Wall Street Week Ahead Earnings: KKR, Walt Disney, Coca-Cola, Twitter and PepsiCo in Focus

Investors will focus on December quarter earnings for stocks that are economically sensitive, which should show better profits than technology stocks. Increasing Treasury yields and risk aversion could hit the stock market hard over the coming months. In addition, investors will closely monitor the latest news on the rapidly spread Omicron coronavirus variant to see how it impacts earnings in 2022.

Earnings Calendar For The Week Of February 7

Monday (February 7)

TICKER COMPANY EPS FORECAST
ACM AECOM $0.77
CHGG Chegg $0.13
HAS Hasbro $0.85
LEG Leggett & Platt $0.73
ON ON Semiconductor $0.94
THC Tenet Healthcare $1.49
TSN Tyson Foods $2.01

 

Tuesday (February 8)

IN THE SPOTLIGHT: KKR

The U.S.-based investment firm KKR & Co is expected to report its fourth-quarter earnings of $1.02 per share, which represents year-over-year growth of over 108% from $0.49 per share seen in the same period a year ago.

The company that manages multiple alternative asset classes would post revenue growth of 17% to $784.8 million. It is worth noting that the company has consistently beaten consensus earnings estimates in the last two years, at least.

“Strong near-term growth with fundraising supercycle and GA accretion coming into earnings, but we see this reflected in the price at the current valuation for a business model with greater earnings contribution from the balance sheet (40%). While strong investment performance could drive upward estimate revisions, we have less visibility on more episodic investment income gains,” noted Michael Cyprys, equity analyst at Morgan Stanley.

“Mgmt’s increased focus on expanding the platform with adjacent strategies and scaling successor funds should drive higher fee-related earnings (FRE).”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 8

TICKER COMPANY EPS FORECAST
BP BP $1.18
IT Gartner $2.47
HOG Harley-Davidson $-0.37
LYFT Lyft $-0.46
PFE Pfizer $0.85

 

Wednesday (February 9)

IN THE SPOTLIGHT: WALT DISNEY

Walt Disney, a family entertainment company, is expected to report its fiscal first-quarter earnings of $0.68 per share, which represents year-over-year growth of over 112% from $0.32 per share seen in the same period a year ago.

The family entertainment company would post revenue growth of over 30% to $21.15 billion. The company has beaten earnings estimates in most of the quarters in the last two years, at least.

Disney is building content assets that enable it to take advantage of the significant direct-to-consumer streaming opportunity ahead. Disney’s underlying IP remains best-in-class, supporting long term content monetization opportunities,” noted Benjamin Swinburne, equity analyst at Morgan Stanley.

“During this period of FCF pressure from Parks closures, ESPN’s FCF generation is key to driving down leverage. Historical cycles suggest a potential return to above prior peak US Parks revenues in FY23.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 9

TICKER COMPANY EPS FORECAST
AFG American Financial Group $2.98
CVS CVS Health $1.56
HMC Honda Motor $0.95
RDWR Radware $0.13
SGEN Seagen $-0.74
TM Toyota Motor $3.76
UBER Uber Technologies $-0.33

 

Thursday (February 10)

IN THE SPOTLIGHT: COCA-COLA, TWITTER, PEPSICO

COCA-COLA: The world’s largest soft drink manufacturer is expected to report its fourth-quarter earnings of $0.41 per share, which represents a year-over-year decline of over 12% from $0.47 per share seen in the same quarter a year ago. However, the company’s revenue would grow nearly 4% to $8.94 billion.

TWITTER: The social media giant is expected to report its fourth-quarter earnings of $0.35 per share, which represents year-over-year growth of about 8% from $0.38 per share seen in the same period a year ago.

The company would post revenue growth of over 21% to $1.57 billion. Twitter expects revenues of approximately $1.5 billion to $1.6 billion in the fourth quarter of 2021. GAAP operating income is expected to range from $130 million to $180 million, according to ZACKS Research.

With a focus on engineering and products, Twitter expects to increase headcount and costs by 30% or more in 2021. In 2021, the company expects total revenues to grow faster than expenses.

“Lack of Negative Revisions and Relative Valuation: Valuation continues to be expensive, but we think investors are likely to continue to pay a premium for Twitter (TWTR) given 1) continued turnaround progress and 2) platform scarcity,” noted Brian Nowak, equity analyst at Morgan Stanley.

“Execution Risk Remains Around Driving Advertiser ROI: Advertiser ROI has clearly improved on Twitter, but the company needs to improve ad targeting and measurability to compete with the larger players. To do that it will have to further personalize the content that users see and use its data more effectively, both of which remain key strategic challenges (and priorities) for management.”

PEPSICO: The Harrison, New York-based global food and beverage leader is expected to report its fourth-quarter earnings of $1.52 per share, which represents year-over-year growth of over 3% from $1.47 per share seen in the same period a year ago.

The U.S. multinational food, snack, and beverage corporation would post revenue growth of about 9% to $24.35 billion. It is worth noting that the company has consistently beaten consensus earnings estimates in the last two years, at least.

The company revised its organic revenue growth to 8% from 6% previously. The company estimates core earnings of $6.20 per share for 2021, compared to $5.52 in 2020, according to ZACKS Research.

PepsiCo struggles with supply-chain headwinds that have caused it to increase costs and limit its output. Investors will want to know whether the beverage company is winning this battle when it reports its financial results for the fourth quarter of 2021 on Thursday, February 10.

“For the quarter, we are expecting PepsiCo (PEP) to deliver EPS of $1.47, which implies flat YoY growth and is 4 pennies below consensus EPS of $1.51. Our $1.47 4Q21 estimate implies FY21 EPS of $6.20, which is at the low end of management’s expectation to deliver “at least” $6.20 in EPS and may ultimately prove conservative given PepsiCo’s (PEP) history of outperforming expectations. Since 1Q18, we can see that PEP’s reported EPS has come in above consensus in 14 out of the past 15 quarters, with an average upside surprise of+5%,” noted Vivien Azer, equity analyst at Cowen.

“As we are already almost a month into the new year, all eyes will be on PepsiCo’s (PEP) initial FY22 guidance. As a reminder, on the last earnings call management noted that at the time they expected FY22 performance to be in line with its stated long-term targets, which means MSD (+4-6%) organic revenue growth and HSD core constant currency EPS growth.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 10

TICKER COMPANY EPS FORECAST
AZN AstraZeneca $0.78
EXPE Expedia Group $-0.01
GDDY GoDaddy $0.41
K Kellogg $0.8
MCO Moody’s $2.3
PEP PepsiCo $1.52
TWTR Twitter $0.16
WU Western Union $0.53

 

Friday (February 11)

TICKER COMPANY EPS FORECAST
APO Apollo Global Management $1.08
D Dominion Energy $0.93
FTS Fortis $0.58
MGA Magna International $0.81

 

Chegg Shares Soar Over 6% on Stronger-Than-Expected Q2 Earnings; Target Price $111

Chegg shares jumped over 6.5% on Tuesday after the education technology company reported better-than-expected earnings and revenue in the second quarter, largely driven by strong growth in services revenue with subscribers growing to 4.9 million in the quarter.

The Santa Clara, California-based company reported quarterly adjusted earnings (EPS) of $0.43 ​ per share, beating the Wall Street consensus estimates of $0.37 per share.

Chegg’s revenue jumped about 30% to $198.48 million from a year earlier. That was also higher than the analysts’ expectations of $190.09 million.

For the full year 2021, the company forecasts total net revenues in the range of $805 million to $815 million and adjusted EBITDA in the range of $295 million to $300 million. For the third quarter, Chegg forecast total net revenues in the range of $170 million to $175 million and adjusted EBITDA in the range of $43 million to $45 million.

Following upbeat results, Chegg shares gained over 6.5% to $85.0 on Tuesday. However, the stock down about 6% so far this year.

Analyst Comments

“Q2 Services upside & FY21 guidance raise help to calm investor concerns on the durability of Services growth. Bullish mgt commentary and demonstrated model efficiency highlight the attractive opportunity at current levels, w/ a high high-30%’s EBITDA CAGR through 2023, not in the price,” noted Josh Baer, equity analyst at Morgan Stanley.

“We see Chegg’s direct-to-consumer platform, with limited competition and large moat, as uniquely positioned to help students’ educational outcomes – especially in a virtual education format given Covid-19, from completing homework to studying for and passing tests, to increasing graduation rates. Combining ~27% operating margins in 2020 (which we expect to expand to 41.5% in CY26) and a durable 25%+ revenue growth underscores Chegg as a unique asset, underpriced versus peers. Our price target implies 16x EV/CY22 Sales or 0.63x EV/S/Growth, in line with the SaaS peer average despite significantly better op margins: 31% in 2021 vs. SaaS comps average at ~1.5%.”

Chegg Stock Price Forecast

Seven analysts who offered stock ratings for Chegg in the last three months forecast the average price in 12 months of $111.67 with a high forecast of $120.00 and a low forecast of $100.00.

The average price target represents a 31.38% change from the last price of $85.00. All of those seven analysts rated “Buy”, none rated “Hold” or “Sell”, according to Tipranks.

Morgan Stanley gave the stock price forecast of $115 with a high of $160 under a bull scenario and $55 under the worst-case scenario. The firm gave an “Overweight” rating on the education technology company’s stock.

Several other analysts have also updated their stock outlook. JPMorgan raised the stock price forecast to $98 from $97. Berenberg lifted the target price to $98 from $96.

CHGG continues to demonstrate the power of its model, with sustained top-line growth and margin expansion, while the company invests in international + skills-based opportunities and expands its content library with University,” noted Brent Thill, equity analyst at Jefferies.

Chegg Services rev growth of 38% yoy was 5 pts ahead of cons. 33%, and adj. EBITDA margin of 43% was 4 pts ahead, through a decelerating subscriber growth number off tough comps remains an area to monitor. Maintain Buy and $105 price target.”

Check out FX Empire’s earnings calendar