Foot Locker, Inc.

FL Details

FL Partner with Melody Ehsani to Unveil Capsule Collection: Foot Locker, Inc. (NYSE: FL) is one of the leading global retailers of shoes and apparel. On May 26, 2021, the company announced that it has unveiled a basketball-stimulated capsule collection in collaboration with the new Creative Director of their women's business, Melody Ehsani. Priced in the range of US$10-$80, the first capsule collection features apparel and accessories, which are now available in sizes XS-2X online and in-store at FL locations across the US and Canada, Europe, and Asia Pacific.

1QFY21 Operational Highlights for the Period Ended 1 May 2021: FL declared its quarterly results, wherein the company posted total sales of $2,153 million as compared to $1,176 million in the previous corresponding period. Excluding the effect of foreign exchange rate fluctuations, total sales for the quarter increased ~79.4%. The increase in top-line was primarily due to potency in the company’s stores, which increased a whopping 99% year over year. In 1QFY21, the company began operating in 12 outlets, relocated 15 stores, and closed 58 outlets. The company reported adjusted earnings per share of $1.96 in 1QFY21 as compared to an adjusted loss of 67 cents per share in 1QFY20. The company exited the quarter with cash and cash equivalent at $1,963 million, while merchandise inventories stood at $1,021 million. Long-term debt at the end of the period stood at $109 million.

Revenues Highlights; Analysis by Kalkine Group 

Risk Analysis: On the flip side, massive operating challenges hindering from the pandemic, including store closures across key markets, could negatively affect FL’s business operations. Also, stiff competition from peers adds to the woes.

Outlook: The company has seen favorable customer response for its merchandise offerings. This, in turn, is expected to aid growth across FL’s stores and digital channels. The company remains positive involving its product categories and capability to drive long-term growth. Further, the company remains on track to boost its store base and position itself well for future growth.

Valuation Methodology: P/CF Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: Over the last one year, the stock went up by ~124.02%. It is currently inclined towards its 52-weeks’ high price of $66.71. We have valued the stock using the P/CF multiple-based illustrative relative valuation method and arrived at a target price with a correction of low-single-digit (in % terms). We believe that the company can trade at some discount to its peer median, considering the risks involved with the uncertainties of the COVID-19 virus outbreak, stiff competition from peers, store closures across key markets, and change in customer’s preferences. We have taken the peer group - L Brands Inc (NYSE: LB), Gap Inc (NASDAQ: GPS), to name a few. Considering the stock’s decent performance in the last year, its current trading level, uncertainty due to the virus outbreak, and valuation, we suggest investors to book profit and give a “Sell” rating on the stock at the closing price of $60.71, down by ~4.23% as on 28 June 2021.

FL Daily Technical Chart, Data Source: REFINITIV

ConocoPhillips

COP Details

A Look at COP’s 1QFY21 Key Results: ConocoPhillips (NYSE: COP) is an energy company that offers a wide range of low-cost of supply portfolio including resource-rich unconventional plays in North America and conventional assets in North America, Europe, Asia, and Australia. During the quarter, the company reported adjusted earnings of 69 cents per share, as compared to adjusted earnings of 45 cents per share reported in the year-ago period. The total revenue and other income for the quarter stood at $10,559 million, up from $ 4,811 million reported in the year-ago period. The year-over-year increase was due to higher production and realized commodity prices. The company exited the quarter with a cash balance of $2,831 million, and total long-term debt amounted to $19,338 million. Net cash provided by operating activities during the quarter came in at $2,080 million. In 1QFY21, the company distributed $0.6 billion in dividends and repurchased $0.4 billion of shares.

Top-Line Highlights; Analysis by Kalkine Group 

Key Risks: The business prospects, including its revenues, operating results, and future growth, are highly correlated with the prices, the business receives for its products. Lower prices for crude oil, bitumen, natural gas, natural gas liquids and LNG may have a material adverse effect on the revenues, operating income, cash flows, and liquidity.

Outlook: For FY21, the company expects production to be ~1.5 million barrels of oil equivalent per day (MMBoe/d). For 2QFY21, the company expects production to be in the range of 1.5-1.54 MMBoe/d. For FY21, adjusted operating costs are expected to be around $6.2 billion, whereas COP restated the 2021 capital budget at $5.5 billion, a rise from ~$4.7 billion recorded in 2020. The company is set to host a virtual market update on June 30, 2021, to feature presentations by COP executives, Chairman and CEO. 

Valuation Methodology: P/CF Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation: Over the last nine months, the stock went up by ~76.77%. It is currently inclined towards its 52-weeks’ high price of $62.35. We have valued the stock using the P/CF multiple-based illustrative relative valuation method and arrived at a target price with a correction of high-single-digit (in % terms). We believe that the company can trade at a slight premium to its peer average, considering the exposure to volatility in the oil price dur to the pandemic, increasing production and operating expenses and a leveraged balance sheet, etc. For the purpose, we have considered peers like Marathon Oil Corp (NYSE: MRO), Devon Energy Corp (NYSE: DVN), to name a few. Considering the stock’s decent performance in the past months, volatility in the oil prices, its current trading level, and valuation, we suggest investors to book profit and give a “Sell” rating on the stock at the closing price of $59.59, up by ~2.81% as on 28 June 2021.

COP Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

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