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Ulta Beauty, Schlumberger, HFF, Gibraltar Industries and UPM-Kymmene highlighted as Zacks Bull and Bear of the Day

For Immediate Release

Chicago, IL – May 03, 2016 – Zacks Equity Research highlights Ulta Beauty ( ULTA) as the Bull of the Day and Schlumberger Limited (SLB) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on HFF Inc. (HF),Gibraltar Industries (ROCK) and UPM-Kymmene (UPMKY).

Here is a synopsis of all five stocks:

Bull of the Day:

Ulta Beauty (ULTA) is cashing in on the extra cash in consumers’ pockets. This Zacks Rank #1 (Strong Buy) is hitting new highs as earnings are expected to jump by the double digits.

Ulta Beauty operates 874 retail stores across 48 states and also sells beauty products through its website.

Some of the stores also operate a full-service hair salon, offering hair, skin and brow services.

It sells over 20,000 products from 500 beauty brands, including both men's and women's products.

Ulta Continues to Add Top Products

While Ulta is known for selling drugstore brand products, such as Maybelline and Cover Girl, it has been expanding into more up market brands such as Lancome and Urban Decay.

On Apr 11, it announced it would be carrying Drybar products.

Drybar operates its own hair salons but also sells 37 hair styling products and tools, including its popular Buttercup Blow Dryer, Detox Dry Shampoo and the recently released Triple Sec 3-in-1.

9 Earnings Beats in a Row

Ulta has been on a roll as other retailers have stumbled. It has put together 9 quarters of earnings beats in a row, which is impressive.

The fourth quarter of 2015 was another exceptional quarter as the company was hitting on all cylinders.

Net sales rose 21.1% to $1.3 billion from $1.05 billion in the fourth quarter of fiscal 2014.

Comparable store sales have been crushing it, rising 12.5% year over year, driven by 8.6% growth in transactions and 3.9% in growth in average ticket.

It saw growth in all areas.

Retail comparable sales rose 10.4%, including salon comparable sales growth of 9.2%. Salon sales have been one of their key drivers of growth, as those sales rose 16.7% to $54.6 million year over year.

E-commerce continues to see gains thanks to a site redesign a few quarters back. E-commerce was up 44.2% to $94.8 million from $65.7 million in the fourth quarter of 2014. E-commerce is now 210 basis points of the total comparable store sales results.

Even gross profit rose to 34.6% from 33.4%.

Bear of the Day :

Schlumberger Limited (SLB) doesn't see the light at the end of the tunnel yet as energy production continues to plummet worldwide. This Zacks Rank #5 (Strong Sell) is expected to see another big earnings decline in 2016.

Schlumberger is one of the largest service providers to the oil and gas industry worldwide, providing project management in over 85 countries.

Big Production Decline in Q1

On Apr 21, Schlumberger reported its first quarter results and missed the Zacks Consensus by a penny.

But the big news with the energy companies is in the outlook.

The decline in global activity and the activity disruption reached "unprecedented levels" during the first quarter as the industry operated in a "full-scale cash crisis."

E&P budgets were slashed again which impacted Schlumberger's results. Revenue fell 16% quarter over quarter to $6.5 billion.

This was the steepest quarter over quarter decline in revenue during this oil crash.

North American revenue dropped 25% as the US land rig count declined 31%. International revenue fell 13% due to a combination of customer budget cuts, and rig count declines, activity disruptions, seasonal winter slowdown and the continuing pricing pressures.

Watching Supply and Demand Metrics

The US rig count has fallen 80% from the peak of October 2014. At some point, the demand will outweigh the supply, especially as the rig count globally continues to fall.

Schlumberger still sees steady demand growth, so it's only a matter of time before supply and demand balance.

The company is still creating strong cash flow, even amidst the downturn, so it is returning it in the form of share buybacks and a dividend, which is still yielding a healthy 2.5%.

Estimates Lowered Again

With the outlook for a true rebound in drilling still several quarters into the future, the analysts have no choice but to lower earnings estimates to match the current reality.

8 estimates were cut for 2016 in the last week. It pushed the Zacks Consensus Estimate down to $1.28 from $1.64.

This is an earnings cut of 62% year over year.

You can really see how far the earnings are expected to fall when you see that just 90 days ago the analysts forecast Schlumberger to make $2.22 per share.

Analysts are also bearish on 2017 with 7 estimates being cut in the last 7 days. The 2017 Zacks Consensus Estimate now stands at $2.06, down from $2.37. It was $3.00 just 3 months ago.

Additional content:

Longs Meet Shorts to Start the Merry Month of May

This week kick-starts the merry month of May.

The ‘Sell in May’ short crowd must keep crowing that old trader’s mantra. It helps their bearish team on to victory.

In the Global Week ahead, I wouldn’t bet on macro data out on the U.S. (or abroad for that matter) to support the short view. Full share valuations on U.S. share indices help shorts -- not looming U.S. macro forecasts.

A looming bull report is the U.S. nonfarm payroll report, out on Friday.

  • The Federal government says +200K should print as April job additions.

  • ADP private data out Wednesday forecasts virtually the same at +195K.

  • U.S. unemployment claims out on Thursday appear rock bottom at 260K.


The U.S. horizon looks clear, once again.

As an economist, please help me. I don’t understand where to find the worry about the U.S. economy. This type of U.S. jobs data looks solid. +200K a month ties to modest and stable expansion in U.S. GDP growth.

Also this week, global traders get comprehensive readings on manufacturing PMIs and services PMIs. Only Brazil looks to remain a threat to longs.

Europe composite PMIs forecast ongoing manufacturing expansion and services expansion. Greece is the sole country exempted from Europe’s expansion, and it is old news.

China manufacturing PMIs -- both official and the private Caixin -- comes out on Tuesday. China got an advance PMI reading out last weekend. This showed a stable print, albeit barely in expansion.

Tepid expansion says China’s manufacturing circumstance is not strong enough to raise market’s consensus, but not weak enough to scare investors, either.

It’s a wait-and-see game with China.

Mexico and U.S. PMIs should move little. Each shows stable expansion. Brazil looks terrible again. A looming 39 print on Brazilian services looks appalling. 50 marks the line into expansion.

It is well past time: shift leaders and policies, Brazil! Just do it in an orderly fashion.

We got bullish additions to the Zacks VGM (Value-Growth-Momentum) ‘A’ ranks with Zacks #1 (Strong Buy) ratings over the weekend.

Two stocks showed up from inside the U.S. commercial real estate business. One is a commercial real estate service provider. The other is a metal building manufacturer. Fresh high marks speak to the turn up in commercial real estate market in the USA generally.

(1) HFF Inc. (HF) went to a Zacks VGM of A. This is a $1.2 billion market cap real estate operations company. The stock also holds a Zacks #1 Rank (Strong Buy) rating.

HFF Inc. operates out of eighteen offices nationwide and is a leading provider of commercial real estate and capital market services to the U.S. commercial real estate industry.

(2) Gibraltar Industries (ROCK) went to a Zacks VGM of A. This is an $800 million market cap building and construction maintenance company. The stock also holds a Zacks #1 Rank (Strong Buy) rating.

Gibraltar Industries, Inc. is a leading manufacturer, processor and distributor of metals and other engineered materials for the building products, vehicular and other industrial markets.

Over in Europe, a large-cap stock name I have seen periodically on Zacks top stock lists re-appeared again.

(3) UPM-Kymmene (UPMKY) is a $10.3 billion market cap ADR stock in the paper and related products industry. The Zacks Industry Rank for Paper is high at 56 out of 265 (top 21%). The stock also holds a Zacks #1 Rank (Strong Buy) rating.

UPM-Kymmene Corporation is a global paper and forest products company. The Company is engaged in the production of paper, with an emphasis on the manufacture and sale of printing and writing papers.

One major driver of the manufacturing upturn in Europe is straightforward. Producer price indexes there are falling -4.6% y/y. European PPI data showing this better cost competiveness is out on Tuesday.

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About the Bull and Bear of the Day

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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ULTA SALON COSM (ULTA): Free Stock Analysis Report
 
SCHLUMBERGER LT (SLB): Free Stock Analysis Report
 
HFF INC-A (HF): Free Stock Analysis Report
 
GIBRALTAR INDUS (ROCK): Free Stock Analysis Report
 
UPM-KYMMENE ADR (UPMKY): Free Stock Analysis Report
 
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