Stocks’ Details
 

Enterprise Products Partners L.P.

 
Higher Sales Volume a Key Catalyst: Enterprise Products Partners L.P. (NYSE: EPD) is engaged in the exploration, treatment, processing, transportation and storage of natural gas and crude oil.
 
1QFY20 Operational Highlights for the Period ended 31 March 2020: EPD came up with its first quarter results, wherein the business reported total revenues of $7,482.5 million as compared to $8,543.5 million in the year-ago period. Higher sales volumes, and margins from the NGL Pipelines & Services business were key catalysts. During the quarter, propylene business registered a $6 million rise in gross operating margin. Net income stood at $1,350 million, up from $1,261 million in 1QFY19 and includes deferred income tax benefitsof an aggregate of$187 million. The company’s total capital investments stood at $1.1 billion, which includes sustaining capital expenditures of $69 million. General and administrative costs for the period stood at $55.5 million, up from $52.2 million from the prior corresponding period.
 

Key Highlights (Source: Company Reports)
 
What to Expect: The company reduced its total FY20 outlook for growth capital investments by ~$1 billion to a range of $2.5 billion to $3.0 billion. The company curtailed its outlook for sustaining capital expenditures to $300 million in FY20 from $400 million. The company finds it uncertain to calculate the impact of COVID-19 for the remainder FY20.
 
Valuation Methodology: Price to Earnings Multiple Based Relative Valuation (Illustrative)

Price to Earnings Based Relative Valuation (Source: Refinitiv,Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: The stock of EPD closed at $17.13 with a market capitalization of ~$37.4 billion. The stock made a 52-week low and high of $10.27 and $30.86 and is currently trading at the lower band of the range. The stock has corrected 33.53% in the last three months but went up 24.22% in the last one-month period. The company remains on track to operate its partnerships in an efficient manner with a long-term emphasis on delivering consistent, value-added services to its customers, producing attractive returns on invested capital, and retaining a strong balance sheet. Considering the aforesaid facts, current trading levels and business prospects, we have valued the stock using Price to Earnings multiple based illustrative relative valuation method. For the purpose, we have considered peers like Plains All American Pipeline LP (NYSE: PAA), ONEOK Inc (NYSE: OKE), Williams Companies Inc (NYSE: WMB), etc., and arrived at a target price with lower double-digit upside (in % terms). Hence, we give a ‘Buy’ recommendation on the stock at the closing price of $17.13, down 2.45% as on 1 May 2020.
 

Pinterest, Inc.

 
Expanded User Base a Key positive: Pinterest, Inc. (NYSE: PINS) is a technology-based company, which operates in visual discovery engine which is used by end-users for discovery of information. On 8^th April 2020, the company withdrew its FY20 revenue and adjusted EBITDA margin outlook, owing to unfavorable impact of the COVID-19 pandemic on its advertising demand. The company also stated its preliminary 1QFY20 results that indicated an expanded user base. PINS expects global monthly active users to be between 365 million to 367 million. Furthermore, the company predicts revenues to be in the range of $269 million and $272 million in 1QFY20. Further, the company ended the first quarter (as of March 31, 2020) with a cash balance of ~$1.7 billion, no financial debt, and an undrawn $500 million revolving credit facility. The company is set to report results for 1QFY20 on May 5, 2020.
 
Q4FY19 Financial Highlights for the Period ended 31 December 2019: PINS announced its quarterly results, wherein the company reported revenue at $400 million, up 46% year over year. The rise can primarily be attributed to higher monthly active users (MAU), which increased 26% year over year. The company reported a non-GAAP net income of $76.9 million, with adjusted EBITDA of $77.3 million, up 55% and 50%, respectively. Sales and marketing expenses and general and administrative expenses stood at $127.5 million and $54.2 million, respectively, during Q4FY19.
 

Q4FY19 Key Highlights (Source: Company Reports)
 
Valuation Methodology: P/Sales Multiple Based Relative Valuation (Illustrative)

Price to Sales Based Relative Valuation (Source: Refinitiv,Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months
 
Stock Recommendation: The stock of PINS closed at $19.75 with a market capitalization of ~$11.5 billion as on 1 May 2020. The stock is trading at the lower band of its 52-week trading range of $10.10 - $36.83. The stock has corrected by 10.35% in the last three months but ran up 39.38% in the last one-month period.PINS’ efforts to enhance user engagement by launching Pinterest Lite, especially in countries such as Peru, Argentina, Colombia, Chile and Mexico are likely to be a key positive, going forward.Considering the aforesaid facts, expanded user base, current trading levels and robust results, we have valued the stock using P/Sales multiple based illustrative relative valuation method, and arrived at a target price with lower double-digit upside (in % terms). We have considered peers like Snap Inc. (NYSE: SNAP), Facebook Inc (NASDAQ: FB), and Twitter Inc (NASDAQ: TWTR). Hence, we give a ‘Buy’ recommendation on the stock at the closing price of $19.75, down 4.4% as on 1 May 2020. 
 

Carter’s, Inc.

 
CRI’s Measures on COVID-19 Outbreak: Carter’s, Inc. (NASDAQ: CRI) is one of the top branded vendors in North America for apparels, solely for babies and adolescent children. Recently, the company stated that it has taken necessary actions to cope with the COVID-19 virus. In doing so, the company has decided to shut down its stores in the United States and Canada until the condition stabilizes. These measures will aid the company to protect the health and well-being of its employees and customers. The company has also boosted its financial position and has cut down on capital spending and other expenses. Further, the company has also suspended all hikes based on incentives and 401(k) matching contributions. Prior to this, the company had also withdrawn its 1QFY20 and FY20 guidance due to coronavirus-led crisis. Additionally, the company has withdrawn $750 million from its revolving credit facility to bolster liqudity. 
 
Q4FY19 Financial Highlights for the Period ended 31 December 2019: During the quarter, the company reported adjusted earnings of $2.81 per share, down 1.1% year over year, owing to higher SG&A expenses and interest expenses. Net sales during the period increased 1.3% and came in at $1,100.5 million, on the back of growth in retail and international segments. Additionally, favorable foreign currency aided revenues by $0.3 million. In 4QFY20, the company opened 20 retail stores and shut three in the United States.
 

Q4FY19 Key Highlights (Source: Company Reports)
 
Valuation Methodology: EV/SalesBased Relative Valuation (Illustrative)

EV/Sales Based Relative Valuation (Source: Refinitiv,Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months
 
Stock Recommendation: The stock of CRI closed at $75.10 with a market capitalization of ~$3.3 billion as on 1 May 2020. The stock is trading at the lower band of its 52-week trading range of $60.17 to $112.45. The stock has corrected by 29.2% in the last three months but ran up 19.59% in the last one month.The company is set to report its 1QFY20 results on 5 May 2020. CRI is investing to enhance guests’ experience through multiple channels and mobile point-of-sale capabilities to improve traffic and transactions online in the coronavirus-led crisis, which remains a key positive. Considering the aforesaid facts, current trading levels and decent results, we have valued the stock usingEV/Sales multiple based illustrative relative valuation method and arrived at a target price with lower double-digit upside (in % terms). We have considered peers like American Eagle Outfitters Inc (NYSE: AEO), PVH Corp (NYSE: PVH), and HanesBrands Inc (NYSE: HBI), to name few. Hence, we give a ‘Buy’ recommendation on the stock at the closing price of $75.10, down 3.96% as on 1 May 2020.
 
 
Comparative Price Chart (Source: Refinitiv,Thomson Reuters)

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