The next week brings a relatively light week on the data front, with few earnings and scarce data economic data marking the calendar.
The May retail sales report on Thursday and earnings from key companies including Lululemon Atletica (LULU), Navistar (NAV), and PVH Corp. (PVH) highlight the vacant calendar.
Key Earnings
Markets will focus eyes on retailers Lululemon Atletica and PVH Corp. Lululemon is expected to report earnings on Monday after the bell while its fellow retailer PVH will report Wednesday after the close. Truck maker Navistar will also report earnings Monday.
Lululemon Atletica
The maker of women's athletic clothes is expected to report earnings Monday after the close. Wall Street is looking for first quarter earnings per share of $0.30 on revenue of $341.00 million. In the same period a year ago, the company reported earnings per share of $0.32 on revenue of $285.7 million
Analysts at Morgan Stanley weighed in on the stock Friday ahead of the earnings release next week. Morgan Stanley has an equal-weight rating on the stock and does not have a price target for the stock.
“We think 1Q13 expectations are in-line with the event's most likely outcome. The market is looking for raised FY13 guidance and probably gets it. We anticipate the pant recall impact debate ends and old debates re-emerge, changing stock dynamics.”
“LULU said on 3/21 its black luon pant recall would cost 2013 EPS $0.25-$0.27 and this led to a -13% Street FY13 earnings revision. Since then however, the stock is up 26%. We believe the market has assumed a less severe impact and we agree. Our store checks suggested customers substituted luon pants with other products and revealed recalled items back in stores earlier than expected.”
“We model $2.03 FY13 EPS vs. the Street's $1.99. We think LULU has to raise its $1.95-$1.99 FY13 EPS guidance to $2.00-$2.05 to meet market expectations. This is the most probable scenario in our view and likely causes a muted stock reaction. We don't see much guidance upside since LULU usually forecasts conservatively. If LULU misses 1Q EPS or guidance falls short, the stock likely drops, but the converse is also true. We doubt either happens, although the risk/reward seems slightly skewed down. The options market is pricing in a +/- 7% jump, 270 bps below the avg. move.”
Canacord Genuity analysts are more bullish on the stock heading into earnings. Already with a buy rating on the stock, they boosted their price target to $92 from $87 Monday ahead of earnings.
“Weekend store checks confirm LULU has begun restocking stores with the Astro and Groove yoga pants – two of the three styles that were recalled in mid-March (the Wonder Under crops have yet to be restocked). This timing is consistent with our note from April 22 in which our supply chain checks indicated LULU would be restocking the recalled Luon pants in early June. As such, we continue to believe Q2 comps will benefit from pent-up demand.”
“Not only is the impact to the brand from the recall expected to be negligible, we believe LULU benefited from increased traffic and substitute purchases. As such, we expect to see upside to our Q1 estimates when the company reports Q1 results on June 10. We reiterate our BUY and are raising our target to $92 from $87 based on a 35x P/E multiple that is more consistent with its growth rate.”
Canaccord Genuity expects Lululemon to report first quarter EPS of $0.30 on revenue of $335.8 million, roughly in line with Wall Street forecasts.
Navistar
Heavy vehicle manufacturer Navistar is also expected to release earnings Monday. The company is expected to report a loss of $1.20 per share in the quarter on revenue of $2.88 billion. In the second quarter last year, Navistar earned $0.67 per share on revenue of $3.3 billion.
J.P. Morgan analysts commented on the stock Friday ahead of earnings. They reiterated their overweight rating on the stock ahead of the earnings.
“Navistar will report earnings Monday afternoon after the close (~4PM), with a conference call at 4:30PM ET. NAV's FQ2'13 is expected to be messy, with improvement expected in FH2'13 as the new 13-L engine was launched at the end of April. EBITDA is expected to be flattish, and cash burn is expected to be ~$100MM- $200MM on the back of restructuring expenses and pension contributions.”
“Key risks to FQ2 results include ongoing costs related to the Garland plant closure and field campaigns to repair existing issues on older engines. NAV's Class 8 production was slightly higher than JPMe, though market share was slightly below as engine offerings remained in transition. We continue to expect market share to be bumpy as new offerings roll-out.”
J.P. Morgan forecasts a loss per share of $1.09 and revenue of $3.0 billion, both higher than Wall Street estimates. The analysts note three key questions that need to be answered:
- 1. How are customers responding to the new 13-L offering?
- 2. How far along is the cost reduction program?
- 3. Have any new cash needs arisen that might affect near-term cash burn?
Jefferies reiterated its buy rating and $45 price target on Navistar earlier this week. They forecast a wider loss per share than the street of $1.16 per share on revenue of $2.9 billion.
“Last quarter, NAV realized EBITDA of $57 mln, versus the guidance of $(50)- $50 mln and ended the quarter with $1,189 mln in cash versus guidance of $950-$1,050 mln. Our EBITDA forecast for F2Q is $39 mln, but we don't include a possible warranty campaign of $25 mln or so as timing remains uncertain. We believe management will provide guidance for F3Q, which should show a slight sequential improvement in EBITDA.”
“Our $45 PT applies an average historical multiple to our FY13 sales – 32% EV/Sales. However, we continue to see significant upside when uncertainty fades. Risks: another downturn in the North American truck market, as well as potential lack of adoption of NAV's enhanced EGR engine technology.”
PVH Corp.
The maker of brands such as Calvin Klein and Izod is expected to report earnings Wednesday after the close. Analysts forecast earnings per share of $1.35, higher than the $1.30 reported in the same period last year. Revenue is expected to rise to 1.91 billion from 1.43 billion a year ago.
Bank of America re-assumed coverage of the company in April with a neutral rating and a $115 price target. They forecast earnings per share of $1.33, slightly below the street as they fear the recent Warnaco acquisition will negatively weigh on earnings.
“Given near-term revenue & expense headwinds following the Warnaco acquisition (completed 2/13/13) we see limited 2013 EPS upside. Our $115 PO is based on 14x our F15 (Jan.) operating EPS estimate of $8.20 and is supported by our DCF analysis (assumes a 7-8% expected return and 7.5x terminal EBITDA multiple).”
“Cost synergies are still expected to reach $100MM over 4 years now (instead of 3) as PVH makes incremental investments in WRC's infrastructure, Calvin Klein Jeanswear product & design quality, in-store marketing, and talent (new heads of Europe & Asia being recruited). Expected WRC EPS dilution of ($0.25) in F14 (reduced from previous +$0.35 accretion) also reflects mark-downs associated with global CK inventory rationalization (particularly the CK Jeanswear business).”
“PVH sales thru 2013 should be pressured by: (1) the impact of global CK inventory clearance on sell-thru of current CK goods; (2) plans to reduce CK off-price distribution by $40-50MM over the next 2 years; (3) continued weakness in Heritage (particularly Bass outlets); and (4) the loss of the “Chaps” license ($250MM sales).”
J.P. Morgan has PVH at a neutral rating and has a slightly higher price target at $120. “We are setting our quarterly 2013E EPS estimates for PVH following 4Q12 Earnings. We estimate 1Q13E EPS of $1.33, 2Q13E EPS of $1.36, 3Q13E EPS of $2.53, and 4Q13E EPS of $1.82. For 2013E, we adjust our estimate from $7.45 to $7.05. We are lowering out FY14 estimate from $8.60 to $8.25.”
“We believe the WRC acquisition is a game-changer longer-term with a united “House of Calvin Klein” and ability to expand Tommy to underpenetrated, higher growth Asia and South American markets attractive, in our view. Incorporating 6-8% revenue growth and mid-to-high teens EPS growth, we see potential for $10-$11 in EPS in FY15. That said, we see FY13 as a "transition" year with SG&A investments (systems, distribution, marketing) potentially offsetting transaction synergies with a number of top-line headwinds.”
Key Economics Releases
The economic calendar in the U.S. Monday is bleak save for the TD Ameritrade Investor Movement Index and the weekly 3- and 6-month bill auctions. Monday night, the Bank of Japan decision is due out and should create some volatility in stocks due to the recent correlation of equities to the yen.
Tuesday morning, British industrial production (IP) data is due out ahead of the open followed by the weekly Redbook report in the U.S. and wholesale trade data. The data precludes the IP report from the eurozone Wednesday morning and MBA Purchase Applications.
Wednesday night, Australia's typically volatile employment report is due out. Thursday morning, the key economic report of the week is set to be released as the U.S. retail sales report for May is expected. Retail sales are expected to have risen 0.4 percent in the month vs. 0.1 percent previously, while core retail sales should jump 0.3 percent vs. a drop of 0.2 percent at the last reading.
Friday morning kicks off with the eurozone's employment report pre-market, followed by the U.S. producer price index and IP report. The Reuters/University of Michigan Consumer Confidence Index rounds up the week's data.
Daily Schedule
Monday>
- Earnings Expected From: Amira Nature Foods (NYSE: ANFI), Camelot Information Systems (NYSE: CIS), KMG Chemicals (NYSE: KMG), Navistar, Lululemon, Annie's (NYSE: BNNY), Diamond Foods (NASDAQ: DMND), North American Energy Partners (NYSE: NOA), and ModusLink Global Solutions (NASDAQ: MLNK).
- Economic Releases Expected: Swiss unemployment rate, Italian industrial production, and the Bank of Japan interest rate decision.
- Earnings Expected From: LDK Solar (NYSE: LDK), Medical Action Industries (NASDAQ: MDCI), Oxford Industries (NYSE: OXM), Ulta Salon (NASDAQ: ULTA), and Rand Logistics (NASDAQ: RLOG).
- Economic Releases Expected: British industrial production, Redbook, NFIB Small Business Optimism Index, and wholesale inventories.
- Earnings Expected From: Agilysys (NASDAQ: AGYS), PVH Corp., and Men's Warehouse (NYSE: MW).
- Economic Releases Expected: British claimant count, eurozone industrial production, MBA Purchase Applications, the Treasury's budget balance, and the Australian employment change.
- Earnings Expected From: Rentrak Corp. (NASDAQ: RENT), Oculus Innovative Solutions (NASDAQ: OCLS), and ALCO Stores (NASDAQ: ALCS).
- Economic Releases Expected: U.S. retail sales, initial jobless claims, and business inventories.
- Economic Releases Expected: eurozone employment change, U.S. capacity utilization, industrial production, and the Reuters/University of Michigan Consumer Confidence report.