Michael Kors, 3D Systems, Lennar, KB Home and D.R. Horton highlighted as Zacks
Bull and Bear of the Day
CHICAGO, Aug. 23, 2013
CHICAGO, Aug. 23, 2013 /PRNewswire/ --Zacks Equity Research highlights
Michael Kors (NYSE:KORS-Free Report) as the Bull of the Day and 3D Systems
(NYSE:DDD-Free Report) as the Bear of the Day. In addition, Zacks Equity
Research provides analysis ontheLennar Corporation (NYSE:LEN-Free Report), KB
Home (NYSE:KBH-Free Report) and D.R. Horton, Inc. (NYSE:DHI-Free Report).
Here is a synopsis of all five stocks:
Bull of the Day:
Michael Kors (NYSE:KORS-Free Report) is back to a Zacks #1 Rank after another
stellar earnings report this month. While other retailers are missing their
comps, lowering guidance, and generally blaming the weather for everything,
this global brand is hitting its growth stride.
In fact, since March of 2012 after the company's first quarterly report
following their IPO in December 2011, KORS has consistently been a #1 Strong
Buy or #2 Buy and we've seen the stock rise from the mid-$40's to $70.
This earnings momentum is built on high double-digit sales growth, global
expansion in branded outlets and top high-end retailers, and a wide diversity
of apparel and accessories for men and women that command must-have fashion
sense. They also position many of their products at more affordable price
points, what the company calls "accessible luxury."
The Zacks proprietary Price & Consensus chart below shows the rapid rise in
analyst earnings estimates. While it may be tempting to think that this kind
of growth must eventually level off (think AAPL), most analysts believe that
this brand, and management's multi-channel strategy and superior execution,
have a few more good years left in them.
Bear of the Day:
3D Systems (NYSE:DDD-Free Report) is a remarkable technology company that
holds many of the first patents on an amazing technology. 3-dimensional
"printing" as it's called uses computer-aided design and manufacturing
applications to recreate objects from a software blueprint, using special
polymers to that are added in precise layers. In the industry, this technology
is referred to as "additive manufacturing."
I first discovered the company in January of 2012 when a friend told me to
watch a video of how one of the company's industrial-strength printers could
replicate a working adjustable wrench in a few hours just from scanning its
dimensions with their proprietary technology.
But then I took a look at the Zacks Rank for DDD, which dropped to a #5 Strong
Sell this month. Upon further investigation, I found that the company has hit
some bumpy patches in their growth story that caused at least two analysts to
lower earnings estimates. The analysts are concerned about acquisition costs,
sales growth execution, and R&D spending.
Net income for the reported quarter was $9.3 million or 10 cents per share,
compared with $8.3 million or 11 cents per share in the year-earlier quarter.
Although the absolute earnings increased year over year, it declined on a per
share basis due to higher number of shares outstanding for the reported
July Existing Home Sales Up
With the recent improvement in economic conditions and the housing market in
general, mortgage/interest rates are edging upwards to more normalized levels
since May 2013. According to the Freddie Mac mortgage survey, the 30-year
fixed mortgage rate has risen from 3.59% on May 23 to 4.40% as of Aug 15. In
fact, mortgage interest rates are at the highest level in two years.
This has raised concerns among some analysts. High interest rates dilute the
demand for new homes, as mortgage loans become expensive. This lowers a
buyer's purchasing power. Moreover, if the Federal Reserve scales back its
current $85 billion bond buyback program and instead adopts a tighter monetary
policy, as planned, interest rates could shoot up further. This in turn would
lower revenues and profits of for homebuilders.
However, another group of analysts believe that interest rates are still below
historical levels despite the recent hike and housing is still very much
affordable. Home prices have also started rising with market demand gaining
momentum but supply remaining limited (both of existing and new homes).
In fact, this group of analysts believes that rising home prices and thinning
home inventories have created a sense of urgency among homebuyers to buy a
house before prices or mortgage rates shoot up further.
Rising interest rates notwithstanding, some companies like Lennar Corporation
(NYSE:LEN-Free Report) and KB Home (NYSE:KBH-Free Report) have witnessed
increasing demand in all their housing markets in the past quarter and were
able to push pricing further.
However, others showed some concern. D.R. Horton, Inc. (NYSE:DHI-Free Report)
noted at its fiscal third-quarter conference call that the spike in interest
rates have slowed orders.
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