Investing

Earnings Previews: JD.com, KE Holdings, Macy's, Medtronic

ozgurdonmaz / iStock Unreleased via Getty Images

The three major U.S. equity indexes closed higher on Thursday. The Dow Jones industrials added 0.06%, while the S&P 500 rose by 0.23%, and the Nasdaq closed up 0.21%. Seven of 11 sectors ended the day higher, led by energy (up 2.7%). Real estate lagged (down 0.7%). Claims for jobless benefits were essentially flat week over week, as were continuing claims. The day’s big mover was Bed Bath & Beyond, falling nearly 20%, and by twice that amount in Friday’s premarket, after investor Ryan Cohen dumped all his stock in the company. All three indexes traded lower about half an hour after Friday’s opening bell.

After markets closed on Thursday, Applied Materials reported better-than-expected earnings per share (EPS) and revenue. Guidance was in line with consensus estimates. Shares traded down about 2.7% Friday morning.

Ross Stores beat the consensus EPS estimate and missed on revenue. The discount retailer guided earnings for the second half of the year lower, and the stock traded down about 1.2% Friday.

Before U.S. markets opened on Friday, Deere badly missed the consensus EPS estimate but surpassed revenue expectations. Shares traded down about 1.6% early Friday.

Foot Locker beat the EPS estimate and barely missed on revenue. New CEO Mary Dillon takes over on September 1. The stock traded up by around 21% Friday morning.

No notable earnings reports are expected either after markets close Friday or before they open on Monday. Palo Alto Networks and Zoom Video take their turns in the earnings spotlight late Monday.

First thing Tuesday morning, these four companies are set to release quarterly results.

JD.com

Beijing-based JD.com Inc. (NASDAQ: JD) is China’s second-largest e-commerce company. Shares have bounced back from a 52-week low set in March but remain about 15.8% lower for the past 12 months.

The stock got a bounce a couple of weeks ago following better-than-expected quarterly results from rival Alibaba. Yet, investors reacted negatively last week after Ray Dalio’s Bridgewater hedge fund dumped JD.com shares in the fund’s purge of Chinese stocks and again this week after Tencent Holdings sold its stake in food delivery company Meituan. If the company can beat modest expectations, investors will be wearing big smiles. If the company misses, doom and gloom will follow.

Of 38 analysts covering the stock, 36 have a Buy or Strong Buy rating. At a recent share price of around $55.20, the stock’s implied upside based on a median price target of $79.44 is about 43.9%. At the high price target of $113.51, the upside potential is 58.3%.

Analysts expect JD.com to report second-quarter revenue of $38.41 billion. That would be up 1.6% sequentially but down 2.3% year over year. Adjusted EPS are expected to come in at $0.41, up 118.9% sequentially and down 8.9% year over year. For the full 2022 fiscal year, EPS are forecast at $1.81, up 112.4%, on sales of $157.75 billion, up 5.4% year over year.

JD.com stock trades at 30.4 times expected 2022 EPS, 20.8 times estimated 2023 earnings of $2.65 and 15.5 times estimated 2024 earnings of $3.57 per share. The stock’s 52-week range is $41.56 to $92.69, and the company does not pay a dividend. Total shareholder return over the past year is negative 13.7%.

KE Holdings

KE Holdings Inc. (NYSE: BEKE) is a Beijing-based online real estate brokerage. The share price is down about 20% over the past 12 months, but that represents a big improvement from its 50% decline just three months ago.

China’s real estate market is sinking, and there is little sign yet that the government is planning to go big to stop the slide. Even sound, well-managed property developers are currently paying double-digit premiums on bonds maturing next year. The government’s continuing lockdowns have knocked residential property sales down by a third compared to last year and have contributed to the lack of new development.

KE’s stock has been rising because investors believe the government will not just sit on its hands as the Chinese economy withers. Is that bet going to pay off, and if so, soon?

Of seven analysts covering the stock, five have a Buy or Strong Buy rating and the others have Hold ratings. At a share price of around $16.00, the stock’s implied upside based on a median price target of $19.28 is about 20.5%. At the high price target of $23.61, the upside potential is 47.6%.

Analysts expect the company to report second-quarter 2022 revenue of $1.59 billion, down 19.8% sequentially and down from $24.17 billion in the year-ago quarter. The expected adjusted loss per share is $0.21, down from a profit of $0.02 in the prior quarter and a profit of $1.37 in the year-ago quarter. For the full fiscal year, EPS are forecast at $0.04, down 86.2%, on sales of $9.35 billion, down 26.4% year over year.

The stock trades at 383.2 times expected 2022 EPS, 27.9 times estimated 2023 earnings of $0.57 and 24.0 times estimated 2024 earnings of $0.67 per share. The stock’s 52-week range is $7.31 to $25.98, and the company does not pay a dividend. Total shareholder return over the past year is negative 20%.

Macy’s

Shares of Macy’s Inc. (NYSE: M) have risen by more than 14% over the past 12 months. All that gain has been made over the past two weeks as the stock rode the wave generated by Walmart’s solid earnings and outlook. Macy’s also benefits from modest expectations, and the stock probably overreacts to macroeconomic news. But then, so do all retailers’ stocks. Investors are going to be looking for any move in the company’s forecast for the rest of this year.

Only four of 17 analysts rate Macy’s stock as a Buy or a Strong Buy. Another 10 have Hold ratings. At a share price of around $19.90, the upside potential based on a median price target of $25.25 is 26.9%. Based on a high price target of $36.00, the potential upside on the shares is almost 81%.

Analysts are forecasting fiscal second-quarter revenue of $5.5 billion, up 2.8% sequentially and down about 2.7% year over year. Adjusted EPS are tabbed at $0.88, down 18.5% sequentially and by 31.8% year over year. For the 2023 fiscal year ending in January, analysts are looking for EPS of $4.58, down 13.7%, on sales of $24.37 billion, down about 0.4%.

Macy’s stock trades at 4.3 times expected 2023 EPS, 4.5 times estimated 2024 earnings of $4.37 and 4.9 times estimated 2025 earnings of $4.03 per share. The stock’s 52-week range is $15.85 to $37.95. The company pays an annual dividend of $0.63 (yield of 3.08%). Total shareholder return for the past year was negative 5.8%.

Medtronic

Medical device maker Medtronic PLC (NYSE: MDT) has posted a share price decline of nearly 25% over the past 12 months. Shares have traded below their 52-week high for 11 straight months, and a couple of bounces have moderated a decline that looked dangerous in mid-December.

On Thursday, the company announced an 8% increase in its quarterly dividend, the 45th consecutive year that the company has increased its dividend payment. Medtronic is one of 65 companies among the Dividend Aristocrats, and it is now just five years away from being crowned a Dividend King.

Analysts remain bullish on the stock, with 15 of 26 brokerages having a Buy or Strong Buy rating and another 10 rating the shares at Hold. At a share price of around $94.90, the upside potential based on a median price target of $109.00 is 14.9%. At the high price target of $129.00, the upside potential is nearly 36%.

Analysts expect the company to report first-quarter revenue of $7.21 billion, down 10.8% sequentially and 9.8% lower year over year. Adjusted EPS are forecast at $1.12, down 26.4% sequentially and by 20.6% year over year. Current estimates for the 2023 fiscal year ending next April call for EPS of $5.57, up 0.4%, on sales of $32.03 billion, up about 1.1%.

Medtronic’s stock trades at 17.0 times expected 2023 EPS, 15.7 times estimated 2024 earnings of $6.02 and 14.5 times estimated 2025 earnings of $6.53 per share. The stock’s 52-week range is $86.70 to $135.89. After the recent increase, the company pays an annual dividend of $2.72 (yield of 2.87%). Total shareholder return for the past year was negative 24.6%.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.