3 Model Zacks Buys

If you have a goal in life, it’s never a bad idea to find a model of success to emulate. Someone who already achieved the results you want.

But what if your goal is a more profitable portfolio? We’ve got an idea for you.

Check out the Model Zacks Strong Buys & Buy screen. You’ll find Zacks Rank #1s (Strong Buys) and Zacks Rank #2s (Buys) that are in the Top 50% of the Zacks Industry Rank and have strong Zacks Style Scores.

That would be a great place to start on your path toward greater profitability.

Target (TGT)

Who says that brick-and-mortar retail is dead?

Well, actually lots of experts and investors have been saying that for years. They were probably tipped off by all the bankruptcies and ‘going-out-of-business’ signs. But Target (TGT) proves that they are all wrong(ish)!

This discount giant is one of the old school retailers that’s managing to prosper in the age of Amazon.

As with any more traditional name thriving in this new “ecosystem”, Target is finding ways to adapt. Some of the initiatives include bulking up its online presence, enhancing its omni-channel capacities and expanding its same-day delivery options.

In other words, it’s trying to be more like Amazon.

And when they get you into one of their locations, the company is also remodeling stores and establishing new brands.

These moves are certainly working! TGT shares are up nearly 70% year-to-date, which easily surpasses the approximately 40% advance for its retail – discount stores space (Top 16% in the Zacks Industry Rank).

In its fiscal second quarter from August 21, TGT reported earnings per share of $1.82 that beat the Zacks Consensus Estimate by more than 13%. It also improved nearly 24% from last year’s $1.47.

Revenue of $18.42 billion snuck by our expectations and improved 3.6% from last year. Same-store sales were up 3.4%. The company enjoyed healthy traffic and improved digital sales.

Perhaps most importantly, TGT now expects fiscal 2019 earnings between $5.90 and $6.20. It was previously expecting $5.75 to $6.05.

Earnings estimates have improved since the report. The Zacks Consensus Estimate for this year, ending January 2020, has gained 3.5% over the past 30 days to $6.13.

Analysts expect earnings of $6.47 for next fiscal year, ending January 2021. That’s up 2.4% from a month ago and suggests year-over-year improvement of 5.5%.  

D.R. Horton (DHI)

There’s no place like D.R. Horton (DHI) in the homebuilding space, as a strong spring selling season lifted this stock to a Zacks Rank #2 (Buy).

The whole building products – home builders space has improved since late last year when the sharp downturn wreaked havoc. But today the space is in the top 13% of the Zacks Industry Rank with a year-to-date gain of more than 38%.  

DHI has outperformed its industry with a gain of approximately 44% so far in 2019.

In its fiscal third quarter, earnings per share of $1.26 beat the Zacks Consensus Estimate by nearly 19% and improved 7% from last year.

Revenue of $4.91 billion topped our expectations by more than 8% and jumped 10.6% from last year.

Homebuilding revenues increased 10% and home sales advanced 11%.

DHI benefits from its industry-leading market share, broad geographic footprint and affordable product offerings across multiple brands.

For the full year, the company expects revenues between $17.3 billion and $17.45 billion. We believe its well-positioned to reach its goals given the impressive sales backlog and well-stocked supply of land, lots and homes.

The Zacks Consensus Estimate for this fiscal year (ending this month) is $4.18 per share, which means it’s up 7.2% over the past two months.

Analysts expect earnings for next fiscal year (ending September 2020) to advance nearly 10% sequentially to $4.58. This consensus has improved 5.8% in the past 60 days.  

Williams-Sonoma (WSM)

You know consumers are feeling pretty good when some of them are willing to spend $500 to $1000 or more on a cookware set… and that’s a sale price!

Such an environment smells pretty good to Williams-Sonoma (WSM), the specialty retailer of high-quality home products that has jumped approximately 35% so far in 2019.

Not only has the stock outperformed the market in that time, but it’s also beaten the approximately 32% return for its highly-ranked space. Retail – home furnishings is in the Top 40% of the Zacks Industry Rank.

WSM is a company that knows how to beat quarterly expectations. Last month, the stock reported its seventh straight quarter with a positive surprise. Fiscal second-quarter earnings of 87 cents beat the Zacks Consensus Estimate by nearly 5%.

Over the past four quarters, it has an average surprise of just under 8%.

Revenue of $1.37 billion surpassed the consensus by almost 5% and improved 7.5% from last year’s $1.28 billion. Same-store sales were up 6.5%.

The company considers the West Elm brand is its biggest growth opportunity, which is understandable since same-store sales soared 17.5% in the quarter.

WSM now expects earnings between $4.60 and $4.80 for the fiscal year, which is up from the previous outlook of $4.55 to $4.75. Sales are now expected between $5.74 billion and $5.9 billion.  

Over the past month, earnings estimates for this fiscal year (ending in January) advanced 1.7% to $4.75 per share.

The Zacks Consensus Estimate for next fiscal year (ending January 2021) has gained about 0.6% to $4.91, which suggests year-over-year improvement of 3.3% for now.

Today’s Best Stocks from Zacks

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Williams-Sonoma, Inc. (WSM): Free Stock Analysis Report
 
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