We have a short week thanks to the long Labor Day weekend, and while the earnings season is all but over, there are still some big names left to report.
The market continues to trade in sympathy to the trade war. With each positive message on trade negotiations the market rallies, only to give back those gains as comments emerge that the U.S. and China are no closer to reaching a deal.
Both countries have imposed tariffs on each other, and neither country seems willing to back down in negotiations that would lead to a deal and put the long-running trade war to rest.
The longer the trade war lingers the greater the impact it will have on both nations as well as the global economy, so the market will remain volatile until some deal is reached. Given the increased level of overall volatility, each earnings report takes on additional meaning, and each has the potential to create a ripple effect across the broader market.
Here are four big name companies set to report their recent quarterly numbers this week.
Lululemon Athletica Inc. (LULU)
Athletic apparel retailer Lululemon Athletica Inc. (LULU) will report its second-quarter numbers after the market close on Thursday. Ahead of the quarterly report analysts forecast earnings of $0.89 per share on revenue of $842.1 million. During the same period last year the company earned $0.71 on sales of $723.5 million. The street expects LULU to post a positive earnings surprise with a whisper number of $0.93 for the quarter. LULU has traded sideways over the last two months as the overall market has struggled to find direction. Uncertainty over interest rates and progress in the trade war are likely to keep the markets volatile, and while LULU has shown impressive numbers with nine straight quarters of top and bottom line beats, the stock will likely continue to break out to the upside as long as the broader market remains volatile. LULU is a little overpriced with a forward P/E of 32, which puts the stock priced for perfection, and there is little room for error in the quarterly report. If the street is correct and LULU is able to post profit of $0.93 for the quarter the stock should remain in the upper end of its 52-week range, but any signs of weakness could pull shares sharply lower. Current shareholders should have a clear exit strategy in place.
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Ciena Corp. (CIEN)
Communications equipment maker Ciena (CIEN) is expected to report fiscal third-quarter earnings of $0.57 per share before the market open on Thursday. Last year the company earned $0.48 and the street expects a positive earnings surprise with a whisper number of $0.60 for the quarter. Last quarter the company reported big beats on both the top and bottom line which pushed the stock to a fresh 52-week high. The stock has traded sideways since its last report, and needs another strong set of numbers to break out from its sideways pattern. There is still value in the stock which trades at 16 times future earnings and profits are forecast to rise at an annual rate of 15% over the next five years. As long as CIEN is able to keep hitting its estimates there is a lot of upside left in the stock. CIEN trades at $40.48 with an average price target of $49.29.
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At Home (HOME)
Home goods retailer At Home (HOME) is scheduled to release second-quarter numbers after the market close Wednesday. Analysts forecast earnings of $0.14 per share, and the street expects an in-line quarter with a whisper of $0.14. During the same period last year HOME reported earnings of $0.34. HOME has struggled over the last year, due in part to back to back earnings misses. This quarter the street expects an in-line report which would bring some support to the stock which is currently bouncing off its all-time low. Earnings growth has been strong and is expected to continue at an annual rate of 14.6% over the next five years, but the company has to start hitting its estimates if the company is going to regain the trust of Wall Street. HOME trades at less than 10 times earnings, so there is plenty of value in the stock, and with so much negativity priced into shares at this time there could be a big rally on the back on any better than expected number. HOME trades at $6.68 with an average price target of $12.67.
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Meredith Corporation (MDP)
Meredith Corporation (MDP) will report its fiscal fourth-quarter numbers before them market open on Thursday. The consensus calls for earnings of $1.18 per share on revenue of $774 million. During the same period last year the company lost 6 cents per share while posting sales of $788 million. Last quarter the company posted big beats on both the top and bottom line, and earnings have outpaced estimates each of the last three quarters. The stock sold off sharply over the last month, hitting a 52-week low in late August and shares are now trading at just 6 times future earnings. Earnings growth has been a modest 1.4% per annum over the last five years, but analysts expect to see profits rise at an annual rate of 25% over the next five years. With so much negativity priced into the stock, and shares trading at such a discount there is good value in MDP ahead of the quarterly report and a good chance for a strong rally as long as the company is able to hit its estimate. Analysts see huge upside in the stock. MDP trades at $42.61 with an average price target of $74.75.
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