Investing

Earnings Previews: BlackBerry, Lululemon, Chewy, Walgreens

Paul Ausick

Published: March 29, 2021 1:42 pm

Last Updated: June 18, 2021 1:53 pm

Monday afternoon’s and Tuesday morning’s noteworthy earnings reports included just two stocks, an EV maker and the co-developer of a COVID-19 vaccine.

Tuesday afternoon’s and Wednesday morning’s noteworthy earnings reports include a security software company, a sports apparel giant, a pet supply company and a Dow 30 component.
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BlackBerry

BlackBerry Ltd. (NYSE: BB) was once the world’s largest maker of cell phones. The company was late to the switch to smartphones, though, and it has repurposed itself as a supplier of security software and a platform for automobile automation. Last year shares posted an overall gain of about a third before dropping back to a bump of just 3.3% for the full year.

The stock spiked again in late January when retail investors went after short sellers in the stock and drove the price up by more than 275%. Shares were up about a third for the year to date at Friday’s close.

The most recent analyst ratings on the stock were downgrades, essentially from Neutral to Sell. With the shares trading at around $9.30 on Monday and a consensus price target of $7.69, the stock likely is overpriced.

Analysts expect BlackBerry to post fiscal fourth-quarter 2021 quarterly earnings per share (EPS) of $0.03 on revenue of $245.1 million when it reports results Tuesday after markets close. That’s a year-over-year drop of two-thirds in EPS and a 16% decline in revenue. For the full 2021 fiscal year, the company is forecast to post EPS of $0.18 (up 38%) on sales of $942.2 million (down 14.3%).

At Monday’s price, the shares trade at a multiple of 53 times expected 2021 earnings, 63 times expected 2022 earnings and 64 times expected 2023 earnings.

Lululemon

Last year, Lululemon Athletica Inc. (NASDAQ: LULU) posted a bump of more than 50% in its share price, even including a drop of more than 40% in mid-March. When the company reports fourth-quarter 2020 results after markets close Tuesday, analysts are expecting the athletic apparel maker to post solid gains over the prior quarter and full year.

Analysts remain bullish on the stock, with Piper Sandler Monday morning maintaining its Overweight rating while lowering the price target from $490 to $478. Last week Morgan Stanley maintained its Equal Weight rating and lowered the price target from $400 to $386. The stock is down about 10% so far in 2021, due in part to investors deciding that pandemic winners like Lululemon are not going to continue posting big numbers. Piper Sandler sees the lower price as a “compelling entry point.”

Fourth-quarter EPS is forecast at $2.49, up 9.2% year over year, and revenue is forecast up 18.9% at $1.66 billion. For the full fiscal year, Lululemon is expected to report EPS of $4.58, down about 7% year over year, on sales of $4.33 billion, up 8.9%.

Lululemon’s stock traded at around $311 Monday morning, in a 52-week range of $177.77 to $399.90. The consensus price target on the stock is $403, implying an upside potential of nearly 30%.

This pure-play e-commerce provider of pet supplies is a subsidiary of privately held PetSmart. Like many other e-commerce companies, Chewy Inc. (NYSE: CHWY) performed quite well during the lockdowns related to the coronavirus pandemic. That performance is expected to be reflected in quarterly results coming out after markets close Tuesday.

Of 16 analyst firms surveyed, 12 have Buy or Strong Buy ratings on the stock, while three have Hold ratings and just one rates the stock at Sell. The consensus price target on the stock is about $101, and shares traded at around $78.30 on Monday, implying upside potential of around 30%. At the high target of $133, the implied upside is almost 70%.

Analysts are looking for a fourth-quarter loss per share of $0.10, an improvement of 33% compared with the same period a year ago. Sales are forecast up nearly 45% to $1.96 billion. For the year, the expected loss per share is $0.38, an improvement of 40% year over year. Revenue for the year is expected to total $7.06 billion, an improvement of nearly 46% compared with the prior year.

The stock’s 52-week range is $31.78 to $120.00, and more than 3 million shares are traded on average every day. Chewy does not pay a dividend.

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Walgreens

Before markets open on Wednesday, Walgreens Boots Alliance Inc. (NASDAQ: WBA) is scheduled to report second-quarter 2021 results. The Dow 30 component’s stock dropped by nearly a third last year but has recovered to trade down by about 12% since January of 2019.

In Moody’s Investors Service’s recent periodic review of Walgreens, the analysts wrote that the COVID-19 pandemic:

… exacerbated the already weaker than expected operating performance of the company. The weak operating results have caused leverage to weaken. We expect earnings to continue to be pressured in the next couple of quarters as the uncertain business environment due to continuing increases in coronavirus outbreaks and the related lockdowns particularly in the UK will remain a headwind for the company. We continue to expect the company to prioritize debt reduction over shareholder returns and to lower its debt levels such that debt/EBITDA will make meaningful improvement over the next 12 months.

About two weeks ago, Amazon announced the national rollout of its health care service, and that caused several stocks, including Walgreens, to swoon. Last August, Moody’s reiterated its Baa2 (investment grade) rating on Walgreens senior unsecured debt and lowered its outlook on the company to negative.

Analysts expect Walgreens to posted EPS of $1.11, down 27% year over year, on revenue of $35.45 billion, down about 1%. Estimates for the 2021 fiscal year ending in August call for EPS of $4.89 on sales of $141.42 billion. That’s a profit bump of about 3.2% on a sales uptick of 1.3%.

The stock was trading at around $52.30 on Monday, up about 0.52%, in a 52-week range of $33.36 to $56.12. The consensus price target on the stock is $47.17. At the high target of $64, shares have a potential upside of about 14%. Walgreens pays an annual dividend of $1.87 (yield of 3.59%).