Wednesday, August 26
Thursday, August 27
Best Buy (BBY)
The Estimize consensus calls for EPS of $0.35 a penny higher than Wall Street. Revenues of $8.32B are just slightly higher than the street’s expectation for $8.30B.
What to watch for: Best Buy is one of those retailers poised to benefit from the consumer appetite for large ticket items this summer. Strong demand for big-screen TVs, smartphones and appliances should carry over from the first quarter, as should higher margins from computer hardware sales as compared to the lower margins from tablet sales which continue to wane in popularity. However, profits are expected to decline 20% year-over-year as a result of costs related to the company’s major restructuring plans; Best Buy has been divesting businesses that aren’t profitable for the last couple of years now. Also, competition from Amazon has been hard to bear, as the Amazon Prime membership offers subscribers free 2-day shipping, something Wal-Mart is trying to replicate with it’s recent yearly shipping subscription. Best Buy still requires online shoppers to spend $35 before they qualify for free shipping.
Abercrombie & Fitch (ANF)
The Estimize consensus calls for EPS of -$0.11 vs. Wall Street’s -$0.08. Revenue expectations from Estimize are also much lower at $796M vs. the Street’s $812M.
What to watch for: Very rarely does the Estimize community have a corporate earnings or revenue consensus that is lower than Wall Street’s, but this is the case for Abercrombie & Fitch. The company is well aware of their issues, and have already ditched logoed gear which has fallen out of favor with teens, and last quarter announced they were getting rid of suggestive and sexy images that have long been a staple of their marketing strategy. There has also been a push to diversify stores which have traditionally been staffed by preppy all-American employees. And the difficulties don’t end with the U.S.: international same store sales figures have been negative for the past 12 quarters, a trend that is only being exacerbated by the stronger dollar. The stock is down more than 30% this year, and could use a positive surprise when they report and maybe some news of an appointed CEO, which they have been without since December.
The Estimize consensus calls for EPS of -$0.04, better than Wall Street’s -$0.06. Revenues of $276.5M are just slightly higher than the Street’s expectation for $274M.
What to watch for: The cloud space is hot right now, and lauded for it’s high growth potential. That was certainly apparent this afternoon when Salesforce.com reported Q2 results that handily beat estimates and raised full-year revenue guidance for the second time. WorkDay, a cloud based financial management and HR app builder has also benefitted from this trend, growing like crazy since it’s late 2012 IPO. Quarterly revenue has consistently increased between 57% and 110% on a year-over-year basis. To make the company’s fundamental growth even more impressive, Workday has only missed expectations once, in Q4 2014. As promising as Workday’s revenue growth is, the company still isn’t profitable, and it trades at a rich valuation. Workday’s stock is priced around 17x sales. Mature companies within the industry like Salesforce (CRM) and Oracle (ORCL) trade at 8x and 5x sales by comparison.
Tiffany & Co. (TIF)
The Estimize consensus calls for EPS of $0.91 a penny higher than Wall Street. Revenues are in-line at $1.0B.
What to watch for: While retail names generally should doing well due to an improving U.S. jobs situation and lower fuel prices which have all lead to increasing consumer confidence, there really is a divide amongst the haves and the have-nots. Most high-end names within autos and housing have fared well this season, with value remaining of the utmost importance and a changing consumer that prioritizes tech and health care purchases over apparel and accessories. Tiffany’s falls into the struggling half of retailers, and reported a decline in earnings and revenues last quarter. Like many other multinationals, currency headwinds are a big issue for TIF and impact the company in two ways. First off, 40% of Tiffany’s sales come from overseas, therefore repatriation of those sales to the US dollar hurt the top-line. Secondly, management is also concerned that the dollar has become so strong that it may impact U.S. sales. Tiffany’s does well when tourists visit its upscale stores and spend money, the stronger dollar has caused international tourists to be more conservative.
The Estimize consensus calls for EPS of $0.27, higher than Wall Street’s $0.24 and company guidance of $0.23. Revenues of $1.745B are only slightly higher than the Street’s estimate of $1.725B.
What to watch for: The video game market seems to be in good shape after some impressive results earlier in the season from gamemakers such as Electronic Arts, Activision Blizzard and Take-Two Interactive. However, the video game business is all about hits, and there were no major releases in the second quarter as is typical for the seasonal low part of the year. The pipeline for the second half of the year looks strong, however, with the release of games such as NBA2K15 and the latest installment of the Call of Duty franchise, both which should mean great things for GameStop’s bottom-line. The big concern here of course is the rise in popularity of digital games, with the latest generation of consoles containing smaller games that can be purchased digitally and also offering premium downloadable content to supplement physical game purchases. And while the retailer does well in the $2B used game space, it now faces stiff competition from Wal-Mart.
(Photo Credit: orange sky)
Source: 5 Stocks to Watch This Week 8/24