The three major U.S. equity indexes closed lower Thursday. The Dow Jones industrials ended the day down 0.35%, the S&P 500 closed lower by 0.84%, and the Nasdaq lost 1.37%. Nine of 11 sectors ended the day with losses, ranging from 2.3% (consumer cyclicals) to 0.1% (consumer staples). Health care was the big gainer, up 0.5% for the day, with communication services up 0.06%.
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Worries about interest rates, both policy and market rates, fed fears of a hard landing for the economy. The Bank of England raised its policy rate to 2.25%, while the Bank of Japan held steady at negative 0.1%. Other central banks to raise rates were Indonesia, Norway and Switzerland. Hong Kong’s monetary authority raised its policy rate to 3.5%. Dollar strength and rising yields on U.S. Treasuries did not help. The three major indexes traded lower in Friday’s premarket session.
After markets closed Thursday, Costco beat consensus estimates on both the top and bottom lines. The company did not increase its membership fee but did not discount the possibility in the future. Shares traded down about 2.3% in Friday’s premarket.
FedEx jumped the gun and reported results before markets closed Thursday. The stock closed up about 0.8% for the day but traded lower early Friday. After last week’s warning, investors did not expect much from FedEx, and the company delivered. Shares traded down about 3% Friday morning.
No earnings reports are due out after U.S. markets close Friday or before they open again on Monday. Here is a look at two companies reporting quarterly results first thing Tuesday morning.
24/7 Wall St.Jabil
Shares of manufacturing services provider Jabil Inc. (NYSE: JBL) have dipped by 4.6% over the past 12 months, including a December spike to an all-time high. Since then, however, the shares plunged nearly 30% by late July and are down just over 20% as of Thursday’s closing bell.
The company has been growing its presence in the automotive market, and that growth is expected to continue. Revenue has beat estimates in 10 of 11 previous quarters, and adjusted earnings per share (EPS) have been higher than estimates in 9 of 11 previous quarters.
Of nine brokerages covering the stock, all have a Buy or Strong Buy rating. At a recent trading price of about $57.60, the upside potential based on a median price target of $79.00 is 37.2%. At the high target of $82.00, the potential upside is about 42.4%.
Analysts are expecting fiscal fourth-quarter revenue of $8.4 billion, which would be up about 0.8% sequentially and by about 14.3% year over year. Adjusted EPS for the quarter are forecast at $2.14, up 24.6% sequentially and nearly 50% higher year over year. For the full 2022 fiscal year ended in August, analysts estimate EPS of $7.45, up nearly 33%, on revenue of $32.15 billion, up 9.8%.
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Jabil’s shares trade at 7.7 times expected 2022 EPS, 7.3 times estimated 2023 earnings of $7.89 and 7 times estimated 2024 earnings of $8.55 per share. The stock’s 52-week trading range is $48.80 to $72.11. The company pays an annual dividend of $0.32 (yield of 0.56%). Total shareholder return for the past 12 months was negative 4.1%.
United Natural Foods
United Natural Foods Inc. (NYSE: UNFI) is the country’s largest distributor (by market cap) of natural, organic, specialty foods, as well as produce, conventional groceries and nonfood products. The stock price is up about 11.5% over the past 12 months. Shares have dropped more than 15%, however, in the past month.
The company has a distribution agreement with Whole Foods that has another five years to run. That is a major plus. On the downside, Whole Foods accounted for 19% of the company’s net sales last year. Anything goes wrong with Amazon/Whole Foods, and United is in serious trouble.
Of 12 brokerages covering the stock, five have a Buy or Strong Buy rating. The rest rate the shares at Hold. At a share price of about $40.70, the upside potential based on a median price target of $53.00 is 30.2%. At the high target of $69.00, the potential upside is nearly 70%.
Analysts are expecting fiscal fourth-quarter revenue of $7.33 billion, up about 1.3% sequentially and by about 8.8% year over year. Adjusted EPS for the quarter are forecast at $1.26, up 1.3% sequentially and by 6.8% year over year. For the full 2022 fiscal year ended in July, analysts estimate EPS of $4.82, up nearly 24.2%, on revenue of $28.98 billion, up about 7.6%.
The shares trade at 8.4 times expected 2022 EPS, 8.0 times estimated 2023 earnings of $5.08 and 7.5 times estimated 2024 earnings of $5.39 per share. The stock’s 52-week range is $33.63 to $57.89. The company does not pay a dividend. Total shareholder return for the past 12 months was 11.5%.
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