Investing

Earnings Previews: Ciena, GameStop, Hormel

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%.

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