Industrials

Earnings Previews: Best Buy, Deere, HP Inc., Nordstrom, SentinelOne

Paul Ausick

Published: November 21, 2022 9:36 am

The three major U.S. equity indexes closed higher Friday. The Dow ended the day up 0.59%, the S&P 500 closed 0.48% higher, and the Nasdaq Composite closed up just 0.01%. Nine of 11 sectors closed higher, with utilities (up 2%) and healthcare (up 1.2%) leading the winners. Energy (down 0.9%) and communications services (down 0.35%) were Friday’s two losers.

There are only a small number of economic reports due during this holiday-shortened week. The weekly report on claims for unemployment benefits, the report on new home sales in October, and the weekly report on oil inventories are all due out on Wednesday.

The three major indexes traded lower in Monday’s premarket session.

After U.S. markets close Monday afternoon, Dell Technologies, Urban Outfitters, and Zoom Video will report quarterly results. American Eagle Outfitters, iQIYI, and Medtronic are on deck to report results before markets open Tuesday.

Here’s a look at three companies set to report results Tuesday and Wednesday.

Best Buy

Over the past 12 months, shares of technology retailer Best Buy Co. Inc. (NYSE: BBY) have plummeted by about 43.5%. The 52-week high was posted on Nov. 22 last year, and the shares have fallen by 43.5% since then. When Target reported poor quarterly results last week, Best Buy dropped 7% on the news. It has gained about half of that back, but weak PC sales will certainly affect the company’s quarterly report. Best Buy reports results before markets open Tuesday.

Analysts are mixed on the stock. Of 27 brokerages covering the company, 17 rate the shares a Hold, and eight have a Buy or Strong Buy rating on the stock. At a current price of around $72.00, the upside potential based on a median price target of $80.00 is 10%. Based on a high price target of $110.00, the upside potential is 52.8%.

For the company’s fiscal 2023 third-quarter revenue, analysts are forecasting $10.3 billion, down 0.3% sequentially and a decline of 13.4% year over year. Adjusted EPS is forecast at $1.02, down 33.6% sequentially and a decrease of 51% year over year. For the full 2023 fiscal year ending in January, current estimates call for EPS of $6.16, down 38.5%, on sales of $45.91 billion, a drop of 11.3%.

The stock trades a multiple of 11.7 times expected 2023 EPS, 10.6 times estimated 2024 earnings of $6.79, and 9 times estimated 2025 earnings of $7.99 per share. The stock’s 52-week range is $60.78 to $141.97. Best Buy pays an annual dividend of $3.52 (yield of 4.89%). Total shareholder return for the past year is negative 44.9%.

Deere

Heavy equipment maker Deere & Co. (NYSE: DE) has posted a share-price gain of nearly 20% over the past 12 months. Since recording a 52-week low in early July, the stock has added about 44%. The company cut its profit outlook in August when it reported third-quarter results citing rising costs and supply-chain issues even though sales were strong. Analysts are looking for a sharp jump in profit. We’ll find out when Deere reports quarterly results before markets open Wednesday morning.

Analysts continue to be bullish on the stock, with 16 of 26 giving the shares a rating of Buy or Strong Buy and nin more rating the stock a Hold. At the current price of around $414.00, the upside potential based on a median price target of $415.00 is negligible. At the high price target of $463.00, the upside potential is 11.3%.

For the company’s fourth fiscal quarter of 2022, analysts expect Deere to report revenue of $13.46 billion, up 3.5% sequentially and an increase of nearly 31% year over year. Adjusted EPS is expected to come in at $7.12, up 15.6% sequentially and a rise of nearly 73% year over year. For the full 2022 fiscal year that ended in October, EPS is forecast at $22.78, up 20%, on sales of $39.74 billion, up 15%.

Deere stock trades at a multiple of 18.2 times expected 2022 EPS, 15.9 times estimated 2023 earnings of $26.07, and 15.2 times estimated 2024 earnings of $27.30 per share. The stock’s 52-week range is $283.81 to $446.76. The company pays an annual dividend of $4.52 (yield of 1.09%). Total shareholder return over the past year was 21.2%.

HP Inc.

PC and printer maker HP Inc. (NYSE: HPQ) has dropped more than 6% from its share price over the past 12 months. Since posting a 52-week high in early April, however, the shares have slid just over 25%. Global PC sales tumbled by 15% year over year in the September quarter. HP’s PC sales fell by an estimated 28%. Fortunately, the company’s printer business is likely to be strong enough to keep overall sales flat with the prior quarter. HP reports October quarterly results after markets close Tuesday afternoon.

Analysts remain cautious on the stock. Of 17 brokerages covering the company, 12 have rated the stock a Hold, while just one has a Buy rating on the shares. At a current price of around $29.50, the upside potential based on a median price target of $30.00 is 1.7%. At the high price target of $33.00, the upside potential is 11.9%.

Revenue in the fourth fiscal quarter of 2022 is forecast to come in at $14.68 billion, flat sequentially and down 12% year over year. Adjusted EPS is forecast at $0.84, down 19.5% sequentially and a drop of 10.6% year over year. For the full 2022 fiscal year that ended in October, analysts currently forecast EPS of $4.07, up 7.5%, on sales of $62.84 billion, down 1%.

HP stock trades at a multiple of 7.2 times expected 2022 EPS, 8.1 times estimated 2023 earnings of $3.62, and 7.5 times estimated 2024 earnings of $3.95 per share. The stock’s 52-week range is $24.07 to $41.47. HP pays an annual dividend of $1.00 (yield of 3.39%). Total shareholder return for the past year is negative 3.5%.

Nordstrom

Department store operator Nordstrom Inc. (NYSE: JWN) shares have lost about 34.5% of their value over the past 12 months. For the year to date, however, the shares have dropped by just over 5%. Shares posted their 52-week low in late September and have added more than 28% since then. The Target report hit Nordstrom’s stock as well, sending shares down 10%. Expectations are low, and any bad news at all is likely to send shares lower. Nordstrom reports quarterly results after markets close Tuesday.

Analysts are wary. Of 22 brokerages covering the stock, 13 have given the shares a Hold rating, and only 4 have a Buy or Strong Buy rating. At a current price of around $21.50, the stock trades slightly above its median price target of $21.00. At the high price target of $42.00, the upside potential is nearly 98%.

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For the third fiscal quarter of 2023 that ended in October, revenue is forecast at $3.49 billion, down 14.7% sequentially and off 4.1% year over year. Analysts have forecast earnings per EPS of $0.15 for the quarter, down 81% sequentially and up 18.7% year over year. For the full 2023 fiscal year ending in January, current estimates call for EPS of $2.36, up 57.1%, on sales of $15.67 billion, a gain of almost 6%.

Nordstrom stock trades at a multiple of 9.1 times expected 2023 EPS, 8.4 times estimated 2024 earnings of $2.55, and 8.2 times estimated 2025 earnings of $2.63 per share. The stock’s 52-week range is $16.14 to $34.65. The company pays an annual dividend of $0.76 (yield of 3.54%). Total shareholder return for the past year was negative 62.8%.

SentinelOne

Cybersecurity software provider SentinelOne Inc. (NYSE: S) has dropped about 57% of its value over the past 12 months. While the company is expected to remain on its revenue growth path when it reports results after markets close Wednesday, growth is not as valuable these days as are profits. SentinelOne’s losses have not been narrowing even though they are no worse than the September quarter of last year, the company’s first as a publicly traded firm.

Of the 20 brokerages covering the company, 15 have rated the stock a Buy or Strong Buy, and the others have a Hold rating on the shares. At a current price of around $16.60, the upside potential based on a median price target of $35.00 is about 111%. At the high price target of $54.00, the upside potential is about 225%.

Third-quarter revenue is forecast at $111.03 million, up 8.3% sequentially and slightly more than double year over year. The company’s adjusted loss per share is forecast at $0.22, compared with the prior quarter’s loss of $0.20 and the year-ago quarterly loss of $0.15 per share For the full 2022 fiscal year that ends in January, the company is currently expected to post a loss per share of $0.81 compared with a loss of $1.03 per share last fiscal year, on sales of $416.4 million, up 103.3%.

SentinelOne is not expected to post a profit in 2023, 2024, or 2025. The stock’s enterprise value to sales multiple is 8.4 in 2023, 5.1 in 2024, and 3.4 in 2025. The stock’s 52-week range is $15.43 to $75.50. The company does not pay a dividend, and the total return for the past year was negative 76.3%.