Earnings Digest - Week of July 03rd
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Last Week in a Nutshell
Summary by Company
To Watch Next Week
Dictionary
Last Week In a Nutshell
Nike Inc: Nike's Q4 fiscal 2023 revenues surpassed expectations, but earnings fell short due to high operating costs and expenses, while the company expects mid-single-digit revenue growth in fiscal 2024.
Carnival Corporation: Despite exceeding expectations and raising forecasts, Carnival's stock dropped due to concerns about future performance and competition from Viking Cruises' bond sale, as the company aims to reduce debt.
BlackBerry: BlackBerry reported strong fiscal Q1 2024 results, driven by licensing and non-core patent sales, while facing challenges in its cybersecurity and IoT businesses.
Walgreens Boots Alliance: Reduced demand for COVID-19 vaccines and a cautious consumer spending environment led to lower-than-expected profits and a decline in Walgreens' stock.
McCormick & Company: McCormick reported strong Q2 fiscal 2023 results, driven by increased sales and earnings, with sustained demand and optimized cost structure supporting future growth.
Summary by Company
CCL 6.17%↑ Carnival Corporation
Carnival Corporation, a cruise ship company, experienced a 7.6% decline in its stock, the largest drop since November 2022, following the release of its fiscal second-quarter report.
While the company's results exceeded analysts' expectations and it raised its forecasts, the stock had already experienced a significant rally this year, leading to some investors selling off their shares. The cruise industry has been rebounding from the impact of the COVID-19 pandemic, and analysts had been optimistic about the demand for travel.
However, some investors are now questioning how much better Carnival's stock can perform in the near future. Additionally, Carnival's peer, Viking Cruises Ltd., is planning to sell $720 million in junk bonds, which has attracted attention in the market.
Carnival has a substantial amount of debt maturing by the end of 2025 and plans to use excess liquidity to repay debt and lower interest expenses, with the goal of reducing its total debt to under $33 billion by the end of 2023.
BB 3.94%↑ BlackBerry
BlackBerry Limited reported strong first-quarter fiscal 2024 results, with increased revenues and better-than-expected earnings per share.
The company's cybersecurity business and IoT business experienced some challenges, but BlackBerry's licensing and other segments performed well, boosted by the sale of non-core patents. The company also secured new design wins and announced integrations to enhance its product offerings.
BlackBerry's QNX software has been integrated into a significant number of vehicles worldwide, showcasing notable growth. The company maintained its long-term financial targets and expects total revenues in the range of $665-$700 million for fiscal 2024, with specific revenue projections for its IoT and cybersecurity businesses.
WBA 0.18%↑ Walgreens Boots Alliance
Walgreens Boots Alliance (WBA) stock experienced a decline as the company issued a warning about lower-than-expected profits due to reduced demand for COVID-19 vaccines and a weakening consumer spending environment.
Walgreens CEO Rosalind Brewer stated that COVID-related demand was lower than anticipated, leading to fewer people willing to vaccinate.
The company administered 800,000 COVID-19 vaccines in the most recent quarter, representing an 83% decline compared to the same period last year. Due to declining COVID-related revenues and a cautious economic outlook, Walgreens adjusted its full-year earnings per share guidance to a lower range.
As a result, Walgreens shares dropped nearly 10% to their lowest levels since 2010. The company's third-quarter revenue slightly surpassed estimates, but adjusted earnings per share were lower than expected. Walgreens attributed its struggles not only to reduced COVID-related demand but also to a more cautious and value-driven consumer in response to higher inflation, interest rates, and an uncertain economic outlook.
MKC 0.05%↑ McCormick & Company
McCormick & Company, a global leader in flavour, reported strong second-quarter fiscal 2023 results, with increased earnings and sales surpassing expectations. The company's success can be attributed to strong demand for its products and effective growth strategies.
McCormick remains optimistic about its future growth due to sustained demand and efforts to optimize its cost structure. The company raised its adjusted operating income and bottom-line guidance for fiscal 2023 while maintaining its sales outlook. The quarter saw an increase in adjusted earnings per share and sales, driven by pricing actions, although volumes declined slightly. McCormick's gross profit margin expanded due to efficient pricing and cost-saving initiatives, offsetting inflationary pressures.
Despite higher SG&A expenses, the adjusted operating income showed significant growth. The company's Consumer and Flavor Solutions segments both experienced sales increases in various regions. McCormick expects a robust cash flow for fiscal 2023 and plans to return a significant portion of it to shareholders through dividends. The company anticipates solid sales growth driven by pricing actions, cost savings, brand strength, and customer engagement, while currency movements are expected to have minimal impact.
The adjusted operating income and EPS guidance for fiscal 2023 were raised, indicating positive bottom-line growth, despite increased interest expenses and a higher projected tax rate.
NKE 0.32%↑ Nike Inc
NIKE Inc. reported its fourth-quarter fiscal 2023 results, with revenues surpassing expectations but earnings falling short. The company attributed the positive results to its business strategy, innovative products, and digital leadership. However, high operating costs and expenses affected profitability.
In Q4, NIKE's revenues grew by 5% to $12.8 billion, driven by growth across all brands, channels, and geographies. Sales at NIKE Direct increased by 15%, while wholesale revenues declined due to inventory adjustments.
The company saw growth in North America, Europe, the Middle East & Africa, and Asia Pacific & Latin America. NIKE's gross margin contracted due to increased costs, but it implemented pricing actions to partially offset this. Looking ahead, NIKE expects mid-single-digit revenue growth for fiscal 2024, driven by NIKE Direct, and projects an expansion in gross margin.
To Watch Next Week
LEVI 0.00%↑ Levi Strauss
Levi Strauss is expected to report another strong quarter of earnings.
The company is expected to see revenue growth of 12% year-over-year, driven by strong demand for denim. However, gross margin is expected to decline by another 5 basis points due to rising costs.
This could weigh on earnings, but investors will be looking for more colour on the company's pricing strategies and cost-saving initiatives. Levi Strauss will also be providing updates on its sustainability initiatives, which have been a key focus for the company in recent years.
Dictionary
Revenue: The total amount of money generated by a company from its business activities.
Adjusted earnings per share (EPS): A measure of a company's profitability that indicates the portion of the company's profit allocated to each outstanding share of common stock, adjusted for certain one-time or non-recurring expenses.
GAAP profitability: Refers to profitability calculated based on Generally Accepted Accounting Principles (GAAP), which are a set of standardised accounting principles and procedures used to prepare financial statements.
Free cash flow: The cash generated by a company's operations that is available for distribution to investors, creditors, or for reinvestment in the business.
Guidance: Refers to the forecasts or estimates provided by a company's management regarding its expected financial performance in future periods.
EBITDA: Stands for Earnings Before Interest, Taxes, Depreciation, and Amortisation. It is a measure of a company's operating performance, excluding the effects of interest, taxes, and non-cash items.
Margins: Refers to the profitability of a company, typically measured by the ratio of its net income to its revenue.
Net revenue: The revenue generated by a company after deducting returns, allowances, and discounts.
Net income: The profit generated by a company after deducting all expenses, including taxes and interest.