Zacks Bull and Bear of the Day Highlights: Lumber Liquidators, Select Comfort, Sprint Nextel, Clearwire and Dish Network
Zacks Equity Research
For Immediate Release
Chicago, IL – May 1, 2013 – Zacks Equity Research highlights Lumber Liquidators (LL) as the Bull of the Day and Select Comfort (SCSS) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Sprint Nextel Corp. (S), Clearwire Corporation (CLWR) and Dish Network Corp. (DISH).
Lumber Liquidators (LL) has seen some excellent growth and just posted a solid quarter. The company is poised to open several new stores and it is a Zacks Rank #1 (Strong Buy), it is the Bull of the Day.
When I look at a stock, I want to see growing earnings and growing revenues. When I see growing revenues I want to see quality growth and I will see that in an increasing number of stores opening. Of those new stores, I want to see higher productivity than the existing stores as management applies lessons learned. This will also serve to expand margins.
These things don't always happen, but they are happening for Lumber Liquidators. Store growth has been consistent, albeit slowing from a 20%+ pace in 2011 to a roughly 10% annual rate in 2012. More importantly there has been the idea of increased productivity from the new stores. Sales per square foot productivity based on a calculation of the difference between sales growth and comps divided by growth in square footage shows significant and steady increases in productivity.
Gross margins have grown in each quarter over the last seven quarters. That growth in margins has also led to the EBITDA line which has seen steady expansion as well. What that will lead to is significantly higher earnings per share.
Select Comfort (SCSS) is giving investors nightmares as it dreams up two negative earnings surprises. The stock is a Zacks Rank #5 (Strong Sell) and is the Bear of the Day.
The two most recent earnings report saw the company post negative earnings surprises. The December 2012 quarters saw a big $0.10 miss which translates into a 31% negative earnings surprise. The next quarter saw a miss of $0.02 or 4.55%.
Following the earnings releases, the stock felt like someone wet the bed. A 14.8% decline followed the December 2012 report that occurred on 1/24. The stock was off less than a full percent following the March 2013 report, so just an uncomfortable night’s sleep and not quite the night terror the stock saw last quarter.
Select Comfort makes and sells adjustable-firmness mattresses and other sleep-related products in the United States and Canada. The company offers its products under the Sleep Number brand name. As of December 29, 2012, it operated 410 stores. The company was founded in 1987 and is headquartered in Minneapolis, Minnesota.
Only two other stocks have been a Zacks Rank #5 (Strong Sell) for a longer period of time. Since January 29, the stock has seen a deterioration of earnings estimates.
Estimates for 2013 were calling for $1.89 in December 2012, but slipped to $1.73 in January 2013. They fell again in March to $1.58 and are currently at $1.36.
Sprint Nextel Corp. (S) is reportedly financing Clearwire Corporation (CLWR) under its buyout deal. Sprint will provide another $80 million to Cleawire in May, leaving lesser scope for Dish Network Corp.’s (DISH) takeover plan to be fulfilled despite its being a lucrative offer.
In Dec 2012, Sprint inked an agreement to acquire the remaining 50% stake in Clearwire Corporation for $2.97 per share, amounting to a total of approximately $2.2 billion. In addition, the company also offered Clearwire a financing arrangement of $800 million that can be drawn in installments.
In January and February, Clearwire declined to receive any sum under the financing arrangement as the company was planning to consider Dish Network Corp.’s (DISH) buyout proposal of $2.28 billion. However, Clearwire moved ahead with Sprint’s deal and sort financing in March and April. After the company drew funds from Sprint in April, news surfaced that Dish is planning a possible withdrawal of its acquisition proposal if Clearwire takes additional funding from Sprint, as this would give Sprint the opportunity to increase its holding with every financing installment. However, nothing has been apparently confirmed by Dish regarding its withdrawal of the proposal.
Going forward, in the middle of this month, Dish came up with another plan of buying Sprint. Dish’s offer of $25.5 billion to acquire Sprint has apparently outbid Softbank offer to acquire 70% of Sprint’s stake for a total consideration of $20.1 billion. Going by recent reports, Sprint is currently reviewing Dish’s offer and has received an approval to seek more details on it from Softbank.
The buyout has created interest, with speculations mounting on which company will finally be able to cut the deal. While Sprint has increased its chances by financing Cleawire, Dish’s counter offer to buyout Sprint for $7 per share (inclusive of $4.76 in cash and 0.05953 shares in Dish for each Sprint share) is a challenge for Softbank.
However, Softbank seems fully geared for this challenge. The company has already hedged the falling yen against the U.S. dollar SoftBank hedged its Japanese currency at $1 = 82.2 yen. Moreover, Japanese banks are ready to lend at the lowest possible rate, thereby helping SoftBank to raise more debt for buying out Sprint Nextel.
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
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