4 companies reporting Thursday
Here's what to watch for when LinkedIn, Starbucks and other companies post quarterly results.
Although we're heading into the later innings of the third quarter earnings season, plenty of prominent, widely-followed names have yet to release their results.
So far, outside of large financial companies, it hasn't been pretty for most of corporate America. Of the more than 270 S&P 500 companies that have reported earnings, only 37% have topped their revenue expectations. Meanwhile, earnings are expected to decline on a year-over-year basis for the first time since 2009.
In short, companies are facing a number of potent headwinds, most notably ongoing weakness in Europe, a slowdown in China, and significant fiscal & political uncertainty here in the U.S.
Let's take a look at a few highly-anticipated reports expected to hit the wires on Thursday, November 1 after the close of the trading session. Among the most notable companies to issue quarterly numbers that day are the most successful social media stock and the world's largest coffee chain.
When LinkedIn Corporation (LNKD) went public in May, 2011, many described its IPO as a precursor to the main event -- Facebook's (FB), which came almost exactly one year later. But to the surprise of many, LNKD has, by far, been the big winner in the social media space with shares up about 130% versus its IPO price.
Unlike most of its peers in social media, the online networking site for professionals has not seen a material slowdown in its business. In four of the past five quarters, revenue growth has exceeded 100%, and the company has yet to miss on either the top or bottom line. In order to continue that streak, LNKD will need to surpass earnings per share of $0.12 and revenue of $243.67 million.
There are a number of factors working in LNKD's favor. For instance, the company has a "legitimate" business model that does not heavily rely on advertising revenue. Instead, it generates most of its revenue through subscriptions and premium services offered to companies looking to find qualified job candidates. It also has been steadily improving its site and launching new services, which is driving user activity metrics higher. Looking ahead, LNKD has a key growth catalyst due to its recent launch of its "Sales Navigator" product, which is a sales force enhancement productivity tool.
In terms of recent stock action, shares have been slumping lately (as has tech in general) with the stock sliding by 13% over the past month. The dive has put the stock at key support levels around $105.
Is the price right?
Another highly anticipated report from the Internet space will be that of Priceline.com (PCLN). For this quarter, the Street is forecasting earnings per share of $11.82 on revenue of $1.65 billion, equating to year-over-year growth of 19% and 14%.
Two concerning revenue trends have been emerging on PCLN. Specifically, its revenue growth rates are dropping rapidly. Also, it has come up short on the topline relative to consensus in each of the past two quarters. Here is a closer look at its declining revenue growth: 3Q11: +45%; 4Q11: +36%; 1Q12: +28%; 2Q12: +20%; and 3Q12 revenue growth is expected to come in at +14%.
On the positive side, one of its main rivals, Expedia.com (EXPE), reported strong results on October 25, beating both earnings per share and revenue estimates. This is a good omen for PCLN, but this is mitigated a bit by the fact that most of PCLN's business is international, with significant European exposure.
In regards to the technicals, despite its current weakness, our real time trading reports show that PCLN still has a ways to go before reaching its longer-term support levels around the $511 area. Therefore, considerable downside risk remains should PCLN disappoint.
Rising commodity costs a buzzkill
By now, everyone is well aware that this summer's drought has caused rising commodity costs, putting a crimp on many restaurants, food producers, and grocery chains' margins. What people may not realize yet, though, is that dairy prices have seen some of the highest increases due to high feed costs and lower milk production. Given that many of its drinks use milk and other dairy products, this is not great news for Starbucks (SBUX).
After the market closes on November 1, SBUX is slated to issue its fiscal fourth quarter results. Analysts are projecting earnings per share of $0.45 on revenue of $3.4 billion. Besides the actual numbers, what participants will be paying special attention to will be management's commentary on cost pressures and/or possible price increases.
In order to diversify its business and look for new avenues of growth, the company has been actively launching new products -- namely, its Verismo Espresso machine -- and has made an acquisition to expand its food lineup, La Boulange Bakery. There have been some rumblings that it may be looking around for another acquisition. This growth strategy, as well as commentary regarding input costs/pressures, should be the focus of the conference call, slated for 5:00 p.m. ET.
According to our real time trading reports, SBUX has been working its way towards its longer-term support level of about $41.30, although that price level still remains about 10% below current prices.
Yelp on review
Online review company and recent IPO Yelp (YELP) is set to release its third quarter numbers after the market close on November 1. The company is expected to report a modest loss of 2 cents per share on revenue of $35.6 million.
With the company providing upside revenue guidance on October 24, seeing third quarter revenue of $36.4 million, much of the risk has been taken out of the quarter. Therefore, much of the focus will turn to its guidance for the fourth quarter. Analysts are currently projecting revenue of $40.6 million and a loss per share of 1 cent for the fourth quarter.
While not on par with LNKD, YELP has been one of the few successful Internet IPOs. It is currently trading about 55% above its IPO price. What has differentiated YELP from other social media stocks is that it has found early success in monetizing its mobile users.
One issue to be mindful of, and a topic that may come up on the conference call, is that there has been speculation that Facebook may look to enter into the restaurant review business.
It's been a roller-coaster for YELP shares, but most recently, the stock has been riding lower despite its upside guidance. To get a better feel for its key trading levels, click here to access our trading reports, which help uncover opportunities, but also mitigate downside risk.
For more details on optimal entry/exit levels and other information click here to access our trading reports.
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