Wall Street Week Ahead Earnings: Caesars Entertainment, Home Depot, Lowe’s and Moderna 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 21

Monday (February 21)

The New York Stock Exchange and NASDAQ will all be closed on Monday, February 21 for President’s Day.

Tuesday (February 22)

IN THE SPOTLIGHT: CAESARS ENTERTAINMENT, HOME DEPOT

CAESARS: The largest casino-entertainment Company in the U.S. company is expected to report its fourth-quarter loss of $-0.71 per share, up over 58%, better compared to a loss of $-1.7 per share seen in the same period a year ago. The Las Vegas-based company would post revenue growth of over 77% to $2.58 billion.

Caesars Entertainment (CZR) is currently trading at below its historical NTM multiple on 2023e EBITDAR, despite our expectation of >1,000bps higher core casino margins and faster growth. We believe regional casino markets (55% of mix) have structural tailwinds from customers acquired post-COVID and sports betting legalization,” noted Thomas Allen, equity analyst at Morgan Stanley.

“We expect CZR to improve its sports betting / iGaming market share in coming qtrs, a key driver to Gaming stocks in recent years. High leverage now (7.5x at YE21) but significant FCF and a planned Vegas asset should drive leverage to ~5x by YE22, opening up a broader investor base.”

HOME DEPOT: The largest home improvement retailer in the United States is expected to report its fourth-quarter earnings of $3.22 per share, which represents year-over-year growth of over 17% from $2.74 per share seen in the same period a year ago.

The home improvement retailer would post revenue growth of over 7% to $34.6 billion. The company has beaten consensus earnings estimates in most of the quarters in the last two years, at least.

“We are Overweight Home Depot (HD) given its best-in-class nature and structural housing tailwinds beyond N-T disruption from COVID-19. The stock seems attractively valued in the context of a potential 2021/2022 economic/housing boom,” noted Simeon Gutman, equity analyst at Morgan Stanley.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 22

TICKER COMPANY EPS FORECAST
CNP CenterPoint Energy $0.33
HR Healthcare Realty Trust $0.44
HD Home Depot $3.22
M Macy’s $1.91
MDT Medtronic $1.38
PANW Palo Alto Networks $-0.42
TOL Toll Brothers $1.26

 

Wednesday (February 23)

IN THE SPOTLIGHT: LOWE’S

Home improvement retailer Lowe’s is expected to report its fourth-quarter earnings of $1.69 per share, which represents year-over-year growth of over 27% from $1.33 per share seen in the same period a year ago. The company that distributes building materials and supplies through stores in the United States would post revenue growth of over 2% to $20.82 billion.

“We view Lowe’s (LOW) favourably given its longer-term transformation opportunity and structural industry tailwinds, with substantial near-term uplifts from COVID-19 spending shifts that likely translate to longer-term sales retention,” noted Simeon Gutman, equity analyst at Morgan Stanley.

“Assuming a healthy underlying housing backdrop, we think comps can accelerate longer-term from stronger sales/sq ft trends, driven by e-comm accelerating, better in-stocks, product refreshes/exclusive launches, greater traction with Pro initiatives, and removing friction from the customer shopping experience. Combined with productivity initiatives, this should enable EBIT margin expansion going forward.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 23

TICKER COMPANY EPS FORECAST
BBWI Bath & Body Works $2.25
BCS Barclays $0.29
EBAY eBay $0.82
HEI Heico $0.57
NTAP NetApp $1.07

 

Thursday (February 24)

IN THE SPOTLIGHT: MODERNA

Moderna, the biotech company focused on drug discovery, is expected to report its fourth-quarter earnings of $8.62 per share, which represents year-over-year growth of over 1,340% from a loss of -$0.69 per share seen in the same period a year ago.

The Massachusetts-based biotechnology company would post revenue growth of 1,075% to around $6.71 billion.

“We are Equal-weight Moderna. While we believe there is long-term upside for Moderna, we believe the significant valuation increase associated with the success of the COVID-19 vaccine limits the near-term upside,” noted Matthew Harrison, equity analyst at Morgan Stanley.

“The company has taken an industrialized approach to developing mRNA based therapeutics and has rapidly generated a broad pipeline of 21 programs, 11 of which have entered clinical development. We believe Moderna’s mRNA drug development platform is more diversified and scalable compared with competitors, and is validated through broad partnerships with Merck and AstraZeneca. We see vaccines and rare diseases as the key valuation drivers of the company.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 24

TICKER COMPANY EPS FORECAST
ADSK Autodesk $0.89
AXON Axon Enterprise $-0.07
SQ Block $-0.06
CVNA Carvana $-0.76
DELL Dell Technologies $1.94
DISCA Discovery $0.84
GCI Gannett $-0.03
NTES NetEase $0.82
NKLA Nikola $-0.46
VMW VMware $1.44
ZS Zscaler $-0.57

 

Friday (February 25)

TICKER COMPANY EPS FORECAST
AES AES Corp. $0.46
CNK Cinemark Holdings $-0.16
DSX Diana Shipping $0.30
SSP E.W. Scripps $0.46
FL Foot Locker $1.46

 

Is It Time to Buy AT&T?

AT&T Inc. (T) reports Q3 2021 earnings on Thursday morning, with analysts looking for a profit of $0.80 per-share on $42.24 billion in revenue. If met, earnings-per-share (EPS) will mark a slight improvement compared to the same quarter in 2020. The stock booked a small gain after beating Q2 top and bottom line estimates in July but quickly turned tail, dropping more than 10% into last week’s 11-year low in the mid-20s.

Income-Minded Shareholders Hit the Exits

The telecomm giant rallied to a 52-week high in May after announcing a merger with Discovery Inc. (DISCA). The news triggered a flurry of upgrades but the mood soured after analysts realized the dividend would need to be slashed to complete the transaction. Income-minded shareholders headed for the exits, triggering a steep slide that relinquished more than 25% of the stock’s value into the October low. The merger is expected to close in the middle of 2022.

KeyBanc analyst Brandon Nispel just upgraded the stock to ‘Sector Weight’, citing reasons that make it tough to justify further downside. As he notes, “AT&T currently trades at <$20 post-Warner Media spin, or <6x our 2023 pro-forma adj. EBITDA, and it appears more difficult to justify further downside from current levels given: 1) simplification of the business; 2) reduced leverage; and 3) peers that trade at premiums. While we do not recommend owning AT&T and see modest downside to our $25 FV, further downside might support a more positive risk/reward.”

Wall Street and Technical Outlook

Wall Street consensus has grown highly bearish since May, dropping to a ‘Hold’ rating based upon 5 ‘Buy’, 2 ‘Overweight’, 18 ‘Hold’, and 1 ‘Underweight’ recommendation. In addition, three analysts are recommending that shareholders close positions. Price targets currently range from a low of $23 to a Street-high $37 while the stock is set to open Wednesday’s session less than $3 above the low target. This placement matches the KeyBanc view of limited downside.

AT&T tested the 2007 high in the 40s in 2016 and reversed, entering a decline that found support at 26.18 in 2018. It undercut that level by 78 cents during 2020’s pandemic decline and posted the second lower high since 2016 in May 2021. The selloff into October has undercut the 2018 and 2020 lows, dropping the stock to the lowest low since July 2010. A rally above 27 will set off a buy signal in this scenario but the 2008 bear market low near 21 may still come into play.

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

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