Earnings to Watch Next Week: Toll Brothers, AutoZone, Campbell, Adobe and Costco Wholesale in Focus

Earnings Calendar For The Week Of December 7

Monday (December 7)

IN THE SPOTLIGHT: TOLL BROTHERS

Toll Brothers, a home construction company based in Fort Washington, is expected to report a profit of $1.23 in the fourth quarter, up from prior $0.90, with new orders growth of more than 60%  as the company benefits from rising housing demand due to record low mortgage rates. Toll Brothers’ shares closed 1.25% higher at $47.9 on Friday; the stock is up over 20% so far this year.

“Our 4Q EPS estimate goes to $1.25. Our FY21 EPS estimate goes to $4.42 given what we expect will be a very large backlog ($6.6 billion, +26% y/y) heading into the new year. As a higher-end builder constructing largely build-to-order product, we do expect closing timing and costs to construct to have somewhat less visibility than peers despite the long backlog. This means guidance will likely be more important to share price performance post-EPS release than 4Q data. As a result of our higher estimates, our target goes to $40 from $36, but for now, we still see relative underperformance for the shares in the intermediate term,” said Carl E. Reichard, equity analyst at BTIG Group.

“While Toll Brothers (TOL) is benefiting from the ‘rising tide’ of housing demand, we believe entry-level, spec-focused builders will produce better growth, margins and returns in an environment where valuation gaps have not led to differentiated stock performance. Although shares are less expensive on a relative basis (1.3x TBV vs 1.8x for the group), and TOL has been moving to smaller homes and more optioned lots to improve turns and returns, we are looking for additional evidence that the company’s strategy for structural (not just cyclical) improvement in turns and/or margins is bearing fruit, such as improved backlog-to-close cycle time (running over 300 days currently) and inventory turns nearer to the group average of 1.0x (currently running below 0.7x.).”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE DECEMBER 7

Ticker Company EPS Forecast
JKS JinkoSolar Holding Co. Ltd. ADR $0.85
CASY Casey’s General Stores $2.80
HQY Healthequity Inc $0.36
SMAR Smartsheet Inc. -$0.21
SUMO Sumo -$0.24
EC Ecopetrol $0.15
GCTAY Siemens Gamesa ADR $0.01

Tuesday (December 8)

IN THE SPOTLIGHT: AUTOZONE

AutoZone, the largest retailer of aftermarket automotive parts and accessories in the United States, is expected to report a profit of $17.56 in the first quarter ended Saturday, November 21, 2020. AutoZone’s shares closed 0.75% higher at $1162.63 on Friday. However, the stock is down 2.5% so far this year.

“AutoZone (AZO) is our top pick in DIY Auto. We see it as a high-quality retailer with the ability to compound earnings/FCF growth over time. While not immune to a tougher macro backdrop (fewer miles driven), we believe AZO is best positioned through any recession given its leading exposure to the more defensive DIY segment (80% of sales),” equity analysts at Zacks Research noted.

“In addition, its DIFM growth was accelerating pre-COVID-19 and we think it can gain more share in that segment going forward. In our view, ongoing share gains coupled with solid expense management should allow AZO to overcome headwinds from less driving in the near- to medium-term.”

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

Ticker Company EPS Forecast
HRB H&R Block -$0.94
CMD Cantel Medical Corp $0.37
THO Thor Industries $1.58
MDB MongoDB Inc -$0.45
GWRE Guidewire Software -$0.05
AVAV AeroVironment $0.31
JRONY Jeronimo Martins $0.45
HOCPY Hoya Corp $0.74

Wednesday (December 9)

IN THE SPOTLIGHT: CAMPBELL SOUP

Campbell Soup, a US-centric packaged food company, is expected to report a profit of $0.91 in the first quarter of fiscal year 2021, up from previous $0.63. The one of the world’s top soup maker has set its Q1 2021 pre-market guidance at $0.88-$0.92 EPS. Campbell’s shares closed 0.49% lower at $48.5 on Friday; the stock is down about 2% so far this year.

“High exposure to secularly challenged soup category: Shelf-stable soup (26.5% of sales) faces headwinds given shifts in preferences toward better-for-you and fresh foods, competition from private label, and pricing pressure. Snacking brands are well-positioned, but face competitive pressures: Milano, Goldfish, Farmhouse, and Snyder’s-Lance have strong brand equity, but face high competition from PEP and MDLZ,” said Pamela Kaufman, equity analyst at Morgan Stanley.

Significant organizational changes over last two years refocused the company and show promise: Divesting non-core businesses and new leadership refreshes the company’s strategic plan, allowing the company to focus on its key segments and geographies,” Kaufman added.

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

Ticker Company EPS Forecast
VRNT Verint Systems $0.80
RH Restoration Hardware $5.23
GEF Greif $0.70
AUOTY AU Optronics $0.09

Thursday (December 10)

IN THE SPOTLIGHT: ADOBE

Adobe, one of the largest software companies, is expected to report a profit of $2.67 in the fourth quarter, up from the previous $2.57. The company has set its Q4 2020 after-hours guidance at 2.64-2.64 EPS and its Q4 guidance at $2.64 EPS.

“Adobe (ADBE) has leading market share in some of the most dynamic secular growth areas in software: creative design, dynamic media, and marketing automation. As such, we see the longer-term growth story for ADBE as better than most,” said Keith Weiss, equity analyst at Morgan Stanley.

“With a large recurring rev base and operating margin improvements expected (as margin pressure from recent acquisitions comes to an end), we expect 23% EBIT CAGR from FY19-FY21 and believe this durable growth is not fully reflected in shares. Our $560 price target is based on 49x CY21e EPS of $11.50, which implies 2.3x PEG on 21% EPS CAGR from FY19-FY21e,” Weiss added.

IN THE SPOTLIGHT: COSTCO WHOLESALE

Costco Wholesale, the largest wholesale club operator in the U.S., is expected to report a profit of $2.02 in the first quarter of the fiscal year 2021, down from the previous $3.51. D.A. Davidson equity analyst M. Baker forecasts the retailer will report earnings per share of $1.93 for the quarter, up from their previous forecast of $1.92.

“FQ1 comps bested our above-cons. est. (as reported on 12/2) with earnings set for 12/10. All-in, Q1 comps accel’d Q/Q, but November slowed, we believe primarily due to hardlines -10 pts and ticket -220 bps. However, largely cont’d strength through the qtr, notably in Fresh and Softlines, should be a positive read for core-on-core GM% and EPS. While go-fwd comps likely moderate on vaccine/normalcy, we see robust growth and share gain opptys L-T. Reiterate Buy,” noted Stephanie Wissink, equity analyst at Jefferies.

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

Ticker Company EPS Forecast
CIEN Ciena $0.63
AVGO Avago Technologies $6.24
MTN Vail Resorts -$3.60
LULU Lululemon Athletica $0.86
ORCL Oracle $1.00
SMDS Ds Smith £17.80
ASEKY Aisin Seiki Co $0.42
RLAY Relay Therapeutics Inc. -$0.32
FIZZ National Beverage $0.90

Friday (December 11)

No major earnings scheduled for release.

Costco Could Hit 500 in 2021

Costco Wholesale Corp. (COST) has posted impressive growth for years, lifting into the 39th slot in SP-500 index capitalization. The big box retailer sharply increased market share in the first quarter, staying open as an essential services provider while many rivals were forced to close or curtail operations. That benefit has underpinned sales throughout 2020, generating a series of all-time highs. It currently boasts a 31% year-to-date return after booking a 44% return in 2019.

Costco Looks Ahead To 2021

The stock posted an all-time high at the start of Tuesday’s U.S. session and pulled back, highlighting mixed sentiment about COVID-19 beneficiaries while Pfizer Inc. (PFE) and Moderna Inc. (MRNA) load vaccines into refrigerated containers for distribution around the world. However, mega-retailers will benefit from the pandemic far longer than the majority of smaller companies that attracted intense interest in the second and third quarters.

Telsey Advisory Group analyst Joseph Feldman raised his price target to $430 on Tuesday, maintaining an ‘Outperform’ rating. He pounded the table in his commentary, stating “we forecast a total comp of 12.5% vs. 5.3% last year. Excluding a projected net gas and FX headwind of about 150 bps, we estimate a core merchandise comp of 14.0% vs. 4.8% last year, with a US comp, ex-gas, of 14.0% vs. 4.3% last year. Overall, we expect another strong monthly sales report, highlighting high member loyalty, the focus on value, and improvement in digital.”

Wall Street And Technical Outlook

Wall Street consensus has been solid as a rock for years, with the current ‘Strong Buy’ rating computed from 17 ‘Buy’ and 5 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions, even though price has nearly doubled in the last two years.  Price targets now range from a low of $310 to a Street-high $435 while the stock opened Monday’s U.S. session about $4 above the median $386 target.

Costco has posted a nearly endless string of higher highs and higher lows since 2009, making it one of the SP-500’s top long-term performers. High volatility hit the uptrend in February 2020 when debate first erupted about potential COVID beneficiaries. It carved a broad triangle pattern into June and broke out, adding more than 100 points into October. The stock is now attempting to break resistance at that level and mount 400 for the first time.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.