A Dick’s sporting goods store Getty Images
Dick’s sporting goods (DKS, $107.93) headlined a busy week of retail earnings. The company is scheduled to publish its fourth-quarter results ahead of Tuesday’s opening in the earnings calendar.
Supply chain issues and inflation will likely take center stage when the sporting goods retailer reports, considering both have been key issues for companies this earnings season.
“The term ‘supply chain’ was mentioned at least once during earnings calls from 341 S&P 500 companies from Dec. 15 to Feb. 28,” said John Butters, senior earnings analyst at FactSet Research. He also notes that the term “inflation” was mentioned by 72% of S&P 500 companies in their earnings calls through Feb. 17.
On the company’s third-quarter conference call, CEO Lauren Hobart said Dick “aggressively ordered this to come first.” [supply chain] Disruption” and ended the period with inventories up 7.3% year over year. She added that the fourth quarter got off to a “strong start” and the company is “well positioned” ahead of the all-important holiday shopping season.
As for inflation, Hobart noted that Dick’s passed on “a few select cost increases” in hardline categories in the third quarter.
Wedbush analyst Seth Basham is “constructive” on the consumer discretionary stock ahead of his earnings report, with the analyst expecting a “good quarter.” This is partly due to the retailer’s “strong supply chain, better inventories and strong relationships with key suppliers” that “have positioned the company favorably relative to competitors during the holiday season,” he writes.
Basham acknowledges that potential headwinds (Omicron, slow traffic due to weather, lack of economic stimulus) are there, but “a sea change in consumer behavior with a greater emphasis on health and fitness, participation in outdoor activities, and a far greater inclination.” on sports and lifestyle products should continue to drive growth in 2022.” He has an Outperform rating on DKS stock, which is a Buy.
The story goes on
Analysts on average are forecasting fourth-quarter earnings of $3.43 per share for Dick’s Sporting Goods, up 41.2% from what the company reported in the prior-year period. Revenue, meanwhile, is expected to reach $3.3 billion, +5.4% YoY.
Oracle stock plummets ahead of earnings
oracle (ORCL, $76.92) Shares hit a record high of $103.65 in mid-December after the enterprise software maker reported higher sales and earnings numbers for the fiscal second quarter. Since then, however, shares have lost more than a quarter of their value, due in part to ORCL’s announcement in late December that it was buying healthcare IT company Cerner (CERN) for $28.3 billion in cash, its largest acquisition to date.
Can another solid earnings report help ORCL, which has been one of the best stocks over the past 30 years?
Deutsche Bank analyst Brad Zelnick (Buy) is “optimistic about software industry fundamentals” as we head into 2022, although he maintains “a healthy respect for the market and the macroeconomic backdrop.” In other words, while the software industry seems well positioned after its recent bear market plunge, he recommends “a balanced approach with greater valuation sensitivity than in recent years.”
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Zelnick has a Buy rating on ORCL and a price target of $110.00 – implied upside of 55%. However, most analysts are currently on the sidelines. Of the 27 following stocks tracked by S&P Global Market Intelligence, 18 have them on hold. This compares to four who say it is a strong buy, two who rate it a buy, two who rate it a sell and one who thinks it is a strong buy strong sell trades.
As for Oracle’s third quarter earnings report, which is due after the March 10th close? Consensus estimates are for earnings of $1.18 per share (+1.7% yoy) and revenue of $10.5 billion (+4.0% yoy).
Rivian’s bait-and-switch price hikes in focus ahead of profits
Rivian Automotive (RIVN, $48.14) got off to a sizzling start after its initial public offering (IPO) in November, but the electric vehicle maker quickly faltered. Since hitting a record high of nearly $180 on Nov. 16 — more than double the Nov. 10 IPO price of $78 — shares are down about 73%.
CFRA Research analyst Garrett Nelson recently lowered his price target on RIVN to $55 from $135 and downgraded his rating from Buy to Hold after the stock’s price slide.
“Customer backlash to the company’s lock-and-switch measure has already been severe, with existing reservation holders posting their order cancellations on social media sites,” the analyst says.
Nelson is referring to Rivian’s announcement earlier this month that it would raise the prices of its R1T truck and R1S SUV by up to 20%, including for customers who had already pre-ordered the vehicles. The company quickly changed course after consumers reacted negatively to the news, saying the price increases would only apply to orders placed after March 1.
Looking ahead: “The company faces a predicament where it will likely struggle to achieve certain benchmarks on its path to profitability (positive gross margin, then positive EBITDA [earnings before interest, taxes, depreciation and amortization]and finally a positive net result) if no higher prices or significantly higher sales volumes are achieved,” writes Nelson.
When Rivian heads into the earnings booth to report fourth-quarter results after the close on Thursday, analysts on average expect the company to report a loss of $1.72 per share. Bottom line, Wall Street pros are forecasting $60.03 million. For comparison, RIVN posted a loss per share of $12.21 on revenue of $1 million in the third quarter.
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