With only a few weeks left until Alcoa (NYSE:AA) kicks off Q2 earnings season, investors are preparing for what’s looking like another disappointing season. Early estimates have earnings declining nearly 2%, marking the third consecutive quarter of declines according to Estimize data. However it won’t be bad across the board and half of the 10 sectors are projecting year-over-year growth, one of those being consumer discretionary. This quarter, investors should keep an eye on Chipotle Mexican Grill (NYSE:CMG), Starbucks (NASDAQ:SBUX), Groupon (NASDAQ:GRPN), Wynn Resorts (NASDAQ:WYNN) and Deckers Outdoor (NYSE:DECK) to move, for better or worse, on earnings.
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Chipotle Mexican Grill (NYSE:CMG) Consumer Discretionary – Hotels, Restaurants & Leisure
The food safety and health scares that closed out 2015 have really put a damper on Chipotle’s earnings. Financial performance of CMG has dipped along with its traffic, with many consumers not ready to return to the burrito chain in the wake of the e.coli and norovirus cases. The first quarter of 2016 featured declines in every key metric: revenue decreased 23.4%, comparable sales down 29.7% and operating margins slid 27.5%. It hasn’t helped that food prices such as chicken and beef have been rising while Chipotle also continues to raise wages for its in-store employees. As the company continues its gradual path to recovery, it’s safe to say that it won’t be fully realized this quarter. The Estimize community is down on Chipotle heading into its Q2 earnings. The consensus data is calling for earnings per share of $1.12 on $1.03 billion in revenue. Compared to a year earlier, this reflects a 70% decline on the bottom line and 12% on the top. In the last 3 months, per share estimates have declined 65% with revenue falling 16%. Estimates should continue to fall as we near Chipotle’s July report date. All of these troubles have no doubt hurt shareholders. Shares are down nearly 40% since news broke of the first health scare.
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Starbucks (NASDAQ:SBUX) Consumer Discretionary – Hotels, Restaurants & Leisure
A cup of coffee is a necessary part of many people’s daily routine. Starbucks hopes that that day to day habit involves visiting 1 of its 24,000 stores found in 70 countries worldwide. The company has been largely successful in doing so as earnings continue to make double-digit gains. In the past 2 fiscal years, Starbucks has posted double digit gains on both the top and bottom line with no sign of slowing down. The company’s constant efforts to expand and improve have been key to driving robust traffic trends. Starbuck’s is seeing upside in its relatively new food segment, increased usage of its mobile platform and general improvements in operational efficiency. Last quarter the coffee chain featured a 6% gain in comparable store sales on the 350 new stores worldwide. The Estimize consensus is high on Starbucks to repeat its past performances. The community is calling for earnings per share of 49 cents on $5.36 billion in revenue, a 17% increase on the bottom line and 10% on the top. Shares of the coffee giant typically do well leading up to earnings, rising 2% in the 30 days ahead of a report.
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Groupon, Inc. (NASDAQ:GRPN) Consumer Discretionary – Internet & Catalog Retail
Groupon is a company trying to drag itself out of the gutter. Despite exceeding expectations the last 2 quarters, earnings have suffered significant negative growth. The fourth and first quarters featured 33% and 133% declines on the bottom line, respectively. Gross billings, revenues and profits continue to decline in international markets as the new CEO has decided to focus on North American Markets. The company’s new growth strategy has Groupon moving away from certain low margin goods and shifting towards an Amazon-like service. This has yet to pay off as gross billings per active user declined by 4% last quarter with no indication of turning around in Q2. Shares are down 42% from a year earlier with a high chance of falling further if earnings disappoint. The Estimize consensus predicts that earnings this quarter will be just as bad, as evidenced by downward revisions activity. Analysts are looking for a loss of 2 cents per share on $710.07 million in revenue. Compared to last year, this represents a 169% decline on the bottom line with an incremental decline in sales. Given how poor earnings have been, it’s not surprising that the stock suffers during earnings season. Through earnings shares typically fall 4% and continue to decline the day following a report.
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Wynn Resorts Ltd. (NASDAQ:WYNN) Consumer Discretionary – Hotels, Restaurants & Leisure
Recently, financial news personality Jim Cramer lauded Steve Wynn for his ability to turnaround Wynn Resorts and lift shareholder value in recent years. The stock is up nearly 50% year to date after delivering strong first-quarter results to kick off fiscal 2016. This marked the first time in 6 quarters that Wynn posted positive earnings growth and single digit revenue declines. Troubles in China have been a huge hurdle for Wynn in the past few years. Stringent regulations and a decline in gaming revenue throughout the region put the company in a difficult situation. As pressures start to alleviate, Wynn should be able to turn positive growth in the region. Construction is also underway for new resorts in Macau and Boston. Las Vegas operations have held the company afloat throughout the turbulent years. This quarter the Estimize community is looking for earnings per share of 90 cents on $1.014 billion in revenue. Compared to a year earlier this represents a 12% increase on the bottom line and 7% on the top. Estimates have been on the rise since its last report, reflecting the company’s positive momentum heading into earnings season.
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Under Armour, Inc. (NYSE:UA) Consumer Discretionary – Textiles, Apparel & Luxury Goods
Under Armour seems to be falling from investor’s good graces. After bursting onto the scene 5 years ago, the company has been stuck in mediocrity lately. A few weeks ago, UA issued a statement that the Sports Authority’s bankruptcy would severely impact fiscal 2016 revenue. Sports Authority’s decision to liquidate rather than restructure caused Under Armour to shift its full-year guidance down $75 million to $4.92 billion. According to management, Sports Authority accounted for $120 million in revenue, some of which it was able to write down given the bankruptcy. Shares are down nearly 5% since the news broke with potential to fall even further.
It’s no secret that earnings will be lower for Q2 and for the rest of fiscal 2016. The Estimize consensus is calling for earning per share of 4 cents on $1 billion in revenue, right in line with Wall Street. Earnings per share estimates have been cut by 58% in the last month and should continue to drop further given the recent revelations. Under Armour is still projecting double digit growth on the top and bottom line but significantly lower than previous quarters.
How do you think these names will report this week?