Investing

Earnings Preview: Bath & Body Works, Foot Locker, Kohl's, Peloton

Paul Ausick

Published: August 21, 2023 11:11 am

After U.S. markets closed on Friday, Palo Alto Networks reported better-than-expected earnings per share (EPS) and revenue that was just barely short of the consensus estimate. Analysts and investors breathed a big sigh of relief and sent shares up by 14.8% in Monday morning trading.

There were no earnings reports due out before markets opened Monday morning.

After markets close on Monday and before they open on Tuesday, Baidu, Dick’s Sporting Goods, Lowe’s, Macy’s and Zoom Video are set to report results. Then look for reports from Toll Brothers and Urban Outfitters later on Tuesday.

Here is a look at what analysts expect from the following four firms, all reporting quarterly results first thing Wednesday morning.

Bath & Body Works

Over the past 12 months, Bath & Body Works Inc. (NYSE: BBWI) stock has dropped by about 9.3%, including a year-to-date decline of more than 13%. Shares were making something of a comeback until investor concerns about consumer spending heated up earlier this month. The company introduced a line of products for men in May, and investors will want to hear how that is going. As for EPS and revenue, the bar has been set fairly low. A miss could really hurt the stock.

Of 20 analysts covering the stock, 13 have a Buy or Strong Buy rating and the other seven rate it at Hold. At a recent trading price of around $37.00, the upside potential based on a median price target of $48.00 is about 29.7%. At the high price target of $78.00, the upside potential is 110.8%.

Analysts have forecast second-quarter revenue at $1.57, which would be up 12.6% sequentially and by 3.1% year over year. EPS are pegged at $0.34, up 3.1% sequentially but down 35.6% year over year. For the full fiscal year ending in January 2024, analysts estimate EPS of $3.04, down 10.7% on sales of $7.47 billion, down 1.2%.

Bath & Body Works stock trades at 12.2 times expected 2024 earnings, 10.2 times estimated 2025 earnings of $3.61 and 8.7 times estimated 2026 earnings of $4.24 per share. The 52-week trading range is $30.52 to $49.55, and the company pays an annual dividend of $0.80 (yield of 2.19%). Total shareholder return for the past year was negative 6.19%.

Foot Locker

Mall-store operator Foot Locker Inc. (NYSE: FL) has had a share price decline of around 21% over the past year due entirely to a 33% drop in 2023. Were it not for the company’s high dividend, there would likely be even less enthusiasm to own the shares. Profits for the second quarter are expected to be nearly invisible, and revenue is forecast down as well. An investment decision rests on whether the investor believes the stock has hit a bottom and is coming back or whether it has further to sink. We’ll find out early Wednesday.

Of 20 analysts covering the stock, 15 are waiting on the sidelines with a Hold rating. Five have a Buy rating. At a share price of around $25.00, the upside potential based on a median price target of $29.00 is 16%. At the high price target of $50.00, the upside potential is 100%.

Second-quarter revenue is forecast at $1.88 billion, down 2.3% sequentially and 8.7% lower year over year. Adjusted EPS are forecast at $0.05, down 93.6% sequentially and by 95.5% year over year. For the full 2024 fiscal year ending next January, Foot Locker is expected to report EPS of $2.03, down 59%, on revenue of $8.07 billion, down 7.8%.

Shares trade at 12.4 times expected 2024 EPS, 8.6 times estimated 2025 earnings of $2.92 and 6.5 times estimated 2026 earnings of $3.88 per share. Foot Locker’s 52-week range is $24.44 to $47.22.The company pays an annual dividend of $1.60 (yield of 6.33%). Total shareholder return for the past year was 17.56%.

Department store operator Kohl’s Corp. (NYSE: KSS) has posted a 12-month share price decrease of about 10%. The good news is that the stock price is up 36.5% over the past three months. The stock dropped by more than 5% on May 30, following a social media-driven boycott of the store for selling LGBTQ+ merchandise during Pride Week. The effect on the stock was short-lived, though. The stock has bounced by more than 51% since then. Investors appear to take any dip in the share price as a buying opportunity.

Of 17 analysts covering the stock, just six have a Buy rating, and seven have a Hold ratings. At a share price of around $28.00, the upside potential based on a median price target of $29.00 is 3.6%. At the high price target of $50.00, the upside potential is about 78.6%.

For the retailer’s second quarter of fiscal 2024, analysts are looking for revenue of $3.71 billion, up 10.6% sequentially but down 3.9% year over year. Analysts are forecasting EPS of $0.23, up 79.3% sequentially and 79.3% lower year over year. For the full 2024 fiscal year ending next January, analysts have forecast EPS of $2.38, compared to fiscal 2023’s loss of $0.15 per share, on sales of $16.87 billion, down 1.7%.

Kohl’s stock trades at 11.8 times expected 2024 EPS, 9.6 times estimated 2025 earnings of $2.92 and 8.0 times estimated 2026 earnings of $3.51 per share. The 52-week trading range is $17.89 to $35.77. Kohl’s pays an annual dividend of $2.00 (yield of 7.1%). Total shareholder return over the past year was negative 2.61%.

Peloton

Shares of fitness product maker Peloton Interactive Inc. (NASDAQ: PTON) have declined by nearly 45% over the past 12 months. The six-month price drop is more than 48%. Peloton has done nothing to give investors a sense of confidence in the company.

Shares popped following June’s announced rebranding and tier setup. By August 1, the good vibes had reached their peak, and the price is down more than 27% in just over two weeks. Based on the weak sentiment for the stock, Peloton had better hit every mark and have a salable story for the next couple of quarters. Otherwise, shares are likely to get hammered again.

Analysts remain mildly bullish on the company. Of 27 brokerages covering the shares, 11 have a Buy or Strong Buy rating, while another 13 rate the stock at Hold. At a price of around $7.00 a share, the upside potential based on a median price target of $10.00 is 11.3%. At the high target of $20.00, the upside potential is about 186%.

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For the company’s fourth quarter of fiscal 2023, which ended in June, analysts expect revenue to total $642.26 million. That would be down 14.2% sequentially and by 5.4% year over year. Analysts also expect a loss per share of $0.37, equal to the loss per share in the prior quarter and better than the $1.32 per-share loss in the year-ago quarter. For the full fiscal year, analysts estimate a loss per share of $1.97, compared to a loss of $4.62 per share in fiscal 2022 on revenue of $2.8 billion, down about 21.8%.

Peloton is not expected to post a profit in 2023, 2024 or 2025. The stock’s estimated 2023  and 2024 enterprise value to sales multiple is 1.4 times. That multiple drops to 1.2  in 2025. The 52-week trading range is $6.62 to $17.83, and Peloton does not pay a dividend. Total shareholder return over the past year is negative 45.1%.