 days.
Investors can also count on BJ's Restaurants, Inc. (BJRI), the operator of casual dining restaurants that carries a Zacks Rank #2 with a long-term earnings growth rate of 18.3%. This Huntington Beach, CA-based company delivered an average positive earnings surprise of 21.3% over the trailing four quarters and has a Growth Score of “A”. The company is expected to witness earnings growth of 18.4% in 2016 and 14.2% in 2017. The Zacks Consensus Estimate too has trended upward over the past 60 days.
Last but not the least is Burlington Stores, Inc. (BURL), with a Zacks Rank #2, long-term earnings growth rate of 16.3% and a Growth Score of “A”. This Burlington, NJ-based company, which operates as a national chain of off-price retail stores, delivered an average positive earnings surprise of 19.1% over the trailing four quarters. It is expected to witness solid earnings growth of 18% in fiscal 2016 and 17.7% in fiscal 2017. The Zacks Consensus Estimate too has been on the rise over the past 60 days.
Bottom Line
Keeping aside the worries for a while, investors can confidently end their search at these stocks that highlight analysts’ constructive view on them via positive estimate revisions. We believe these stocks could fetch you higher returns as soon as the market frees itself from all the commotion and picks up pace.
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