Earnings

Weekly Preview: Earnings to Watch This Week (COUP, CRWD, FDX, NKE)

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Despite another volatile trading week, both the Dow Jones Industrial Average and the S&P 500 index ended Friday’s trading session at all-time highs. And while the tech-heavy Nasdaq Composite index finished lower Friday, the fact that all three major averages booked weekly gains underscores the level of optimism investors still have about the strength of the economic recovery.

But is that optimism misplaced, particularly as rising bond yields, which sparked the recent selloff, rose to a one-year highs? On Friday the Dow ended higher by 293.05 points, or 0.9%, to close at 32,778.64, netting another all-time closing high. The blue chip index was powered by, among others, Boeing (BA) which flew more than 17 points Friday for gain of 6.82%. Walmart (WMT) and JPMorgan Chase (JPM), up 1.51% and 1.19%, respectively, boosted the Dow. Also booking a record close was the S&P 500 index which added 4 points on Friday, or 0.1%, to end the session at 3,943.34.

The Nasdaq, meanwhile, declined 78.81 points, or 0.6%, to finish at 13,319.86. As noted, bond yields which rose to one-year high on Friday pressured tech stocks. The 10-year note rose roughly 10 basis points on Friday to end at 1.63%. As such, notable tech decliners were DocuSign (DOCU) which lost 6.61% Friday despite reporting earnings on Thursday that not only beat on both the revenue and profits, DocuSign also issued bullish guidance. Declines in other work-from-home winners such as CrowdStrike (CRWD) and Zoom Video (ZM) also pressured the Nasdaq.

Dip-buying investors, however, swooped in on these declines, capitalizing on on these opportunities to add shares ahead of the economic recovery. This would explain why all three benchmarks booked weekly gains, led by the Dow which added 4.1%. Despite the route in tech, the Nasdaq added 3.1% for the week, while the S&P 500 rose 2.6%. In other words, there is still tons of confidence in the market, particularly in stocks that have been devastated by the pandemic-induced lockdowns.

Investors have begun to rotate into these names (cyclicals) as vaccine rollouts accelerate and the economy prepares for re-opening. According to data from the CDC, some 30% of the U.S. population has received at least one dose of vaccine. Combined with President Joe Biden on Thursday signing into law the $1.9 trillion COVID-19 relief package, there is plenty of reason to suggest that the worst of the pandemic is behind us. The question remains, while the economic recovery has demonstrated resiliency, where is the market heading next?

Economists forecast a robust 6% growth in 2021 for the U.S. economy. Is that realistic? Is that what the market is already pricing in? Time will tell how realistic the market’s growth forecasts will be. But earnings results from the likes of FedEx, which is often regarded as a gauge of global economic activity, will offer a glimpse of what’s likely to come in the next few quarters. FedEx is one of several stocks I’ll be watching this week.

Coupa Software (COUP) - Reports after the close, Tuesday, Mar. 16.

Wall Street expects Coupa to lose 11 cents per share on revenue of $145.66 million. This compares to the year-ago quarter when it earned 21 cents per share on revenue of $111.45 million.

What to watch: Shares of Coupa, a provider of a cloud-based corporate spend management software, have fallen 21% over the past month amid the route in tech and software stocks. Investors have become concerned about the possibility of slower growth and an increased valuation that recently placed Coupa at 40 times forecasted revenue. Aiming to become a BSM (Business Spend Management) leader, Coupa makes money by analyzing large quantities of corporate transactional expense data, looking for spending patterns and areas of inefficiency. Its platform helps customers with actionable insights that can lead to improved inventory management, smarter purchasing decisions, while lowering expenditures. With its total addressable market measured at $56 billion and growing, now could be a solid opportunity to buy on the recent dip, particularly as its customers becoming more integrated. But on Tuesday Coupa’s revenue and earnings growth must match the expectations in the stock price.

CrowdStrike (CRWD) - Reports after the close, Tuesday, Mar. 16.

Wall Street expects CrowdStrike to earn 8 cents per share on revenue of $250.44 million. This compares to the year-ago quarter when it lost 2 cents per share on revenue of $152.11 million.

What to watch: Software stocks have been under pressure over the past couple of weeks. Among the biggest decliners have been the stay-at-home beneficiaries which surged in 2020 during the pandemic. However, as vaccines become more widely available the market has grown concerned about these names, including cybersecurity stocks like CrowdStrike which has surged as much as 380% over the past year. Valuation concerns have been raised, but it’s hard to imagine a scenario where cybersecurity won’t be a critical part of enterprise spending in a post-pandemic world. There will continue to be a need for better security as companies continue to adopt digitalization while making cybersecurity a top operational priority. Currently worth $200 billion, the market is projected to grow to approximately a 10% compound annual growth rate within the decade. As such, it would be a mistake to part with CrowdStrike during this pullback.

FedEx (FDX) - Reports after the close, Thursday, Mar. 18.

Wall Street expects FedEx to earn $3.28 per share on revenue of $19.93 billion. This compares to the year-ago quarter when earnings came to $1.41 per share on revenue of $17.49 billion.

What to watch: Can FedEx deliver on earnings? Buoyed by stronger-than-expected business activity, particularly in its domestic parcel capacity, the stock up more than 140% over the past year. Investors now want to know what the company can do to sustain the momentum? The shares have fallen some 12% from their 52-week high. Last quarter revenue for the Express segment, the company’s largest operation, grew more modestly than the Ground and Services business. But there are now signs of a recovery in air cargo demand which should help relieve some of the pressure. What’s more, the mass distribution of vaccines and the re-opening of the economy should bode well for FedEx in the quarters ahead. On Thursday investors will want to hear that same level of optimism, namely about profitability improvements among FedEx’s various segments.

Nike (NKE) - Reports after the close, Thursday, Mar. 18.

Wall Street expects Nike to earn 76 cents per share on revenue of $11.05 billion. This compares to the year-ago quarter when earnings came to 53 cents per share on revenue of $10.1 billion.

What to watch: Shares of Nike has risen 7% over the past week, asserting itself as one of the better-performing names within the retail sector. Notably, the shares are up some 70% over the past year, despite the economic devastations the pandemic has inflicted upon consumers. Some might suggests that the Nike shares have now run too far ahead of the company’s fundamentals. At the same time, however, driven by the pandemic, Nike is benefiting from the fact that consumers across the globe have developed an increased focus on health and wellness. As such, known for its strong brand name and innovation, Wall Street sees Nike strongly positioned to capitalize on increased demand for its products like shoes and apparel. The company will need to affirm that confidence with strong revenue forecasts, particularly coming off the holiday quarter.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Richard Saintvilus

After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.

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