Rackspace Hosting (N:RAX)
Information Technology - Internet Software & Services | Reports February 16, after the close.
The Estimize community calls for EPS of $0.24, just one penny higher than the Wall Street consensus. Revenue estimates from Estimize are slightly more bullish as well, at $522.7M vs. the Street’s $521.7M and guidance of $485.4M.
What to Watch: Despite how fast cloud computing is growing, not all players in the industry are winners. That’s something Rackspace needs to consider as shares of the company have fallen a resounding 65% in the past the past 12 months. The cloud computing specialist has struggled to maintain growth while heavy hitters like Google (O:GOOGL), Microsoft (O:MSFT) and Amazon (O:AMZN) take the industry by storm. Just this year, Amazon and Microsoft cut prices of their flagship cloud products, partly explaining the 30.4% drop in Rackspace’s stock year-to-date. To avoid getting squeezed out by the competition, Rackspace has focused on investments in its services. The company recently launched “fanatical support”, an around the clock managed support service dedicated to serving Amazon Web Services and Azure customers. Rackspace is also targeting Adobe users, offering a managed cloud service devoted to marketing leaders and technology teams. The service aims to optimize solutions surrounding websites and mobile apps on Adobe Experience Manager. In the short-term, these investments into managed solutions as well as additional data centers and servers are expected to put pressure on Rackspace’s bottom-line.
Fossil Group (O:FOSL)
Consumer Discretionary - Textiles, Apparel & Luxury Goods | Reports February 16, after the close.
The Estimize community calls for EPS of $1.36, 7 cents higher than Wall Street while revenue estimates of $924.9M vs. $919.25M, both below company guidance.
What to Watch: Fossil is coming off a year which saw share prices fall 67% due to a decline in its portfolio of licensed brands, weaker watch sales, and sluggish international performance from currency headwinds. Despite all of these headwinds, Fossil has beat on the bottom line each quarter of 2015 and historically has beat the Estimize EPS consensus 63% of the time. Growth of Fossil’s flagship product, watches, turned negative in 2015 for the first time in 5 years, due to a weakened portfolio of licensed brands and market saturation. Slower demand for Michael Kors products has played a large role in Fossil’s sales decline. The Kors (N:KORS) brand represents roughly 25% of Fossil’s revenue and has contributed to almost 50% of the company’s sales growth in the past 5 years. Moreover, Fossil recently announced it will be parting ways with Burberry (L:BRBY) in December 2017. The company’s biggest threat comes from the increased prevalence of tech accessories including smartwatches and activity trackers. As a result the company is adjusting its strategy by leaning on investments in smart accessories to revive growth and capture a share of the robust wearables market. Last quarter, Fossil rolled out a line of Fossil branded watches in partnership with Google and Intel (O:INTC), they also recently acquired Misfit, a producer and manufacturer of wearables.
Priceline.com (O:PCLN)
Consumer Discretionary - Internet & Catalog Retail | Reports February 17, before the open.
The Estimize consensus is calling for EPS of $11.97 as compared to Wall Street’s consensus of $11.83, and guidance for $11.50. Revenues currently stand at $1.988B, are a bit higher than the Street’s consensus of $1.977B, and guidance of $1.923B.
What to watch: Last quarter Priceline impressively beat the Wall Street EPS consensus by almost $1.00, and revenues of $3.103B surpassed both Estimize and Wall Street by more than $25M. This is including FX headwinds that slashed gross travel bookings growth by 15 percentage points! However, that wasn’t enough to excite investors, who were more focused on reduced Q4 guidance which sent the stock tumbling. Overall, Priceline remains dominant against direct competitors such as Expedia (O:EXPE) and TripAdvisor, but they are starting to see stiff competition from vacation rental sites such as Airbnb. Priceline owned booking.com rivals all other sites in the space, but the company still lags behind Expedia in the US. Despite a weakened economy in China, Priceline sees huge potential there, as the expanding Chinese middle class has led to increased travel. The company recently upped their bet on the region by making a 10% investment in Ctripcom (O:CTRP), China’s leading online travel booking site. China hasn’t seen a maturing of the online travel market like Europe and the US, leaving room for exponential growth. Priceline’s high exposure to international markets is not only worrisome due to currency headwinds, but terror attacks in Europe have lead to less travel there.
Wal-Mart Stores (N:WMT)
Consumer Staples - Food & Staples Retailing | Reports February 18, before the market opens.
The Estimize community calls for EPS of $1.45, one penny lower than Wall Street. Revenue expectations of $130.513B are greater than the Street’s consensus of $130.461B.
What to Watch: Anyone that follows the Estimize consensus knows that it’s pretty rare when our community’s expectations are below Wall Street. This happens to be the case with Wal-Mart’s EPS estimate, and it should be taken as a bearish signal. While revenue estimates are more in-line, they have fallen by almost $1B in the last 3 months. This quarter it is expected to post a 10% decline in EPS YoY, with revenues estimated to fall 1%. Declining expectations have to do with guidance Walmart gave in October, lowering FY 2015 guidance and claiming YoY sales growth would be flat due to wage hikes and FX headwinds, but most investors took it as a sign that competition from Amazon was the most likely culprit. The world’s largest retailer recently announced that it would be closing 270 stores in the U.S. and overseas, stores closing represent less than 1% of Wal-Mart’s worldwide sales. Despite store closures, Walmart plans to open over 300 new stores in fiscal 2017, including 50 to 60 supercenters. Beyond brick and mortar, Wal-Mart is looking to develop a digital relationship with customers through the launch of Wal-Mart Pay, the first step in their e-payment strategy.
Nordstrom (N:JWN)
Consumer Discretionary - Multiline Retail | Reports February 18, after the close.
The Estimize community calls for EPS of $1.22, in-line with Wall Street. Revenue expectations from Estimize of $4.23B are also in line with the Street.
What to Watch: For the fourth quarter, analysts are projecting Nordstrom’s EPS will decline 7%, while sales will grow 8%. This would be the 5th consecutive quarter of EPS declines, after a huge miss in Q3, while revenue growth has actually been relatively strong in 2015, coming in at 13%, 12% and 7% for the first three quarters of the year. However, it’s important to keep in mind that JWN only beats on revenue expectations 21% of the time, one of the lowest beat rates for a company of this size. Of the department stores, Nordstrom is considered higher end, a hard spot to sit as the US consumer becomes more value-focused and less willing to spend on apparel. While same store sales were strong in the first half of the year, coming in at 4.4% and 4.9% in Q1 and Q2, outpacing many of its competitors, they dropped to 0.9% in Q3. A large part of the company’s success during the first half of the year can be attributed to Nordstrom Rack, Nordstrom’s discount store. That segment saw sales grow 8.4% in Q3, ending a 26 quarter streak of double-digit growth. Other initiatives such as the launch of Nordstromrack.com, entry into Canada and the acquisition of Trunk Club drove a third of total sales growth in the latest quarter and are expected to do so again in the fourth quarter.