5 Stocks To Watch This Week: LEN, ADBE, FDX, BBBY, BBRY
Estimize | Jun 21, 2016 12:06AM ET
Tuesday, June 21
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Consumer Discretionary - Household Durables | Reports June 21, before the open.
The Estimize consensus on LEN is calling for a decline in earnings of 91 cents per share on $2.594 billion in revenue, 4 cents higher than Wall Street on the bottom line and $20 million above on the top. Earnings per share estimates have decreased 4% in the past 3 months, while revenue expectations have fallen 3%. Despite falling expectations, the bottom-line growth is expected to come in at 13%, while the top-line is pegged for an 8% rise. LEN has a strong history of beating expectations, surpassing the both the Estimize EPS and revenue consensus 88% of the time.
What to Watch: The housing sector is typically seen as a barometer of health for the US economy and the consumer. Lennar results have painted a rosy picture for these two metrics, delivering robust growth in each of the last 7 quarters, and Q2 should make it an 8th quarter. The homebuilder continues to see strong demand, momentum and volume trends in many of its key reporting segments. Last quarter featured increases in deliveries, new orders and backlog orders. Earnings from its multifamily ventures came in at $12.2 million, compared to a loss from a year earlier.
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Earnings from Rialto and financial services sectors have both struggled lately, coming in below expectations for the first quarter. The early spring selling season started out strong, yet gross margins remain a concern due to rising land and labor costs. The Southeast and Southwest still remain the most under pressure regions thanks to weakness specifically in Florida and Texas (Houston).
h3 Adobe Systems (NASDAQ:ADBE)/h3Information Technology - Software | Reports June 21, after the close.
The Estimize community calls for EPS of $0.70, two cents above Wall Street for ADBE . Revenue expectations of $1.4 billion are roughly in-line with the sell-side consensus. Earnings estimates have increased slightly by 4% over last 3 months, now expected to show YoY growth of 45%. Revenue estimates have remained flat during that time, and are still projected to show 21% YoY growth for the quarter. Adobe’s stock doesn’t move much after releasing earnings results, but they tend to beat bottom-line expectations 79% of the time, only surpassing on revenues 56% of the time.
What to Watch: In the past 2 years, Adobe has seen both earnings and revenue steadily increase. In 2014, Adobe was plagued with low single digit growth, yet last quarter YoY earnings growth topped 50% with revenue exceeding 20%. The new age of cloud computing has been key to Adobe’s success.
Currently, the company’s two biggest drivers are the Creative Cloud and Marketing Cloud segments, which continue to see record adoption rates. Enterprise adoption in particular is helping out the Creative Cloud division, with many enterprise customers converting to Enterprise Term License Agreements. Early indications suggest that booking growth will also support strong Q2 earnings.
A couple of concerns remain, including cloud competition from Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT), and broad international exposure that could be pinched again due to the stronger YoY dollar.
h3 FedEx (NYSE:FDX)/h3
Industrials - Air Freight & Logistics | Reports June 21, after the close.
The Estimize consensus on FDX is calling for EPS of $3.29, three cents higher than Wall Street. Revenue expectations of $12.876 billion are also above the sell-side expectation of $12.826 billion. Both top and bottom-line estimates have remained unchanged since the FQ3 report, now expected to grow 6% and 24%, respectively. While they beat on earnings 59% of the time, revenue results have fallen short in 53% of reported quarters.
What to Watch: FedEx currently reports thee core financial segments; Express, Ground and Freight. At the moment, Express has been the standout performer, accounting for 40% of the company’s operating income followed by Ground and Freight. FedEx Express is the fastest and most expensive mode of delivery which makes the biggest contributions to income and margins. There are signs that this is starting to slow down, however, as cost conscious consumers are shifting towards slower and less expensive delivery services. Turning to Ground, FedEx is seeing strong business to consumer demand with e-commerce creating the most opportunities.
The company continues to make strategic investments to position itself as a worldwide leader in transportation and logistics services. Earlier this month FedEx acquired TNT Express, in a move that aligns them to grow its extensive global air network. TNT is essentially FedEx of Europe, so the merger should have strong synergies moving forward. New initiatives are important for maximizing profitability especially with the rapid growth in e-commerce.
h3 Bed, Bath and Beyond (NASDAQ:BBBY)/h3Consumer Discretionary - Specialty Retail | Reports June 22, after the close.
The Estimize consensus on BBBY is calling for earnings of $0.86 per share on $2.78 billion in revenue, right in-line with Wall Street on both metrics. In the last 3 months, estimates for EPS have fallen 3%, while sales estimates have remained flat. Year-over-year comparisons are now projecting a -3% decrease in profitability with sales actually increasing 3%. The company tends to miss the Estimize consensus both on the top and bottom-line more often than not, only beating on EPS 44% of the time historically, and an even lower 39% for revenues.
What to watch: The retail space has been spotty this year, with Q1 earnings reports clearly laying out the winners and the losers. Bed, Bath & Beyond is one of the stragglers still left to report for Q1, and they fit into a very interesting specialty space that focuses on home furnishings. While many home goods companies with multiple price points, such as Home Depot (NYSE:HD), Lowe’s (NYSE:LOW) and Williams-Sonoma (NYSE:WSM), did incredibly well last quarter, higher-end names such as Restoration Hardware (NYSE:RH) did not.
While Bed Bath & Beyond fits at the lower end of that equation, expectations are rather muted for Q1. One major headwind has been currency fluctuations, as BBBY has high exposure to international markets. Margins remain under pressure as well, with both gross profit margins and operating margins showing contractions in the fourth quarter.
h3 BlackBerry(NASDAQ:BBRY)/h3
Information Technology - Computers & Peripherals | Reports June 23, before the open.
The Estimize consensus on BBRY calls for EPS of -$0.04, 100% higher than Wall Street’s consensus. Revenue expectations are slightly higher than the sell-side, with the Estimize community expecting $479 million, as compared to $467 million. Earnings expectations have trended upward by 8% since last quarter, while revenue estimates have fallen by 3%. This puts YoY growth expectations at 6% for EPS and -27% for sales. This is a stock that tends to trend negative initially after a report, but pops up by an average of 2% in the 30-day post earnings period.
What to Watch: After three consecutive quarters of triple digit declines on EPS, it’s exciting to see a comeback for the fiscal first quarter of Q1, even though it’s slight. Recent success has been driven by the company’s Software and Services division which saw growth of 106% in FQ4 2016, and 113% for the entire fiscal year. During that quarter BBRY released it’s new QNX software platform targeted towards automotive companies. They also unveiled the Internet of Things (IoT) over-the-air software platform and BlackBerry Radar tracking device.
BlackBerry has also increased investments in its Enterprise Mobility Management division. Along with capabilities from Good launching, which BBRY acquired last fall, they launched five secure suites in Q4 to provide “a holistic management, messaging, collaboration, application and enablement and content management platform. They are also foraying into the cybersecurity space with a consulting service that helps customers mitigate risks.
Blackberry’s handset business seems at a standstill, however. After launching the Android-based PRIV later than planned, lower than expected sales dragged on the company’s bottom-line. Heavy competition from Android (NASDAQ:GOOGL) and Apple platforms are also taking their toll.
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