5 Stocks to Watch Thursday – Friday – Under Armour (UA), Caterpillar (CAT), Amazon (AMZN), Microsoft (MSFT), Chevron (CVX) by Estimize
Thursday, January 28
Friday, January 29
There has been much talk in recent years about disruption and trying to pick companies that will disrupt their industries. The debate continued at the Morningstar Investment Conference as Bill Nygren of Oakmark Funds faced off with Morgan Stanley's Dennis Lynch. Q2 2021 hedge fund letters, conferences and more Persistence Morningstar's Katie Reichart moderated the Read More
Under Armour (UA)
Consumer Discretionary – Textiles, Apparel & Luxury Goods | Reports January 28, before the open.
The Estimize community is looking for EPS of $0.48 as compared to the Wall Street consensus of $0.46. Revenues are also slightly higher with an Estimize Mean of $1.14B vs. the Street’s $1.12B.
What to Watch: Once seen as a viable threat to Nike’s dominance, Under Armour has fallen victim to a recent rough patch. The combination of unseasonably warm weather as well as a weaker-than-expected holiday season led the stock to collapse 18% in the fourth quarter. Ironically, while expectations on EPS have fallen by 5 cents since the Q3 report, revenue estimates have actually increased 2%. In a competitive footwear and apparel industry, Under Armour has positioned itself as a premium brand against Nike and Lululemon. Footwear continues to be their fastest growing segment and is currently benefitting from the launch of NBA champion, Stephen Curry’s exclusive shoe line. The company has also upped their wearables and smart apparel offerings, recently announcing a line of footwear and apparel that track key fitness metrics. Typically, the fourth quarter is peak season for retailers, however accumulating inventory and decelerating demand for Under Armour’s key products is expected to put a damper on Q4 earnings. Read more about what we’re expecting for UA.
Industrials – Machinery | Reports January 28, before the open.
The Estimize consensus calls for EPS of $0.73, 2 cents above the Wall Street consensus. Revenues are also slightly higher at $11.33B as compared to the Street’s $11.28B.
What to Watch: This proxy for global growth has not been painting a very pretty picture of the world economy lately. After a massive miss on the top and bottom-line in Q3, estimates have come way down. EPS estimates have fallen 21% and revenues are down 7%. Goldman Sachs recently downgraded the stock to a sell under the premise that a new commodity deflation cycle will cripple Caterpillar. The three main concerns for CAT going into this report remain the continual drop in commodity prices, economic turmoil in China and the strong US dollar, none of which seem to be letting up in 2016. On the energy front, oil prices below $30 per barrel means sales of industry related equipment have declined. The plunge in oil prices can be tied to a weakening Chinese economy, an important market for Caterpillar. On top of all this, currency headwinds from a strong U. dollar have weighed down company revenues. To deal with the recent turmoil, Caterpillar is undergoing significant restructuring and cost cutting initiatives which, in the short term, will put pressure on margins. Read more about what we’re expecting for CAT.
Consumer Discretionary – Internet & Catalog Retail | Reports January 28, after the close.
The Estimize Mean consensus calls for EPS of $1.64, three cents above the Wall Street estimate. Revenue expectations for $35.9B are in-line with the Street’s consensus, and higher than guidance of $35.13B.
What to Watch: The third of the FANG stocks is set to report after tomorrow’s closing bell, and like it’s predecessors, Netflix and Facebook, Amazon is also expected to put up some big numbers. After continually being scrutinized for posting losses, Amazon is coming off two straight quarters of profitability. In 2015, Amazon shares rose 90% and sets the tone for another favorable quarter. The e-commerce company’s remarkable growth comes on the back of strong Q4 holiday sales, the strength of Amazon Prime and the dominance of Amazon Web Services. Amazon Prime has been killing big box retailers, such as Wal-Mart, for months now. Subscriptions to the service have doubled in two years and offer users free two-day shipping, streaming video and cloud storage. Speaking of the cloud, Amazon Web Services has also been giving competitors a run for their money, leading the cloud infrastructure industry and representing about 30% of the market. Read more about what we’re expecting for AMZN.
Information Technology – Software | Reports January 28, after the close.
The Estimize consensus calls for EPS of $0.71, two pennies higher than the Wall Street consensus. Revenue expectations of $25.2B are just $70M ahead of the Street.
What to Watch: Microsoft made headlines this week, when they announced they would be donating $1 billion in cloud computing services to nonprofits around the world. That’s certainly an admirable contribution, but weak expectations for tomorrow’s report are what’s currently in focus. While EPS expectations are in-line with the year-ago quarter, revenues are anticipated to decline 4%. Contributing to declining revenue, Microsoft gave away its newest operating system, Microsoft 10, foregoing potential licensing fees. Despite slowing revenue growth, Microsoft share prices still rose almost 20% in 2015 thanks to its rapidly growing cloud business. Two of the company’s main drivers moving forward will include improving its cloud services and expanding operating margins. Look out for fuller MSFT coverage on the blog tomorrow!
Energy – Oil, Gas and Consumable Fuels | Reports January 29, before the open.
The Estimize community is looking for EPS of $0.57 as compared to the Wall Street consensus of $0.51. Revenues are also higher with an Estimize Mean of $29.19B vs. the Street’s $28.76B.
What to Watch: The downward trend commodities took in 2015 have had large implications for energy corporations around the world. Headlining this freefall, oil took its biggest dive in Q4 2015 with the price of Brent Crude dropping 30% and WTI falling nearly 20%. Oil has struggled to stay above $25 a barrel as a strong dollar and geopolitical issues drag down prices. For Chevron, plunging oil prices have led to a steep decline in upstream services while the downstream segment remarkably withstood the volatility. Consequently, Chevron has begun implementing cost saving initiatives to sustain operations during low oil prices. Recent moves include downsizing and reducing capital expenditures aimed to procure additional cash flow. Even so, shares fell 20% in 2015 and the company is poised for a disappointing fourth quarter, with EPS expectations falling 22% since the last report, and revenues estimates down 8%.