Investing

Earnings Previews: Deere, Foot Locker, Ross Stores

All three major U.S. equity indexes posted gains of more than 1% Tuesday but gave some of that back in premarket trading Wednesday. Interest on 10-year Treasuries has risen above 3%, stoking worries about rising inflation and declining consumer spending. The monthly report on housing starts and new building permits showed that both slipped in April. Rising mortgage rates, record-high home prices and the high cost of building materials get the blame.

Before markets opened on Wednesday, big-box retailer Target reported a big miss on earnings, as operating margins were hit by the company’s efforts to reduce inventory and higher freight and transportation costs. The stock traded down nearly 25% in mid-morning action Wednesday.

Lowe’s reported better-than-expected earnings but missed on revenue. The home improvement retailer reaffirmed prior guidance for its 2023 fiscal year. The stock traded down more than 4%.

Chipmaker Analog Devices beat estimates on both the top and bottom lines and raised fiscal third-quarter earnings per share (EPS) and revenue guidance. The stock traded up by about 2%.

Container shipper ZIM beat both the revenue and GAAP EPS estimate and declared a dividend payment of $2.85 per share. Shares traded up about 4%.

We already have previewed earnings reports from Cisco, Kohl’s, SQM and Trip.com that are due out after markets close Wednesday or before they open again on Thursday. In a separate story, we took a look at what analysts expect to hear after markets close Thursday from Applied Materials and Palo Alto Networks.

Here is a look at three firms set to report earnings late on Thursday or first thing Friday morning.

Deere

Heavy equipment maker Deere & Co. (NYSE: DE) has posted a share price gain of just 0.4% over the past 12 months. In mid-April, the stock put up an all-time high but shares have dropped by more than 12% since then. The reasoning is that rising fertilizer prices (along with shortages of fertilizer) could cause farmers to hold off on new equipment purchases or plant less acreage. Inflation does not help either. Deere reports results before Friday’s opening bell.

Analysts remain bullish on the stock, with 14 of 25 having a rating of Buy or Strong Buy and 10 more rating the stock at Hold. At a recent price of around $383.60 a share, the upside potential based on a median price target of $445.50 is about 16.1%. At the high price target of $487.00, the upside potential is about 27%.

For the company’s second quarter of fiscal 2022 ended in April, analysts expect Deere to report revenue of $13.16 billion, which would be up 54.2% sequentially and 19.6% higher year over year. Adjusted earnings per share (EPS) are expected to come in at $6.69, up 129.2% sequentially and up 17.8% year over year. For the full fiscal year, EPS are forecast at $22.71, up 19.6%, on sales of $47.54 billion, up about 19.6%.

The stock trades at 16.4 times expected 2022 EPS, 14.2 times estimated 2023 earnings of $26.23 and 13.5 times estimated 2024 earnings of $27.69 per share. Deere’s 52-week range is $320.50 to $446.76. The company pays an annual dividend of $3.90 (yield of 1.13%). Total shareholder return for the past year was 2.05%.

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