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%.
Foot Locker
Shares of Foot Locker Inc. (NYSE: FL) have trailed downward for the past 12 months and have lost about 51% of their value in that time. The stock reached a 52-week low in late February, after reporting quarterly earnings and warning the full-year revenue for 2022 would be lower than the year before. Mall-based businesses like Foot Locker are struggling, and rising prices for everything are likely to keep these stores starved for traffic and sales. Foot Locker reports quarterly results early Friday.
Of 21 analysts covering the company, 13 have moved to the sidelines with a Hold rating. Only three have a Buy or Strong Buy rating. At a share price of around $31.20, the stock trades slightly above its median price target of $31.00. At the high price target of $61, the upside potential is almost 96%.
Fiscal 2023 first-quarter revenue is forecast at $2.20 billion, down 6% sequentially and 2.3% lower year over year. Adjusted EPS are forecast at $1.52, down 8.9% sequentially and 22.4% year over year. For the full fiscal year ending in January 2023, Foot Locker is expected to report EPS of $4.43, down 42.9%, on revenue of $8.45 billion, down 5.7%.
The stock trades at 7.1 times expected 2023 EPS, 7.1 times estimated 2024 earnings of $4.19 and 7.0 times estimated 2025 earnings of $4.51 per share. Foot Locker’s 52-week range is $26.36 to $66.71. The company pays an annual dividend of $1.00 (yield of 5.10%). Total shareholder return for the past year was negative 49.4%.
Ross Stores
Off-price apparel retailer Ross Stores Inc. (NASDAQ: ROST), like Foot Locker, has seen its share price trail down for the entire past 12 months. The stock posted its 52-week high a year ago and its 52-week low in early March. Since that low, shares have added about 14%. Discount stores typically do well during periods of inflationary pressure and rising prices. Ross’s performance in the past few weeks was tied directly to inflation fears. The company reports quarterly results after markets close Thursday.
Analysts are bullish on the stock, with 13 of 23 having ratings of Buy or Strong Buy on the shares and the rest rating the stock at Hold. At a share price of around $97.70, the upside potential based on a median price target of $116.00 is 18.7%. At the high price target of $145.00, the upside potential is 48.4%.
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