Williams-Sonoma, Inc. (WSM) | Daily Alert September 2
Our first pick is a home goods retailer whose online sales during this pandemic, have increased 46%. The company’s current annual dividend yield is 2.19%, paid quarterly. Our second recommendation is a sale of an aerospace/defense company whose shares are not moving.
Home-goods retailer Williams-Sonoma appears well-positioned to weather the coronavirus-driven recession, especially as Americans spend more time in their homes. In the April quarter, the retailer’s online business partially overcome widespread store closures, as per-share profits slipped 9% on flat sales. For the July quarter, rising analyst estimates target flat per-share profits on 3% sales growth.
The shares trade at 20 times estimated current-year earnings, a 7% discount to the median S&P 1500 Index specialty retailer. The stock is being initiated as a Buy and a Long-Term Buy.
Richard Moroney, CFA, Dow Theory Forecasts, dowtheory.com, 800-233-5922, August 10, 2020
Griffon Corporation (GFF) | Daily Alert September 14
Griffon Corporation is built around three attractive and growing businesses. The consumer products business (46% of trailing 12-month revenue), which traces its roots back to 1774, sells
storage and landscaping products. The home products division (39%) is the largest U.S. maker of residential and commercial garage doors. The defense electronic unit (15%) is a leading provider of surveillance and communications gear used in military and aerospace applications.
Griffon’s strong operating momentum reflects robust demand for home-improvement products spurred by the pandemic. A favorable product mix, improved profit margins, and acquisitions have boosted earnings and cash flow growth.
For fiscal 2020 ending September, the three-analyst consensus calls for per-share earnings of $1.54, up 43%. For fiscal 2021, per-share profits are expected to advance 3%—a conservative target based on recent operating momentum. Over the next five years, the consensus calls for per-share profits to grow 20% annually. While that figure seems optimistic, the company appears
capable of delivering 7% to 12% annual profit growth.
The stock trades at less than 14 times expected 2021 per-share earnings. Griffon, which earns an 83 for Quadrix® Value and 99 in Overall, is being initiated as a Buy.
Richard J. Moroney, CFA, Upside, upsidestocks.com, 800-233-5922, September 7, 2020
*Paychex, Inc. (PAYX)
Paychex is a leading provider of payroll processing, human resources, and benefits services to small business around the country and around Europe.
Roughly 99% of Paychex’s clients are businesses composed of 100-or-fewer employees. The average client size of the business is approximately 16 employees.
Paychex’s business is divided into two primary segments—payroll services (55% of revenue) and human resources services (45%). Paychex also partners with an array of insurance carriers to provide property and casualty coverage, workers’ compensation and business-owner policies.
Paychex reported fiscal-year 2020 (ended in May) revenue of $4.04 billion. Annual revenue has doubled over the past 10 years. It has grown at an average 7% annual rate. Earnings per share (EPS) posted at $3.04 in fiscal-year 2020. That’s double the EPS of a decade ago. Paychex’s competitors are few and far between, as barriers to entry are high.
I have a $90 price target for the next 12 months. That’s a 17% upshot from the market price today. The return potential is further enhanced by a generous dividend. I am expecting at least a 20% total return over the next 12 months.
Buy Paychex shares up to $80.
Ian Wyatt and Stephen Mauzy, Personal Wealth Advisor, www.wyattresearch.com, September 2, 2020
*Conagra Brands, Inc. (CAG)
Conagra Brands Inc. is a buy. (TSINetwork Rating: Above Average) makes a variety of popular foods, including Chef Boyardee canned pasta, Hunt’s tomato sauce, Peter Pan peanut butter, Orville Redenbacher popcorn and Reddi-wip whipped cream.
Due to strong demand for packaged foods during the COVID-19 lockdowns, Conagra’s sales in its fiscal 2020 fourth quarter, ended May 31, 2020, jumped 25.8%, to $3.29 billion from a year earlier. If you exclude the businesses that Conagra recently sold, foreign exchange rates and the impact of an extra week, sales gained 21.5%.
Excluding unusual items, overall earnings in the quarter soared 110.5%, to $367.6 million from $174.6 million.
The $0.85 a share dividend still looks safe. Conagra is a buy.
Patrick McKeough, Wall Street Forecaster, tsinetwork.ca, 888-292-0296, September, 2020