Investing

Earnings Previews: Lowe's, Zim Integrated Shipping, Zoom Video

Paul Ausick

Published: May 19, 2023 10:29 am

Last Updated: May 19, 2023 12:46 pm

Friday morning, the Dow Jones industrials were trading up 0.15% and the S&P 500 traded up 0.22%, but the Nasdaq traded 0.02% lower.

After U.S. markets closed on Thursday, Applied Materials reported better-than-expected earnings per share (EPS) and revenue. The company also issued current quarter guidance that was in line with estimates, but a note from KeyBanc analysts Friday morning sees added risk for new investors. Shares traded down 2.6%.

Before U.S. markets opened on Friday, Deere reported solidly beating consensus estimates on both the top and bottom lines. Shares traded up 4.4%.

Foot Locker missed both top-line and bottom-line estimates and issued downside guidance. Shares were pummeled. Same-store sales fell by 9.1%. The company also lowered guidance for fiscal 2024 same-store sales from a previous range of down 3.5% to 5.5% to a new, lower range of down 7.5% to 9.0%. The stock traded down 27.4%.

Catalent was supposed to report results Friday morning after postponing two earlier delays. Instead, Catalent will delay its report again, and the clock began ticking on Monday on a six-month deadline to regain compliance with New York Stock Exchange listing rules. Shares traded up 12.4%.

Here is a look at what to expect when the following two companies report quarterly results on Monday and Tuesday of next week.

Lowe’s

Over the past 12 months, the share price of Lowe’s Companies Inc. (NYSE: LOW) has increased by more than 13%. Since hitting a 52-week high in February, however, the shares dropped by 6.3%. Since rival Home Depot posted a weak report earlier this week, shares of Lowe’s have added 4%, while Home Depot has managed to add 3.8%. Investors will want to hear (and see profits to back up the talk) about the inroads Lowe’s has made in its professional contractor segment. The company reports results early Tuesday.

Of 34 analysts covering the stock, 20 have a Buy or Strong Buy rating. Another 13 rate it at Hold. At a recent price of around $207.00 a share, the upside potential to a median price target of $228.00 is 10.1%. At the high price target of $300.00, the upside potential is 31%.

Fiscal first-quarter revenue is forecast at $221.78 billion, which would be down 2.9% sequentially and by 7.9% year over year. Adjusted EPS are expected to come in at $3.47, up 52.2% sequentially but down 1.1% year over year. For the full 2024 fiscal year ending next January, analysts expect EPS of $13.66, down 0.5%, on sales of $88.62 billion, down 8.7%.

Lowe’s stock trades at 15.2 times expected 2024 EPS, 13.8 times estimated 2025 earnings of $14.99 and 12.3 times estimated 2026 earnings of $16.88 per share. Its 52-week range trading is $170.12 to $223.31, and the company pays an annual dividend of $4.20 (yield of 2.03%). Total shareholder return for the past year is 15.09%.

Zim Shipping

In the upside-down world of global maritime shipping, shares of Zim Integrated Shipping Inc. (NYSE: ZIM) have tumbled by almost 71% over the past 12 months. The good news is that the Israel-based container shipping firm has a forward dividend yield of 96.2% for the period, slightly above its trailing 12-month dividend of 94.8%. The stock has dropped by almost $70.00 a share, and Zim has paid out $27.65 in dividends for the past four quarters.

The stock’s annual shareholder yield (dividends plus buybacks plus debt paydown) was more than 220% at the end of the prior quarter. Investors who bought Zim stock last June when shares traded at around $40 a share have seen a share price decline of about $22 a share and received dividend payments totaling almost $17 a share.

Zim’s dividend policy comprises a distribution of approximately 30% of net quarterly income in the first three quarters of the year. The annual dividend is expected to total 30% to 50% of annual net income. Zim reports quarterly results first thing Monday morning.

Of seven brokerages covering the company, none has a Buy rating. Four rated the shares at Hold, and the others have a Sell or Strong Sell rating. At a share price of around $18.00, the upside potential based on a median price target of $20.00 is 11.1%. At the high target of $27.00, the upside potential is 50%.

For the company’s first quarter of fiscal 2023, the consensus revenue estimate is $1.59 billion, down 27.6% sequentially and 57.3% lower year over year. Analysts expect an adjusted loss per share of $0.22, compared to EPS of $3.44 in the previous quarter and EPS of $14.19 in the year-ago quarter. For the 2023 fiscal year, estimates call for a net loss of $2.54, compared to 2022 EPS of $38.41. Full-year revenue is forecast at $6.23 billion, down by 50.4%.

Zim stock trades at an enterprise value to sales multiple of 0.5 for each of the next three years, based on annual revenue of $6.23 billion, $6.25 billion and $7 billion in 2023, 2024 and 2025, respectively. The stock’s 52-week range is $16.20 to $71.40. The company pays an estimated annual dividend of $16.95 (yield of 96.2%). Total shareholder return for the past year was negative 47.59%.

Zoom Video

Over the past 12 months, shares of Zoom Video Communications Inc. (NASDAQ: ZM) have dropped by about 19%. They have added a meager 2.5% to date in 2023, and the company is trying to reclaim the magic it had during the pandemic lockdowns. Zoom cut about 1,300 people from its workforce, the CEO cut his salary and bonus and, earlier this week, Zoom announced an investment in AI start-up Anthropic, saying it intends to integrate Anthropic’s Claude large-language model into its video conferencing platform. Zoom reports quarterly results after markets close on Monday.

Analysts remain unconvinced. Of 34 brokerages covering the stock, 23 have a Hold rating, while 10 have Buy or Strong Buy ratings. At a share price of around $69.00, the upside potential based on a median price target of $84.00 is 21.7%. At the high price target of $105.00, the upside potential is 52.2%.

Fiscal first-quarter revenue is forecast at $1.08 billion, down 3.0% sequentially but 0.9% higher year over year. Adjusted EPS are pegged at $0.99, down 18.7% sequentially and by 3.9% year over year. For the full 2024 fiscal year ending in January, current estimates call for EPS of $3.95, down 22.2%, on sales of $4.38 billion, up 6.9%.

Zoom Video’s stock trades at 16.5 times expected 2024 EPS, 15.8 times estimated 2025 earnings of $4.38 and 15.0 times estimated 2026 earnings of $4.63 per share. The stock’s 52-week range is $60.45 to $124.05. Zoom does not pay a dividend, and total shareholder return for the past year was negative 23.76%.