The earnings season has come to a close, but there are still a few names to report before the end of the year. So far it has been a good earnings season, but concerns remain on slowing earnings growth.
Trade war fears and concerns over rising interest rates have kept volatility in the market, and as a result we have seen a lot of stocks make big moves following their quarterly reports. The market is very cautious, and any signs of weakness in a quarterly report will result in a big selloff, so investors should pay close attention to reports in the companies in which they have positions.
With most big names having already reported and the busy holiday season upon us it would be easy to lose focus on the market, but given the recent market volatility it remains very important to stay on top of quarterly reports.
After this week the earnings season will dry up until the new year, but here are four stocks reporting this week that could make big moves following their releases.
Software giant Adobe (ADBE) has had a strong 2018, with shares currently up 36% on the year. Adobe has done a good job converting its software business to a cloud-based subscription model, and earnings have been on the rise. Profits have risen 45% per annum over the last five years, and are forecast to rise an additional 32% per annum over the next five years. The company has posted better than expected numbers on the top and bottom line each of the last four quarters. Adobe will report its fiscal fourth-quarter results after the market close Thursday. Analysts expect earnings of $1.89 per share, up from $1.26 during the same period last year. The street expects another positive earnings surprise, with a whisper number of $1.93 for the quarter. ADBE’s valuation is a bit of a concern, with a forward P/E of 29.8, but given the strong growth estimates the stock continues to have upside potential as long as the quarterly report does not show signs of weakness and its Creative Cloud shows growth. Last quarter Creative Cloud revenues were up 28% year over year, and Wall Street wants to continue seeing that number rise. ADBE trades at $238.00 with an average price target of $290.79.
Membership club Costco (COST) reports fiscal first-quarter numbers after the market close Thursday. The stock has traded sideways over the last three months as volatility hit the overall market, but the stock remains up 22% for the year following a strong first half of the year. Costco has shown solid earnings growth over the last five years with profits up 9.3% per annum and looking ahead analysts expect average annual earnings growth of 12% over the next five years. For the company’s most recent quarter the consensus calls for earnings of $1.61 per share, but the street has a slightly higher whisper number for the quarter at $1.62. During the same period last year Costco earned $1.45 per share. Costco’s valuation is a little high with a forward P.E of 26 which is keeping a ceiling on the stock at this time. If the company is able to post better than expected earnings, the stock has upside potential, but an earnings miss will likely result in a big drop in the stock given its valuation and the fact shares are priced for perfection ahead of the report. COST trades at $224.86 with an average price target of $245.83.
American Eagle (AEO)
Teen fashion retailer American Eagle (AEO) will report its third-quarter numbers after the market close Tuesday. Analysts expect earnings of $0.47 per share for the quarter, but the street is looking for a small earnings beat with a whisper number of $0.48 for the quarter. During the same period last year, the company earned $0.37 per share. Last quarter the company posted better than expected numbers on both the top and bottom line, but the stock sold off sharply following the report on disappointing guidance. American Eagle forecast Q3 earnings in a range of $0.45 and $0.47, which was lower than the $0.49 analysts had forecast at the time. The good news for investors is that the lower guidance has already been priced into the stock so there is upside potential in the event the company posts higher than expected profits. American Eagle has posted outpaced estimates on the top and bottom line the last two quarters and if it is able to extend that streak the stock will make back a lot of its recent losses through the remainder of the year. AEO has a low forward P/E of 11.7 so there is limited downside and decent upside potential following the quarterly report. AEO is trading at $19.01 and analysts have an average price target of $26.67 on the stock.
Scholastic Corp. (SCHL)
Scholastic Corp. (SCHL) publishes and distributes children’s books. The company last reported earnings in late September with big beats on both the top and bottom line. The strong numbers shot the stock towards its 52-week high, but shares have been volatile over the last month in sympathy to volatility in the overall market. The company will report its fiscal second quarter numbers before the market open Wednesday with the consensus calling for earnings of $2.16 per share, up from $1.92 during the same period last year. The company’s fiscal second quarter is very important since it makes the majority of its full year earnings during the three months, so the stock could move significantly following the report. Analysts see a little extra upside in the stock at this time with an average price target of $44.00. SCHL is currently trading at $42.44.