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Earnings Calendar: March 13 – 17

We are now at the very end of earnings season but the US calendar still has some big names reporting this week, headlined by software giant Adobe, housebuilder Lennar and delivery outfit FedEx.

In the UK, the insurance sector will remain in play as Direct Line and Prudential follow in the wake of their peers. We will also have updates from gold miner Centamin, pest control firm Rentokil and financial services company TP ICAP.

Automakers will also be under the spotlight as German firm BMW and Chinese electric vehicle maker XPeng report.

Adobe (ADBE)

Demand for Adobe’s suite of software continues to grow but at a much slower rate than we have seen in recent years as customers tighten their belts. Still, Adobe is aiming to grow revenue by 8% to 10% in the new financial year and deliver an even faster rise in adjusted EPS of 10% to 13%. Wall Street forecasts Adobe will report a 8.5% rise in first quarter revenue to $4.62 billion and a 9% rise in adjusted EPS to $3.67, in-line with its guidance. Notably, we could see guidance impacted if/when its $20 billion acquisition of collaborative design platform Figma closes, with analysts stating this will negatively impact profitability. European regulators have announced the takeover could threaten competition in the market, providing a potential hurdle to the deal.

Lennar (LEN)

Demand for housing is being tested as it becomes more difficult to get on the property ladder. Rising interest rates have pushed up the cost of borrowing and inflation is also making it harder to save. Orders have been declining since the middle of last year and markets believe they will fall 20% to 12,600 in the first quarter. That is eating into its backlog. Lennar has said it should deliver between 12,000 to 13,500 homes in the first quarter. Meanwhile, it has been forced to drop prices to prevent cancellations and protect its backlog, squeezing margins that are already being strained by rising costs. Lennar is now pulling back on building to balance prices. This leads Wall Street to forecast Lennar will report adjusted EPS of $1.55 in the first quarter, down 43% from the year before. Lennar has said it is taking a broad view on this financial year due to the uncertain outlook but is aiming to deliver 60,000 to 65,000 homes over the full year compared to the 66,399 homes delivered in the last one.

XPeng (XPEV)

We know that Chinese EV maker XPeng delivered 120,757 vehicles in 2022 and that sales dropped significantly in January due to the Chinese New Year holidays. We saw output start to climb again in February but levels are still subdued compared to what we saw in the fourth quarter. The ramp-up is vital considering analysts believe it can produce just under 160,000 vehicles in 2023. We have seen rivals, including NIO, severely disappoint with their sales guidance for this year and this will prove the most influential factor on the share price. Revenue is forecast to have risen 29% to RMB27.2 billion in 2022, with its net loss expected to swell to RMB8.6 billion. The drop in sales in early 2023 is partly seasonal and coincides with the end of subsidies in China but new models, having just launched its new P7i sports sedan, and its push into Europe should lead to stronger sales growth from the second quarter onwards. XPeng had around RMB40 billion, equal to around $5.6 billion, at the end of September, suggesting XPeng could need more money within the next year.

Jabil (JBL)

Manufacturing behemoth Jabil upgraded its full year outlook in the last quarter despite suffering from a slowdown. Analysts forecast Jabil will report a 7.3% year-on-year rise in second quarter revenue to $8.1 billion, marking the third consecutive period of slower growth. Electronics Manufacturing Services is forecast to contribute topline growth of 5.9%, underpinned by expansion of renewable energy projects,  while Diversified Manufacturing Services is expected to report 8.6% growth as demand for electric vehicles and healthcare remains resilient. Analysts are looking for a 9.9% rise in core adjusted EPS to $1.85.

Direct Line

It has been a rough ride for Direct Line, having issued multiple profit warnings in the past year and seeing its CEO resign in January amid a swift change in fortunes for the home and motor insurance markets. Direct Line disappointed investors further in January when it said it would not be paying a final dividend for 2022 because challenging conditions have pushed capital coverage levels to the lower end of its risk appetite. The insurance giant was negatively impacted by freezing weather conditions, increased claims against motor policies and a reduction in the value of its property investment portfolio in the fourth quarter. It said this will mean its combined operating ratio – a key measure of profitability (above 100% represents losses and below is profit) – will come in at 102% to 103% in 2022 and rise another two to three percentage points in 2023. That is drifting away from its target of 95%. With Direct Line struggling to make money in the current environment, analysts believe pretax profit will plunge 86% in 2022 to just £60.6 million from the £446 million profit seen in 2021. Markets believe profit will rebound in 2023 but remain below what it has delivered over the past five years.

TP ICAP

Analysts forecast TP ICAP, which provides data on key financial and commodity markets, will report a 12% rise in revenue in 2022 to £2.08 billion and pretax profit is expected to rise four-fold to £109 million from subdued levels the year before. Its Agency Execution division will lead topline growth thanks to the addition of Liquidnet, while its Global Broking unit is reaping rewards from higher interest rates. We could hear news on Parameta after Sky News reported last month that TP ICAP has made a U-turn on plans to sell the division. TP ICAP has not announced plans to sell the division, which accounts for around 9% of revenue but boasts high margins, but is thought to have held discussions with some potential buyers before calling it off. Some investors had pushed for Parameta to increase the amount of money returned to shareholders through dividends and buybacks, but the company is keen to keep the unit now that its trading performance has improved over the past year.

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