5 Stocks to Watch This Week: ANF DSW BOX SWHC CPB
The second-quarter earnings season has faded into second-quarter leftovers. Good timing, that, as many Wall Street traders are taking their final summer vacations before Labor Day, leaving behind what's sure to be a low-volume affair with very little excitement.
But the remaining earnings calendar does have a couple interesting sparks that, if you haven't retreated to the Hamptons, you should consider watching and even playing.
Abercrombie & Fitch Co. (ANF). Abercrombie is one of the final companies to report in what has been, overall, a pretty encouraging season for the retail crowd.
Prepare for a bitter aftertaste.
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The struggling retailer is expected to announce a 20-cent loss for its second quarter, on a 4.4 percent drop in revenues, when it reports Tuesday morning. An upside surprise seems unlikely, too, with a strong dollar sure to mute the company's international sales.
There's not much to like about Abercrombie stock right now. Net income has plunged from $237 million in 2013 to just $35.6 million last year. Revenues are off more than 20 percent in that time. ANF isn't exactly in immediate bankruptcy danger with cash of $490 million more than offsetting $338 million in total debt. However, Abercrombie is slated to pay out 80 cents per share in dividends this year -- exactly how much Wall Street expects it to make in profits.
Abercrombie, like the rest of the stock market, is recovering well from its June lows. But reality should set back in shortly.
DSW (DSW). DSW has been quietly chugging along for the past few years, growing sales at a modest 5 percent clip since 2013. Analysts actually expect a 6.3 percent bump this year before reverting to that 5 percent mean next year.
Slow and steady typically wins the race, but not for this shoe retailer.
Shares are up 9 percent this year to beat the market, but that has come in a roller-coaster manner. Plus, DSW still is mired in a 45 percent downturn since a November 2013 peak.
Investors have been swallowing gross margins declines in every year since 2011. Earnings, when not stagnant, are in decline. And while store additions are fueling sales growth, comps are suffering; they flipped to negative 1.6 percent in the first quarter from 5.2 percent growth in the year-ago quarter, and DSW predicts 1 to 2 percent declines for the rest of the year.
Analysts expect more of the same in the second quarter, predicting 5 percent sales growth to $657.5 million on a 29 percent drop in profits to 30 cents per share. DSW is unlikely to weather any kind of disappointment in Tuesday morning's report.
Box (BOX). The cloud storage and content management service provider Box has mostly struggled since its January 2015 initial public offering. Shares are off nearly 45 percent since their first day of trading despite constantly, robustly growing revenues.
Consider early June, when Box beat the Street on the top and bottom lines, including 37 percent sales growth. Shares still plunged 12 percent as investors worried about future growth via a low billings figure.
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The oft-cited culprit is Box's high sales and marketing spend. The company is improving on this front, but Box still is spilling a lot of red ink. Sales and marketing spend shrunk to 65 percent of revenues from nearly 78 percent in the year-ago quarter. Nonetheless, sales and marketing still was up about $3 million; cost of revenues and R&D were higher, too. The net loss, while smaller, still was a considerable $38.6 million.
Wall Street expects Box to cut its losses from a non-GAAP 28 cents per share in the second quarter of 2015 to just 19 cents in the red this year. But BOX shares have recovered 11 percent in the past month alone, so any shortcomings on the profit front Wednesday afternoon are sure to spook investors once more.
Smith & Wesson Holding Corp. (SWHC). Smith & Wesson is one of the best stocks of the past half-decade, up an eye-popping 560 percent since the start of 2012. That includes 32 percent gains in 2016 to obliterate the Standard & Poor's 500 index and put SWHC just a couple percent below all-time highs set earlier this month.
All of this screams for some sort of pause, but SWHC could very well just keep running.
National Instant Criminal Background Check System background checks have improved for 15 straight quarters, up 37 percent in July from a year ago. Simply put, demand has been through the roof, which propelled Smith & Wesson in each of its past four earnings reports.
Even at all-time highs, SWHC only trades at 14 times next year's expected earnings, so it's far from overbought.
Smith & Wesson is expected to earn 53 cents per share (up 66 percent from last year) on revenues of $186.16 million (up 34 percent). SWHC almost certainly will smash those numbers, and shares should continue to defy gravity.
Campbell Soup Co. (CPB). Soup used to be as bulletproof a business as toilet paper, but over the past few years, consumer tastes have turned away from Campbell and Chunky and toward more fresh, organic offerings. That's a problem.
Campbell has been working on solutions, though. CPB has made inroads in other food categories through acquisitions such as its June 2015 buyout of Garden Fresh Gourmet (salsa, hummus) and the acquisition of organic baby foods maker Plum Organics in 2013. Moves like those, as well as a $250 million cost-cutting initiative, have helped Campbell minimize revenue declines and perk up earnings, helping CPB soundly outperform the S&P 500 by about 300 percent over the past couple of years.
But its fiscal fourth quarter could be difficult. Campbell blamed poor performance in its soup unit on unseasonably warm weather last quarter. Well ... May, June and July were all the hottest on record.
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Analysts see Campbell growing earnings 16 percent to 50 cents per share, but on essentially flat revenues. A disappointment seems likely, putting some of CPB's outperformance in jeopardy.
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