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Earnings Previews: Darden Restaurants, Fortuna Silver, Hello Group, Trip.com
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The Dow Jones industrials were outpacing the S&P 500 and Nasdaq Composite indexes just after Tuesday’s opening bell, largely due to a solid earnings report last night from Nike. Year over year, revenue rose by 4.8%, and earnings per share (EPS) beat estimates by nearly 21%. The company also said that its business in China (which had been poor) was improving, and Nike expects the improvement to continue in the current quarter. The stock traded up more than 5%.
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The other side of the earnings coin is represented by Tencent Music, which missed both EPS and revenue expectations and traded down by around 8% in the early going Tuesday. Carnival Cruise Lines also missed on both but traded up by less than 1%, and Huya, the China-based streaming games platform, traded down about 6% after posting a smaller-than-expected loss on a year-over-year drop in revenue of about 6%.
After markets close Tuesday and before they open again on Wednesday, reports are due from these five firms, among others: Adobe, General Mills, JinkoSolar, PagSeguro and Winnebago.
Here we preview four companies set to report quarterly later on Wednesday or first thing Thursday morning.
Darden Restaurants
Darden Restaurants Inc. (NYSE: DRI), the owner and operator of more than 1,800 restaurant locations, including Olive Garden and Longhorn Steakhouse, will report fiscal third-quarter results before Thursday’s opening bell. Over the past 12 months, Darden’s stock has dropped by about 1.4%, following a dip of 19% in the first week of this month. For the month of March to date, Darden stock is down about 7.6%. It seems that investors are not yet convinced that Darden has a handle on rising costs in the current economic environment.
Of 29 analysts covering the stock, 19 have a Buy or Strong Buy rating on the shares and another nine rate the stock at Hold. At a recent price of around $134.50 a share, the upside potential based on a median price target of $162.50 is 20.8%. At the high price target of $180, the upside potential is 33.8%.
Third-quarter revenue is forecast at $2.51 billion, which would up 10.6% sequentially and about 45% year over year. Adjusted EPS are forecast at $2.11, up 42.6% sequentially and 115% higher year over year. For the full fiscal 2022 year ending in May, current estimates call for EPS of $7.53, up 74.7%, on sales of $9.30 billion, up 33.4%.
Darden stock trades at 17.8 times expected 2022 EPS, 15.9 times estimated 2023 earnings of $8.42 and 14.3 times estimated 2024 earnings of $9.34 per share. The stock’s 52-week range is $116.03 to $164.28. Darden pays an annual dividend of $3.45 (yield of 3.29%). Total shareholder return for the past year was 0.6%.
24/7 Wall St.Fortuna Silver
Over the past two years, shares of Fortuna Silver Mines Inc. (NYSE: FSM) have risen by about 64%. Since reaching an all-time high of around $9.70 in January of 2021, however, the shares fell to a recent low of below $3 a share. The better news is that the stock has added about 34% since posting that low. It is all down to demand for precious metals. Silver futures have added more than 13% since mid-December, a better return than the increase of about 8.5% in gold. Vancouver, B.C.-based Fortuna has silver and gold projects in Mexico, Peru and Argentina. The company will report quarterly results after markets close Wednesday.
Broker coverage is light, with just seven firms covering the stock. Three have a Buy or Strong Buy rating on the shares and the rest have Hold ratings. At a share price of around $4.10, the stock trades just above its median and price target of $4.00.
Fourth-quarter fiscal 2021 revenue is forecast at $191.7 million, up 17.9% sequentially and 85.2% year over year. Adjusted EPS are forecast at $0.14, up 25.6% sequentially and 16.7% higher year over year. For the full fiscal year, analysts are expecting EPS of $0.47, up 176.2%, on sales of $593.11 million, up 112.6%.
Fortuna stock trades at 8.7 times expected 2021 EPS, 11.3 times estimated 2022 earnings of $0.36 and 9.3 times estimated 2023 earnings of $0.44 per share. The stock’s 52-week range is $2.91 to $7.98. The company does not pay a dividend. Total shareholder return for the past year was negative 42.4%.
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Hello Group
Beijing-based Hello Group Inc. (NASDAQ: MOMO) provides a mobile platform for social media and entertainment in China. Over the past 12 months, the stock has dropped by about 51%, including a brief dip to around $4.50 a share following J.P. Morgan’s blanket cut on Chinese stocks last week. But the operator of two big dating sites has suffered about half its annual loss in the past month. Hello Group is expected to report results early Thursday.
Of 15 analysts covering the company, 11 have given the shares a Hold rating and four rate them at Buy. At a share price of around $7.65, the upside potential based on a median price target of $13.58 is about 77.5%. At the high price target of $28.01, the upside potential is 266%.
Fourth-quarter revenue is forecast at $569.01 million, down 2.4% sequentially and 2.0% lower year over year. Adjusted EPS are forecast at $0.27, down nearly 35% sequentially and 53.4% year over year. For full fiscal 2021, analysts are looking for EPS of $1.52, down 24.8%, on sales of $2.29 billion, down less than 1%.
Hello Group stock trades 5.0 times expected 2021 EPS, 4.7 times estimated 2022 earnings of $1.64 and 3.9 times estimated 2023 earnings of $1.97 per share. The stock’s 52-week range is $4.47 to $16.45. The company does not pay a dividend. Total shareholder return for the past year was negative 49.6%.
Trip.com
Travel services giant Trip.com Group Ltd. (NASDAQ: TCOM) has posted a 12-month share price decline of about 42%. The stock reached a multiyear low below $15 a share, a drop of around 60% for the 12-month period. New lockdowns in several major Chinese cities could hit the Shanghai-based travel company hard in the weeks to come. Trip.com is expected to report quarterly results late on Wednesday.
Notwithstanding J.P. Morgan’s downgrade of Chinese stocks last week, analysts remain bullish on the stock, with 24 of 32 rating the stock a Buy or Strong Buy. Another six have a Hold rating on the shares. At a share price of around $24.00, the upside potential based on a median price target of $32.07 is 33.6%. At the high target of $44.04, the upside potential rises to 83.5%.
Analysts expect Trip.com to report fourth-quarter revenue of $668.34 million, down by 19.4% sequentially and 13.8% year over year. The consensus forecast also calls for an adjusted loss per share of $0.08, compared to EPS of $0.02 in the prior quarter and year-ago EPS of $0.27 per share. For the 2021 fiscal year, analysts are looking for EPS of $0.17, better than the year-ago loss of $0.23 per share, on sales of $3.08 billion, up 9.8% year over year.
The stock trades at 138.2 times expected 2021 EPS, 42.0 times estimated 2022 earnings of $0.57 and 17 times estimated 2023 earnings of $1.42 per share. The stock’s 52-week range is $14.29 to $42.63, and Trip.com does not pay a dividend. Total shareholder return for the past year was negative 41.6%.
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