The current street estimates call for EPS of ($0.15), w/ revs +66% y/y to $678.4 mln.
The current Capital IQ Consensus Estimates call for Q1 EPS of $0.36 on revenues of $12.03 billion
Current street estimates call for GAAP breakeven EPS on revs of $86.64 mln. Etsy's earnings the last two quarters have hit the wires within the first five minutes after the market has closed. In the event ETSY discusses its forward looking guidance, here are the current street expectations for Q1 and FY16
Q1: GAAP EPS of ($0.04), w/ revs +29.4% y/y to $75.74 mln
FY16: GAAP EPS of ($0.10), w/ revs +27.9% y/y to $347.9 mln
After dropping to fresh post-IPO lows just above $6.00 (The IPO priced at $16.00 and opened at $31.00 on 4/16/15) earlier this year, shares have seen some recent interest following the disclosure of new positions taken in Q4 by hedge funds Paulson & Co and Kerrisdale Capital. Still, shares are down 50% from the IPO pricing and 78% from their all-time highs seen its first day of trading. Growth continues to be closely watched amid competition from Amazon and eBay.
Highlights from Last Quarter
Reported Q3 (Sep) loss of $0.06 per share, in-line with the two analyst estimate of ($0.06); revenues rose 38.0% year/year to $65.7 mln vs the $66.39 mln Capital IQ Consensus.
GMS was $568.8 million, up 21.7% compared with the third quarter of 2014. Growth in GMS was driven by 19.4% year-over-year growth in active sellers and 24.9% year-over-year growth in active buyers.
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- Commented on expected performance for Q4:
- "First, from an overall business perspective, we're excited about our competitive position as we head into the fourth quarter - our biggest quarter of the year - and the holiday season. We have launched a holiday campaign that we believe is our strongest holiday effort to date.
- Even so, just as we conveyed in the first and second quarters of 2015, if currency exchange rates remain at current levels, then currency translation will continue to negatively affect reported GMS growth for goods that are not listed in U.S. dollars and will also continue to dampen the demand for U.S. dollar-denominated goods from buyers outside of the United States.
- The second qualitative factor we'd like to highlight is that from a modeling perspective, the operating leverage that we achieved in the third quarter will not repeat in the fourth quarter for a few reasons"
Options Analysis
Based on ETSY options, the current implied volatility stands at ~ 102%, which in 42% higher than the historical volatility (over the past 30 days). Based on the ETSY March $7.5 straddle, the options market is currently pricing in a move of ~21% in either direction by March expiration (March 18th).
Technical Analysis
- Technically the stock has been significantly under-performing since last summer, losing nearly -75% off its July peak of 23.44. The $8-level is currently acting as resistance with its down-sloping 50-day moving average in play. A positive reaction to earnings could put it back on the radar of Buyers if it clears that downtrend, with a potential target at the $10-mark. A negative response to earnings will likely bring its Jan/Feb lows in play as possible support along the $6-level.
With recent institutional adds and with what appears to be a rounding bottom downside risk is limited in this one.
BIAS: BUY
Current position: STO Mar 5 Puts
RESULTS
Etsy misses by $0.04, beats on revs; guides FY16 revs below consensus; sets 2018 targets
- Reports Q4 (Dec) GAAP loss of $0.04 per share, $0.04 worse than the two analyst estimate of ($0.00); revenues rose 35.4% year/year to $87.9 mln vs the $86.64 mln Capital IQ Consensus; GMS +21% to $741.5 mln; adj. EBITDA +51% to $14 mln. Growth in GMS was driven by 15.5% year-over-year growth in active sellers and 21.4% year-over-year growth in active buyers.
- Co issues downside guidance for FY16, sees FY16 revs at high end of (+20-25% YoY) ~$328-342 mln vs. $347.90 mln Capital IQ Consensus Estimate.
What looked like a repeat disaster was uplifted by the following statements made by the company:
"We expect to achieve a three-year revenue CAGR in the 20-25% range and a three-year GMS CAGR in the 13-17% range. In 2016, we expect revenue growth to be at the high end of our three-year range and GMS growth to be near the mid-point of our three-year range... We expect to exit 2018 with a full-year gross margin that is in the mid-60s percent range, and that 2016 gross margin will be in this range as well... Finally, from an Adjusted EBITDA margin perspective, we estimate that our margin in 2016 will be comparable to 2015 in the 10-11% range and that it will expand to the high teens range by the end of 2018."
Current Q4 consensus stands at EPS of $0.77 on Revenue of $928 mln
Earnings results from Target (TGT) will be released tomorrow before the open at ~7am ET followed by conference call at 10:30am ET.
Current consensus estimates are for Q1 EPS of $1.19 on sales -3.2% to $16.6 bln and FY17 EPS $5.16 on sales -2.5% to $72.0 bln.
Full year guidance expected next week as they are hosting Target Financial Community Meeting on March 2).
TGT results follow earnings from big box peer Wal-Mart (WMT) and precedes Costco (COST) - scheduled to report March 2 after the close. ETFs: Retail HOLDRS Trust (RTH) -- TGT ~5%, Consumer Dis Spdr (XLY) 2%, SPDR Retail (XRT) less than 2%.
Key areas of interest:
Q4 results are in-line with previously guided EPS range of $1.48-1.58 (current consensus is $1.54 on sales -0.5% to $21.6 bln).
Guidance: The company will issue Q1 EPS guidance in the earnings press release and comps guidance during the call
Comparable Store Sales
TGT guided for Q4 comps of 1-2% vs +1.5% estimate with digital growth 20%. Q3 comparable sales were +1.9% (near the high end of guidance) and driven primarily by traffic (+1.4% in Q3). Q3 digital sales +20% (well below co's expectation of 30% growth) contributing about 40 bps to comp sales increase. Q3 apparel comp sales grew just under 3% vs nearly 5% in Q2. This slowdown was correlated with warm weather in September. SG&A expenses were solid and in line with expectations. Comps guidance: Co typically discusses any forward looking comps expectations during the conference call.
Margins: Q3 gross margin rate contracted 10 bps to 29.4% (short of co's expectations) and Q3 EBITDA and EBIT margin rates were both ~20 bps higher (consistent with guidance) . Q4 Margin guidance -- gross margin ‘moderate decline' from 28.5% year ago and EBITDA margin rate flat to down slightly from 9.8% last year.
TECHNICAL
BIAS: BULLISH
UPDATE
Target misses by $0.02, reports revs in-line; guides Q1 EPS in-line; guides FY17 EPS above consensus (73.99)
Reports Q4 (Jan) earnings of $1.52 per share, $0.02 worse than the Capital IQ Consensus of $1.54; revenues fell 0.6% year/year to $21.63 bln vs the $21.65 bln Capital IQ Consensus.
Q4 comparable sales increased 1.9 percent vs. +1-2% guidance and 1.5% estimates, driven by traffic growth of 1.3 percent. Digital channel sales increased 34 percent, contributing 1.3 percentage points to comparable sales growth. Fourth quarter comparable sales in signature categories (Style, Baby, Kids and Wellness) grew more than three times faster than the company average.
- Q4 gross margin rate was 27.9 percent, compared with 28.5 percent in 2014, as the benefit from a favorable merchandise mix was more than offset by investments in promotions.
- Co issues in-line guidance for Q1, sees EPS of $1.15-1.25, excluding non-recurring items, vs. $1.19 Capital IQ Consensus Estimate.
- Co issues upside guidance for FY17, sees EPS of $5.20-5.40 vs. $5.16 Capital IQ Consensus Estimate.
Target Earnings Conference Call Highlights
- Guidance: TGT sees Fiscal 2016 comps 1.5-2.5% vs ~2% estimate (Q1 comps slightly lower than this range). Q1 total sales expected to decline excluding pharmacy sales 4.5-5% vs -3.2% estimate. In the guidance, the company said it includes consistent level of buybacks. Full year guidance also assumes some slight margin EBITDA increase.
- Q4 performance played up pretty much in-line as expected -- co knew it was going to be promotional but guests responded favorably to company drivers -- as seen in the traffic. This was the fifth straight quarter of traffic growth and the 1.3% increase was on top of strong 3.8% last year.
- Digital -- co did not quite make its ambitious goal of 40% but it did end the year with 34% growth during Q4
- Merchandise inventory was up 4% - a bit more than the current sales trend. Co said it ended the year with "very clean" inventory position
*DATA SOURCE: BRIEFING*
CHK shares are lower by 56% largely due to the drop in energy prices with Earnings tonight.
The first area of interest will be liquidity and debt
In the co's most recent 10K filing (issued on February 27, 2015) CHK stated "As of December 31, 2014, we had indebtedness of $11.535 bln, and our net indebtedness represented 30% of our total book capitalization, which we define as the sum of total equity and total current and long-term debt less unrestricted cash. Our level of indebtedness affects our operations in several ways...We may continue to incur cash and noncash charges that would negatively impact our future results of operations and liquidity."
Chesapeake currently has no plans to pursue bankruptcy and is aggressively seeking to maximize value for all shareholders.
The next area of interest will be production
Taking a look at last quarter, the company reported that Q3 production averaged ~ 667,000 barrels of oil equivalent, a YoY increase of 3% adjusted for asset sales. Average daily production consisted of ~ 114,100 barrels of oil, 2.9 billion cubic feet of natural gas and 76,200 bbls of NGL, which represent year-over-year increases of 4%, 2% and 7%, respectively; CHK's 2015 third quarter drilling and completion capital expenditures decreased 41% sequentially to ~ $467 million. The company is also expected to guide for FY16 production and capital. The current FY15 guidance for production is for 670 -- 680 mboe per day. FY15 Capital guidance is $3.4-3.9 bln.
Based on the CHK Weekly Feb26 $2.5 straddle, the options market is currently pricing in a move of ~25% in either direction by weekly expiration (Friday).
Technical Perspective
CHK shares have underperformed the Nasdaq so far this year with CHK falling by 15% vs 12% decline in the index.CHK tends to have 5-7% reactions to earnings.
On a positive report, look for resistance near the $3.00 area while support sits near $2.00.
Fitbit beats by $0.10, beats on revs; guides Q1 EPS below consensus, revs below consensus; guides FY16 EPS in-line, revs in-line
FitBit is down after hours after the company's quarterly report. Though their earnings and revenue easily topped Wall Street's forecast the company totally whiffed on forward guidance due to "extra costs" that they will endure in their latest product manufacturing. Below are the highlighted stats from the quarterly report.
- Reports Q4 (Dec) earnings of $0.35 per share, $0.10 better than the Capital IQ Consensus of $0.25; revenues rose 92.2% year/year to $711.6 mln vs the $648 mln Capital IQ Consensus.
- Co sold 8.2 mln connected health and fitness devices.
- U.S. comprised 75% of Q4 revenue; EMEA 12%, APAC 8%, and Other Americas 5%.
- Q4 non-GAAP gross margin adjusted for foreign currency exchange rate impact was 50.0%.
- Active users grew 152% to 16.9 million at year-end 2015 from 6.7 million at year-end 2014
- Co issues downside guidance for Q1, sees EPS of $0.00-$0.02 vs. $0.23 Capital IQ Consensus Estimate; sees Q1 revs of $420-$440 mln vs. $484.59 mln Capital IQ Consensus Estimate. Co states, "For 1Q16, FIT expects several dynamics to drive results. For the first time in the company's history, FIT will make a global launch of new products, Fitbit Blaze and Alta. Launching media campaigns around the world is expected to drive higher sales and marketing expenses for the quarter. Also, the timing of shipments into sales channels may result in the majority of reorders, especially for Alta, coming in the second quarter of 2016. The company also expects to incur additional manufacturing costs in the first quarter to maximize production of new products to meet expected demand, which is expected to impact gross margins in the quarter."
- Co issues in-line guidance for FY16, sees EPS of $1.08-$1.20 vs. $1.14 Capital IQ Consensus Estimate; sees FY16 revs of $2.4-$2.5 bln vs. $2.41 bln Capital IQ Consensus Estimate. Co expects gross margin of 48.5-49.0%.
BIAS: This is dog shit. Sell the "F" out of "it."
Tomorrow before the open, farm equipment giant Deere (DE) is scheduled to report results with analyst expecting EPS of $0.70 on revs of $4.86 bln. If realized, this would mean a YoY decline in EPS of 38% and a decline in revenue of 13.3% YoY.
Last quarter, on Nov 25, Deere reported Q4 earnings of $1.08 per share, $0.34 better than the Consensus of $0.74; net sales (ex-financial services, other rev) fell 26.2% year/year to $5.93 bln vs the $6.11 bln Capital IQ Consensus.
Co also provided a mixed forecast...
Co issues upside guidance for Q1, sees Q1 net sales -11% to ~$4.99 bln vs. $4.92 bln Capital IQ Consensus Estimate. Co issues in-line guidance for FY16, sees FY16 net sales -7% to ~$23.97 bln vs. $24.11 bln Capital IQ Consensus; earnings of $1.4 bln. However, Deere says, "Although our forecast calls for lower results in the year ahead, the outlook represents a level of performance that is considerably better than we have experienced in previous downturns."
Industry Peers and some color on recent earnings reports:
Some of Deere's closest competitors have already reported quarterly results, including AGCO and CNHI, which gives some nice color into the state of the global agriculture business.
On Feb 2, AGCO Corp (AGCO) reported Q4 earnings of $0.80 per share, $0.01 better than the Capital IQ Consensus of $0.79; revenues fell 21.2% year/year to $1.96 bln vs the $2.03 bln Capital IQ Consensus.
Fourth quarter regional sales results: North America (18.9)%, Europe/Africa/Middle East 0.9%, South America (33.9)%, Asia/Pacific (4.5)%. Reports inventory reduction of $134 mln compared to year-end 2014 on a constant currency basis. Co issues guidance for FY16, sees EPS of $2.30 vs. $2.39 Capital IQ Consensus Estimate; sees FY16 revs of approximately $7.0 bln vs. $6.95 bln Capital IQ Consensus Estimate.
AGCO said, "Co states: "Softer industry demand for farm equipment across all regions and the unfavorable effects of foreign currency translation are expected to negatively impact AGCO's sales and earnings for 2016... Gross and operating margins are projected to be below 2015 levels due to the impact of lower sales and production volumes, a weaker sales mix and increased investment in product development expenses. Benefits from the company's cost reduction initiatives are expected to partially offset the volume-related impacts..."
TECH'S
Nordstrom (JWN) is set to report Q4 results today February 18 after the close.
Unlike the other department store names, Nordstrom does not report holiday sales -- and has not updated guidance since last quarter's earnings.
Last quarter, JWN fell to multi-year lows after seeing a slowdown that resulted in the huge Q3 miss and lowered full year outlook. The performance was also below company expectations, which the management said was due to softer sales trends that were generally consistent across channels and merchandise categories. Comparable sales were up only 0.9% (missing estimates for the first time in the past year -- and by nearly more than 200 bps) with Nordstrom Rack comps actually declining 2.2%.
Key points:
- Current Q4 Expectations: Q4 EPS -6% to $1.24 on sales +6% y/y to $4.17 bln and comps +1%.
- Guidance: The earnings release will include FY17/fiscal 2016 outlook (sales given as %)— current estimates are for EPS of $3.56 on sales +6.6% and comps +2.4%. JWN does not typically provide quarterly expectations with its Q4 results.
- Margin related: Reported Q3 gross margin decline of 163 bps to 33.9% primarily due to higher markdowns in addition to the planned impact of higher occupancy costs related to store growth and the increased mix of Nordstrom Rack. Co also lowered its FY16 gross profit rate assumption to 50-60 bps decrease from +/-5 bps prior outlook.
- Other topics of interest:
- Nordstrom Rack will be in focus after the former bright spot turned sour last quarter. Comps specifically were huge disappointment with decline of 2.2% and investors are looking for this segment to bounce back.
- TrunkClub—completed acquisition last August—update likely discussed during the call.
- Expansion plans—as of last qtr the co had 323 stores (118 full-line stores in US/3 in Canada; 194 Nordstrom Racks; 8 ‘other' stores—includes Trunk Club clubhouses, Jeffrey boutiques and Last Chance/clearance stores). Co will likely provide expansion update for FY17 in the earnings release.
- Street expectations: The street and investors alike were shocked by last quarter's results. But even at multi-year lows, some analysts seem to be maintaining cautious stance.
Based on JWN options, the current implied volatility stands at ~ 57%, which in 42% higher than the historical volatility (over the past 30 days). Based on the JWN February $52.5 straddle, the options market is currently pricing in a move of ~11% in either direction by the end of the week.
PCLN is expected to report fourth quarter earnings tomorrow before the open. There is a conference call scheduled for tomorrow morning at 7:30 AM ET.
Consensus calls for EPS of $11.81 (versus $10.85 last year) on revenue of $1.956 billion, up 6% YoY).
The current consensus is within the company's guidance range of $11.10-11.90 & $1.86-1.99 bln. The company is expected to guide for the first quarter where consensus stands at $9.60 & $2.067 billion.
Peers in the space EXPE, CTRP, QUNR, MMYT, TRIP, TZOO, SABR
Gross bookings is the first important metric. Las quarter, the company reported gross travel bookings of $14.8 bln, which was up 7% YoY (or ~22% on a constant currency basis). PCLN's gross profit for the 3rd quarter was $2.9 billion, a 12% increase from the prior year (approximately 29% on a constant currency basis). International operations contributed gross profit in the 3rd quarter of $2.6 billion, an 11% increase versus a year ago (~ 29% on a constant currency basis).
Looking ahead to the fourth quarter, the company is expecting total gross travel bookings to increase ~1-8% (an increase of ~13-20% on a constant currency basis). International gross travel bookings are expected to increase 3-10 in Q4 (or ~17-24% on a constant currency basis).
The next area of interest will be adjusted EBITDA. Adjusted EBITDA for the 3rd quarter 2015 was $1.6 billion, an increase of 12% versus a year ago. Looking ahead to the fourth quarter, the company is expecting adjusted EBITDA of $710-760 mln (versus $712 mln in the same quarter as last year.
Options Activity
- Based on the PCLN February $1080 straddle, the options market is currently pricing in a move of ~13% in either direction by February expiration (Friday).
Technical Perspective
- On a positive report, look for resistance near the $1100-1125 area, while support sits near the $1025-1050 vicinity.
BIAS: BULLISH. LEAVE IT TO THE NEGOTIATOR.
Potbelly Tuesday announced that its fourth quarter ER exploded 76% as they benefitted from high sales and kept their costs low.
Potbelly beats by $0.02, reports revs in-line; guides FY16 EPS above consensus
Reports Q4 (Dec) earnings of $0.08 per share, $0.02 better than the Capital IQ Consensus of $0.06; revenues rose 12.1% year/year to $95.1 mln vs the $94.86 mln Capital IQ Consensus.
Comps +3.7% vs. ests just above 2%.
- Co issues upside guidance for FY16, sees EPS of $0.36-0.38 vs. $0.33 Capital IQ Consensus Estimate. Company-operated comparable store sales growth of ~3.5% to 4.5%; 55 -- 65 total new shop openings, including 45 -- 50 company-operated shop openings; adj. net income up +20%.
For a few months now the street has been asking who is eating Chipotle's lunch (literally and figuratively) well it appears that PotBelly may be seeing an added benefit from the burrito maker's troubles.
The Cheesecake Factory just released their 4th quarter ER results posting an earnings of $0.54 per share and revs of $526.8M.
Cheesecake Factory beats by $0.02, misses on revs
- Reports Q4 (Dec) earnings of $0.54 per share, $0.02 better than the Consensus of $0.52; revenues rose 5.4% year/year to $526.8 mln vs the $532.2 mln Consensus.
- COMPS restaurant sales increased 1.1% in 4Q15.
- The company opened six restaurants during 4Q15, meeting its objective to open as many as 11 Company-owned restaurants domestically in fiscal 2015.
- In fiscal 2016, CAKE continues to expect to open as many as eight company-owned restaurants domestically. Internationally, the company expects as many as four to five restaurants to open under licensing agreements.
- In fiscal 2015, the company repurchased 2.1 mln shares of its common stock at a cost of $104.8 mln, including approximately 350,000 shares repurchased in Q4 at a cost of $17.3 mln.
Fossil beats by $0.17, beats on revs; guides Q1 EPS below consensus, revs in-line; guides FY16 EPS in-line, revs above consensus
- Reports Q4 (Dec) GAAP earnings of $1.46 per share, $0.17 better than the Consensus of $1.29; revenues fell 6.8% year/year to $992.5 mln vs the $923.86 mln Consensus. During the fourth quarter of fiscal 2015, the translation impact of a stronger U.S. dollar decreased the Company's reported net sales by $55.6 million, operating income by $38.7 million and diluted earnings per share by $0.28.
- Global retail comps for the fourth quarter of fiscal 2015 increased 1% compared to the fourth quarter of fiscal 2014. A solid comparable sales increase in Europe was partially offset by a modest decline in the Americas and a flat comp in Asia. A comparable sales increase in leathers and watches was partially offset by a decline in jewelry.
- Gross margin decreased 380 basis points to 53.0%.
Co issues guidance for Q1, sees GAAP EPS of $0.05-0.20 vs. $0.41 Capital IQ Consensus Estimate; sees Q1 revs (10)-(7%) to ~$652-674 mln vs. $661.41 mln Capital IQ Consensus Estimate.
Co issues guidance for FY16, sees GAAP EPS of $2.80-3.60 vs. $3.18 Capital IQ Consensus Estimate; sees FY16 revs (3.5%) to +1% ~$3.12-3.26 bln vs. $3.04 bln Capital IQ Consensus Estimate.
This is an example of what happens when expectations are just so low and a company doesnt report nearly as bad as everyone is expecting. Looking at the numbers they aren't that great, but they are a beat. The aspect that is troubling to me however is the continued lowball guidance the company issues.
As you can see from the charts above, not much overhead resistance exists until we meet the MA's at ~50/share
Shares of Rackspace Hosting were off over 8% in the after market session after the cloud-computing company posted lower quarterly earnings yet again. The highlights are as follows:
Rackspace beats by $0.09, reports revs in-line; guides Q1 revs below consensus; guides FY16 revs below consensus
- Reports Q4 (Dec) earnings of $0.31 per share, $0.09 better than the Consensus of $0.22; revenues rose 10.7% year/year to $522.8 mln vs the $521.16 mln Consensus. Adjusted EBITDA for Q4 of 2015 was $184 million, for a margin of 35.1 percent, up 11.0 percent from the fourth quarter of 2014.
Co issues downside guidance for Q1, sees Q1 revs of $517-521 mln vs. $530.08 mln Consensus Estimate.
Co issues downside guidance for FY16, sees FY16 revs of $2.08-2.16 bln vs. $2.21 bln Consensus Estimate.
Guidance Details: Excluding the expected negative impact of currency movements and a small divestiture, we expect our normalized year-over-year growth rate for the quarter to range between 9.2 percent and 10.2 percent.... Excluding the expected negative impact of currency movements and a small divestiture, we expect our normalized growth rate for the year to range between 6 percent and 10 percent. Adjusted EBITDA margins are expected to range between 33 percent and 35 percent for the first quarter and the full year.
There is no solace in any of these charts.
ISSUES
This company started seeing issues last year as AWS started beefing up its cloud business. Last May management blamed its struggles on currency rates and one time costs, but as we've learned in the last 10 months these issues are systemic.
With guidance cut yet again there really hasn't been much hope for the stock and that appears to continue as the stock's off 8% in the aftermarket.
This theme is what we expected before earnings today. As described in the earnings packet.
BIAS: GET THE FUCK OUT.
With a recent spark lit in the gaming space by WYNN and their CEO Steve Wynn, Boyd Gaming (BYD) furthered that sentiment today reporting better than expected earnings after the bell today.
Heres a quick summation of how they did:
Boyd Gaming beat by $0.03, reported revs in-line; provided 2016 EBITDA guidance
- Reported Q4 earnings of $0.16 per share, excluding non-recurring items, $0.03 better than the Consensus of $0.13; revenues rose 2.1% year/year to $542.7 mln vs the $541.25 mln Consensus.
- For the full year 2016, the company projects total Adjusted EBITDA, including Peninsula and 50% of Borgata's Adjusted EBITDA, of $635-655 million.
The company issued the following commentary:
The fourth quarter of 2015 was a strong conclusion to a year of solid progress for our Company. Our operating teams continued to drive profitable revenue growth, identify additional efficiencies in our business, and successfully leverage new amenities, all of which contributed to our fifth consecutive quarter of revenue and double-digit Adjusted EBITDA growth. We were particularly encouraged by the performance of our Las Vegas Locals business, as a strengthening economy and effective marketing programs resulted in the segment's strongest fourth-quarter results since 2007. After a strong performance in 2015, we are well-positioned for continued growth and success this year."
TECH SUPPORT
If BYD opens here tomorrow it will look to make a run for the 9EMA on the Weekly and Daily basis. Above 18 and expect a challenge 20 and potentially a rounded bottom on the monthly.
As markets trend higher, it is commonplace that stocks will receive a multiple that exceeds their "fair market value." This multiple that they are assigned will naturally continue to appreciate and expand so long as the stock in question continues to perform and "meet expectations." This increase and disjointed market perception will assign a "premium" to particular Wall St. darlings and makes for a situation where certain stocks trade well above their reality.
I present to you, Hormel Foods (HRL).
This pig (pun intended) has risen in stock price significantly faster than the S&P 500 in the past year and it's peer group. Hormel's moonshot rise has can be attributed to the following:
- Improved quarter over quarter EPS growth (5.9% in the most recent quarter)
- Pattern of positive EPS growth over the past two years
- Year over year bottom line growth ($2.23 vs $1.94) and an expectation of improved earnings year over year ($2.60 vs $2.23)
- Net income growth from the same quarter one year ago exceeded the S&P 500 and has decimated any competition. ($137.98M vs $146.94M)
- Net operating cash flow increased significantly (104.89% to $244.51M) when compared to same quarter (most recent quarter) last year
- Debt to equity ratio is 0.15 and is below that of the industry average. This implies that the company is really good at managing debt and improving operating efficiencies.
As you can see above, the stock is beyond extended and is showing signs of a parabolic move on the monthly basis. It's tough to see how this trend can continue in such an environment for stocks.
What can we say about this piece of crap? No support on the chart, part time CEO, and part time investors.
TWTR reported Q3 results at 4:10pm. Current consensus stands at EPS of $0.12 on Revenue of $710M.
Shares of TWTR have been under steady selling pressure since hitting $55 last April. The slide has led the stock to all time lows as it trades in the $14 area ahead of tonight's report. A lack of growth in its user base has been a key in driving the stock lower.People are questioning TWTR's viability compared to it's primary social media peer Facebook (FB) which continues to grow at a faster rate despite a user base that is 5x the size. TWTR has also had issues with it's top management as there were four notable departures. A concern for investors as the co is in the midst of a turnaround plan.
The combined issues have led to sentiment dropping to an all time low. Investors would like to see signs that the turnaround is starting to show some rewards despite the departures. And perhaps most importantly investors would like to see a stabilization of the user base.
Key Metrics
Monthly Active Users- Q3 Total average MAUs were 320 mln, up 11% y/y, and compared to 316 million in the previous quarter (Current expectations are 324 mln).
Excluding SMS Fast Followers, MAUs were 307 million for the third quarter, up 8% y/y, and compared to 304 million in the previous quarter. (4Q15 was 292 mln)
- Q3 Mobile MAUs represented approximately 80% of total MAUs.
- Q3 Advertising revenue totaled $513 million, an increase of 60% y/y.
- Q3 Mobile advertising revenue was 86% of total advertising revenue.
- Q3 Data licensing and other revenue totaled $56 million, an increase of 37% y/y.
Guidance
- TWTR issued downside guidance for Q4, projecting revenue in the range of $695-710 mln vs. then-$741.70 mln Capital IQ Consensus Estimate.
- Q4 Adjusted EBITDA is projected to be in the range of $155-175 mln.
- GAAP expenses are projected to include the vast majority of the $5-15 mln of total restructuring charges expected from corporate restructuring activities. These charges are projected to be $10-20 mln. The majority of corporate restructuring charges will be in Q4 (this is excluded from Q4 EBITDA guidance).
- Capital expenditures are projected to be no more than $110 million.
- TWTR is expected to guide for Q1 and FY16
- Q1 Capital IQ consensus- EPS $0.08, Revenue $629 mln.
- FY16 Capital IQ consensus $0.54, Revenue $3.093 bln.
Q3 Recap
TWTR reported Q3 (Sep) earnings of $0.10 per share, $0.05 better than the Capital IQ Consensus of $0.05. Revenues rose 57.6% year/year to $569 mln vs the $562.17 mln Capital IQ Consensus.
- Revenue Breakdown
- Advertising revenue totaled $513 million, an increase of 60% y/y (Q2 +63%)
- Mobile advertising revenue was 86% of total advertising revenue.
- Data licensing and other revenue totaled $56 million, an increase of 37% y/y (Q2 +44% y/y)
- U.S. revenue totaled $370 million, an increase of 54% y/y (Q2 +53% y/y)
- International revenue totaled $199 million, an increase of 65% y/y (Q2 +78% y/y).
BIRD SHIT
Q4 EPS of $0.16 vs $0.12 Capital IQ Consensus Estimate
Q4 Monthly Active Users 320 mln (+10% y/y); Street Expectations were for approx flat q/q; Q3 was 324 mln (+11% y/y), 4Q14 was 292 mln
Disney ($DIS) is set to report Q1'16 earnings after the bell this afternoon, at 4:15pm ET. The company has an earnings webcast scheduled to follow at 5:00pm ET, which can be found on their investor relations page of their website. Disney does not typically provide forward earnings or revenue guidance with its release or during its conference call.
Key Metric: Current Capital IQ Consensus is for adj EPS of $1.44 on revenues +19% Y/Y to $14.75 bln.
- FY16 Cap IQ Consensus is for adj EPS of $5.66 on revenues +7% to $56 bln.
- Interesting fact: Disney has reported adjusted EPS above, or equal to (twice), Capital IQ Consensus every quarter since Q2 2011.
- Last quarter, Disney beat on Q3 EPS of $1.20 ($1.14 Capital IQ Consensus) and reported in-line revenues of $13.51 bln.
Cut the Cord:
With ESPN being a huge revenue driver, the company was (possibly still is) tied to cable and media networks. Revs from media networks account(ed) for ~31% of the company's revs.
- One of the largest concerns investors have about Disney is that services like Netflix, HULU, and Amazon Prime are going to create headwinds for cable subscriptions going forward as consumers "cut the cord." The fear is that if cable subscriptions face headwinds, so too does Disney's Cable Networks revenue.
- ESPN estimated their subscribers at ~92 mln as of October 3, 2015, which was down 3 mln from September 27, 2014 and down 7 mln from September 28, 2013.
Revs from the Cable Networks decreased their Y/Y growth from 12.2% in FY11 to 9.7% in 2015 (Growth fell to 5.8% in 2012, 6.1% in 2013, and 4.5% in 2014)
- Disney announced that Star Wars: The Force Awakens was the largest U.S. box office of all time, surpassing Avatar's $760.5 mln record in just 20 days. It's since crossed $2B
Q4'15 Segment Results
- Media Networks
- Revenues of $5.8 bln; up 12% Y/Y and flat Q/Q.
- Operating income of $1.8 bln; up 27% Y/Y and down 25% Q/Q.
- Operating income increased Y/Y as a result of an increase at ESPN as well as to A&E Television and Disney Channels, to a lesser extent. ESPN reflected a benefit of a 53rd week, higher affiliate revenues and higher advertising revenues
This chart is setting up for a potential small pop (to sell) or an implosion.
BIAS: Bearish
$AKAM reports ER after the bell today. The call is at 4:30pm EST.
Consensus is: EPS of $0.63 (versus $0.70 last year) on revenue of $568.8 mln (+6% YoY). The current consensus is within the company's guidance range of $0.60-0.64 & revenue of $557-577 mln. The company is expected to guide for the first quarter where Capital IQ consensus stands at $0.62 & revenue of $567.9 mln.
The company has said it expects a decline in revenue in Q4 and three of largest US media accounts. With FB showing that ad sales are through the roof this leads me to believe there is a bigger issue here with the management or with the positioning they've taken for the future benefit of the company.
The company said the revenue decline was driven primarily by slowing traffic growth and a very strong Q4 2014.
Again, not sure how that was possible with a growth in web traffic. It seems they may need to look forward yet again.
Metrics:
The first area of interest will be various metrics. Taking a look at last quarter, the company reported adjusted EBITDA of $222 mln, which grew 4% over Q3. Adjusted EBITDA margin was 40%, down 3 percentage points YoY. Looking ahead to the fourth quarter, the company expects adjusted EBITDA margins of 40-41%. Looking beyond Q4, the company will strive to operate the company in the 40% to 41% EBITDA range for the foreseeable future.
Taking a look at last quarter, the GAAP gross margin was 67% which was in line with the prior quarter and down 1 percentage point from the same period last year. Looking ahead to the fourth quarter, the company expects GAAP gross margins to come in around 66%. DA Davidson expects 44% of rev from the Media Delivery group, 48% from the Performance and Security group, and the remaining 8% from the Service and Support group. The firm also expects gross margins of 66%, operating margin of 27.9%, and EPS of $0.60, which compares to $0.70 in the year-ago quarter. Q4 is typically a strong seasonal quarter, with online retail activity through the holiday season providing a tailwind to growth.
Options Activity
- Based on AKAM options, the current implied volatility stands at ~ 75%, which is 64% higher than historical volatility (over the past 30 days). Based on the AKAM Weekly Feb12 $40 straddle, the options market is currently pricing in a move of ~12% in either direction by weekly expiration (Friday).
Technical
- AKAM shares have underperformed the Nasdaq so far this year with AKAM falling by 22% vs 14% decline in the index.