The three major U.S. equity indexes closed lower Thursday. The Dow Jones industrials ended the day down 0.02%, the S&P 500 closed 0.31% lower and the Nasdaq retreated 0.35%. Eight of 11 sectors closed lower, with utilities (−1.79%) and consumer cyclicals (−1.27%) leading the slide. Technology (0.21%) and energy (0.12%) posted the largest gains.
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The only notable data point due out Friday is the National Association of Realtors report on existing home sales for October. Economists expect the number to decline from 4.71 million in September to 4.38 million.
The three major indexes traded higher after an hour of regular trading Friday morning.
After U.S. markets closed Thursday, Applied Materials beat analysts’ estimates for earnings per share (EPS) and revenue. The semiconductor equipment maker also issued in-line guidance for the first quarter of fiscal 2023. Shares traded up more than 4% Friday morning.
Gap posted EPS of $0.71, compared to a consensus break-even estimate, and also surpassed revenue expectations. Earnings included a tax benefit of $0.33 per share and excluded a $53 million impairment charge related to the company’s Yeezy partnership. The stock traded 7.5% Friday morning.
Palo Alto Networks also beat estimates on the top and bottom lines. The cybersecurity specialist raised fiscal 2023 guidance. It expects fiscal year billings of $9.95 to $9.1 billion and adjusted free cash flow of 34.5% to 35.5%. Shares traded up more than 8%.
Ross Stores posted better-than-expected revenue and EPS and also issued upside guidance for fiscal 2023. The company noted, however, that it expects a “very promotional holiday selling season and ongoing inflationary headwinds.” Shares jumped by nearly 13%.
Before markets opened on Friday, Foot Locker beat estimates on the top and bottom lines and raised guidance for a smaller loss than previously expected and better-than-expected EPS. Shares traded up about 9.7% Friday morning.
JD.com reported better-than-expected EPS but missed the revenue estimate. The stock traded up by about 1.4%.
No notable earnings reports are due out after markets close Friday or before they open on Monday. Later on Monday, Dell Technologies, Urban Outfitters and Zoom Video will report quarterly results.
Here is a look at three companies on deck to report results first thing Tuesday morning.
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American Eagle Outfitters
Specialty retailer American Eagle Outfitters Inc. (NYSE: AEO) has seen its share price plunge by around 55% over the past 12 months. Since posting a 52-week high nearly a year ago, the stock trailed downward until mid-October, when it rang up a new yearly low. Since then, shares have added about 24%, recovering the ground they lost after the company reported second-quarter results
American Eagle has worked to reform its distribution network and has opened its new process to other retailers. The company claims to have doubled the revenue going through the new distribution network. And then there is the rich dividend. Can it continue?
Of 11 analysts covering the stock, just three rate the shares at Buy while another six have Hold ratings. At a recent share price of around $13.25, the stock trades above its median price target of $11.00. At the high price target of $16.00, the implied upside is 20.8%.
Third quarter 2023 revenue is expected to come in at $1.21 billion, which would be up 0.9% sequentially but down 4.7% year over year. Adjusted EPS are forecast to rise by about 450% sequentially from $0.04 to $0.22 and tumble by 71% year over year. For the full year, analysts expect EPS of $0.65, down 70.2%, on sales of $4.92 billion, down 1.9% year over year.
The stock trades at 20.3 times expected 2023 EPS, 14.1 times estimated 2024 earnings of $0.94 and 11.9 times estimated 2025 earnings of $1.11 per share. The stock’s 52-week trading range is $9.46 to $29.19. American Eagle pays an annual dividend of $0.72 (yield of 5.92%), and the total shareholder return for the past year was negative 51.6%.
24/7 Wall St.iQIYI
Shares of Beijing-based online entertainment firm, iQIYI Inc. (NASDAQ: IQ) have dropped by about 60% over the past 12 months. The stock posted a new 52-week low in the last week of October, but since then, the shares have jumped by nearly 40%. The company is following other Chinese tech stocks higher now that the government appears to be reconsidering its strict zero-Covid policy and its crackdown on tech stocks. iQIYI is a subsidiary of Baidu.
Of 20 brokerages covering the stock, 10 have a Buy or Strong Buy rating and nine rate the shares at Hold. At a price of around $2.80 a share, the upside potential to the median price target of $4.24 is 51.4%. At the high target of $9.69, the upside potential is nearly 250%.
Third-quarter revenue is forecast to rise by 3.0% sequentially to $1.02 billion and fall 13.6% year over year. The company is expected to post EPS of $0.04, up by three cents sequentially and better than a loss of $0.34 per share in the year-ago quarter. For the full fiscal year, analysts expect EPS of $0.11, up from a loss of $1.22 per share last year, on revenue of $4.03 billion, down 16.1%.
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The stock trades at 22.9 times expected 2022 EPS, 12.9 times estimated 2023 earnings of $0.22 and 8.7 times estimated 2024 earnings of $0.32 per share. The stock’s 52-week range is $1.65 to $7.22. The company does not pay a dividend, and the total shareholder return for the past year was negative 60.5%.
Medtronic
Medical device maker Medtronic PLC (NYSE: MDT) has posted a share price decline of nearly 32% over the past 12 months. Shares have traded below their 52-week high for a week short of 12 months.
More than 80% of Medtronic’s are held by institutional investors who could make life at least uncomfortable for management unless the company has something to offer besides a decent dividend. The company announced a spin-off of its patient monitoring and respiratory intervention businesses into a separate company in an effort to gin up shareholder value.
Analysts remain upbeat, if not exactly bullish, with 13 of 28 brokerages having a Buy or Strong Buy rating and another 13 rating the shares at Hold. At a price of around $80.40 a share, the upside potential based on a median price target of $102.50 is 27.5%. At the high price target of $127.00, the upside potential is 58%.
24/7 Wall St.Analysts expect the company to report 2023 second-quarter revenue of $7.7 billion, up 4.5% sequentially but down 1.9% year over year. Adjusted EPS are forecast at $1.28, up 13.1% sequentially and by 2.2% year over year. Current estimates for the 2023 fiscal year ending next April call for EPS of $5.53, down about 0.4%, on sales of $31.61 billion, down 0.2%.
Medtronic’s stock trades at 14.6 times expected 2023 EPS, 13.7 times estimated 2024 earnings of $5.87 and 12.8 times estimated 2025 earnings of $6.28 per share. The stock’s 52-week range is $79.19 to $118.80. The company pays an annual dividend of $2.72 (yield of 3.33%). Total shareholder return for the past year was negative 29.7%.
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