Yahoo!, Harley-Davidson, American Express – Stocks That Could Crumble On Earnings This Week by Estimize
Harley-Davidson (HOG) Consumer Discretionary – Automobiles | Reports April 19, before the open.
ValueWalk's Raul Panganiban interviews Kirk Du Plessis, Founder and CEO of Option Alpha, and discuss Option Alpha and his general approach to investing. Q1 2021 hedge fund letters, conferences and more The following is a computer generated transcript and may contain some errors. Interview with Option Alpha's Kirk Du Plessis
What to Watch: Despite delivering positive earnings this past quarter, Harley Davidson faces near term headwinds that could hamper earnings. In the past 12 months, the stock has fallen 24.7% on speculation of waning motorcycle demand. Harley is slowly losing its market dominance as young riders are opting for low cost sport bikes over lavish v-twin cruisers. Revenue has followed this evolving trend and is now expected to be flat from a year earlier and down from two years prior. Harley’s initiatives to expand its product portfolio, while great for the future, has weighed down its financial position. In the past two years, the company has increased its debt burden and depleted cash reserves in an effort to reinvigorate growth. As of December 2015, Harley reported cash and cash equivalents of $722.2 million, down from $906.7 million the year prior, and $1.06 billion in 2013. Total debt has also been worse off, increased to $6.89 billion from $5.5 billion in the same time frame. It wouldn’t be surprising if these numbers come down even further as Q1 results are likely to be weigh down by economic weakness, unfavorable exchange rates and aggressive competitor pricing.
Yahoo! (YHOO) Information Technology – Internet Software & Services | Reports April 19, after the close.
What to Watch: The drama that continues to follow Yahoo and its CEO Marissa Mayer has been no secret. Since being appointed to the role in 2012, Mayer has largely failed to turnaround the company in the three years that she promised. What was once the dominant search engine in the early 2000’s is now an afterthought to Google. Sure enough, earnings have tracked downward, steadily declining in each quarter of fiscal 2015. The stock has also suffered and is now down 20.3% in the past 12 months. Yahoo continues to see a significant slowdown in its core search platform and what Mayer has called the Mavens business. Its search troubles are nothing new and are unlikely to get better as many users are too accustomed to using Google. Mavens (mobile, video, native, social), on the other hand, had grown 44.1% in 2015 but early indications suggest this number will fall to 8.7% in fiscal 2016. Financials have been just as bad. Last quarter Yahoo posted a huge net loss of $4.44 billion on a declining cash position and rising operating expenses. Yahoo released its best news this past month after indicating they would explore bids for a potential takeover. A potential acquisition could be the boost the stock needs.
American Express (AXP) Financials – Consumer Finance | Reports April 20, after the close.
What to Watch: With credit cards companies prepared to report over the next two weeks, early indications are bleak for American Express. The premier credit card company has had a rough 2 years, missing on revenue in 8 consecutive quarters. Amex didn’t do itself any favors after cutting ties with its 16-year-old Costco account. Costco alone accounted for 8% or $80 billion of the company’s billed business and about 20% or $14 billion of its interest bearing credit portfolio. Management has indicated the breakup could generate a loss for the next couple years. Moreover, earnings growth faces headwinds from higher expected loan loss provisions, a strong U.S. dollar, and higher expenses on growth initiatives. Though the company experienced a 3% YoY decline in provisions for 2015, the continued growth in loans and write offs are expected to bump this for the remainder of 2016. Surprisingly, American Express’s financial position remains strong, with long term debt declining on a year over year basis and cash rising. However, investors are losing faith in current CEO, Kenneth Chenault, calling for change at the top. The stock has reacted poorly in light of this, falling 23.2% in the past 12 months and 10.1% year to date.
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