Estimize’s Expected Earnings Surprises For The Second Peak Week

Before we visit this week’s expected earnings and revenue beats and misses, let’s quickly recap our picks from last week.

Last week our data pointed to Grubhub Inc (NYSE:GRUB), Advanced Micro Devices Inc (NASDAQ:AMD), Twitter Inc (NYSE:TWTR) and Align Technology Inc (NASDAQ:ALGN) all as potential beats on the top and bottom-line, all did exactly that, with the exception of Twitter which reported in-line on EPS. As for the misses, toymakers HAS and MAT were both expected to be losers, but in fact, Hasbro (NASDAQ:HAS) was able to put up a beat, while Mattel Inc (NASDAQ:MAT)did in fact miss. SAVE was also expected to be a miss, but eked out a positive surprise on profits, but missed on revenues.

Now onto our picks for the second peak week of the Q2 2018 earnings season!

The Beats

To determine possible positive surprises we look for companies that have the following characteristics: 1. Large positive deltas vs. Wall Street 2. Significant upward revisions momentum into the report 3. Positive YoY growth expectations 4. A long history of beating 5. A long history of Estimize accuracy vs. the Street.

Caterpillar (NYSE:CAT)

Industrials - Machinery | Reports July 30, before the open.

The Estimize community is looking for earnings per share (EPS) of $2.76 when Caterpillar reports on Monday morning, revised upward by 12% in the last 3 months and 4% higher than Wall Street’s $2.66. Revenues are also expected to come in higher at $13.83B as compared to the sell side’s consensus of $13.77B, a number that has been revised upward by 5% since last quarter. . Year-over-year (YoY) EPS and revenue growth are expected to come in healthy at 85% and 22%, respectively. This is a name that tends to beat the Estimize consensus 74% of the time on EPS, and that Estimize is more accurate than Wall Street on 70% of the time on EPS and 59% on Revenue.

Caterpillar is often seen as a proxy for global growth, and after nearly two years of declining profits from Q4 2014 - Q2 2016, the machinery company has been making a comeback due to the recovery of commodity prices and a strong global economy. After reporting a positive surprise in Q1, CAT significantly raised full year EPS guidance to a range of $10.25 - $11.25 from $8.25 - $9.25 due to increased sales volumes, better pricing trends, a strong backlog and growth across segments such as energy and transportation. What could possible dampen all of this growth? Tariffs. Caterpillar mentioned the negative impact steel tariffs would have on material costs during their Q1 presentation, and will likely address it once again on tomorrow’s call.

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Baidu Inc (NASDAQ:BIDU)

Information Technology - Internet & Software Services | Reports July 31, after the close.

The Estimize community is looking for earnings per share (EPS) of $2.77 when Baidu reports on Tuesday, revised upward by 8% in the last 3 months and 5% higher than Wall Street’s $2.63. Revenues are also expected to come in higher at $4.1B as compared to the sell side’s consensus of $4.0B, a number that has been revised upward by 7% since last quarter. . Year-over-year (YoY) EPS and revenue growth are expected to come in healthy at 17% and 32%, respectively. This is a name that tends to beat the Estimize consensus 59% of the time on EPS and 93% on revenues, and that Estimize is more accurate than Wall Street on 70% of the time on EPS and 85% on Revenue.

The Google (NASDAQ:GOOGL) of China has put up triple digit profit growth and revenue growth of 27%+ in the last four quarters thanks to improved advertising in news feeds among other things. Ad revenues are expected to continue to grow throughout 2018 along with an expanding user base. The Chinese search giant is also investing heavily in AI technology to aid advertising efforts, by more appropriately matching ads to users.

Fortinet Inc (NASDAQ:FTNT)

Information Technology - Software | Reports August 1, after the close.

The Estimize community is looking for earnings per share (EPS) of $0.37 when Fortinet reports on Wednesday, revised upward by 14% in the last 3 months and 5% higher than Wall Street’s $0.35. Revenues are also expected to come in higher at $429M as compared to the sell side’s consensus of $425.5M. Year-over-year (YoY) EPS and revenue growth are expected to come in healthy at 38% and 18%, respectively. This is a name that tends to beat the Estimize consensus 54% of the time on EPS and 73% on revenues, and that Estimize is more accurate than Wall Street on 73% of the time on EPS and 85% on Revenue.

T

This cybersecurity name continues to benefit from widespread data breaches, as corporations and governments increase spending on software to prevent future instances. Q1 saw impressive YoY EPS growth of 94%, and revenue growth of 17%, and although Billings missed the Estimize consensus, they were still up 15% from the year prior on the back of growing subscriptions. Fortinet is making significant investments in AI capabilities to help identify and respond to attacks more quickly and efficiently.

The Misses

To determine possible negative surprises we look for companies that have the following characteristics: 1. Large negative deltas vs. Wall Street 2. Significant downward revisions momentum into the report 3. Negative YoY growth expectations 4. A long history of missing 5. A long history of Estimize accuracy vs. the Street

Papa John's International Inc (NASDAQ:PZZA)

Consumer Discretionary - Hotels, Restaurants & Leisure | *Estimated* to report July 31, after the close (PZZA has not confirmed yet, Estimate based on historical report date)

The Estimize community is looking for earnings per share (EPS) of $0.50 when Papa John’s reports on Tuesday, revised down by 11% in the last 3 months and lower than Wall Street’s $0.52. Revenues are also expected to come in lower at $420M as compared to the sell side’s consensus of $422.5M, a number that has been revised downward by 4% since last quarter. Year-over-year (YoY) EPS and revenue growth are expected to come in at -23% and -3%, respectively. PZZA tends to only beat the Estimize consensus 50% of the time, and Estimize is more accurate on EPS 60% of the time, and 81% of the time on revenues.

Repeated PR gaffes by Papa John’s founder and now ousted chairman have been detrimental to the company’s fundamentals. After a controversial statement on the NFL back in November, and more recently the use of a racial slur on a company call, profits and revenues for the pizza chain have been slowly declining for the last two quarters, with no expectation to improve in Q2. North American System Wide Comparable Sales have been falling since Q2 2017, with the Estimize consensus calling for -4% in Q2 due to decreasing foot traffic.

Qorvo Inc (NASDAQ:QRVO)

Information Technology - Semiconductors | Reports August 1, after the close.

The Estimize community is looking for earnings per share (EPS) of $0.72 when Qorvo reports on Wednesday, revised down by 73% in the last 3 months and lower than Wall Street’s $0.76. Revenues are also expected to come in lower at $642.3M as compared to the sell side’s consensus of $655M, a number that has been revised downward by 14% since last quarter. Year-over-year (YoY) EPS and revenue growth are expected to come in at -17% and 0%, respectively. Estimize is more accurate on EPS 71% of the time, and 81% of the time on revenues.

Despite beats from peers AMD, INTC and TXN last week, the same is not expected of Qorvo when they report on Wednesday. The semiconductor is anticipated to report a decline in YoY profits for the first time in over a year, mostly driven by gross margins which are expected to fall 7% for the quarter. Muted iPhone demand for the quarter is the main culprit of lower expectations, but many analysts believe that will turn around in the second half of the year, with profit growth expectations of 9% for calendar Q3 2018 and 18% for Q4. Analysts at KeyBanc, who recently upgraded the stock, think this is due to robust smartphone trends in China, improving iPhone demand, and increasing market share vs. peer Skyworks.

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Written By: Estimize