The Zacks Analyst Blog Highlights: Home Depot, Lowe's, Kirkland's, Tempur Sealy International and Williams-Sonoma

News provided by

Jul 10, 2014, 09:30 ET

CHICAGO, July 10, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Home Depot, Inc. (NYSE:HD-Free Report), Lowe's Companies Inc. (NYSE:LOW-Free Report), Kirkland's Inc. (Nasdaq:KIRK-Free Report), Tempur Sealy International Inc. (NYSE:TPX-Free Report) and Williams-Sonoma Inc. (NYSE:WSM-Free Report).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Wednesday's Analyst Blog:

3 Home Furnishing Stocks to Buy Now

Following a significant increase in April, consumer credit increased once again in May. Automobile purchases made up the largest slice of consumer borrowing.

But revolving credit also increased, which indicates that an improving labor market and stock market gains have boosted consumer confidence. This has coincided with higher appliances and furniture sales, indicating an economic recovery.

Consumer Credit Rises

The Board of Governors of the Federal Reserve System reported yesterday that consumer credit increased by $19.6 billion in May, following a $26.1 billion increase in April. This increase in the indicator of potential future spending levels was more than the consensus estimate of an increase by $17.5 billion.

Consumer credit increased at a seasonally adjusted annual rate of 7.50%. Non-revolving credit increased at an annual rate of 9.25%. Revolving credit rose at an annual rate of 2.50%.

Home Sales Surge

The basis for the revival of home furnishings and building materials is the fact that housing data itself is on the positive side. Sales of new single-family houses increased 18.6% from April's revised rate of 425,000 to a seasonally adjusted annual rate of 504,000 in May. New home sales for the month of May increased to the highest level in six years.

Existing home sales rose 4.9% to a seasonally adjusted annual rate of 4.89 million in May from an upwardly-revised 4.66 million in April. This was also the fastest pace of increase in seven months.

The pending home sales index, a forward looking indicator based on contract signings, went up 6.1% to 103.9 in May. Further, May's 6.1% increase turned out to be the largest month-over-month gain since April 2010. It also touched the highest level in eight months.

The Silver Lining of Retail Sales

The U.S. Department of Commerce reported that seasonally adjusted sales of retail and food services rose 0.3% in March, less than the previous month's gains of 0.5%. This rise in retail sales in May was also less than the consensus estimate of an increase of 0.6%. Excluding motor vehicles sales, retail sales increased 0.1%, less than the consensus estimate of a 0.4% increase.

However, April's numbers were revised upward from the earlier reported increase of 0.1% to an impressive 0.5%. Taken together with these new numbers, May data looks much stronger.

Apart from auto sales, building materials were the only other bright spot for retail sales in May. Sales at stores like The Home Depot, Inc. (NYSE:HD-Free Report) and Lowe's Companies Inc. (NYSE:LOW-Free Report), which sell building materials, increased 1.1%. Such gains are usually witnessed in spring, when winter's chill recedes. Nearly, every other sector suffered reverses.

Another significant development was the spurt in sales at home-furnishing and furniture stores. Sales touched a seasonally adjusted figure of $8.55 billion in May. This is the highest monthly figure in six years. An increase in expenditure on carpets, couches and similar products supports upbeat home sales data.

This is also in keeping with the latest consumer credit numbers. It implies that consumers were willing to spend on more expensive items after reducing their credit card bills for several years. Such big-ticket items are often purchased on credit.

Our Choices

Data on retail sales, consumer credit and the housing sector all indicate that the environment for home furnishing companies is quite conducive. Below we present three stocks which possess the potential to grow appreciably in this environment, each of which also has a good Zacks Rank.

Kirkland's Inc. (Nasdaq:KIRK-Free Report) is a leading specialty retailer of home décor products in the United States. The company sells framed art, mirrors, candles, lamps, picture frames, accent rugs, garden accessories and artificial floral products. The company's stores also offer holiday merchandise as well as throughout-the-year gifts.

The company operates through its stores under the names of Kirkland's, Kirkland's Home, Kirkland's Home Outlet, Kirkland's Outlet and The Kirkland Collection. The company also operates online through its website www.kirklands.com.

Kirkland's holds a Zacks Rank #2 (Buy) and has expected earnings growth of 22.40%. The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 17.73.

Tempur Sealy International Inc. (NYSE:TPX-Free Report) is involved in the development, manufacturing and marketing of bedding products primarily in North America and internationally. It provides mattresses, adjustable bases, pillows and other sleep and relaxation products.

The company's brand portfolio includes Tempur, Tempur-Pedic, Sealy, Sealy Posturepedic, Optimum and Stearns & Foster. Tempur Sealy International, Inc., formerly known as Tempur-Pedic International Inc., is headquartered in Lexington, Kentucky.

Currently the company holds a Zacks Rank #2 (Buy) and has expected earnings growth of 16.90%. It has a P/E (F1) of 21.53.

Williams-Sonoma Inc. (NYSE:WSM-Free Report) is a specialty retailer of home products which uses multiple channels to reach its customers. The company sells its products through its own retail stores in the U.S., Canada and Puerto Rico

It also has franchisees in certain countries in the Middle East. The company also uses catalogs and the Internet to reach its customers. The retail segment sells its products using five merchandising concepts: Williams-Sonoma, Pottery Barn, Pottery Barn Kids, Rejuvenation and West Elm.

The direct-to-customer segment sells similar products utilizing seven merchandising concepts Williams-Sonoma, Pottery Barn, Pottery Barn Kids, PBteen, Rejuvenation, Mark and Graham and West Elm.

Apart from a Zacks Rank #2 (Buy), Williams-Sonoma has expected earnings growth of 13.30%. It has a P/E (F1) of 22.85.

With growth expected to pick up in the second quarter, consumers are expected to have more spending dollars at their disposal. Combined with positive news on the jobs front, this makes these three home furnishing stocks excellent options for your portfolio.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today.

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros.

Get the full Report on HD - FREE

Get the full Report on LOW - FREE

Get the full Report on KIRK - FREE

Get the full Report on TPX - FREE

Get the full Report on WSM - FREE

Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
[email protected]
http://www.zacks.com

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Logo - http://photos.prnewswire.com/prnh/20101027/ZIRLOGO

SOURCE Zacks Investment Research, Inc.