Stocks’ Details

Dollar Tree, Inc.

Top-line Increased by 3.7% on y-o-y: Dollar Tree, Inc. (NASDAQ: DLTR) is a leading operator of discount variety stores and operates through 15,262 stores across 48 states and five Canadian provinces.On December 9, 2019,Michael A. Witynski has been appointed as President of the Company, Dollar Tree Stores, Inc., and Family Dollar Stores, Inc.

Q3FY19 Operational Highlights for the Period ended 02 November 2019: DLTR announced its quarterly results, wherein the company reported net sales at $5,746.2 million, up 3.7% on y-o-y basis aided by higher comparable store net sales across the Dollar Tree and Family Dollar segments. Comparable store net sales increased 2.5% on constant currency terms on account of a 1.4% increase in average ticket and a 1.1% increase in customer count. Gross profit stood at $1,704.5 million as compared to $1,671.9 million in the previous corresponding quarter. The quarter witnessed gross margin at 29.7% as compared to 30.2% in Q3FY18 due to higher freight costs, higher sales of lower-margin merchandise, higher distribution center payroll, and higher depreciation. Selling, general and administrative expenses increased to $1,346.1 million, increased 4.8% on y-o-y basis due to higher operating and corporate expenses partially offset by decreased payroll expenses. The company reported net income at $255.8 million as compared to $281.8 million in the previous corresponding quarter.


Q3FY19 Income Statement Highlights (Source: Company Reports)

Outlook:As per the FY20 guidance, DLTR expects its top-line within the range of $23.62 billion to $23.74 billion with a low single-digit increase in same-store sales and 1.1% selling square footage growth. Diluted earnings per share is expected within the range of $4.66 - $4.76.

Valuation Methodology: Price to Earnings Multiple Approach

Price to Earnings Based Valuation (Source: Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The stock of DLTR is quoting at $91.06, with a market capitalization of $21.55 billion. The stock is quoting at the lower band of its 52- week trading range of $88.26 and $119.71. At the current market price, the stock has delivered negative returns of 20.059% and 17.94% in the last three months and six-months, respectively.The value and convenience offered by Dollar Tree and Family Dollar continue to resonate with the shoppers, while the company is planning for more than 1,000 Family Dollar H2 renovations in FY20. Considering the aforesaid facts, we have valued the stock using one relative valuation method, i.e., price to earnings multiple method. We have taken the peer group - Walmart Inc (NASDAQ: WMT), Target Corp (NASDAQ: TGT), Costco Wholesale Corp (NASDAQ: COST), etc., and arrived at a target price of lower double-digit (in % terms). Hence, we recommend a ‘Buy’ rating on the stock at the closed price of $91.060, up 1.41% as on 09 January 2020.

Expedia Group, Inc.

Gross Bookings Increased 9% on y-o-y:  Expedia Group, Inc. (NASDAQ: EXPE) provides online travel services to customers and partners around the globe. Recently, EXPE reported the resignation of Mark Okerstrom from the position of CEO and as a member of the Board of Directors, and Alan Pickerill from the post of CFO. Barry Diller, Chairman of the Board will be looking at the company’s executive leadership team while Eric Hart, the company’s Chief Strategy Officer, will serve as acting CFO.

Q3FY19 Operational Highlights for the Period ended 30 September 2019: EXPE declared its quarterly results, wherein the company reported revenue at $3,558 million, up 9% on y-o-y basis aided by growth at Expedia Partner Solutions, Hotels.com and Vrbo segments. The company reported 11% and 6% y-o-y growth in domestic and international revenues.Gross bookings stood at $26,927 million, up 9% on y-o-y basis, driven by the growth in Expedia Partner Solutions, which includes the benefit from enterprise deals launched in late 2018. The business reported net income at $409 million, depicting a decline of 22% on y-o-y basis. On a year-on-year basis, the business witnessed a 9% and 7% increase in technology and content expense and general & administrative expenses, respectively.


Q3FY19 Income Statement Highlights (Source: Company Reports)

Valuation Methodology: Price to Earnings Multiple Approach

Price to Earnings Based Valuation (Source: Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The stock of EXPE is trading at $109.76 with a market capitalization of $15.902 billion. The stock is quoting at the lower band of its 52- week trading range of $93.53 and $144.00. The stock delivered negative returns of 19.28% and 18.05% in the last three months and six-months, respectively.In order to expand the company’s global reach, EXPE has leveraged significant investments in technology, operations, brand building, supplier relationships and other initiatives. In the recent-past, the company invested in migrating parts of the technology platform to the cloud and focusing on expanding the lodging supply across the key focus markets around the world. Considering the aforesaid facts, we have valued the stock using one relative valuation method, i.e., price to earnings multiple method. We have taken the peer group - Booking Holdings Inc (NASDAQ: BKNJ), TripAdvisor Inc (NASDAQ: TRIP), Trip.com Group Ltd (NASDAQ: TCOM), etc., and arrived at a target price of lower double-digit upside (in % terms). Hence, we recommend a ‘Buy’ rating on the stock at the closed price of $109.76, up 1.05% as on 09 January 2020.

Pfizer Inc.

Joint Venture with GSK Aided Higher EPS: Pfizer Inc. (NASDAQ: PFE) is engaged in the development and manufacturing of healthcare products, including innovative medicines and vaccines. Recently, PFE announced that Ian Read and James Kilts will be joining the Viatris Board of Directors after the completion of the planned combination of Mylan N.V. and Upjohn Inc., during mid-2020.

Q3FY19 Operational Highlights for the Period ended 30 September 2019: PFE declared its quarterly results, wherein the company reported revenue of $12,680 million as compared to $13,298 million in pcp. The company reported research and development expenses at $2,283 million, representing 18% of the revenue. During the period, the company reported a 26% operational decline from Upjohn, due to U.S. loss of exclusivity of Lyrica during July 2019. PFE reported a lower cost of sales at $2,602 million as compared to $2,694 million in Q3FY18. The company reported net income at $7,680 million as compared to $4,114 million in the previous corresponding period. Diluted EPS for the quarter came in at $1.36, driven by a gain associated with the completion of the Consumer Healthcare JV Transaction with GSK. 


Q3 FY19 Financial Highlights (Source: Company Reports)

Guidance: As per the FY19 outlook, the company expects revenue to come within the range of $51.2 billion to $52.2 billion and adjusted diluted EPS within the range of $2.94 to $3.00. Adjusted cost of sales as a percentage of revenue, is expected within the range of 19.3% to 19.8%.

Valuation Methodology: Price to Earnings Multiple Approach

Price to Earnings Based Valuation (Source: Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation:The stock of PFE is quoting at $38.89 with a market capitalization of $215.222 billion. The stock has generated 8.66% and -9.51% returns in the last three-months and six-months, respectively. Within the Biopharma segment, Ibrance reported 48% operational growth in international markets, reflecting continued strong uptake following launches, primarily in developed Europe and certain emerging markets. The company is positive about the progress with the product pipeline, both in terms of the breadth of opportunities and depth of the science. Considering the aforesaid facts, we have valued the stock using one relative valuation method, i.e., price to earnings method. We have taken the peer group - Merck & Co Inc (NASDAQ: MRK), Eli Lilly and Co (NASDAQ: LLY), Johnson & Johnson (NASDAQ: JNJ), etc. and arrived at a target price of lower double-digit upside (in% terms). Hence, we recommend a “Buy” rating on the stock at the closed price of $38.89, down 0.44% as on 09 January 2020.

 
Comparative Price Chart (Source: Thomson Reuters)

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