Starbucks (O:SBUX)
Consumer Discretionary - Hotels, Restaurants & Leisure | Reports October 29, after the close.
Cult favorite stock, Starbucks, has an Estimize EPS consensus of $0.45, one penny higher than Wall Street and 22% higher than the year-ago result. Revenues of $4.915B are also ahead of the Street’s estimate for $4.888B.
What to watch: Starbucks is leading the restaurant industry in mobile and is reshaping the way people order and pay. Close to 20% of all transactions are now mobile and customers using the app tend to spend more. Starbucks mobile order & pay app launched this spring in the US and was recently released in Canada and the UK as well. The app allows customers to order and pay ahead of time and is already gaining a lot of traction. To fill in non-peak hours such as lunch, the coffee company is focusing on higher margin offerings, aka food. Late last year Starbucks said it plans to double its annual revenue from food in the U.S. to more than $4 billion in the next five years. The company acknowledged that the quality of its food didn’t always match the quality of its coffee, so it acquired Bay Bread LLC and its line of La Boulange baked goods in 2012. Starbucks also keeps customers loyal with its very popular rewards program which is important for retaining customers and attracting new ones. Starbucks has 10 million customers signed up for its rewards program.
LinkedIn Corporation (N:LNKD)
Information Technology - Internet Software & Services | Reports October 29, after the close.
The Estimize community looking for EPS of $0.49 as compared to Wall Street’s $0.47 and company guidance of $0.43. Revenues are also slightly higher, expected to come in at $758.0M vs. Wall Street’s $756.7M and guidance of $747.5M.
What to watch: To LinkedIn’s dismay, it often gets lumped together with social media companies like Facebook (O:FB) and Twitter (N:TWTR), which are criticized for not making enough money despite having massive user bases. Unlike FB and TWTR which generate nearly all of their revenue from advertisers, LNKD makes money off of its subscriptions. Less than 25% of its revenue comes from its advertising segment, Marketing Solutions. LinkedIn’s main source of cash (close to 60%) is its recruiting platform, Talent Solutions, but even that segment may be suffering. After last quarter’s report, the company said display ad sales have fallen 30% and premium subscriptions are shrinking as a percentage of total revenue. A recent survey from the American Customer Satisfaction Index may shed some light on this, finding that LinkedIn ranks as the least favorite of all social media names. Users find the platform clunky and difficult to use, and the biggest complaint was regarding unwanted connection requests and spam messages. Carrying a P/E value of 55, the company will have to at least meet Thursday’s expectations to prevent the stock from dropping.
Expedia (O:EXPE)
Consumer Discretionary - Internet & Catalog Retail | Reports October 29, after the close.
Fresh off its acquisition of Orbitz, travel-booking site Expedia will report its third quarter results on Thursday. Estimize is expecting EPS of $2.03, in-line with Wall Street, and making it the first time in 3 quarters that the company is expected to post YoY profit growth. Revenues are also in-line at $1.954B.
What to watch: Bookings is always the number to watch with Expedia and its peers. Many analysts believe the acquisition of Orbitz during the final two weeks of the third fiscal quarter will help that number grow, along with the long awaited platform upgrade. Bookings increased 19% in both the first and second quarter. Also helping this metric will be the shedding of Expedia’s 62% stake in eLong, a flailing Chinese booking site. Revenues are also expected to benefit from this move. EXPE is the first of its group to report, with TripAdvisor and Priceline releasing results next week, all will likely cite the stronger dollar as having a negative impact on the top and bottom-line again this quarter. The biggest challenge for the travel booking sites will no doubt be the increasing popularity of alternative accommodation providers such as privately held Airbnb and HomeAway (AWAY). While the US consumer mostly remains healthy and willing to spend at this point, they are being very choosy with how they allocate their discretionary income, leading to a case of the haves and the have-nots in the leisure space.
Electronic Arts (O:EA)
Information Technology - Software | Reports October 29, after the close.
The Estimize consensus for EA stands at $0.49, a nickel higher than the Wall Street consensus, and 9 cents higher than company guidance. Revenues are expected to come in at $1.111B vs. the Street’s $1.092B.
What to watch: Despite reporting YoY decline on EPS for the last 3 quarters, the company has been blowing away analyst expectations for the last 8 quarters. Revenues have beaten in 6 of those 8 quarters. Helping the video gaming company this quarter is the popularity of its recently released “Madden NFL ‘16” game, which ranked as the top-selling game in August even though the it only debuted on August 25. In September the game fell to #2 behind NBA 2K16. Generally, positive trends in the videogame industry dictate that is will generate over $115B in revenues in the U.S. this year, a nearly 50% increase in 3 years. Titles for videogame consoles are the strongest segment, making up half of those revenues. EA chalks its success up to a push into digital and mobile, as downloadable content (add-ons to purchased titles) have been increasing in popularity. Unlike other forms of media, video game players are engaging longer and spending more money. Next up is the release of EA’s most anticipated game of the year, Star Wars: Battlefront Shooter game due out next month, causing EA to raise guidance for fiscal 2016.
Exxon Mobil (N:XOM)
Energy - Oil, Gas & Consumable Fuels | Reports October 30, before the open.
Estimize is looking for EPS of $0.91, two cents higher than what Wall Street is expecting. This would denote a profit decline of 52% YoY, the fourth consecutive quarter of negative numbers. Revenues are expected to come in at $69.23B vs. the Street’s $68.0B, also a decline of 36%.
What to watch: It’s no surprise that Energy companies are the biggest losers this season. Falling oil prices have caused the S&P 500 Energy sector to post the largest YoY decline of 65% for earnings and 28% on revenues. It was initially thought that Q3 would be the first quarter of even year-over-year comparisons. Oil prices first dropped during the third quarter of 2014 in response to the stronger dollar, therefore making Q3 2015 the first quarter with level comparisons. However, oil prices dropped even further in the third quarter, prolonging the difficult YoY comparisons. Brent Crude Oil fell 22% in the third quarter, and 50% YoY. Similarly, West Texas Intermediate ended Q2 at $59.83, down 24%. Exxon is not only the largest US oil company, but the second largest company in the S&P 500 index. At that size, XOM’s results have a big impact on the overall index. While the oil giant missed EPS expectations by $0.07 in Q2, revenues beat by nearly $10B!