Earnings Calendar: November 21 – 25

The US calendar starts to taper off this week as we approach the back end of earnings season, but we still have some big names due to report including computer makers Dell and HP, electronics retailer Best Buy, discounter Dollar Tree, department store Nordstrom, pandemic winner Zoom Video and agricultural tech outfit Deere & Co.

There are also some Asian firms with listings in the US to watch out for, with shopping platform Meituan as well as video platform IQIYI and its owner Baidu all pencilled-in.

Meanwhile, the UK calendar gets busier this week with updates due out from water companies Severn Trent and United Utilities, repair outfit Homeserve, defence firm Babcock, electronics seller AO World, retailer Pets at Home, bike and car store Halfords and Kingfisher, which owns DIY chains B&Q and Screwfix. We will also have news out from airline Jet2, chemicals giant Johnson Matthey and beverage maker Britvic.

Dell (DELL)

There has been widespread warnings that demand for technology has unwound this year after booming during the pandemic and investors will be keen to see how Dell is faring in the tougher environment. Revenue growth has been gradually grinding to a halt over the last year and is expected to pivot and fall in the third quarter by 14% to $24.5 billion. That will be the first drop in over two years. Adjusted EPS is expected to decline for a fourth consecutive quarter to $1.61 as margins remain under pressure. The hope is that its large exposure to corporate clients will allow it to be more resilient to the downturn in demand than those focused on selling to consumers. Some analysts believe estimates could be tempered further depending on how it performs this quarter, although its low PE ratio, driven by a 27% fall in the year-to-date, suggests much of the negative prospects have already been priced in.

HP (HPQ)

HP is another firm producing computers and other tech that is also boasting a low valuation after falling 23% in 2022. The fact it is releasing fourth quarter results will place a greater focus on the company’s view for the new year as we approach 2023, with risks stemming from a pullback in consumer spending and a slowdown in corporate IT spending. Analysts believe revenue will fall for a second consecutive quarter, this time by 11.5% to $14.8 billion, as both its personal systems and printing units struggle. Meanwhile, adjusted EPS is expected to decline 10% to $0.85 – marking the first drop in two years – as margins continue to contract. The outlook remains bleak, but HP has already outlined that it could be another rough year, meaning this looks priced in, and its focus on capital returns should help it win some brownie points from investors.

Zoom Video (ZM)

Zoom Video shares have more than halved in value this year as the boom seen during the pandemic continues to unwind. The company has continued to add larger businesses (defined as with over 10 employees) as the number of smaller businesses using its service falls, but is still facing tough comparatives. The number of customers that generate over $100,000 in annual revenue is expected to grow by almost one third from last year. Wall Street forecasts revenue will grow 4.4% to $1.09 billion – although that will be the slowest growth on record. Adjusted EPS is expected to fall for a third consecutive quarter, this time by 25%, to $0.84. It has said it is trying to improve profitability, but margins remain under pressure thanks to slower sales growth and increased R&D spend as it looks to introduce new products.

VMWare (VMW)

VMWare is currently in the process of being acquired by Broadcom and is awaiting regulatory approval. That will mean Broadcom investors will also be interested in VMWare’s results this week. VMWare mostly caters to businesses and enterprise spending has held up so far even if the foot has come off the pedal. Analysts forecast revenue will rise 5.2% from last year to $3.35 billion as subscriptions business gains traction. Billings are expected to grow 5.9% although analysts believe remaining performance obligations, which represent the amount of work secured under contract but yet to be completed, will be flat from last year. Adjusted EPS is expected to drop 8% to $1.58.

Dollar Tree (DLTR)

Discounter store Dollar Tree, which has recently shuffled some of its top brass, has benefited as consumers look to make savings and seek value, but investors will be wary amid signs that consumers are reducing spending on discretionary items. Revenue is expected to come in at $6.8 billion, up 6.8% from last year and in-line with the growth delivered throughout 2022. Wall Street is looking for same store sales of 1.8%, level with the previous quarter. However, adjusted EPS growth is expected to slow once again, but still rise a healthy 23% to $1.18. Keep an eye on inventory levels, which are forecast to be over 30% higher than this time last year. Whilst this is partly down to inflation, investors will be keen to know how much unwanted inventory it must discount and shift, which in turn will pressure margins, ahead of the key holiday shopping season. A string of retailers have signalled that softer conditions surfaced in late October and that this has persisted into November.

Best Buy (BBY)

Best Buy has seen sales and earnings fall for three consecutive quarters and this is expected to be the fourth as the unwinding of demand for electronics hurts the topline while rising costs squeeze the bottom. The company has said same store sales will be down slightly sharper than the 12.1% drop seen in the last quarter, with analysts expecting a 13.1% fall. Adjusted EPS is forecast to plunge 49% to $1.05. While the third quarter was challenging, investors are focused on how Best Buy is shaping up in the fourth quarter that is a key period for sales. Markets believe the decline in sales will moderate from the fourth quarter onwards and that margins will fare better as they start to come up against weaker comparatives, leading some to believe that the third quarter could be the trough.

Baidu (BIDU)

Chinese internet search giant Baidu is forecast to deliver revenue that will be down 0.5% from last year in the third quarter at RMB31.77 billion and expect adjusted earnings per ADS to rise 1.2% to RMB14.83. The Covid-19 situation in China remains the key headwind, although Chinese stocks have found some support lately from tweaks to restrictions and fresh government support for the economy. Notably, IQIYI – which is listed and set to report this week - will be responsible for the fall in revenue and the rise in profit, with its core operations propping up the topline but weighing on the bottom.

Kingfisher (KGFHY)

Kingfisher’s trading update for the third quarter this week will focus on sales and how it is faring as we approach the end of the year. The headline figure to look out for is revenue, which analysts believe will be 0.6% higher than last year at £3.27 billion. Like-for-like sales are set to be down for the sixth consecutive quarter with the consensus baking-in a 0.8% drop this time around, although that would mark the shallowest fall so far thanks to an improvement across B&Q and Screwfix in the UK as well as from Brico Depot in France. Kingfisher is aiming to deliver adjusted pretax profit of £770 million over the full year but has warned it could be as low as £730 million depending on how economic conditions fare. Kingfisher has said there is still strong demand for big ticket items, and it is benefiting from its equal mix between DIY and ‘Do-It-For-Me’ customers.

Halfords (HLFDY)

Halfords has benefited from offering more vital services and products to motorists, making it far more resilient in the current environment. However, it is still transforming itself and makes around 30% of sales from the likes of discretionary and higher ticket items that are experiencing softer demand, while earnings are also under pressure thanks to rising costs and its commitment to keep prices low for consumers. The result is expected to be a 9.1% rise in revenue to £758 million and a 34% drop in underlying pretax profit to £38 million. Halfords said it was expecting underlying pretax profit of £65 million to £75 million over the full year, so keep an eye out for any update after it warned things remained highly uncertain.

Pets at Home

Pets at Home is set to have continued growing in the first half of its financial year as people continue to spend on their pets even in a tough economic climate. The company is expected to report a 6.6% rise in revenue in the first half to £722 million, which would suggest things slowed down in the second quarter following the 7.1% increase seen in the first. Underlying pretax profit is forecast to edge up 2.4% to £147 million. The more vital nature of its VET Group is forecast to see revenue rise 10.8% while its retail unit that is more exposed to any pullback in spending is expected to see sales rise by a more tepid 6.3%. Pets at Home is aiming to deliver underlying pretax profit of £131 million over the full year, up from the £126.4 million seen last year.

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