Investors have been rattled by geopolitical tensions over the Russia-Ukraine crisis, which has caused the global stock market to suffer. The S&P 500 plunged into correction territory.
If this tension continues for long, analysts fear that it will be harder for the U.S. Federal Reserve to raise rates after this month’s hike. Due to this, investors sought safe-haven assets and U.S. Treasury yields fell as tensions between Ukraine and Russia increased.
In addition, investors will focus on December quarter earnings for stocks that are economically sensitive, which should show better profits than technology stocks amid surging inflation.
The sporting goods retailer Dick’s Sporting Goods is expected to deliver earnings per share of $2.75 in the holiday quarter, which represents year-over-year growth of over 13% from $2.43 per share seen in the same period a year ago.
The Coraopolis Pennsylvania-based company would post revenue growth of more than 5% to $3.29 billion from $3.13 billion a year earlier. The company has beaten consensus earnings estimates in most of the quarters in the last two years, at least.
“Dick’s Sporting Goods (DKS) is in a favourable position given its category dominance, industry tailwinds, and healthy balance sheet. Its outlook within the category is likely to be even stronger post-COVID-19. We see a positive risk/reward skew based on our view the earnings power of the business is underappreciated. Key drivers include merchandise margin expansion and capital return (buybacks). We think there is upside for the stock without underwriting a higher valuation multiple as a result,” noted Simeon Gutman, equity analyst at Morgan Stanley.
“The stock’s multiple has not broken out like it has for other retailers in our space which should emerge stronger post-COVID-19. The potential for multiple expansion adds optionality/upside to the bull case.”
The Camden, New Jersey-based soups and snacks maker Campbell Soup is expected to report earnings per share of $0.78 in the fiscal second quarter, which represents a year-over-year decline of over 7% from $0.84 per share seen in the same period a year ago.
Analysts expect that easing COVID-19 curbs and consumers eating out more would affect the company’s processed food sales. Campbell’s revenue was forecast to decline nearly 3% to $2.21 billion. However, it is worth noting that the maker of canned soup has beaten consensus earnings estimates in most of the quarters in the last two years, at least.
“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,” noted 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.”
The world’s largest database management company, Oracle, is expected to report earnings per share of $1.0 in the fiscal third quarter, which represents a year-over-year decline of nearly 3% from $1.03 per share seen in the same period a year ago.
The Austin, Texas-based computer technology corporation would post revenue growth of more than 4% to $10.5 billion from $10.1 billion a year earlier. The company has beaten consensus earnings estimates in most of the quarters in the last two years, at least.
“A preliminary look at a potential Oracle + Cerner Pro-forma model suggests modest EPS accretion by CY23, assuming Oracle shifts capital allocation priorities and halts the torrid pace of buybacks. Our illustrative analysis shows leverage exiting CY23 at 3.2x, assuming a deal at 32% cash/68% debt,” noted Keith Weiss, equity analyst at Morgan Stanley.
In December, several equity analysts raised their price targets after the database management company beat earnings estimates for the fiscal second quarter and forecasts profit and revenue above expectations for the ongoing quarter.
The company expects to earn $1.19 to $1.23 per share in the fiscal third quarter, higher than the Wall Street consensus estimates of $1.16. Revenue is expected to be $10.7 billion to $10.9 billion, above expectations of $10.56 billion, Reuters reported.
“Oracle’s current low valuation at ~18x CY22e EPS reflects its slower growth rate compared to peers. Despite potential opportunities within existing database customers and cloud-based ERP applications, offsets from waning businesses mean 2021 likely lacks the catalysts for the positive inflection in revenue growth investors would need to see to drive multiples higher. With management guiding to mid-single-digit CC revenue growth in a software sector filled with strong secular growth stories, and operating margins declining in FY22 due to heightened investment in Cloud, we remain Equal-weight while our price target moves up to $87,” Weiss added.
