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Our preview of the upcoming week’s earnings reports include Dick’s Sporting Goods (DKS), Oracle (ORCL) and Rivian Automotive (RIVN).Dick’s Sporting Goods (DKS, $107.93) headlines a busy week of retail earnings. The company is slated on the earnings calendar to report its fourth-quarter results before Tuesday’s open.
Supply-chain issues and inflation will likely be in focus when the sporting goods retailer reports, considering both have been key topics for companies this earnings season.
“The term ‘supply chain’ was mentioned at least once during the earnings conference calls of 341 S&P 500 companies from Dec. 15 through Feb. 28,” says John Butters, senior earnings analyst at FactSet Research. He also notes that the term “inflation” was mentioned by 72% of S&P 500 companies in their earnings calls through Feb. 17.
In the company’s third-quarter earnings call, CEO Lauren Hobart said Dick’s “ordered aggressively to get ahead of this [supply chain] disruption,” and ended the period with inventory levels 7.3% higher than the year prior. She added that the fourth quarter was off to a “strong start,” and the firm was “well positioned” ahead of the key holiday shopping season.
As for inflation, Hobart noted that Dick’s passed along “some select cost increases” in hardline categories in Q3.
Wedbush analyst Seth Basham is “constructive” on the consumer discretionary stock ahead of its earnings report, with the analyst expecting a “good quarter.” This is due in part to the retailer’s “strong supply chain, better in-stocks and strong relationships with key vendors,” all of which “positioned the company favorably through the holiday season relative to competitors,” he writes.
Basham admits potential headwinds (omicron, slow traffic due to weather, lack of economic stimulus) do exist, but “a fundamental shift in consumer behavior with an increased emphasis on health and fitness, participation in outdoor activities and a far greater propensity for athletic and lifestyle products should continue to drive growth in 2022.” He has an Outperform rating on DKS stock, which is the equivalent of Buy.
Analysts, on average, are forecasting fourth-quarter earnings of $3.43 per share for Dick’s Sporting Goods, which is 41.2% more than what the company reported in the year-ago period. Revenue, meanwhile, is expected to arrive at $3.3 billion, +5.4% year-over-year (YoY).
Oracle Stock Slumps Before EarningsOracle (ORCL, $76.92) stock hit a record high of $103.65 in mid-December after the enterprise software provider reported top- and bottom-line beats in its fiscal second quarter. However, shares have shed more than a quarter of their value since then, due in part to ORCL’s late-December announcement that it is buying healthcare IT company Cerner (CERN) for $28.3 billion in cash, its largest acquisition to date.
Can another solid earnings report help jumpstart ORCL, which has been one of the best stocks to own over the past 30 years?
Deutsche Bank analyst Brad Zelnick (Buy) is “bullish on software industry fundamentals” in early 2022, though he maintains a “healthy respect for the market and macro backdrop.” In other words, while the software industry appears well positioned following its recent decline into bear-market territory, he recommends “a balanced approach with greater valuation sensitivity than in recent years.”
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Zelnick has a Buy rating on ORCL and a $110.00 price target – representing implied upside of 55%. Most analysts are on the sidelines right now, though. Of the 27 following the stock that are tracked by S&P Global Market Intelligence, 18 have it at Hold. This compares to four who say it’s a Strong Buy, two that rate it at Buy, two that have it at Sell and one that believes it’s a Strong Sell.
As for Oracle’s fiscal third-quarter earnings report, due out after the March 10 close? Consensus estimates are for earnings of $1.18 per share (+1.7% YoY) and revenue of $10.5 billion (+4.0% YoY).
Rivian’s “Bait-and-Switch” Price Hikes in Focus Ahead of EarningsRivian Automotive (RIVN, $48.14) had a red-hot start after its November initial public offering (IPO), but the electric-vehicle maker quickly stalled out. Since hitting a record high near $180 on Nov. 16 – more than double its Nov. 10 IPO price of $78 – shares are down roughly 73%.
CFRA Research analyst Garrett Nelson recently slashed his price target on RIVN to $55 from $135 and lowered his rating to Hold from Buy following the stock’s slide.
“Customer backlash to the company’s bait-and-switch move has already been severe, with existing reservation holders posting their order cancellations on social media sites,” the analyst says.
Nelson is referring to Rivian’s announcement earlier this month that it is hiking prices on its R1T truck and R1S SUV by up to 20% – including for customers who had already placed pre-orders for the vehicles. The company quickly reversed course after consumers reacted negatively to the news, saying the price increases would only be applicable to orders placed after March 1.
Going forward, “The company faces a predicament where it will likely struggle to meet certain benchmarks on its path to profitability (positive gross margin, then positive EBITDA [earnings before interest, taxes, depreciation and amortization], and finally positive net income) absent higher prices realizations or significantly higher sales volumes,” Nelson writes.
When Rivian steps into the earnings confessional after Thursday’s close to unveil its fourth-quarter results, analysts, on average, are expecting the company to report a per-share loss of $1.72. On the top line, Wall Street pros are projecting $60.03 million. For reference, RIVN posted a per-share loss of $12.21 on $1 million in sales in its third quarter.