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

 

Uber Oversold Ahead of Earnings

Uber Technologies Inc. (UBER) reports Q3 2021 earnings after Thursday’s close, with analysts forecasting a loss of $0.16 per-share on $4.41 billion in revenue. If met, earnings-per-share (EPS) will mark 25% of the loss posted in the same quarter last year, when folks avoided ride-share to lower infection risk. The stock rose 3.0% in August after beating Q2 guidance but has added just three points since that time, with structural issues continuing to impact ridership.

Ride-Share Headwinds Persist

Rival Lyft Inc. (LYFT) eased bearish sentiment earlier this week, beating Q3 top and bottom line estimates, but the comparison may not be accurate due to Uber’s major exposure to food delivery, which is now growing at a slower pace due to the resumption of normal day-to-day activities. That venue has become overcrowded as well, at the same time that some municipalities are setting fee limits and restaurants are looking for cheaper alternatives.

Uber raised Q3 earnings guidance in September but the subsequent uptick fizzled out because concerns persist about driver shortages and legislative threats to reclassify workers. The financial press has picked up on this chronic negativity, with a recent New York Times article entitled “For Uber and Lyft, the Rideshare Bubble Bursts” while Business Insider is reporting that neither company has achieved the promised increase in drivers, especially during peak periods.

Wall Street and Technical Outlook

Wall Street consensus has remained wildly bullish despite obvious headwinds, yielding a ‘Buy’ rating based upon 36 ‘Buy’, 4 ‘Overweight’, 4 ‘Hold’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $35 to a Street-high $82 while the stock is set to open Thursday’s session $24 below the median $70 target. This weak placement highlights investor skepticism about Uber achieving sustained profitability and overcoming legislative challenges.

Uber came public in the 30s in 2019 and sold off to the mid-teens during 2020’s pandemic decline. The subsequent uptick reached the IPO opening print in November, yielding a breakout that posted an all-time high at 64.05 in February. Lower highs and lower lows since that time have relinquished 30% of the stock’s value while price action has failed two tests at the 200-day moving average, which was broken in May. However, monthly relative strength readings have eased off extremely oversold levels, favoring intermediate upside into the low 50s.

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

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

 

Today’s Market Wrap Up and a Glimpse Into Tuesday

Stocks are on a roll, with all three of the major indices closing in the green. The tech-heavy Nasdaq even clinched a fresh all-time high, closing at 14,942, while the Dow Jones Industrial Average and S&P 500 also advanced.

Investors were in a cheery mood after the FDA placed its full stamp of approval on Pfizer’s COVID-19 vaccine. Shares of the pharmaceutical giant climbed approximately 2.5% higher on the day. Now that the drug, which Pfizer made alongside BioNTech, has received the blessing of regulators, Americans who have been holding out might be swayed to get jabbed.

Stock index futures are continuing their upbeat performance in the after-hours market on Monday evening as investors breathe a sigh of relief about the vaccine. The Dow, Nasdaq and S&P 500 futures are all flashing green.

Stocks to Watch

  • Ride-share companies Uber and Lyft were resilient in the face of a setback in a California court. A judge decided that Prop 22, which is a ballot initiative in the state designed to keep gig economy workers as independent contractors rather than employees, is unconstitutional. Companies including Uber, Lyft and DoorDash poured hundreds of millions of dollars into Prop 22, the decision on which they are now expected to appeal.
  • Tech giant Microsoft saw its shares rally to a new record after revealing plans to hike the price on some Office 365 subscriptions next year. Wall Street analysts reacted positively to the new pricing model, suggesting that Microsoft could see a bump in revenue as a result.
  • Shares of Palo Alto Networks are up 10% in after-hours trading on the heels of the tech company’s quarterly results. Palo Alto Networks beat Wall Street estimates on the top and bottom lines as businesses begin to refresh their hardware. The extended-hour gains are notable considering the stock’s year-to-date gains fell below 6% prior to Monday.

Look Ahead

With no sign of the markets slowing down, investors will be looking to see if stocks will extend their gains yet again on Tuesday. Fed officials are a wildcard that could derail the market optimism as they prepare for the annual Jackson Hole symposium, which will be held virtually this year. Fed Chairman Jerome Powell’s keynote address will come on Friday.

Today’s Market Wrap Up and a Glimpse Into Wednesday

Stocks rallied thanks to more good news out of corporate America. The Dow Jones Industrial Average raced ahead more than 270 points or close to 1%, while the S&P 500 achieved a new high and the Nasdaq gained more ground. Investors appear confident that stocks still have more fuel left in the tank for gains this year as quarterly earnings continue to outperform even the most bullish expectations.

In after-hours trading, stock futures are holding their own and trading slightly in the red. Despite a display of caution, there are several stocks that are being celebrated on the heels of solid earnings reports after Monday’s closing bell.

CNBC’s Jim Cramer suggested that investors use caution amid a stock market that is starting to look a little frothy. The stock expert singled out the S&P 500 and Nasdaq, in particular.

In crypto land, the infrastructure bill proposed by lawmakers in Washington, D.C. takes aim at bitcoin, and market leaders are pushing back. According to bitcoin bull Jack Dorsey, the bill “would put unworkable requirements on bitcoin node runners, developers and miners.”

Stocks to Watch

Lyft reported better-than-expected Q2 revenues of USD 765 million, an increase of 125% YoY and a sign that the economic recovery is humming along. The stock, however, is only up fractionally in after-hours trading. Lyft’s Q3 sales outlook may have taken the wind out of the sails of investors amid a trend of lower trip prices. Meanwhile, Uber Technologies is on tap to report its Q2 results on Wednesday.

Shares of sports apparel maker Under Armour climbed 6% higher in the regular session. The company’s quarterly earnings beat Wall Street estimates, and Under Armour lifted its revenue forecast for 2021. Analysts are eating it up, suggesting that Under Armour’s outlook could be on the “conservative” side.

One rare loser on the day was Zymergen, which is a newly public company. Shares of the biology company shaved more than two-thirds off its value on Tuesday amid a management shakeup and disappointing revenue prospects.

Look Ahead

If anything besides earnings could sway the markets, it’s the Fed. Richard H. Clarida, vice-chair of the Federal Reserve, is poised to make comments on Wednesday about monetary policy. Investors are also bracing for the employment report for the month of July, which comes out on Friday.

Lyft Expects Positive Weekly Ride-Share Growth Beginning This Week

The company said its app-based ride volume last week was the highest since March last year. For the following week, Lyft expects volumes to more than double compared to a year earlier.

Scaling up of COVID-19 vaccine distribution is expected to gradually restore pre-pandemic normality to the ride-hailing sector, following a tumultuous year for Lyft and rival Uber Technologies Inc.

Lyft said last month it could make an adjusted profit by the third quarter of this year despite the pandemic, thanks to additional cost cuts and an expected rebound in ride-hailing demand beginning in the second quarter of 2021.

(Reporting by Akanksha Rana in Bengaluru; Editing by Vinay Dwivedi)

Lyft Quarterly Revenue Jumps About 50%, Expects Profitability by End of Next Year

Lyft Inc, an American ridesharing company based in California, said its revenue jumped about 50% in the third quarter of 2020 and number of active riders increased nearly 45% to 12.5 million as demand recovered, but that is still lower than what it was in the third quarter of 2019.

The ride-sharing company said its third-quarter revenue fell to $499.7 million, surpassing average analyst expectations of $486.5 million, according to Reuters. Lyft said it delivered Q3’20 adjusted EBITDA loss of $240 million versus most recent outlook of $265 million. The company executive said it is focused on achieving adjusted EBITDA profitability by end of next year.

Lyft said its active riders increased to 12.5 million in Q3, up 44% from the previous quarter but about half the level of 22.3 million in the same period last year. revenue per active rider increased 2% versus Q2’20 reflecting an improvement in ride frequency, the company said.

“Lyft posted better-than-expected third-quarter top-and bottom-line results as sequential improvement in ride service demand accelerated. Lyft’s cost control, especially on marketing lowered the operating loss. While higher demand continued through October, we think the latest wave of coronavirus cases across the U.S. will slightly slow down the recovery in the remainder of 2020. However, with a likely gradual economic recovery in 2021 accompanied by an increase in commute and travel, we expect Lyft ridesharing revenue to return to strong double-digit growth next year,” said Ali Mogharabi, senior equity analyst at Morningstar.

“Still, we do not expect Lyft to hit 2019 revenue levels until 2022. While in its early stages, the firm’s efforts to partake in the growing but very competitive delivery space represents some upside to revenue in 2021 and beyond. We made minor adjustments to our model, which did not change our $50 fair value estimate. While the stock has more than doubled since its March lows, with the risk of California Proposition 22 out of the way (as we expected in our note published on Aug.  13), another 39% potential upside remains, making this narrow-moat name still attractive, in our view,” Mogharabi added.

Lyft shares closed 4.35% lower at $36.05 on Tuesday; the stock is down over 15% so far this year.

Lyft Stock Price Forecast

Twenty-one equity analysts forecast the average price in 12 months at $42.74 with a high forecast of $66.00 and a low forecast of $31.00. The average price target represents an 18.56% increase from the last price of $36.05. From those 21 analysts, 15 rated “Buy”, six rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $31 with a high of $49 under a bull-case scenario and $16 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the ride-sharing company’s stock. RBC lowered their stock price forecast to $46 from $48; BTIG increased the target price to $50 from $40; Jefferies upped their stock price target to $45 from $40.

Several other analysts have also recently commented on the stock. Piper Sandler raised the target price to $39 from $31; Evercore ISI upped their stock price forecast to $50 from $48; Truist Securities lowered their price objective to $44 from $49; Guggenheim increased the target price to $38 from $35; Deutsche Bank raised their stock price forecast to $55 from $52; Bernstein decreased the target price to $28 from $33.

Analyst Comments

“How Big is Lyft’s Active Rider Opportunity? We view Lyft’s primary addressable market as 18-50-year-olds living in MSAs with a household income of $50K+. We estimate (at most) 24% of this demographic were Lyft users in ’18. We expect the more rational duopoly structure in North America to lead to rising adjusted take rates and faster revenue growth for Lyft,” said Brian Nowak, equity analyst at Morgan Stanley.

“We don’t see Lyft generating positive adj. EBITDA until ’22, but expect healthy operating leverage due to insurance and sales and marketing efficiencies.”

Check out FX Empire’s earnings calendar

Lyft Quarterly Revenue Drops Over 60% as COVID-19 Pandemic Bites

Lyft Inc, an American ridesharing company based in California, said its revenue plunged 61% in the second-quarter and number of active riders dropped by 60% to 8.69 million as the COVID-19 pandemic drastically affected business, sending its shares down over 1% in after-hours trading on Wednesday.

The ride-sharing company said its revenue slumped to $339.3 million in the second quarter ended June 30, 2020, versus $867.3 million in the second quarter of 2019, a decrease of 61% year-over-year.

Lyft said its restructuring effort to reduce operating expenses and adjust cash flows, announced in April 2020, is on track to reach its objective of becoming profitable by the end of next year. The number of active riders tumbled 60% to 8.69 million in Q2.

“We view 3Q20 earnings as the next major catalyst, as well as any updates on LT projections and/or any regulatory or legal proceedings related to ridesharing, and updates on COVID-19 impact,” said John Blackledge, equity analyst at Cowen.

“We forecast 23% annual revenue growth’20-’30 driven by ~12% active rider growth over the period and expect EBITDA to turn positive by ’22 with 42% annual EBITDA growth from ’23 to ’30,” Blackledge added.

Lyft shares closed about 0.42% lower at $30.52 on Wednesday. The stock has declined about 30% so far this year.

Executive comments

“In Q2, we successfully limited our Adjusted EBITDA loss, outperforming the outlook we shared on our Q1 call by more than 20%.  We continued to take aggressive actions to reduce costs and increase our underlying unit economics in the quarter, which has put Lyft on track to achieve $300 million of annualized fixed cost savings by the end of the year,” said Brian Roberts, chief financial officer of Lyft.

“These steps position the Company to achieve adjusted EBITDA profitability with 20 – 25% fewer rides than originally contemplated in our fourth quarter 2021 target.”

Lyft stock forecast

Nineteen analysts forecast the average price in 12 months at $44.79 with a high forecast of $66.00 and a low forecast of $30.00. The average price target represents a 46.76% increase from the last price of $30.52. From those 19, 13 analysts rated ‘Buy’, six analysts rated ‘Hold’ and none rated ‘Sell’, according to Tipranks.

Morgan Stanley target price is $34 with a high of $52 under a bull scenario and $20 under the worst-case scenario. BTIG lowered the target price to $40 from $52 and RBA raised the target price to $48 from $47.

Several other equity analysts have also updated their stock outlook. Lyft had its price target dropped by Jefferies Financial Group to $40 from $50. The brokerage presently has a “buy” rating on the ride-sharing company’s stock. Credit Suisse Group lowered their target price to $66 from $75 and set an “outperform” rating. At last, RBC upped their price target to $51 from $47.00 and gave the company an “outperform” rating.

We think it is good to hold for now as 100-day Moving Average and 100-200-day MACD Oscillator signal a selling opportunity. However, can target $20 under a worst-case scenario.

Analyst comment

“How Big is Lyft’s Active Rider Opportunity? We view Lyft’s primary addressable market as 18-50-year olds living in MSAs with a household income of $50K+. We estimate (at most) 24% of this demographic were Lyft users in ’18. We expect the more rational duopoly structure in North America to lead to rising adjusted take rates and faster revenue growth for Lyft,” said Brian Nowak, equity analyst at Morgan Stanley.

“We don’t see Lyft generating positive adj. EBITDA until ’22 but expect healthy operating leverage due to insurance and sales and marketing efficiencies,” he added.

Upside and Downside risks

1) Less than expected impact from COVID-19. 2) Faster than expected rationalization in US rideshare industry. 3) Positive resolution of AB5, Morgan Stanley highlighted as major upside risks to Lyft.

1) Greater than expected impact from Covid-19. 2) Slower than expected market rationalization. 3) Inability to spur user/frequency growth through lower prices, higher liquidity and innovation. 4) Regulation as Lyft faces municipal, country and labour regulatory/legal challenges, were major downside risks.