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

 

GoDaddy a Top Value Play Among Website Builders, Price Target $110: Jefferies

Jefferies said they agree GoDaddy is a top value play among website builders, with consistent execution and healthy cash flow generation after the activist investor Starboard announced that it has purchased a 6.5% stake in a web services firm worth about $800 million.

Starboard in its regulatory filing with the U.S. Securities and Exchange Commission said that the Arizona-based company’s shares were undervalued and represented an attractive investment opportunity.

Following this, GoDaddy’s stock surged as high as 9.6% to an intraday high of $83.29 on Monday.

Analyst Comments

“We agree as our thesis has been on GoDaddy (GDDY) being a top value play among website builders, with consistent execution and healthy cashflow generation. Even after today’s +9% move, valuation EV/FCF 2nd NTM 14.8x is below 3-yr avg 15.9x and at a sharp discount to 3-yr FCF CAGR 18%. FY22 looks set up to benefit from the product innovation delivered throughout FY21,” noted Brent Thill, Equity Analyst at Jefferies.

“We like GoDaddy (GDDY) for its consistent execution, double-digit organic rev growth, strong uFCF generation and attractive valuation (14.8x EV/FCF 2nd NTM vs.18% CAGR thru ’23; EV/S multiple is also a reasonable 3.6x CY23E & 4.1x NTM for a subscription-based model.). Our 12-month price target of $110 (unchanged) is based on EV/FCF 19x.”

GoDaddy Stock Price Forecast

Eight analysts who offered stock ratings for GoDaddy in the last three months forecast the average price in 12 months of $95.63 with a high forecast of $112.00 and a low forecast of $81.00.

The average price target represents a 13.98% change from the last price of $83.90. Of those eight analysts, five rated “Buy”, three rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $81 with a high of $136 under a bull scenario and $46 under the worst-case scenario. The firm gave an “Equal-weight” rating on the internet domain registrar and web hosting company’s stock.

GoDaddy is a market leader in an underpenetrated SMB Internet infrastructure market. Market growth is supported by a tailwind of growing technology adoption by smaller businesses to develop an online presence. Expansion of the portfolio into horizontal applications to help SMBs and improving attach rates should drive increasing ARPU and retention rates to fuel revenue growth,” noted Elizabeth Elliott, equity analyst at Morgan Stanley.

“Scaled, steady growth and profitability gives us confidence in cash flow growth estimates. We see an acquisition-heavy strategy limiting a re-rating to a mix of software and internet peers, given historically M&A-skewed companies trade at an EV/S and EV/FCF discount to peers.”

Several other analysts have also updated their stock outlook. Citigroup raised the price target to $110 from $105. Truist Securities lifted the target price to $112 from $110. Raymond James cut the target price to $100 from $108. Berenberg upped the price objective to $101 from $99.

Technical analysis also suggests it is good to hold for now as 50-200-day MACD Oscillator and 100-200-day MACD Oscillator signals a mild selling opportunity.

Check out FX Empire’s earnings calendar

Starboard Value Spends $800M to Acquire 6.5% Stake in GoDaddy

The shares of GoDaddy have been rallying since the start of the day after investor Starboard Value spent nearly a billion dollars in acquiring its stocks.

Starboard Value Buys Shares Worth $800 Million

Activist investor Starboard Value announced earlier today that it had acquired a 6.5% stake in GoDaddy, spending $800 million in the process. The acquisition led to a massive interest in GoDaddy, with the shares of the web service company rallying by more than 8% over the past few hours.

In its regulatory filing, the hedge fund firm said it had acquired more than 10,000 shares of GoDaddy, worth over $800 million. Following this latest development, the investment in GoDaddy is Starboard’s biggest yet.

Starboard Value is a hedge fund with more than $6 billion in assets under management, according to its filings through the first quarter of 2020. Founded by Jeff Smith, Starboard Value was created from investment firm Ramius in 2011.

The CEO Jeff Smith is known as one of the leading activist investors on Wall Street. He has been pushing for changes in how companies operate, especially those in areas such as healthcare, chemicals and veterinary.

GDDY Rallies Following the Announcement

The shares of GoDaddy have been rallying since the announcement earlier today. Since the US market opened a few hours ago, the shares of GoDaddy have been up by more than 8%, making it one of the best performers in the market.

At press time, GDDY is trading above the $82 mark, outperforming numerous stocks in the market. GDDY has underperformed since the start of the year, losing less than 1% of its value in the past 12 months.

However, the stock could recover its position following the latest announcement. In the past month, GDDY’s value has surged by more than 18%. If it maintains the momentum, then GDDY could top the $85 level soon and end the year with a positive performance.