The next week brings a relatively light week on the data front,
with few earnings and scarce data economic data marking the
The May retail sales report on Thursday and earnings from key
companies including Lululemon Atletica (NASDAQ:
), Navistar (NYSE:
), and PVH Corp. (NYSE:
) highlight the vacant calendar.
Markets will focus eyes on retailers Lululemon Atletica and PVH
Corp. Lululemon is expected to report earnings on Monday after the
bell while its fellow retailer PVH will report Wednesday after the
close. Truck maker Navistar will also report earnings Monday.
The maker of women's athletic clothes is expected to report
earnings Monday after the close. Wall Street is looking for first
quarter earnings per share of $0.30 on revenue of $341.00 million.
In the same period a year ago, the company reported earnings per
share of $0.32 on revenue of $285.7 million
Analysts at Morgan Stanley weighed in on the stock Friday ahead
of the earnings release next week. Morgan Stanley has an
equal-weight rating on the stock and does not have a price target
for the stock.
"We think 1Q13 expectations are in-line with the event's most
likely outcome. The market is looking for raised FY13 guidance and
probably gets it. We anticipate the pant recall impact debate ends
and old debates re-emerge, changing stock dynamics."
"LULU said on 3/21 its black luon pant recall would cost 2013
EPS $0.25-$0.27 and this led to a -13% Street FY13 earnings
revision. Since then however, the stock is up 26%. We believe the
market has assumed a less severe impact and we agree. Our store
checks suggested customers substituted luon pants with other
products and revealed recalled items back in stores earlier than
"We model $2.03 FY13 EPS vs. the Street's $1.99. We think LULU
has to raise its $1.95-$1.99 FY13 EPS guidance to $2.00-$2.05 to
meet market expectations. This is the most probable scenario in our
view and likely causes a muted stock reaction. We don't see much
guidance upside since LULU usually forecasts conservatively. If
LULU misses 1Q EPS or guidance falls short, the stock likely drops,
but the converse is also true. We doubt either happens, although
the risk/reward seems slightly skewed down. The options market is
pricing in a +/- 7% jump, 270 bps below the avg. move."
Canacord Genuity analysts are more bullish on the stock heading
into earnings. Already with a buy rating on the stock, they boosted
their price target to $92 from $87 Monday ahead of earnings.
"Weekend store checks confirm LULU has begun restocking stores
with the Astro and Groove yoga pants - two of the three styles that
were recalled in mid-March (the Wonder Under crops have yet to be
restocked). This timing is consistent with our note from April 22
in which our supply chain checks indicated LULU would be restocking
the recalled Luon pants in early June. As such, we continue to
believe Q2 comps will benefit from pent-up demand."
"Not only is the impact to the brand from the recall expected to
be negligible, we believe LULU benefited from increased traffic and
substitute purchases. As such, we expect to see upside to our Q1
estimates when the company reports Q1 results on June 10. We
reiterate our BUY and are raising our target to $92 from $87 based
on a 35x P/E multiple that is more consistent with its growth
Canaccord Genuity expects Lululemon to report first quarter EPS
of $0.30 on revenue of $335.8 million, roughly in line with Wall
Heavy vehicle manufacturer Navistar is also expected to release
earnings Monday. The company is expected to report a loss of $1.20
per share in the quarter on revenue of $2.88 billion. In the second
quarter last year, Navistar earned $0.67 per share on revenue of
J.P. Morgan analysts commented on the stock Friday ahead of
earnings. They reiterated their overweight rating on the stock
ahead of the earnings.
"Navistar will report earnings Monday afternoon after the close
(~4PM), with a conference call at 4:30PM ET. NAV's FQ2'13 is
expected to be messy, with improvement expected in FH2'13 as the
new 13-L engine was launched at the end of April. EBITDA is
expected to be flattish, and cash burn is expected to be ~$100MM-
$200MM on the back of restructuring expenses and pension
"Key risks to FQ2 results include ongoing costs related to the
Garland plant closure and field campaigns to repair existing issues
on older engines. NAV's Class 8 production was slightly higher than
JPMe, though market share was slightly below as engine offerings
remained in transition. We continue to expect market share to be
bumpy as new offerings roll-out."
J.P. Morgan forecasts a loss per share of $1.09 and revenue of
$3.0 billion, both higher than Wall Street estimates. The analysts
note three key questions that need to be answered:
1. How are customers responding to the new 13-L offering? 2. How
far along is the cost reduction program? 3. Have any new cash needs
arisen that might affect near-term cash burn?
Jefferies reiterated its buy rating and $45 price target on
Navistar earlier this week. They forecast a wider loss per share
than the street of $1.16 per share on revenue of $2.9 billion.
"Last quarter, NAV realized EBITDA of $57 mln, versus the
guidance of $(50)- $50 mln and ended the quarter with $1,189 mln in
cash versus guidance of $950-$1,050 mln. Our EBITDA forecast for
F2Q is $39 mln, but we don't include a possible warranty campaign
of $25 mln or so as timing remains uncertain. We believe management
will provide guidance for F3Q, which should show a slight
sequential improvement in EBITDA."
"Our $45 PT applies an average historical multiple to our FY13
sales - 32% EV/Sales. However, we continue to see significant
upside when uncertainty fades. Risks: another downturn in the North
American truck market, as well as potential lack of adoption of
NAV's enhanced EGR engine technology."
The maker of brands such as Calvin Klein and Izod is expected to
report earnings Wednesday after the close. Analysts forecast
earnings per share of $1.35, higher than the $1.30 reported in the
same period last year. Revenue is expected to rise to 1.91 billion
from 1.43 billion a year ago.
Bank of America re-assumed coverage of the company in April with
a neutral rating and a $115 price target. They forecast earnings
per share of $1.33, slightly below the street as they fear the
recent Warnaco acquisition will negatively weigh on earnings.
"Given near-term revenue & expense headwinds following the
Warnaco acquisition (completed 2/13/13) we see limited 2013 EPS
upside. Our $115 PO is based on 14x our F15 (Jan.) operating EPS
estimate of $8.20 and is supported by our DCF analysis (assumes a
7-8% expected return and 7.5x terminal EBITDA multiple)."
"Cost synergies are still expected to reach $100MM over 4 years
now (instead of 3) as PVH makes incremental investments in WRC's
infrastructure, Calvin Klein Jeanswear product & design
quality, in-store marketing, and talent (new heads of Europe &
Asia being recruited). Expected WRC EPS dilution of ($0.25) in F14
(reduced from previous +$0.35 accretion) also reflects mark-downs
associated with global CK inventory rationalization (particularly
the CK Jeanswear business)."
"PVH sales thru 2013 should be pressured by: (1) the impact of
global CK inventory clearance on sell-thru of current CK goods; (2)
plans to reduce CK off-price distribution by $40-50MM over the next
2 years; (3) continued weakness in Heritage (particularly Bass
outlets); and (4) the loss of the "Chaps" license ($250MM
J.P. Morgan has PVH at a neutral rating and has a slightly
higher price target at $120. "We are setting our quarterly 2013E
EPS estimates for PVH following 4Q12 Earnings. We estimate 1Q13E
EPS of $1.33, 2Q13E EPS of $1.36, 3Q13E EPS of $2.53, and 4Q13E EPS
of $1.82. For 2013E, we adjust our estimate from $7.45 to $7.05. We
are lowering out FY14 estimate from $8.60 to $8.25."
"We believe the WRC acquisition is a game-changer longer-term
with a united "House of Calvin Klein" and ability to expand Tommy
to underpenetrated, higher growth Asia and South American markets
attractive, in our view. Incorporating 6-8% revenue growth and
mid-to-high teens EPS growth, we see potential for $10-$11 in EPS
in FY15. That said, we see FY13 as a "transition" year with
SG&A investments (systems, distribution, marketing) potentially
offsetting transaction synergies with a number of top-line
Key Economics Releases
The economic calendar in the U.S. Monday is bleak save for the
TD Ameritrade Investor Movement Index and the weekly 3- and 6-month
bill auctions. Monday night, the Bank of Japan decision is due out
and should create some volatility in stocks due to the recent
correlation of equities to the yen.
Tuesday morning, British industrial production (
) data is due out ahead of the open followed by the weekly Redbook
report in the U.S. and wholesale trade data. The data precludes the
IP report from the eurozone Wednesday morning and MBA Purchase
Wednesday night, Australia's typically volatile employment
report is due out. Thursday morning, the key economic report of the
week is set to be released as the U.S. retail sales report for May
is expected. Retail sales are expected to have risen 0.4 percent in
the month vs. 0.1 percent previously, while core retail sales
should jump 0.3 percent vs. a drop of 0.2 percent at the last
Friday morning kicks off with the eurozone's employment report
pre-market, followed by the U.S. producer price index and IP
report. The Reuters/University of Michigan Consumer Confidence
Index rounds up the week's data.
Earnings Expected From: Amira Nature Foods (NYSE:
), Camelot Information Systems (NYSE:
), KMG Chemicals (NYSE:
), Navistar, Lululemon, Annie's (NYSE:
), Diamond Foods (NASDAQ:
), North American Energy Partners (NYSE:
), and ModusLink Global Solutions (NASDAQ:
). Economic Releases Expected: Swiss unemployment rate, Italian
industrial production, and the Bank of Japan interest rate
Earnings Expected From: LDK Solar (NYSE:
), Medical Action Industries (NASDAQ:
), Oxford Industries (NYSE:
), Ulta Salon (NASDAQ:
), and Rand Logistics (NASDAQ:
). Economic Releases Expected: British industrial production,
Redbook, NFIB Small Business Optimism Index, and wholesale
Earnings Expected From: Agilysys (NASDAQ:
), PVH Corp., and Men's Warehouse (NYSE:
). Economic Releases Expected: British claimant count, eurozone
industrial production, MBA Purchase Applications, the Treasury's
budget balance, and the Australian employment change.
Earnings Expected From: Rentrak Corp. (NASDAQ:
), Oculus Innovative Solutions (NASDAQ:
), and ALCO Stores (NASDAQ:
). Economic Releases Expected: U.S. retail sales, initial jobless
claims, and business inventories.
Economic Releases Expected: eurozone employment change, U.S.
capacity utilization, industrial production, and the
Reuters/University of Michigan Consumer Confidence report.
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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