B&G Foods, Boot Barn, Royal Dutch Shell, TOTAL and BP highlighted as Zacks Bull and Bear of the Day

For Immediate Release

Chicago, IL – May 26, 2020 – Zacks Equity Research Shares of B&G Foods, Inc. BGS as the Bull of the Day, Boot Barn Holdings, Inc. BOOT asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Royal Dutch Shell RDS.A, TOTAL TOT and BP plc BP.

Here is a synopsis of all five stocks:

Bull of the Day:

Bull:

B&G Foods, Inc. is in the right industry at the right time in 2020 as Americans stock up on frozen foods during the coronavirus crisis. This Zacks Rank #1 (Strong Buy) is expected to grow earnings by 21% this year.

B&G Foods makes and sells branded shelf-stable and frozen foods in the United States, Canada and Puerto Rico. It has more than 50 popular brands in its portfolio including Back to Nature, Cream of Wheat, Dash, Green Giant, Las Palmas, Mama Mary's, Ortega, Spice Islands and Victoria.

Green Giant is Hot Again

On May 5, B&G Foods reported first quarter results and beat the Zacks Consensus by $0.03. Earnings were $0.46 versus the consensus of $0.43.

It was the fourth quarter in a row the company met or beat the Zacks Consensus Estimate.

Net sales rose 8.9% to $449.4 million as base business net sales increased 4.3% to $430.5 million.

Net sales of Green Giant, including Le Sueur, rose 16.3% in the quarter year-over-year. Cream of Wheat sales rose 8.7%, Ortega was up 4.1% and Maple Grove Farms rose 3%.

I don't know about you, but I bought frozen Green Giant vegetables in March during the coronavirus panic buying. Apparently, I was not alone.

The company said that increases in sales to supermarkets, mass merchants, warehouse clubs, wholesalers and e-commerce customers more than offset the declines at food service customers in the quarter.

In 2019, food service customers were just 13% of the company's overall sales.

But What Happens Now?

B&G Foods saw the higher sales trend continue in April, with net sales in April 2020 increasing more than $70 million, or more than 60%, compared to net sales in April 2019.

But most states still had lock downs on in April.

Will the US consumer continue to buy Green Giant and other "eat at home" foods and products in May and June?

No 2020 Guidance But Analysts Still Raised Estimates

Even though the trends have been good, B&G Foods did not provide any guidance for the remainder of 2020. There are too many unknowns about the impacts of COVID-19 on business.

Each state is reopening at different times, which means different demands for food. Additionally, what will a second, or even third, wave do for demand?

The company is taking all safety precautions with its own manufacturing and has been paying employees $2.00 an hour extra pay starting in March through at least May 22.

But there is no guarantee there won't be production shutdowns in its own business going forward.

Still, analysts are bullish and have been raising 2020 earnings estimates.

The Zacks Consensus for 2020 has jumped to $1.99 from $1.67 in the last 30 days.

That's earnings growth of 21.3% as the company only made $1.64 last year.

Cash Flow is Solid

Even though the company had an outstanding first quarter, it still tapped its revolver and drew down $100 million in mid-March. It has a $700 million revolving credit facility.

At the end of the first quarter it had cash and cash equivalents of $127.1 million.

It's Paying It's Big Dividend

On May 13, B&G Foods announced the payment of its quarterly dividend of $0.475 per share.

It's payable to shareholders of record as of June 30, on July 30, 2020.

This is its 63rd consecutive quarterly dividend.

With the shares still down 24% year-to-date, it's currently yielding an incredible 8.6%.

Other food company competitors, such as Campbell Soup, paid a dividend earlier this year as well, but Campbell's currently yields only 3%.

Shares Soar Off the Lows, But Are They Still a Deal?

B&G Foods shares have been on a steady 5-year decline until shoppers ran into a panic to their supermarkets to buy food in mid-March during the coronavirus shutdowns.

Shares were up 30% in the last month but have fallen from their highs, making the stock more attractive.

They now trade with a forward P/E of just 11.1.

For investors looking for a company that is benefiting from the coronavirus crisis, B&G Foods is one to put on your short list.

Bear of the Day:

Boot Barn Holdings, Inc. managed to keep most of its stores open as an essential business during the coronavirus shutdowns. But this Zacks Rank #5 (Strong Sell) is still facing difficult economic conditions as the consumer focuses only on essential goods.

Boot Barn is a specialty retailer of western and work-related footwear, apparel and accessories for men, women and children. It operates 260 stores in 35 states, with Texas being its largest market. It also operates several e-commerce sites including www.bootbarn.com, www.sheplers.com and www.countryoutfitter.com.

A Miss in Fiscal 2020 Fourth Quarter

On May 20, Boot Barn reported its fiscal 2020 fourth quarter and full year results and missed on the Zacks Consensus in the quarter by $0.12. Earnings were just $0.18 versus the consensus of $0.30.

Net sales fell 2.1% to $188.6 million in the quarter while same-store-sales fell 4.7%, with retail stores falling 7.1% but e-commerce rising 7.5%.

The quarter was on track for another positive comparable until COVID-19 hit in March.

In the third week of fiscal March, same-store-sales turned negative, declining 8%. They were down more than 50% in the final two weeks of the quarter as various state shutdown.

However, unlike some other specialty retailers which were among those ordered to close when the states started shutting down businesses, Boot Barn was considered an "essential business" in many states due to the workwear apparel and shoes that it sells, including scrubs for the medical profession, and could keep its stores open.

The vast majority of its stores have remained open but are operating at reduced hours and have seen a big decline in traffic.

Was March the Worst of the Coronavirus Impacts?

It has seen a steady increase in sales every week since the end of March, mostly in online sales, however.

For the 7 weeks of April and May to start the fiscal first quarter, retail store same-store-sales were down 49% while e-commerce same-store-sales were up 60%, for a same-store-sales comp of down 30%.

But in April, same-store-sales were down 45% while the first three weeks of May were down just 14%.

Men's work boots and clothing were performing the best, with fashion styles lagging. Women's apparel and, to some extent, women's boots, were also slow.

No Guidance for Fiscal 2021

Like most companies, due to the uncertainty with COVID-19, the company did not provide any fiscal first quarter or full year 2021 guidance.

It also cautioned on its conference call that while its retail stores have remained open during the state shutdowns, many of its competitors, such as those in malls, have not.

It's unclear whether the turnaround in sales in the first 7 weeks of the fiscal first quarter will hold as competitors reopen.

Additionally, it will see impacts from the cancellation and/or postponement of important yearly events like Stagecoach music festival and the Houston Rodeo.

Boot Barn also has extensive business in the energy industry, especially for fire retardant clothing and boots. The energy industry is, obviously, struggling as oil has plunged and rigs have been shut.

Full Year Estimates Cut

The analysts have mostly already cut Boot Barn's fiscal 2021 and fiscal 2022 earnings estimates, even ahead of the earnings report.

In fact, at least one analyst cut too far, as one estimate was raised for this year in the week after the earnings report.

The fiscal 2021 Zacks Consensus Estimate is now at $1.26, up from $1.22 just a week ago, but down from $2.14 three months ago, before COVID-19 struck.

That's an earnings decline of 19.2% as the company made $1.56 last year.

Shares Plunge in 2020

Boot Barn had been one of the hottest retailers on the Street in 2019 as same-store-sales popped.

But they've plunged 53% year-to-date, although they are off their worst lows of the year.

Are they a deal?

Boot Barn now trades with a forward P/E of 17, as those earnings estimates have fallen in conjunction with the share price. It's not expensive, but nor is it dirt cheap.

Boot Barn joins the list of other retailers that are seeing their earnings estimates slashed in 2020 thanks to COVID-19.

The group is under performing compared to the S&P 500 year-to-date.

Investors in the specialty retailers might want to wait on the sidelines to see how the next few months shake out.

Additional content:

Energy Future: American Fossil Fuels or European Low Carbon?

The coronavirus pandemic has indelibly impacted the global energy sector. Although the demand for oil has noticeably dropped and prices have plunged, the pace of shift to renewable energy from fossil fuel is still uncertain.

The oil and gas industry is currently facing testing times in the wake of the COVID-19 pandemic. The dual effect of coronavirus demand disruption and a supply glut has pushed the industry into an unprecedented crisis.

As global energy demand fell off a cliff amid lockdown and oil prices tanked, the recent months have been perhaps the most testing times for the global energy industry. The sector has already suffered a setback due to concerns about long-term sustainability as the world seeks to curtail its use of fossil fuel. With the virus causing the most catastrophic dip in energy sector across the globe, the debate about long-term oil consumption has intensified.

Does COVID-19 Provide Green-Energy Transition Opportunity?

The benefits of clean energy systems have been known for quite some time. Supermajors like Royal Dutch Shell, TOTAL (TOT), BP plc have long been revving up investments and expanding their renewable foothold. The ongoing turmoilin oil market presents a global opportunity to accelerate the transition to alternative fuels. Top European energy players have started betting big on greener sources. But their U.S. peers have an opposing view. They believe that oil demand will soon rebound and slow down the shift to renewable energy.

Global oil giants have rationalized their planned capital budgeting, slashed operating costs and suspended share buyback to cope up with the prevalent adversities. With such remodeled business strategies, companies expect to balance their books, generate enough free cash flow and put a check on escalating debt levels.

However, European players are trimming their capital spending primarily on oil and gas activities, and sparing their renewable and low carbon businesses from budget cuts. This move is in line with the European Union’s emphasis on green COVID-19 recovery plan, a vital step toward realizing the Paris Climate Agreement, a global commitment to fight against climate crisis.

Europe’s Low Carbon Push

London-based integrated energy giant BP has cut its 2020 organic capital budget by roughly 25% from the prior guidance to $12 billion. Yet, this Zacks Rank #3 (Hold) company is committed to keep its low-carbon investment plan of $500 million intact.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Meanwhile, its larger rival Shell looks to trim its 2020 capital spending by a minimum of $5 billion from the past projection of $25 billion to weather the crisis. However, the company reaffirmed its focus on expanding its renewable energy drive. While upstream and downstream businesses would each constitute 45% and 30% of total investment reduction, the Integrated Gas and New Energies division would be hit by only 25% of remaining spending cuts. The oil major was expected to invest approximately $2 billion till 2020 and then up to $3 billion a year thereafter in its low-carbon energy division.

Another European major, TOTAL, has decided to lower its 2020 capital expenditure guidance by nearly 20% to less than $15 billion from $18 billion. But it has not shrunk its $1.5 to $2 billion of energy transition investment goal this year.

Equinor, Shell and TOTAL recently announced their decision to invest in the Northern Lights project to transport and store carbon. It is Norway’s first exploitation license for carbon capture and storage (“CSS”) on the Norwegian Continental Shelf. With an initial investment of roughly NOK 6.9 billion, the project can be the first carbon dioxide storage for industries of Norway and Europe and help in reducing net greenhouse gas emissions to zero by 2050. The project is awaiting Norway government’s final decision.

Despite companies pumping money into strategies to de-carbonize the energy system by increasingly shifting to alternative fuels, renewable and low carbon technology investments still make up for only 15% of these players’ total investments. Therefore climate advocates want the companies to invest more.

The group had aimed to significantly decrease carbon emissions by 2050 even before COVID-19 came along. Yet, some investors are of the opinion that these plans are not sufficient to achieve the Paris climate targets of keeping global average temperature increase to well below 2°C above pre-industrial levels and to limit the increase  to 1.5 °C.

America’s Oil Boom

U.S. oil and gas companies hold a different opinion compared to their European counterparts’ renewables focus. They argue that oil demand will bounce back once the global economy recovers from the pandemic. ExxonMobil and Chevron continue to earmark investments for oil production.

Both the players have reduced their capital investments for the current year. Chevron has trimmed its 2020 capex guidance by 20% to $16 billion, while ExxonMobil has cut it by 30% to $23 billion from the previously announced guidance of $33 billion. But both the companies believe that long-term fundamentals of their business are intact. Large shift to another source of energy still seems far-fetched.

The current collapse in the oil sector might not be a game changer for the climate-change movement. The American Petroleum Institute sees the COVID-19 demand dip to be temporary. Oil consumption would pick up as lockdowns are eased and businesses reopen.

President Trump’s administration is infusing additional stimulus measures like tax breaks to attract billions of investment in its oil and gas sector. It is rolling out relevant measures to accelerate fossil fuel development, making it difficult to reduce greenhouse gas emission. Citing the economic burden imposed on Americans, the President has even decided to withdraw from the Paris Climate Agreement, per which the United States had agreed to reduce its climate pollution by 26%-28% below 2005 levels by 2025.

Conclusion

Despite getting a clear view of lower-emission energy system, the pace of shift to renewable energy from fossil fuel is still uncertain. Oil prices have already started to rise on global output cuts and easing of lockdown norms. However, demand recovery is unlikely to be rapid, as some restrictions remain and the possibility of a second wave of COVID-19 exists.

The race for green energy is gaining momentum. But the transition away from conventional energy sources will largely depend on how governments, companies and societies embrace the fundamental changes in the energy system. Declining prices of renewable energy gives it a competitive edge over fossil fuels. Yet, building a more resilient renewable energy system will not be easy. The question whether oil will continue to dominate the energy sector or be overpowered by clean energy systems in the long run is still debatable.

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TOTAL S.A. (TOT) : Free Stock Analysis Report
 
BP p.l.c. (BP) : Free Stock Analysis Report
 
Royal Dutch Shell PLC (RDS.A) : Free Stock Analysis Report
 
Boot Barn Holdings, Inc. (BOOT) : Free Stock Analysis Report
 
BG Foods, Inc. (BGS) : Free Stock Analysis Report
 
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