ARGUS MODERATORS Jim Kelleher, CFA Director of Research

Transcription

1 THE MONTHLY RESEARCH CONFERENCE CALL RETAIL: OUTLOOK FOR THE HOLIDAY SEASON ARGUS MODERATORS Jim Kelleher, CFA Director of Research John M. Eade Argus President Chris Graja, CFA Senior Consumer Discretionary Analyst Wednesday, October 4, :00 a.m. ET 61 Broadway NYC, N.Y Telephone: (212)

2 WHAT'S NEW AT ARGUS OCTOBER 2017 Argus Podcast Argus Podcast: our latest thoughts on earnings, GDP, the market, etc. Recent John Eade podcasts: sector views, rates, the Fed Analysts also participate in the Podcast series In the News & Media section, on the Argus home page Argus Weekly Stock List Relatively new feature flying under the radar Each week, John Eade presents an investment theme in Quick Notes This week: Promising Pipelines among biotech & pharma stocks Past themes: Millennial Stocks, M&A Candidates, etc. On the website, look under Equity Research Then Choose Quick Notes, to start your week with a theme Closing in on 450 stocks in Analyst Coverage New additions to technology coverage: Intuit: small business & consumer finance Lam Research: leading semiconductor capital equipment company Brighthouse Financial: annuity/financial spinoff from MetLife Anheuser-Busch InBev: the Budweiser maker is back DowDuPont: chemicals giant will split into 3 companies Look for more coverage additions going forward - 2 -

3 MACRO FORECASTS REAL GDP W/FORECASTS (%) TREASURY YIELD CURVE (%) 8 Source: Bureau of Economic Analysis, Argus Research Corp '00 '01 '02 '03 '04 ' Year-Ago Current 6-Month Forecast 3-Mo bill 2-Yr Note 5-Yr Note 10-Yr Bond 30-Yr Bond S&P 500 QUARTERLY EARNINGS GROWTH MARKET SECTOR DISTRIBUTION - PERCENT OF S&P % 80% 60% 40% 20% 0% -20% -40% '00 '01 '02 '03 '04 '05 06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 17E Sectors in Green are Recommended Overweight; Blue are Marketweight; Red are Underweight Telecom Basic Materials Utilities Consumer Discretionary Industrial Consumer Staples Energy Healthcare Real Estate Financial Services Technology 0% 5% 10% 15% 20% 25% - 3 -

4 MARKET PERFORMANCE DATA AS SEPTEMBER 29, 2017 MAJOR INDEX SECTOR Nasdaq Composite Growth Stocks (Wilshire Large Growth) DJIA S&P 500 Russell 2000 Value Stocks (Wilshire Large Value) Lehman US Aggregate Bond Index 0% 5% 10% 15% 20% 25% Real Estate NM Technology Health Care Materials Industrials Financials Consumer Discretionary Utilities Consumer Staples Telecom Energy -20% -10% 0% 10% 20% 30% GLOBAL EQUITY MARKETS China Brazil DJ World Index India US Euro Zone Mexico Japan UK Canada Russia -10% 0% 10% 20% 30% 40% 50% - 4 -

5 HOLIDAY SEASON 2017 What s going on with Retail Stocks? Performance Sector dynamics How is the U.S. consumer? Income Balance sheet What have we learned? Holiday season 2016 Back to school 2017 What does Argus expect? 4% increase in Holiday Sales Almost 20% increase in e-commerce sales - 5 -

6 RETAIL RECOMMENDATIONS Home Depot (HD) $180 target price Lowe s (LOW) $95 target price Costco (COST) $188 target price Kroger (KR) $28 target price Williams-Sonoma (WSM) $60 target price - 6 -

7 AMAZON HOLIDAY SEASON 2017 Holiday season crucial to topline & bottom line Holiday season crucial to topline & bottom line 34% of total sales in 4Q17 (33% average ) Bottom line = AWS, but 4Q retail aids op margin Amazon strategy: electronics, gifts and now holiday yams Prime & Whole Foods: good alignment, make it better Prime: whatever it takes to win every online $ ecommerce, media, Alexa, RTE foods next: AWS consumer services? Amazon thumbs nose at Wall Street, Wall Street loves it Don t chase profits, delight the customer Focus less on profits, more on new markets conquered Amazon: a core holding in most portfolios $200 billion company growing revenue like a start-up. As AWS grows, relative margin contribution will drive EPS growth Target price: $1,

8 AIR FREIGHT INDUSTRY FedEx (FDX: BUY) $60.7B Market Cap $61B Revenue Revenue Growth: MSD Operating Margin: HSD Valuation: < UPS Yield: 0.9% UPS Inc. (UPS: BUY) $104.6B Market Cap $63B Revenue Revenue Growth: MSD Operating Margin: HSD Valuation: > FDX Yield: 2.8% Holiday quarter important for top-line, but costs high as well FedEx working through Ukraine cyberattack in late spring; lowered guidance UPS conservative guidance could lead to EPS surprise Porter s Five Forces: rival threat, buyer threat, new entrant threat - 8 -

9 DISCLAIMER The Argus trademark, service mark and logo are the intellectual property of The Argus Research Group, Inc. Investing in any security or investment strategy discussed in this presentation may not be suitable for you and it is recommended that you consult an independent investment advisor. Investments involve risk and an investor may incur either profits or losses. Past performance should not be taken as an indication or guarantee of future performance. Argus officers, employees, agents and/or affiliates may have positions in funds or stocks discussed in this presentation. The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but Argus makes no representation as to their timeliness, accuracy or completeness or for their fitness for any particular purpose. Argus shall accept no liability for any loss arising from the use of this presentation or the materials contained in this presentation