Earnings This Week: Nike, Costco and Carnival

Corporate earnings calendar: September 18-22

The US earnings calendar is headlined by athleisure giant Nike, retailer Costco, memory chipmaker Micron, and IT outfit Accenture.

Attention in the UK will be on consumer healthcare company PZ Cussons and semiconductor firm Alphawave.

Meanwhile, cruise liner Carnival and plumbing distributor Ferguson – both of which have listings in the US and the UK - will draw attention on both sides of the Atlantic. Clothing behemoth H&M is atop the agenda in Europe.

Below is a calendar with all the major earnings to watch this week.

Nike stock: Q1 earnings preview

Nike has said it expects to deliver another year of “profitable growth” but it may be a tough start to the year, and this is reflected in the fact Nike shares are trading at their lowest level in 11 months!

Revenue is forecast to rise 2.5% from last year to $13.00 billion, which would represent the slowest growth in over a year, while adjusted EPS is expected to decline for a third consecutive quarter, this time by 20% to $0.74.

However, Wall Street believes this will be the worst quarter and expects revenue growth to accelerate, fuelled by the recovery in China and its direct-to-consumer business. North America remains soft, so keep an eye on commentary here, but it appears China and other markets like Latin America are keeping the growth engine running.

Analysts also believe its bottom-line will rise by double-digit percentages over the next three quarters. Nike says it is on the “front foot” and competing from a “position of strength” amid the uncertain economic outlook. The inflationary cost pressures that weighed on profit last year are fading, but may linger in the first quarter based on the consensus figures.

The fact Nike has been faster in sorting over-sized inventories bodes well as this will reduce the need to cut prices. Its shift to serving customers directly online should also help. Nike makes over one-quarter of all sales digitally now, a marked jump from just 10% before the pandemic.

Nike is aiming to deliver mid-single digit revenue growth over the full year as its digital business powers ahead and gross margins should improve as cost pressures subside. That suggests the weakness in the first quarter could provide an opportunity should investors grow confident that this will be another year of progress. Nike still trades at a premium to its rivals and, while well-earned, this may prove a limiting factor.

Costco stock: Q4 earnings preview

We already have some insight into sales ahead of the Costco results. It reported increases of 1.2% in May, 0.4% in June, 4.5% in July and 5.0% in August. That is forecast to smooth out to a 7.8% year-on-year rise in revenue in the fourth quarter to $77.7 billion, with same store sales expected to rise 3.9%. That would mark an acceleration from the previous quarter, driven by an improvement in the US.

That would be a fairly impressive performance in the current climate, especially as comparatives from last year are tough – sales were up over 15% the year before. This is a testament to its focus on value and its membership model, which is continuing to draw-in customers despite a pullback in discretionary items. This has, however, hurt its ecommerce division as around half of its sales come from big ticket items. Costco should see inflationary pressures ease going forward and is likely to be among the first to lower prices to solidify its value offering, which should keep memberships and sales growing.

EPS is forecast to rise 13.1% and hit a new quarterly record of $4.76, marking the third consecutive quarter of double-digit growth as margins recover and inventory declines. If it meets expectations, Costco is on course to report a 6.2% rise in annual sales and an 8.7% jump in full-year EPS. Commentary on what to expect over the next 12 months will be influential, with Wall Street anticipating slower growth but for Costco to remain firmly on the right path to deliver another record-breaking year.

Costco shares are up 22% in 2023, slightly outperforming the wider retail sector. However, further gains could be hard to come by despite its impressive performance considering the premium on its valuation multiple, which is trading near 36x forward earnings, is about 80% above the industry average!

Micron stock: Q4 earnings preview

Micron is still feeling the pain and will be glad to see the back of the financial year, plagued by the sharpest fall in revenue on record and the first time it has been in the red since 2013.

For the fourth quarter, revenue is forecast to fall for a fifth consecutive time, by 41% to $3.92 billion. It is expected to report its fourth straight quarter of losses, with the adjusted loss per share forecast to come in at $1.18.

Micron believes it is over the worst of its problems, and markets have agreed considering the shares have steadily climbed 38% over the past year. Its woes stem from the fact its customers loaded-up on memory chips when there was a boom in demand for devices during the pandemic and demand for Micron’s chips has therefore been under pressure, as have prices, while these inventory levels unwind. The fall in demand for consumer electronics has added further pressure on prices.

Still, we are still far from a pivot to better times. Wall Street believes Micron will return to growth in the new financial year, underpinned by expectations that we will see a recovery in the second half, although it is set to be another year of losses. While markets believe we will see demand return to growth later on in 2024, recession fears are growing in the ‘higher for longer’ interest rate environment and could pose a risk to those expectations. Plus, new sanctions from China targeting Micron, with the country accusing it of being a national security risk, muddies its prospects in a key market.

The outlook for the new financial year will therefore be crucial. For the first quarter, analysts are looking for Micron to target $4.19 billion in sales and adjusted loss per share of $0.98.

Carnival stock: Q3 earnings preview

Carnival has been one of the best performers in the S&P 500 this year as the travel industry continues to roar back to life. While consumers are having to cope with a cost-of-living crisis, holidays and travel remain a high priority for people after years of being locked away during lockdown. Carnival shares are up almost 80% since the start of 2023.

The cruise liner is set to report its fourth year of losses this year, but sales are set to hit an all-time high and losses are set to be almost negligible, setting it up for a big recovery in 2024 so long as the travel industry remains resilient.

Quarterly revenue is expected to be up 57% from the year before at $6.75 billion as more people book trips at higher prices and occupancy rates keep improving. Adjusted Ebitda – its headline measure – is expected to come in at $2.11 billion, marking a seven fold increase from the year before. Markets may get excited considering analysts predict it will report adjusted earnings of $0.76 per share – which would be its first quarterly profit in three-and-a-half years! However, be wary as analysts see it slipping back into the red for the next three quarters and don’t see it sustaining a move back into the black for some time. With that in mind, liquidity remains strong and it has the resources it needs to make its comeback.

Carnival may have popped this year but it remains well-below its all-time highs and remains a strong recovery play. Demand has never been stronger and it remains on the path back to profitability. Inflationary pressures are easing, although the recent rise in oil prices may be a headwind, and prices remain elevated.

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