The markets are starting to digest the rip-roaring gains following Donald Trump’s Election Day win, and that means focus has returned on operational results.
For investors paying close attention to the holiday-shortened week, that means one eye should be turned toward retail, which has a swath of earnings reports up ahead. There are four to pay particular attention to, but investors should also keep an eye on Weibo Corp. (ticker: WB) — often referred to as “China’s Twitter” — which is one of the best tech stocks on Wall Street this year.
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Weibo. Yes, Weibo is sliding into its third-quarter earnings report after tonight’s bell, but shares still are up more than 130 percent this year. Meanwhile, Weibo is set to follow up its first profitable year by more than doubling those earnings.
You hear that, Twitter ( TWTR)? “Earnings.”
While Weibo’s American counterpart can’t turn a profit while suffering glacial user growth, Weibo is racking up outstanding stats such as 33 percent monthly active user growth and 36 percent daily active user growth in the second quarter, and it’s doing so while sitting at 282 million monthly active users in China alone — not too far off from Twitter’s 313 million.
And it’s putting up consistent quarterly profits to boot. None of those accounting shenanigans, either. Pure GAAP profits.
Speaking of which, earnings for the third quarter are expected to double to 20 cents per share. Full-year earnings are expected to bounce from 32 cents per share to 68 cents. Meanwhile, the revenue forecast is nothing but robust, with 39 percent growth predicted for this quarter, 33 percent for the full year and a bump up to 42.5 percent sales improvement in 2017.
Given that WB stock has pulled back about 15 percent in the past month, expect the market to get a fresh slap of Weibo’s promising reality and bid shares back up tonight.
Barnes & Noble (BKS). Barnes & Noble is having itself a superb 2016, too, up 35 percent. But it’s not because BKS is finally pulling off a turnaround; instead, it has been more so relief rallies on its own news or along with the market.
For instance, back in February, shares shot up by 50 percent, in part bolstered by stocks’ broader recovery, but also because General Growth Properties’ ( GGP) CEO walked back comments about Amazon.com ( AMZN) opening hundreds of mall book stores. And more recently, BKS has shot up amid the so-called “Trump bump.”
But bookselling hasn’t suddenly become a better business. BKS booted CEO Ronald D. Boire back in August, describing him as “not a good fit.” The company followed that up a couple weeks later by announcing a $14.4 million quarterly loss and a worse-than-expected revenue drop of 6.6 percent.
BKS’ roughly 25 percent jump makes it a selloff candidate should fiscal second-quarter results, due out Tuesday morning, not knock the socks off Wall Street. But it is a low bar — analysts are expecting a 34-cent loss on a revenue decline of 4 percent to $859.8 million.
Dollar Tree (DLTR). Also reporting on Tuesday morning is Dollar Tree, and the discount retailer has had one heck of a roller-coaster ride on its way to a year of slight underperformance.
In May, DLTR knocked down a four-quarter streak of earnings misses, which sent shares up about 20 percent through its second-quarter earnings report, when a miss on both lines decimated shares immediately and continued to weigh on shares through the November lows. Overlooked in that report was substantial improvement largely (but not completely) driven by the acquisition of Family Dollar, including 66 percent revenue growth and 77 percent gross profit growth.
[See: 7 Stocks to Buy When a Recession Hits.]
That Family Dollar acquisition could drive a beat this quarter, too. Barclays analyst Karen Short says that, among other tailwinds, conversions of FDO locations should allow for easier comps this quarter.
The Family Dollar deal closed in early July 2015, so the massive revenue gains Dollar Tree has seen as a result will thin out this quarter; analysts expect just 2.7 percent improvement there. But DLTR should be able to squeeze about 60 percent more in profits, with Wall Street estimating 78 cents in EPS.
But a big post-earnings pop might be a tall order. DLTR has already bounced back with much of the market and now trades at a not-cheap 18 times forward profit estimates.
GameStop Corp. (GME). The scenario that many feared would one day send GameStop into terminal decline has been starting to play out over the past 52 weeks after a few years of staunch defiance.
GameStop has been hemorrhaging both hardware sales and new game sales as we get further away from the most recent launch of next-gen consoles. The upshot is that a more diversified set of offerings such as collectibles and mobile electronics are more profitable, helping to buoy the bottom line.
Still, declining revenues and comparable-store sales have had investors selling off in droves, and that continued earlier this month when GameStop guided lower for the third quarter, which it will report Tuesday evening. GME now expects revenues of $2 billion on a comps decline of 6 to 7 percent, versus expectations of $2.08 billion in sales on a 1 percent decline in same-store sales. GameStop’s projected earnings range of 45 to 49 cents per share also was well short of Wall Street estimates for 56 cents per share.
While encouraging news seems unlikely, it could draw value investors into GME shares, which trade at a mere 6 times forward earnings and yields north of 6 percent.
Urban Outfitters (URBN). Last up is Urban Outfitters, which also reports Tuesday after the bell and hopes to keep up the momentum in its red-hot rebound year.
After sinking to lows last seen in 2009 in the market’s January lull, URBN shares have ripped off 80 percent-plus runs on a couple of earnings beats and record results. The impetus isn’t anything scintillating — just better operational performance. Among other things, Urban Outfitters has been improving its inventory management via upgrades to its supply chain, which in turn bolsters margins. That profitability helped fuel an all-time best 66 cents per share for the second quarter, as well as a record $891 million in sales.
[See: 9 ETFs to Buy When the Market Tanks.]
While URBN’s ridiculous run-up could leave the stock vulnerable to profit-taking in the event of a lackluster quarter, Wall Street’s bar is modest, at revenues of $869.1 million (an increase of 5.3 percent) and earnings of 44 cents per share (4.8 percent). Especially if Urban’s management seems optimistic about the holiday quarter, the stock could be sent toward a doubling by year’s end.
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Earnings Preview: Investors Are Watching Weibo Corp (WB) and 4 Retail Stocks originally appeared on usnews.com
