Earnings Previews: Academy Sports, Campbell Soup

The three major U.S. equity indexes closed mixed on Friday. The Dow Jones industrials ended the day up by 0.10%, while the S&P 500 closed 0.12% lower and the Nasdaq down 0.18%. Six of 11 sectors closed lower, with energy (−0.60%) and technology (−0.55%) falling the most. Materials (1.1%) and industrials (0.62%) posted the largest gains.

The Bureau of Labor Statistics (BLS) employment situation report Friday morning sent U.S. markets lower at the opening bell, but as the day went on, traders refused to let equities fall much below the break-even line. After Monday’s opening bell, the Institute for Supply Management (ISM) reports its non-manufacturing index for November. Economists are expecting a reading of 53.5%, lower than October’s level of 54.4%. On Friday, the BLS will issue its report on the producer price index (PPI) for November. Economists are expecting the index to rise by 0.2%, as it did in October. Core PPI is expected to be flat compared to an increase of 0.2% month over month in October.

All three major indexes traded lower in Monday’s regular session.

Before markets opened on Monday, SAIC reported results that beat analysts’ estimates on both the top and bottom lines. The company also raised fiscal year earnings and revenue guidance. Shares traded up about 6% Monday morning.

AutoZone and Signet Jewelers are on deck to report earnings before U.S. markets open on Tuesday. Later in the day, MongoDB, SentinelOne, Stitch Fix and Toll Brothers release their reports.

Here is a preview of two companies set to report quarterly results first thing Wednesday morning.

Academy Sports

Sporting gear retailer Academy Sports and Outdoors Inc. (NASDAQ: ASO) has seen its share price rise by about 15.5% over the past 12 months. The stock posted a new all-time high about two weeks ago, but shares have backed off by nearly 9% since then. Some of that dip may have been a response to competitor Dick’s Sporting Goods’ strong quarterly report and 10% share price hike after reporting earnings just two days after Academy put up the new high. Regardless, Academy’s one-year return remains nearly three times better than Dick’s.

Of 12 brokerages covering the stock, 11 have a Buy or Strong Buy rating and the other rates the shares at Hold. At a recent price of around $47.70 a share, the upside potential based on a median price target of $60.00 is 25.8%. At the high price target of $76.00, the upside potential is about 59.3%.

Analysts expect Academy Sports to report third-quarter fiscal 2023 revenue of $1.55 billion, which would be down 8.1% sequentially and by 2.5% year over year. Adjusted earnings per share (EPS) are forecast at $1.59, down 30.8% sequentially and 8% lower year over year. For the full fiscal year ending next January, estimates call for EPS of $7.17, down 5.7%, and revenue of $6.55 billion, down 3.3%. The prior quarter is typically Academy’s second strongest, trailing the fourth quarter.

The stock trades at 6.6 times expected 2023 EPS, 6.3 times estimated 2024 earnings of $7.60 and 5.5 times estimated 2025 earnings of $8.58 per share. The stock’s 52-week range is $25.10 to $52.34. Academy Sports pays a forward annual dividend of $0.30 (yield of 0.59%). Total shareholder return for the past year was 16%.

Campbell Soup

Over the past 12 months, shares of Campbell Soup Co. (NYSE: CPB) have risen by about 29.4%, while the consumer staples sector has added just over 10%. For the year to date, Campbell Soup has added more than 25%, while the S&P 500 is down by about 14.5%. The stock posted a new 52-week high last week, a level the stock has not reached in around two years. The company recently filed a brief with the U.S. Supreme Court in a trademark infringement suit brought by Brown-Forman on behalf of its Jack Daniel’s brand against a maker of dog toys.

Analysts are less than bullish on the shares, probably because they have run up so much this year. Of 20 brokerages covering the company, 12 have a Hold rating while five rate the stock at Sell or Strong Sell. At a share price of around $53.20, the stock trades above its median price target of $48.00. At the high price target of $55.00, the upside potential is about 3.4%.

For the company’s first quarter of fiscal 2023, the consensus revenue estimate is $2.44 billion, up nearly 23% sequentially and by 8.9% year over year. Adjusted EPS are forecast at $0.87, up 54.5% sequentially but down 2.2% year over year. For the fiscal year ending in July, estimates call for EPS of $2.91, up 2%, on sales of $9 billion, up by about 5.1%.

Campbell Soup stock trades at 18.3 times expected 2023 EPS, 17.5 times estimated 2024 earnings of $3.05 and 16.7 times estimated 2025 earnings of $3.19 per share. The stock’s 52-week range is $40.60 to $54.18. The company pays an annual dividend of $1.48 (yield of 2.81%). Total shareholder return for the past year was 33.7%.

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