Walmart, Home Depot, Nvidia, Gap

(Bloomberg) — While most of the U.S. reporting season is coming to an end, this week’s earnings will focus on big-box chains, chip makers and home improvement retailers amid a worsening economic environment. However, there are still glimmers of optimism.

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Tyson Foods, the largest U.S. meat producer, said sales could rise to a record next year on the back of “solid profitability” despite the company missing adjusted EPS estimates as inflation fears prompted consumers to buy less pork and prepared foods and cut back on sales. gained in premarket trading on Monday. to cheaper products. Shares in Alibaba and, both due to report full results in the coming days, edged higher, shrugging off mixed reports from Singles’ Day promotions as China plans to ease Covid restrictions and roll out a sweeping package to tackle the problem. struggle in the property market.

Bloomberg Intelligence reports that more than half of the S&P 500 sectors could enter an earnings recession next reporting season, with the positive-to-negative earnings ratio at its lowest level since 2019. Disney, Lyft and Roblox last week highlighted the entertainment industry’s earnings weakness in the face of a broader economic slowdown. Among the 11 S&P 500 sectors, communications firms have posted the highest rate of earnings losses so far this season. Meanwhile, Ralph Lauren and Tapestry also took a hit, citing the strong dollar. Reports this week from U.S. retailers including Walmart, Target, Home Depot, Lowe’s and Gap will shed more light on consumer spending as regulators try to stem rising inflation rates.

S&P 500 futures were little changed early Monday morning as investors watched President Joe Biden and his Chinese counterpart Xi Jinping shake hands to mark the start of the first face-to-face summit since the pandemic began. The two join other G-20 leaders on Tuesday and Wednesday in Bali, Indonesia, amid rising geopolitical tensions, the war in Ukraine and rising inflation that central banks and corporations have struggled to address in recent months. As the G-20 wraps up, all eyes will be on former President Donald Trump, who could send shock waves through the markets with his expected “big announcement” on Tuesday.

Votes continue to be counted in key midterm races across the country, with Democrats retaining control of the Senate and Republicans looking poised to take control of the House, albeit by a smaller margin than predicted. Congress returns to Washington on Monday for a year-end push that could see legislative action on issues like the debt ceiling in the coming weeks.

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  • Click through to see the key points to watch this week from earnings reports in Europe and Asia.

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Expected earnings points this week:

Tuesday: Walmart ( WMT US ), which reports third-quarter results before the bell, is forecast to benefit from a strong back-to-school season and a consumer shift to value amid rising spending, according to Bloomberg Intelligence. Again, inflation changes the mix of sales and margins as customers spend more on food and less on discretionary items. The company’s inventory will be notable as it tries to sell off excess stock ahead of the holiday season and minimize discount risk. Overall, retail sales declined in October as more promotion by inventory-laden sellers led to lower net sales despite increased traffic. Still, Walmart, along with peer Target ( TGT US ), which is due to report on Wednesday, saw its October non-cash sales rise year-over-year, helped by a flight in value.

  • According to Bloomberg Intelligence, Home Depot ( HD US ) is expected ahead of the bell and is expected to report a steady increase in same-store sales for the third quarter, and the consensus calls for about 3% due to increased retail sales at home centers. The increase may be supported by higher prices, which will offset a sixth quarter of a decline in the number of transactions, partly due to inflation. However, while Home Depot’s exposure to professional customers helped it outperform Peer Lowe’s ( LOW US ), which reported results on Wednesday, overall industry demand is expected to decline through the end of the year and into 2023 amid a rising housing market. is expected. mortgage interest.

Wednesday: Nvidia ( NVDA US ) results are due after the closing bell, and the most valuable chipmaker in the US is expected to post a year-over-year decline in both revenue and profit for the first time in two years. Its gaming segment could take the biggest hit as economic conditions continue to weigh on demand, according to Bloomberg Intelligence. Investors will be looking for comments on the company’s increased exposure to China, where it accounts for about 25% of sales, after the Biden administration expanded restrictions on semiconductor sales to the country last month. Earlier this week, Nvidia announced that it has started production of a new chip that it says is compliant with new export rules, hoping to restore revenues put at risk by government measures. The company has lost almost half of its value this year after three consecutive years of gains on the stock market.

  • ESG in focus: Chipmaker advances in “green computing,” the practice of limiting the environmental impact of computer chips, have the potential to help solve energy use problems in data centers as data traffic continues to grow. Nvidia estimates that if companies put artificial intelligence and high-performance computing to work on its more efficient chips, they could save 19 terawatt-hours of electricity a year, the equivalent of taking 2.9 million cars off the road for a year. Read more in this week’s ESG Stock Watch.

Thursday: Gap (GPS US) reports after the closing bell. Investors will be looking for signs of earnings growth after the owner of Old Navy and Banana Republic brands took full-year guidance and ended his partnership with Kayne West and his Yeezy Gap label. The Bloomberg consensus calls for adjusted EPS of $0.01 for the third quarter, down 83% from last quarter’s surprise profit. The apparel retailer’s turnaround, including an ongoing CEO search, 500 corporate job cuts and an impairment charge to eliminate excess inventory, will take several quarters, according to analysts at Argus Research.

  • Alibaba ( BABA US ) is ahead of the opening bell. The Chinese e-commerce behemoth may report its annual expansion in adjusted Ebita margin since 2019 thanks to expected narrower losses at online food delivery platform and Southeast Asian arm Lazada, Bloomberg Intelligence reports. On Sunday, the retailer said the total product value of its Singles Day shopping event was the same as last year, although it broke with tradition of disclosing full sales results for the event, and China’s Covid-Zero policy could also force Alibaba to do so. focusing on profit maximization rather than top-line growth. In the upcoming second-quarter financial report, Wall Street analysts expect sales to rise 4.3%, down from the 29% growth seen in the same period last year, reflecting revenue concerns raised by JPMorgan when it cut its price target in September.

Friday: (JD US) reports before the market opens. China’s second-largest online retailer’s third-quarter results will come after a Singles Day shopping spree and earnings from peer Alibaba, with a Bloomberg consensus forecasting the highest gross margin in two years. An improved product mix and platform fees could offset higher implementation costs stemming from the country’s mobility restrictions, Bloomberg Intelligence writes. However, BI also noted that potentially weak business sentiment in China could lower the contribution of service revenues in the current quarter.

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