5 Stocks to Watch this Week 5/31 - WDAY, ASNA, KORS, CBRL, AMBA
Information Technology - Software | Reports May 31, after the close.
The Estimize consensus is calling for earnings of -$0.01 cents per share on $340.6 million in revenue, a penny higher than Wall Street on the bottom line and nearly $2.0 million above on the top. Earnings per share estimates have increased by 28% in the past 3 months while sales expectations have stayed flat. Compared to a year earlier, this reflects 53% growth in EPS with revenue projected to increase 36%.
What to Watch: Workday provides enterprise cloud solutions to businesses, mainly to assist in managing human resources and critical business functions. Enterprise tech has been doing well once again this season, with names such as New Relic, Zendesk and Splunk leading the way, all with significant beats on the top-line, but still struggling on the bottom. Since debuting in late 2012, Workday has been coming for the big guys, mainly Oracle and SAP. Workday software is targeting two main areas, human resources and financial departments. Cloud software is becoming much more appealing to customers as it costs less in the long run. Workday is working to differentiate itself with the addition of such new tools as Collaborative Anytime Feedback, which allows users to commend a colleague’s good work in a public forum. Despite having more than 1,000 clients, Workday is still far off from Oracle’s customer base of 10,000+, and while 2016 revenues are expected to surpass the $1B mark, that still pales in comparison with Oracle’s estimate of $38B. Year-to-date the stock is nearly flat.
Ascena Retail Group (ASNA)
Consumer Discretionary - Specialty Retail | Reports May 31, after the close.
The Estimize consensus calls for EPS of $0.12, one penny lower than Wall Street. Revenue expectations are slightly more bearish as well, at $1.743 billion vs the sell-side’s $1.751 billion. Not surprisingly, these numbers have been trending lower since the last quarterly report, with EPS estimates dropping 14% and revenues down 2%. This puts YoY growth expectations at -31% for EPS yet up 52% for sales. This is a company that has a terrible track record of beating on the top-line, only surpassing revenue estimates 23% of the time over the last 13 quarters.
What to Watch: It’s been a rough season so far for retail, with most of the apparel and accessories names missing expectations. Ascena, owner of Ann Talyor, Loft, Lou and Grey, and others, is expected to continue the trend after the bell, with the Estimize community looking for a slight miss on both the top and the bottom-line. Recently acquired Ann Inc. was a big contributor during the holiday quarter, with the LOFT brand coming in strong. However, costs related to that acquisition were blamed for weak results, and will continue to impact the bottom-line for the next few quarters. As far as sames store sales results, the only positive segment in FQ2 2016 was Lane Bryant, up 2%. Tween retailer, Justice, has been one of the worst performers, with negative SSS of 17% last quarter. Overall, Ascena blamed dressbarn for softness in 2015, which posted the second worse SSS number last quarter of -4%. The company is focusing on improving both its Lane Bryant and Justice segments, as well as the full integration of ANN.
Consumer Discretionary - Textiles, Apparel & Luxury Goods | Reports June 1, before the open.
The Estimize consensus is calling for earnings of 98 cents per share on $1.153 billion in revenue, 2 cents higher than Wall Street on the bottom line and right in line on the top. Since the holiday season earnings estimates have fallen 3% while revenue has dropped only 1%. Year over year comparisons are now projecting a 9% increase in profitability with sales anticipated to grow 11%. KORS has a history of beating the consensus, surpassing bottom-line expectations 81% of the time and revenues 88% of the time
What to watch: This year, many upscale apparel and accessories brands have been worse off as consumers opt for discounted goods and services. This season we have already seen losses from luxury retailers including Nordstrom and Tiffany’s, setting the stage for weakness from Michael Kors, Vera Bradley, and Lululemon over the next week. In an effort to drive top line growth, Michael Kors has focused on opening new stores. Last quarter the company opened 34 new stores, comprising of 15 in the United States and the rest in international markets. While the new stores will increase operating costs and contract margins, they should help generate higher revenue in the near term. Global stores should continue to see adverse impacts from weak currency conditions. Regardless, Michael Kors continues to deliver positive growth in key financial metrics including revenue, net sales, profits and net income. Unfortunately, another setback will be the fact that Nordstrom has decided to no longer carry Michael Kors handbags. Nordstrom has been feeling squeezed by Macy’s and other mid-priced department stores to price match and discount similar Kors bags. The ongoing promotions Macy’s ran was a major determinant for Nordstroms to stop carrying the bags. This clearly isn’t a good thing for Michael Kors, which should expect to feel the aftermath for the remainder of the year.
Consumer Discretionary - Hotels, Restaurants & Leisure | Reports June 1, before the open.
The Estimize consensus is calling for earnings per share of $1.81, one cent higher than Wall Street. Revenue expectations of $705.1 million are just slightly ahead of the sell-side’s $703.95 million. Estimates on both the top and bottom-line have stayed flat since the Q4 2015 report, with EPS now expected to grow 22% YoY and revenues by 3%. expectations increased 92% and revenues 8%.
What to Watch: Despite a lackluster FQ2, Cracker Barrel has benefited from the resurgence in the casual dining space. The stock is up nearly 19% in the past 6 months and is poised to jump following its report. Cracker Barrel has seen increasing interest in its brand despite not having made any major changes. The company continues to deliver positive comparable store sales on core values and offerings of the past 50 years. Recent results have also continued to outperform peers in the casual dining industry and even its own expectations. In its Q2 analyst call, the company raised its fiscal year earnings for the second half of 2016 to reflect moderation in commodity prices and the opening of 5 to 6 new stores. Cracker Barrel also recently announced it will transition to cage free eggs in its commitment to provide high quality products. The company plans to source 100% of its eggs from cage free hens by 2026. The shift also feeds changing consumer preferences for healthy and organic ingredients.
Information Technology - Semiconductors | Reports June 2, after the close.
The Estimize community calls for EPS of $0.33, 6 cents above Wall Street. Revenue expectations from Estimize are also higher at $57.11 million as compared to the Street’s $55.94 million. Estimates have have come down over the last 3 months, with EPS expected to decrease 54%, and sales down 19% YoY.
What to Watch: The GoPro chipmaker has had a great run since IPOing in 2014, beating the Estimize EPS consensus in all 7 quarters despite the struggles of its biggest client. However, those results started to crack last quarter, with the expectation that negative earnings growth will continue in FQ1 2017. GoPro reported earlier in the season and severely missed on the bottom line, reporting a loss per share of -$0.63, a YoY decline in profits of 363%, with revenues declining 49%. Shares of AMBA have been in a downward spiral as well. After reaching highs of $126.70 in June 2015, shares of Ambarella have plummeted 68% in the past 12 months. Fortunately, the semiconductor is attempting to diversify its top line away from action cameras and drones and into less volatile products.
How do you think these names will perform? Get your estimates in here!
(Photo Credit: Mike Mozart)
