Core Viewpoint - Growth stocks are appealing due to their potential for above-average financial growth, but identifying strong candidates involves significant risk and volatility [1] Group 1: Growth Stock Identification - The Zacks Growth Style Score system aids in identifying promising growth stocks by analyzing real growth prospects beyond traditional metrics [2] - BJ's Wholesale Club is currently highlighted as a recommended growth stock, possessing a favorable Growth Score and a top Zacks Rank [2] Group 2: Earnings Growth - Earnings growth is a critical factor for growth investors, with double-digit growth being particularly attractive [3] - BJ's historical EPS growth rate stands at 10.4%, with projected EPS growth of 6% this year, surpassing the industry average of 4.6% [4] Group 3: Cash Flow Growth - Higher-than-average cash flow growth is essential for growth-oriented companies, enabling expansion without relying on external funding [5] - BJ's year-over-year cash flow growth is currently at 5.3%, exceeding the industry average of 3.3% [5] - The company's annualized cash flow growth rate over the past 3-5 years is 17.1%, compared to the industry average of 5.5% [6] Group 4: Earnings Estimate Revisions - Positive trends in earnings estimate revisions correlate strongly with near-term stock price movements [7] - BJ's current-year earnings estimates have been revised upward, with the Zacks Consensus Estimate increasing by 1.5% over the past month [7] Group 5: Overall Assessment - BJ's has achieved a Zacks Rank of 2 and a Growth Score of A, indicating its potential as a solid choice for growth investors [9]

Core Insights - Investors in the Consumer Products - Staples sector may consider BJ's Wholesale Club (BJ) and Hermes International SA - Unsponsored ADR (HESAY) as potential value opportunities [1] - A strong Zacks Rank combined with a good Value grade is identified as an effective strategy for discovering value stocks [2] Valuation Metrics - Both BJ and HESAY currently hold a Zacks Rank of 2 (Buy), indicating positive earnings estimate revisions and an improving earnings outlook for both companies [3] - BJ has a forward P/E ratio of 26.01, while HESAY has a significantly higher forward P/E of 55.44 [5] - BJ's PEG ratio is 3.28, which is more favorable compared to HESAY's PEG ratio of 5.79, indicating better expected earnings growth relative to its price [5] - BJ's P/B ratio stands at 7.48, while HESAY's P/B ratio is 15.51, further suggesting that BJ is undervalued compared to HESAY [6] - Based on these valuation metrics, BJ is rated as a superior value option with a Value grade of B, while HESAY has a Value grade of F [6]

Market Overview - U.S. stocks experienced gains on Monday, with the S&P 500 increasing by 0.41% to 5,935.94, the Nasdaq rising by 0.67% to 19,242.61, and the Dow Jones Industrial Average edging up by 35.41 points, or 0.08%, to finish at 42,305.48, despite ongoing global trade concerns [1] U.S.-China Relations - Market participants are expected to closely monitor developments in U.S.-China relations, as changes could significantly impact market sentiment [2] Importance of Financial Analysis - Investors often rely solely on sales and earnings figures, which may not accurately reflect a company's ability to meet financial obligations; thus, a critical analysis of a company's financial background is essential for informed investment decisions [3][2] Interest Coverage Ratio - The interest coverage ratio is a key metric used to assess how effectively a company can pay interest on its debt, calculated as Earnings before Interest & Taxes (EBIT) divided by Interest Expense [5][6] - A higher interest coverage ratio indicates a greater ability to meet interest obligations, while a ratio below 1 suggests potential default risks [8] Stock Recommendations - Four companies, Sterling Infrastructure, BJ's Wholesale Club, Molina Healthcare, and Halozyme Therapeutics, exhibit strong interest coverage ratios and are recommended for consideration [4][11] - These companies also demonstrate high EPS growth and favorable Zacks Ranks, indicating robust performance potential [11][14][15][16] Company Performance Highlights - Sterling Infrastructure (STRL) has a projected EPS growth of 38.5% and has risen 68.4% over the past year [14] - BJ's Wholesale Club (BJ) shows projected sales and EPS growth of 5.6% and 5.9%, respectively, with a stock increase of 29.1% in the past year [15] - Molina Healthcare (MOH) anticipates sales and EPS growth of 8.4% and 7.8%, respectively, although the stock has declined by 3.3% in the past year [16] - Halozyme Therapeutics (HALO) expects sales and EPS growth of 22.1% and 23.6%, respectively, with a stock increase of 25.6% in the past year [17]

Group 1 - Coca-Cola European (CCEP) is outperforming the Consumer Staples sector with a year-to-date return of 19.2%, compared to the sector's average return of 7.4% [4] - CCEP is ranked 2 (Buy) in the Zacks Rank system, indicating a favorable earnings outlook and improving analyst sentiment, with a 4.9% increase in the full-year earnings estimate [3][4] - The Beverages - Soft drinks industry, which includes CCEP, has gained about 8.3% year-to-date, showing that CCEP is performing better than its industry peers [6] Group 2 - BJ's Wholesale Club (BJ) is another strong performer in the Consumer Staples sector, with a year-to-date return of 25% and a Zacks Rank of 2 (Buy) [5][7] - The Consumer Products - Staples industry, which includes BJ, has only moved +1.8% since the beginning of the year, indicating that BJ is also outperforming its industry [7]

Financial Performance - Net sales for the first quarter of fiscal year 2025 were $5.0 billion, a 4.7% increase from $4.8 billion in the first quarter of fiscal year 2024[96] - Operating income for the first quarter of fiscal year 2025 was $203.6 million, compared to $160.8 million in the first quarter of fiscal year 2024[94] - Comparable club sales increased by 1.6% in the first quarter of fiscal year 2025, with merchandise comparable club sales rising by 3.9%[100] - Adjusted net income for Q1 FY2025 was $150.9 million, up from $113.4 million in Q1 FY2024, resulting in adjusted EPS of $1.14 compared to $0.85[119] - Adjusted EBITDA increased to $285.8 million in Q1 FY2025 from $236.4 million in Q1 FY2024, highlighting improved core operating performance[123] Membership and Fees - Membership fee income increased by 8.1% to $120.4 million in the first quarter of fiscal year 2025, up from $111.4 million in the same period last year[104] - The annual membership fee for Club Card membership increased to $60 from $55, effective January 2025, which is expected to positively impact membership fee income[85] - The company has over 7.5 million members, with a tenured membership renewal rate of 90% at the end of fiscal year 2024[88] Club Operations - The company operates 255 clubs at the end of the reporting period, an increase from 244 clubs in the previous year[94] - Pre-opening expenses rose significantly to $5.0 million in Q1 FY2025 compared to $0.9 million in Q1 FY2024, reflecting the timing and number of club openings[112] Costs and Expenses - Cost of sales was $4.2 billion, or 83.1% of net sales, in the first quarter of fiscal year 2025, down from 83.9% in the same period last year[106] - SG&A expenses increased by 5.4% to $760.9 million in Q1 FY2025 from $721.8 million in Q1 FY2024, primarily due to higher labor and occupancy costs[109] Cash Flow and Investments - Net cash provided by operating activities was $208.1 million in Q1 FY2025, an increase from $200.8 million in Q1 FY2024, driven by higher net income[128] - Net cash used in investing activities rose to $142.3 million in Q1 FY2025 from $105.7 million in Q1 FY2024, attributed to increased capital spending for new clubs[131] - Adjusted free cash flow decreased to $67.6 million in Q1 FY2025 from $95.1 million in Q1 FY2024, primarily due to higher capital expenditures[134] Debt and Interest - As of May 3, 2025, the company's total debt outstanding was $550.0 million, comprising $150.0 million under the ABL Revolving Facility and $400.0 million under the First Lien Term Loan[146] - Interest expense, net decreased to $11.1 million in Q1 FY2025 from $14.0 million in Q1 FY2024, due to reduced borrowings and interest rate fluctuations[113] - The effective income tax rate improved to 22.2% in Q1 FY2025 from 24.4% in Q1 FY2024, driven by higher tax benefits from stock-based compensation[115] - The interest rates for the ABL Revolving Facility and First Lien Term Loan are 5.42% and 6.07%, respectively[146] - A 100 basis point change in prevailing market rates would result in an annual interest cost change of approximately $5.5 million[146] - The primary market risk faced by the company is interest rate risk, which could materially impact cash flow and net interest expense[145] - The company plans to use interest rate caps and/or swap agreements in the future to manage interest rate risks associated with variable rate debt[145] Future Outlook - The company anticipates that infrastructure investments will support continued profitable growth and enhance the shopping experience[90]

Core Viewpoint - BJ's Wholesale Club reported mixed first-quarter results, with adjusted earnings per share exceeding analyst expectations but revenues falling short of projections [1][2]. Financial Performance - Adjusted earnings per share for the first quarter were $1.14, surpassing the consensus estimate of $0.92 [1]. - Quarterly revenues reached $5.15 billion, reflecting a year-over-year increase of 4.7%, but missed the expected $5.20 billion [1]. Future Guidance - The company reaffirmed its full-year 2025 adjusted earnings guidance of $4.10 to $4.30 per share, compared to the $4.24 estimate [2]. - BJ's expects comparable club sales (excluding gasoline) to grow between 2.0% and 3.5% for the year [2]. - Planned capital expenditures for the year are approximately $800 million [2]. Stock Performance and Analyst Ratings - Following the earnings announcement, BJ's Wholesale shares experienced a slight decline of 0.1%, closing at $115.88 [3]. - Analysts have adjusted their price targets for BJ's Wholesale, with Morgan Stanley raising it from $115 to $125, Loop Capital from $110 to $120, and Wells Fargo from $125 to $127 [8].

Core Insights - BJ's Wholesale Club Holdings, Inc. reported mixed results for Q1 of fiscal 2025, with revenues below expectations but earnings exceeding them, supported by modest growth in comparable club sales [1][2]. Financial Performance - Adjusted earnings per share were $1.14, surpassing the Zacks Consensus Estimate of 91 cents and increasing from 85 cents in the previous year [2]. - Total revenues reached $5,153.5 million, a 4.8% increase year over year, but fell short of the consensus estimate of $5,179 million [2]. - Net sales increased by 4.7% to $5,033.1 million, while membership fee income rose 8.1% to $120.4 million [2]. Comparable Sales - Total comparable club sales increased by 1.6% year over year, with a 3.9% increase when excluding gasoline sales, outperforming the estimate of 3.7% [3]. - Robust traffic contributed 2.5 percentage points to comparable sales growth, marking the 13th consecutive quarter of growth [3]. - Digitally enabled comparable sales surged by 35% during the quarter [3]. Expansion Plans - BJ's Wholesale Club continued its expansion by adding five new clubs and four new gas stations, with a target of 25 to 30 new club openings over the next two fiscal years [4]. Margin Analysis - Gross profit increased to $969.5 million from $883.4 million year over year, with the merchandise gross margin rate expanding by 30 basis points [5]. - Operating income rose by 26.7% year over year to $203.6 million, and the operating margin expanded by 70 basis points to 4% [6]. - Adjusted EBITDA increased by 20.9% to $285.8 million, with the adjusted EBITDA margin expanding by 70 basis points to 5.5% [6]. Expense Overview - Selling, general and administrative (SG&A) expenses rose by 5.4% year over year to $760.9 million, reflecting higher labor and occupancy costs due to new openings [7]. Financial Snapshot - At the end of the quarter, cash and cash equivalents stood at $39.5 million, with long-term debt at $398.9 million and stockholders' equity at $1,971.6 million [8]. - Net cash provided by operating activities was $208.1 million, and adjusted free cash flow totaled $67.6 million for the 13 weeks ended May 3, 2025 [8]. - The company repurchased 55,000 shares worth $6.2 million during the quarter [8]. Guidance - BJ's Wholesale Club expects fiscal 2025 comparable club sales, excluding gasoline sales, to increase between 2% and 3.5% year over year [9]. - Management guided adjusted earnings per share to be between $4.10 and $4.30, compared to $4.05 reported for fiscal 2024 [9]. - Capital expenditures are anticipated to be around $800 million for fiscal 2025 [9].

Financial Performance - BJ's Wholesale Club reported a 4.7% increase in net sales to $5 billion for fiscal Q1 2025, with comparable sales (excluding gas) up 3.9% and adjusted earnings per share (EPS) of $1.14. Operating income increased by 27% and net income rose by 35% year over year [1]. Membership Growth - The share of higher-tier memberships grew by over 100 basis points sequentially to surpass 40% for the first time, driven by product and benefit enhancements, with a January fee increase not affecting uptake [2][3]. This shift to premium membership tiers enhances customer lifetime value, improves renewal rates, and raises average spend [3]. Digital Sales and Engagement - Digitally enabled comparable sales surged by 35% year over year, contributing significantly to total sales growth, and have maintained double-digit growth for four consecutive years. Enhanced fulfillment technology utilizing AI and robotics reduced order picking time by over 45% [4][5]. Expansion and Real Estate Strategy - The company opened five new clubs and four gas stations during the quarter, including a new location in Staten Island, with plans for 25 to 30 new clubs over the next two years. There was a 2% increase in comparable gas gallons, contrasting with a decline in broader U.S. industry volumes [6][7]. Future Outlook - Management reaffirmed fiscal 2025 guidance for comparable sales growth (excluding gas) of 2% to 3.5% and adjusted EPS of $4.10 to $4.30, exercising caution due to potential macroeconomic conditions. The first half of fiscal 2025 is expected to be the strongest for same-store sales comps, with a focus on margin discipline amidst ongoing investments [8].

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Group 1 - BJ's Wholesale Club Holdings, Inc. reported fiscal Q1 results on May 22, showing sales nearly in line with Wall Street's consensus [1] - Profitability metrics indicated a decline compared to previous periods, raising concerns about the company's financial health [1] Group 2 - The company operates in the wholesale retail sector, which has been facing challenges due to changing consumer behaviors and economic conditions [1] - Analysts are closely monitoring BJ's performance as it reflects broader trends in the retail industry, particularly among small-cap companies [1]