【can i sprinkle diatomaceous earth around my house】Best & Worst Performing Stocks in Coronavirus Outbreak
Thecan i sprinkle diatomaceous earth around my house coronavirus outbreak and its subsequent impact on corporate profit margins and the global economy continue to dominate the headlines. U.S. stocks endured their worst weekly slide on Feb 28 since October 2008. In fact, all the major indexes closed in the correction territory last Thursday, and several well-known companies like Nike, United Airlines and Mastercard issued earnings and revenue warnings.
Goldman Sachs’ chief global equity strategist, Peter Oppenheimer, added that “in the nearer term…we believe the greater risk is that the impact of the coronavirus on earnings may well be underestimated in current stock prices, suggesting that the risks of a correction are high.”
But U.S. stocks did make a roaring comeback on Mar 2 after investors started to believe that central banks around the world, including the Fed, would take actions to put a check on the steep losses. Most of them are widely expecting a coordinated global effort to trim rates to stimulate the economy.
Australian central bank’s governor in the meantime acknowledged that the coronavirus outbreak does have a “significant effect” on the country’s economy and any move to ease monetary policy will certainly “provide additional support to employment and economic activity.”
However, let’s admit we can not completely write off the adverse impact of the outbreak, and the U.S. stock market will continue to gyrate in the days to come. After all, the disease continues to spread. The virus has reached countries beyond China, including the United States, Italy, Germany, Iran and South Korea.
Nonetheless, these stocks are the big winners and losers since the coronavirus outbreak stalled the U.S. bull market —
Stocks That Defied the Coronavirus Pandemic
Co-Diagnostics, Inc. CODX, Moderna, Inc. MRNA, Regeneron Pharmaceuticals, Inc. REGN and Netflix, Inc. NFLX are some of the prominent names that have soared 1889.5%, 33%, 23.8% and 17.8%, respectively, so far this year amid the coronavirus rout. Take a look —
Molecular diagnostics company Co-Diagnostics has introduced an easier-to-use molecular diagnostic test known as the Logix Smart Coronavirus COVID-19 test. And the company has received a CE mark approval from the European Union to make this test commercially available.
With the outbreak spreading rapidly, the need for molecular diagnostic tests will increase, and in turn, boost Co-Diagnostics’ revenues. The company currently has a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for its current-year earnings has moved up 66.7% over the past 60 days. What’s more, the company’s expected earnings growth rate for the next quarter is 44.4%. You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Story continues
Clinical stage biotechnology company, Moderna has manufactured a new vaccine for coronavirus treatment. Unlike DNA-based treatments, Moderna focuses on developing mRNA treatments, which should help in treating the virus better. DNA-based treatments generally require the nucleus of the cell but mRNA can be found across the cell which makes it easily accessible.
Moderna, by the way, has been pretty impressive. After getting to know the virus’ genetic composition, it took the company less than two months to develop the vaccine. Moderna currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved up 6.2% over the past 60 days. The company’s expected earnings growth rate for the current and next quarter is 7.5% and 9.8%, respectively.
Based on Ebola knowledge, Regeneron Pharmaceuticals is making a vaccine to tackle COVID-19. Regeneron’s initiative to prepare such a potent weapon helped its shares increase leaps and bounds this year especially when compared to the mere 2.5% it brought in for the last 12 months. By the way, the company is doing well in itself. Its fourth-quarter results were impressive, wherein both sales and earnings beat estimates on label expansion of Eylea and Dupixent.
Regeneron currently possesses a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has moved up 6.4% over the past 60 days. The company’s expected earnings growth rate for the current and next quarter is 35.5% and 15.1%, respectively.
Apart from biotech stocks, Netflix’s shares have gained because the company has an established business models and is fundamentally strong enough to provide hedge against any downfall. Firstly, it primarily provides streaming services, so any lockdown in response to the coronavirus outbreak won’t have any impact on its subscriber growth. In fact, Netflix added 8.8 million subscribers internationally last quarter, surpassing analysts’ expectations by more than a million.
Netflix’s subscriber growth was mostly driven by content strength, focus on originals across various genres and languages, rapid international expansion and partnerships with telcos. Meanwhile, Netflix entered this year’s Oscars with 24 nominations, and walked away with two wins. Such wins will certainly help Netflix lure and retain subscribers in the face of challenges from rival services like Disney+ and Apple TV+.
Netflix currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved 10.6% north over the past 60 days. The company’s expected earnings growth rate for the current quarter and year is a promising 119.7% and 46.7%, respectively (read more: Coronavirus Fears Holding You Back? 3 Smart Ways to Invest).
Not So Lucky Ones
With so many people affected across the globe by the spread of the contagious disease, travel-related stocks were hit hard. Cruise operators were among the worst hit. Shares of Norwegian Cruise Line Holdings Ltd. NCLH have tanked 39.1% on a year-to-date basis. After all, the company has generated 2% of its revenues from China over the last 12 months. Airline stocks were also collectively affected, and most prominently American Airlines Group Inc.’s AAL shares have slipped 34.2% so far this year.
Coming back to revenue exposure, energy giant Chevron Corporation CVX have seen its shares slide 19.8% so far this year. This is because Chevron’s revenue exposure to China is about 27%. The Boeing Company BA also took a beating. Boeing’s shares fell 11.3% on a year-to-date basis, as the manufacturer of commercial jetliner has a slightly more than 13% revenue exposure to China, according to FactSet.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
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Chevron Corporation (CVX) : Free Stock Analysis Report
Moderna, Inc. (MRNA) : Free Stock Analysis Report
Netflix, Inc. (NFLX) : Free Stock Analysis Report
American Airlines Group Inc. (AAL) : Free Stock Analysis Report
Norwegian Cruise Line Holdings Ltd. (NCLH) : Free Stock Analysis Report
Co-Diagnostics, Inc. (CODX) : Free Stock Analysis Report
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- 5%, led by a 17% increase in average ticket and a slight decline in traffic. Growth in the quarter reflected the impact of households stocking up on essentials like paper goods and cleaning supplies as the pandemic became a nationwide concern, along with strength in discretionary categories as the quarter came to a close and stimulus dollars and tax refunds were disbursed.
As shown below, the results in the quarter materially changed the trend in two-year stacked comps for each of the banners, along with a significant acceleration for consolidated comps.
The increase in consolidated comps was the primary driver of an 8% increase in revenues to $6.3 billion. The company ended the quarter with 15,370 locations, up less than 1% year-over-year. This reflects a 7% increase in Dollar Tree units, offset by a 4% decline in Family Dollar units.
The top-line results at each banner flowed through to their respective income statements, with Dollar Tree gross margins and operating margins declining year-over-year while Family Dollar gross margins and operating margins expanded year-over-year. On a consolidated basis, gross margins contracted by 120 basis points in the quarter to 28.5%, reflective of a shift to lower-margin consumables, tariff costs and the impact of markdowns from the Easter headwinds at the Dollar Tree banner. The company saw slight operating leverage on SG&A from higher comps, with the net result being an 80 basis point contraction in operating margins to 5.8%, with operating income declining 5% to $366 million. This is not adjusted for $73 million of pandemic-related costs, such as PPE supplies.
In the first quarter, the company opened 85 stores (net of closures) and completed 220 Family Dollar renovations to the H2 format. Importantly, comps at renovated Family Dollar stores continue to outpace the chain average by more than 10%. On the call, management indicated that they plan on reducing both the number of new store openings (from 550 to 500) and the number of H2 renovations (from 1,250 to 750) in 2020.
Personally, given the fact that Family Dollar is seeing material benefits to its business from the pandemic with new or lapsed customers coming into its stores, I think the company should try to get more aggressive with its renovation plans, not less. On the other hand, you could argue that renovations cause short-term disruptions and limit their ability to fully capitalize on the business momentum they are currently experiencing.
As a result of fewer new stores and remodels, management now expects 2020 capital expenditures to total $1.0 billion compared to previous guidance of $1.2 billion. In addition, the company has temporarily suspended share repurchases. At quarter's end, the company had $1.8 billion in cash on its balance sheet compared to $4.3 billion in total debt.
Conclusion
In recent years, Dollar Tree has been a tale of two cities. While its namesake banner has generally delivered impressive financial results, Family Dollar has been a persistent underperformer. This quarter, those results flipped, and given what we've seen in the weeks since quarter's end, there's a decent possibility that we will see something similar in the coming months. As the CEO noted, the second quarter is off to a very good start at Family Dollar.
Here's the important question: how useful is that information is in terms of making future predictions about the business? Will recent success at Family Dollar translate into long-term success for the banner? The optimistic take is that new or lapsed customers, especially those visiting the renovated stores, could become recurring business for the banner. The pessimistic take is that they have experienced short-term success out of necessity as people went to any store that was open to try and find essentials like toilet paper and hand sanitizer that were largely out of stock throughout the retail landscape. From that view, many of these customers could abandon the retailer when life returns to normal. As Philbin noted on the conference call, early on [during the pandemic], folks needed us. Will people still shop as much at Family Dollar when it's no longer a necessity?
Personally, I do not place too much weight on the recent results. I will need to see incremental data points that indicate that Family Dollar has truly won sustained business from these new customers. While I still believe that the Dollar Tree banner is a well-positioned retailer with attractive unit returns, I'm not yet willing to say the same thing for Family Dollar. For that reason, along with the recent run-up in the stock price, I plan on staying on the sidelines for now.
Disclosure: None
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