Foot Locker (FL)
Foot Locker has been making new 52 week highs and has run over 15% since I last wrote about it as a momentum Rank Buy on January 30th. More importantly, in the past couple weeks the company solidified their fundamental story, increased their quarterly dividend and approved a 400 million dollar share buyback program.
Even with all this positive news, does this stock still have upside from these price levels?
Recent Developments
Foot Locker remains a Zacks Rank 1 momentum stock after it reported strong earnings on March 1st. The athletic retailer earned net income of $81 million or $0.53 per share (GAAP), which represented an increase of 47% over the $0.36 per share in the same quarter in 2010. This was also the eighth consecutive quarter of sales and profit increases over the comparable prior year period for Foot Locker.
Non-GAAP earnings were $0.55 per share for the quarter and $1.82 per share for the full year (2011) which was a record for the athletic company.
Year over year comp sales were up 7.5% in Q42011; this was after a 7.3% increase in Q42010. For the entire year, sales were up 11.4% and got a boost from just about all divisions of the company. They also continued to see improvements in gross margin for the 4th quarter of 110 basis points, but this step up was slower compared to the prior three quarters. This seems to be the theme as many companies are reaching peak efficiency.
The Board of Directors declared a quarterly cash dividend of $0.18 per share, payable on April 27, 2012. This dividend represents a 9% increase over the previous quarterly dividend amount and equals and annualized rate of $0.72 per share or 2.4% yield on Thursday’s closing price. In addition, the Board of Directors also approved a new three year, $400 million share repurchase program which replaces the company’s previous $250 million program.
Moving Forward
Foot Locker’s strong results set the foundation for the company’s next move higher. They are expanding several lines of athletic footwear and apparel to help stimulate growth. Online presence and expansion were a focal point in their most recent earnings call; the CEO noted that “total Direct-to-Customers segment posted sales that were about 11% of total sales in the fourth quarter, a new high. We had over 64 million visitors to our websites in the quarter, and we have millions of fans on our Facebook and Twitter sites.”
In 2012, the company expects comp gains in the mid single digit range and expects all divisions to be comp positive for the year.
There was concern expressed about Foot Locker Europe which has had a tough time getting off the ground in Q4. The company blamed harsh weather, but investors will want to see that division improve dramatically in the current quarter if weather was really the cause.
They also plan to open 82 new stores and close 75 stores in 2012, which would be the first time in many years that FL opened more stores than were closed.
According to the company’s forward statements, they feel confident that 2012 will be a strong year and it seems that analysts agree, being that just about all of them have hiked their estimates for next quarter’s results as well as full year 2013 and 2014.
The current Zacks Consensus Estimate is for FL to earn $0.72 in the quarter. Analysts are also looking for 23% growth in this year and 9% growth in the following year from FL.
At a forward P/E of about 13.5, the company is still fairly valued here and may attract some bulls after all…
This Week’s Momentum Zacks Rank Buy Stocks:
Valspar (VAL)
Where there is smoke there’s fire, or in this case, where there is home improvement growth (and more), there is paint.
Home Depot and Lowes both reported strong earnings this past season, which is good news for Valspar as home improvement continues to strengthen. Housing prices are bottoming, but more importantly, transactions are increasing and many of the properties being sold are distressed or multi-family developments. Both of which will most likely require a common element for the new owner(s); paint!
Even though Valspar provides Lowes with a huge array of premium coatings to sell to customers, Lowes is not the only way Valspar is making money.
Valspar’s diverse selection of coatings of all types for many industries may make it a second derivative play for the global economic recovery that is underway. READ FULL STORY
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Zumiez (ZUMZ)
While most of you reading this probably haven’t bought a Zumiez product, that doesn’t mean tons of kids, teens and young adults (especially hipsters, skaters, BMX’ers, etc) aren’t buying en mass.
In fact Zumiez reported record earnings on March 8th and saw sales increase almost 18% in the fourth quarter that ended on January 28th. Yesterday’s strong retail sales data also added credence and perhaps stability to the Zumiez numbers and future outlook.
Can this niche retailer keep their sales growth and stock momentum going into 2012? READ FULL STORY
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Dollar Thrifty Automotive Group, Inc. (DTG)
It was less than two months ago when DTG hit the Momentum list as Rank Buy. At the time, the stock was trading at $71 a share. Shares have since rallied 13% to a new 52 week high of over $80 and continue to build on the tremendous momentum we have seen since October 2011.
Prior to its most recent report, DTG showed strong Q3 results and beat estimates across the board. They saw improving rent rates and increasing demand. DTG was looking strong going into their Q4 report on February 21st and they delivered. READ FULL STORY
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IntercontinentalExchange (ICE)
Just about everything in our lives that we use, drive, fly, eat and essentially need to survive comes in part or in whole from a commodity. Commodities are generally traded using futures contracts that help professionals, farmers and big companies lock in prices for different assets. Commodities include everything from oil and gas, to gold and silver down to coffee and the sugar you put in it. Even the dollars that you spend are a commodity of sorts.
Our consumption of commodities and perhaps more importantly, the trading and risk management of those commodities are an essential and growing part of global business.
Advances in global economic integration as well as financial reform measures such as Dodd-Frank and others are moving market participants to trade their financial instruments on centralized, monitored exchanges so we can help avert another financial meltdown like we had in 2008.
For Intercontinental Exchange, it has the capability and could stand to benefit further from an increase in exchange traded products including derivatives, futures and other financial instruments. The question really is how much and how quickly. READ FULL STORY
Jared A Levy is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Whisper Trader Service.