Key Earnings for Week 2 in December
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Moving into the second week of December, most thoughts will turn to the retail sector and how its most important quarter will fare. It’s always a tricky time as every year retail habits appear to be change in some form or other. Without doubt, e-commerce will increase as a share of total sales and I’m also certain that some retailers will give some weak commentary which will be backed up in January but others will see that it was just a question of timing.
My suspicion is that it will be a good Christmas, but US consumers, who are by now becoming highly proficient in holding out for a discount or a promotion, will leave it to the last minute before splurging. In other words, look out for some negative commentary leading into Christmas but hold your nerve if you believe in the company.
With my preamble focusing on retail, it’s only natural to mention that Toys "R" Us is due to give results on Monday and investors will look for any early commentary on sales. On another front, packaging company Greif will give a good update on the state of the industrial sector in its earnings report. I find its commentary to be extremely useful.
The big earnings report on Tuesday will come from Dollar General (NYSE: DG). I confess I’m becoming interested in the dollar stores. They do offer relatively recession resistant growth but were arguably overvalued earlier in the year. The good news is that they have corrected but the bad news is that that is because same store sales growth appears to be slowing. The likes of Kroger are fighting back, and growth maybe harder to come by as the economy improves. With that said, Kroger did point out that the value end of the market was still seeing customers wanting to trade down. Good news for Dollar General? We shall see.
There aren’t many companies reporting on Wednesday but the three that I’m highlighting are extremely interesting. Costco (NASDAQ: COST) reported a strong set of results last time around, and I would advise reading the linked article to see the relationship between margins and revenue growth. Investors will be looking for signs that margins can and revenues can grow together. I think the omens are good here and I’m particularly interested to see if there is any positive commentary on future input costs. Inflation should abate on some non-food items.
I’m also interested in looking at Restoration Hardware Holdings; it’s not a stock I am familiar with but from what home furnishings companies like Williams-Sonoma have been reporting recently it will be a good idea to take a closer look at results.
The third key report will come from Joy Global (NYSE: JOY), which is a company that is as closely tied to prospects in China and mining in particular. The stock has come off a lot as the market anticipated a slowdown so it is anyone’s guess what it will do now. However, my main interest is with its commentary on China and prospects for hard commodities in general.
Pier 1 Imports is another hot housing play that gives results. I like its near term prospects but am not convinced longer term. Turning to technology, Ciena (NASDAQ: CIEN) will give results and I’m not sure what to expect here. It does have good exposure to 100G spending (a relatively stronger area of telco spending) but recent results from Finisar were no more than ok on the telco side. Time will tell.
Adobe Systems will give results, and they need to be read closely to see how the plans to migrate customers to a SaaS based model are progressing. I think Adobe will surprise with how successful this migration will be, and I hold the stock on that basis; however, in the near term, it's not clear how revenues will be affected or how the market will take to seeing revenues weaker due to the shift from permanent license sales towards subscription based.
Verifone (NYSE: PAY) will give results. I’ve discussed the company in an article here and frankly it is about as volatile a stock as you could wish to find. The key questions here are split between the long and near term. In the short term investors will trade the stock based on how the European slowdown will affect growth in some key regions. Longer term it has good prospects from increasing penetration in emerging markets, and it could turn out to be a great way to play growth in mobile commerce.
SaintGermain has positions in Williams-Sonoma and Adobe Systems. The Motley Fool owns shares of Costco Wholesale, Joy Global, and VeriFone Holdings. Motley Fool newsletter services recommend Costco Wholesale. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!