5 Things to Watch This Week 9/14 – Retail Sales, ORCL, FDX, ADBE, RAD

Just as quickly as the second quarter ended, we are now starting to get a trickle of early Q3 reports. Next week, four popular names will release results, as well as the August reading on retail sales.

Tuesday, Sept 15

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Wednesday, September 16

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Thursday, September 17

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Retail Sales

Reports September 15, before the open

The Estimize community is looking for US Retail and Food Services Sales to hit $447,911 for the month of August, a MoM increase of 0.32%. Excluding vehicles and parts, that estimate drops to $302,169, only a 0.24% increase over July.

What to watch: Retail sales have been mixed so far this year. Despite lower gas prices which were expected to give a boost to retailers, consumers have changed the way they spend, allocating discretionary income towards technology and health care, not traditional apparel and accessory retailers. In fact, the retail sales figure does not accurately represent the consumption economy anymore. Digital goods are not reflected, which is a big chunk of consumer purchases. For instance, 1% of the world’s population purchased an iPhone 6 in the first quarter, and that is not accounted for in retail sales. We have seen a pickup in purchases of large ticket items such as autos, which had been slumping a couple of years ago. Continually low interest rates have encouraged auto sales, with 17.8 million vehicles sold in August, up 1.5% MoM led by SUVs and Pickup trucks as lower fuel prices have caused consumers to feel more comfortable purchasing gas guzzlers.

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Oracle Corporation (ORCL)

Information Technology – Software | Reports September 16, after the close

The Estimize consensus calls for EPS of $0.54, two pennies higher than the Wall Street consensus. The Estimize community is also expecting slightly higher revenues of $8.54B as compared to the Street’s estimate for $8.52B.

What to watch for: Estimates suggest Oracle’s Q3 earnings will be down 13% YoY, with revenues falling nearly 1%. It’s no secret that the strengthening exchange rate in the US has been an issue for the tech giant, responsible for revenues that dropped 5% YoY in Q2; on a constant currency basis the top-line would have increased 3%. Oracle is also trying to enter the cloud space, but is playing catchup as several competitors are well ahead. Investors will be looking for an improvement in this segment on Wednesday, with cloud progress disappointing last quarter when sales only increased a meager 2%. However, Cloud software as a service (SaaS) and platform as a service (PaaS), as well as infrastructure as a service (IaaS) did markedly better, increasing revenues by 29% and 25%, respectively. The segment lagging the most at this point is Oracle’s legacy hardware business, showing declining revenues for several quarters now.

imageFedEx (FDX)

Industrials – Air Freight & Logistics | Reports September 16, before the open

The Estimize consensus calls for EPS of $2.46, higher than Wall Street’s consensus of $2.44. On revenues, Estimize is looking for $12.28, just slightly higher than Wall Street’s estimate for $12.23B.

What to watch for: After reporting 4 consecutive quarters of double-digit EPS growth from fiscal Q4 2014 – Q3 2015, FedEx slowed down to 8% last quarter, but is poised to pick back up to 17% in its fiscal Q1 2016. Revenues are also expected to increase to 5%. Despite strong fundamentals, FedEx is not immune to the global slowdown. While the transports should be benefitting from lower fuel prices, decreased fuel surcharges and lower package weight, along with a decrease in international revenue per package due to currency headwinds has been weighing on the company. FedEx is also finding their higher end services waning in popularity, with more demand for ground services. As a result of these ongoing concerns, the Estimize Consensus has been revised downward by 6% in the last month.

imageAdobe Systems (ADBE)

Information Technology – Software | Reports September 17, after the close

The Estimize consensus calls for EPS of $0.52, higher than the Wall Street consensus of $0.49 and corporate guidance of $0.48. The Estimize community is also expecting higher revenues of $1.23B as compared to the Street’s estimate for $1.21B and guidance of $1.20B.

What to watch: Adobe’s cloud business has massively boosted top-line results this year, with total quarterly revenue hitting an all-time high in the second quarter. The company’s largest segment, Digital Media Solutions, makes up close to 65% of total revenues and is driven by the Creative Cloud, Document Cloud and Marketing Cloud businesses. The company maintains that Creative Cloud subscriptions will hit 5.9M by the end of 2015, up from 4.6M as of the end of Q2. CEO Shantanu Narayen announced the release of their “best Creative Cloud to date” by the end of the year, which includes Adobe Stock, their stock content service. Adobe plans to preview their new video technology for Creative Cloud at the IBD Electronic Media conference this week in Amsterdam, including integration of UltraHD and touch screens. One segment that hasn’t been doing as well is the LiveCycle and Connect business due to a decline in Print and Publishing. Despite all of the promising new updates, Adobe has struggled with the stronger dollar in the past year, although that should subside in Q3 as YoY comparisons get easier.

imageRite Aid Corp (RAD)

Consumer Staples – Food & Staples Retailing | Reports September 17, before the open

The Estimize consensus calls for EPS of $0.07, higher than Wall Street’s consensus of $0.03. However, the Estimize community is looking for revenues of $7.39B, lower than the Street’s consensus of $7.57B.

What to Watch for: Last quarter, Rite Aid’s year-over-year EPS growth came in flat, tapering from the triple digit growth seen at the end of last year. Looks like earnings growth will even decline in their fiscal Q2, down 77%. In February, RAD announced it would be acquiring pharmacy benefit manager (PBM) EnvisionRX. While this move will put the company in the a better position to compete with larger peers which already run PBMs, it came at a cost of $2B, and is the cause of falling profits. Rite Aid’s multibillion-dollar acquisition of Eckard had the company on edge a few years ago, but luckily a recovering economy came to the rescue. Rite Aid also penned a deal to buy RediClinic in fiscal 2015, a health-care clinic operator that provides in-store care, something many of its competitors already offer (which has aided sales). The company also announced last month that they would begin accepting mobile payments at all of their nearly 4,600 stores.

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(Photo Credit: Peter Kaminski)
Source: 5 Things to Watch This Week 9/14 – Retail Sales, ORCL, FDX, ADBE, RAD

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