Investing

Earnings Previews: Ciena, GameStop, Hormel

Paul Ausick

Published: December 7, 2021 11:34 am

This week’s earnings reports calendar is not very populated. Barely 100 companies are scheduled to disclose results this week, and the count drops even lower the closer we get to Christmas.

After markets close Tuesday, we’ll hear from two companies of interest, and another will be reporting before markets open on Wednesday: Stitch Fix, Toll Brothers and Campbell Soup.
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Here’s a look at three more companies set to report results after markets close Wednesday and before they open on Thursday.

Ciena

Network hardware and software maker Ciena Corp. (NYSE: CIEN) reports fourth-quarter fiscal 2021 results before markets open Thursday. Over the past 12 months, Ciena’s stock has added about 34%, including a 13% drop in the first three weeks of September. Since then, the stock has added more than 20%.

Last month, Ciena announced a collaboration with Samsung to deliver “the next-generation of high-bandwidth applications and services driven by expanding 5G networks.” That, probably more than anything else (the S&P 500 is up about 4.5% in the same period), is the reason for Ciena’s share price increase.

Analysts are solidly bullish on the stock, with 13 of 16 giving the shares a rating of Buy or Strong Buy and the rest have put Hold ratings. At a recent price of around $63.30 a share, the upside potential based on a median price target of $67 is 5.8%. At the high price target of $80, the upside potential is more than 26%.

For the company’s fiscal fourth quarter, analysts have forecast revenue of $1.02 billion, which would be up 3.7% sequentially and 23% higher year over year. Adjusted earnings per share (EPS) are forecast at $2.92, down 7% sequentially but up nearly 42% year over year. For the full fiscal year, Ciena is expected to report EPS of $2.92, down 1%, on sales of $3.6 billion, up 2%.

Ciena’s share price to earnings multiple for fiscal 2021 is 21.7. For fiscal 2022, the multiple to estimated EPS of $3.14 is 20.2, and for 2023, it is 18.0-times estimated EPS of $3.53. The stock’s 52-week range is $43.63 to $63.12. The high was posted early Tuesday. Ciena does not pay a dividend. Total shareholder return for the past year was nearly 31%.

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GameStop

Since GameStop Corp. (NYSE: GME) stock skyrocketed in late January, it has given back more than half of its share price gain. That means it currently trades about 1,000% higher than its share price 12 months ago.

Except for continued strong interest in the stock by some retail investors, however, GameStop’s fundamentals probably haven’t changed much and may have gotten a bit worse given the supply issues facing gaming console makers like Microsoft and Sony. Analysts and some investors are still waiting for GameStop to reveal its turnaround plan. Maybe Wednesday afternoon, when the company reports third-quarter results, will be the day.
GameStop gets very little analyst coverage, probably due to a relatively small number of shares in the hands of big investors and a “who cares what they say” attitude from the true believers. Of four analysts covering the stock, two have a Hold rating and the other two have Sell ratings. At a price of around $175.70, the shares have left the median price target of $37 well behind. Even the high target of $54 is attainable only if the shares lose about two-thirds of their current value.

Analysts estimate third-quarter revenue of $1.19 billion, up less than 1% sequentially but up 19% year over year. GameStop is expected to post an adjusted loss per share of $0.52, smaller than the per-share loss of $0.76 in the prior quarter. For the full 2022 fiscal year ending in January, the adjusted loss is pegged at $0.64 per share, sharply better than last year’s loss of $2.14 per share, on sales of $5.67 billion, up 11.3%.

Analysts currently estimate that GameStop will post a profit of $0.15 per share in its 2023 fiscal year and $1.40 per share in 2024. Based on estimates of GameStop’s enterprise value ranging between $5.54 billion and $5.72 billion for the three fiscal years, the sales to enterprise value multiple is around 2.2%. The stock’s 52-week range is $12.14 to $483.00, and GameStop does not pay a dividend. Total shareholder return for the past year is about 970%.

Hormel

Food products producer Hormel Foods Corp. (NYSE: HRL) has had an up-and-down 12 months with the stock ending up down about 8% over the period. While the S&P 500 has gained more than 22% so far this year, the food products industry has managed a gain of just 5.3%. And Hormel has posted a smaller loss per share (6.4%) than hot stocks like Oatly (down 55.5% since its May IPO), Beyond Meat (down 43%) or Vita Coco (down 14.2% since its October IPO).

As with all food products, higher costs either have to be passed along to consumers or the producers have to swallow them. Hormel’s gross margins dipped from 18.5% in its second quarter of fiscal 2021 to 15.3% in the third quarter. In the fourth quarter last year, Hormel’s gross margin was 22.2%. The company has to turn that decline around, or at least have a plan on how to do so. Hormel reports results before markets open Thursday.

Of 13 analysts covering the stock, all but two have a Hold rating on the shares. The other two rate the stock a Strong Sell. At a share price of around $42.70, the implied upside based on a median price target of $45, is 5.4%. At the high price target of $50, the implied upside is 17%.

For fourth-quarter 2021, the consensus revenue estimate is $3.22 billion, up 12.5% sequentially and 33% year over year. Adjusted EPS are tabbed at $0.50, up more than 56% sequentially and 16.3% higher year over year. For the full fiscal year, the EPS estimate is $1.70, up 2.5%, on sales of $11.21 billion, up 16.7%.

Hormel’s share price to earnings multiple for fiscal 2021 is 25.1. For fiscal 2022, the multiple to estimated EPS of $1.94 is 22, and for 2023, it is 20.3 times estimated EPS of $2.10. The stock’s 52-week range is $40.48 to $50.86. Hormel pays an annual dividend of $1.04 (yield of 2.42%). Total shareholder return for the past year was negative 7.5%.