We will learn a lot about the health of corporations worldwide in the weeks ahead. As yet another earnings season kicks off, we'll soon know more about which companies are faring well and which not so well in the COVID-19 economy.
Some stocks warrant more investor attention than others on account of them benefitting from the current environment. Let's take a sneak peak at some of the ones that could creep higher in the days before their reports on expectations of more strong results.
Will Sony Reach New Highs Leading up to Earnings?
Sony (NYSE:SNE) is one ADR that investors should be tuned into. The Japanese electronics manufacturer is scheduled to report fiscal 2021 third quarter earnings on February 3rd. The Street will be looking for EPS of $0.80 on revenue of $24.5 billion for the three-month period ended December 2020.
The key growth drivers here are Sony's gaming and music divisions which are experiencing higher than expected sales during the pandemic. Homebound consumers desperate for entertainment are scooping up Sony's PlayStation gaming consoles (including the recently launched PS5), PlayStation Plus subscriptions, games, and streaming music offerings like they are going out of style.
Meanwhile, the lesser-known financial services unit, which accounts for nearly one-fifth of sales is benefitting from healthy Japanese demand for life and non-life insurance, mortgages, and online banking services. This is helping to offset weakness in the Sony Pictures business which continues to be negatively impacted by closed movie theaters. Strength in gaming, music, and financial prompted management to raise its full-year revenue and profit guidance.
Sony is coming off a strong quarter in which revenue of $19.9 billion topped analysts' estimates by 14%. Earnings easily surpassed forecasts as well and were up 150% year-over-year. This is a stock that is trading near its 52-week high but is likely to reach new highs in 2021. It is still inexpensive at 15x earnings and the balance sheet contains an increasing $41.6 billion cash balance that is approximately six times the amount of long-term debt.
Will Evercore's Stock Gap Up Again?
Financial stocks have been gaining favor in recent weeks with massive fiscal stimulus measures expected to spur economic activity, higher inflation, and potentially higher interest rates over time. One name to keep an eye on in the investment banking space is New York-based Evercore (NYSE:EVR).
Last quarter the mid cap company posted EPS that were more than twice the consensus forecast. In response, the stock jumped 7% on the day of the report. And while the bottom-line performance was flat relative to the prior year period, the quarter may have marked an inflection point. After declining in each of the past two years, revenue is expected to cross the $2 billion mark in 2021 to a record high.
Evercore's investment management business is performing well of late thanks to the sharp rebound in the global equity markets. However, this segment accounts for less than 5% of sales.
More importantly, the core investment banking unit is likely to see healthy levels of activity going forward. This is because while market volatility is a foe to some, it is a friend to Evercore. It tends to equate to higher client demand for advisory services related to restructuring, M&A, and the capital markets.
Evercore stock had an outstanding run last year and appears to be picking up where it left off in 2021. It will likely be riding a six-month winning streak into its February 3rd earnings announcement and analysts seem to think it can move higher. All nine sell-side analysts have 'Buy' ratings on Evercore with price targets as high as $135.
It's easy to see why. The company has industry leading profit margins and boasts a 27% return on equity (ROE) that is well above its peer group average. It is also active on the share buyback front and pays a rising dividend that currently represents a 2.1% yield.
Evercore's extensive streak of earnings beats will also be on the line next month. And while we are likely to see another positive surprise, it is management's outlook for the current fiscal year that will be of great interest to investors. If the tone around future investment banking activity remains upbeat, Evercore's stock could once again gap higher.
Is Deckers Outdoor Stock a Buy Ahead of Earnings?
Deckers Outdoor (NYSE:DECK) is a California-based maker of footwear and accessories for outdoors sports and activities. Appropriately, its stock chart looks like one of the mountains that its customers climb—and for good reason.
The company is on a hot streak due to the popularity of its UGG, Teva, and HOKA ONE ONE branded footwear and apparel. Sales of all three brands were up sharply last quarter including an 83% surge in HOKA footwear and athletic wear sales.
Outdoor enthusiasts, both seasoned and newbies, have gained a greater appreciation for the great outdoors during the pandemic. This has translated to elevated demand for hiking shoes, running sneakers, and performance gear. Coinciding with consumers' increased interest in healthy eating and exercise, it’s a trend that has some serious staying power.
Almost all of Decker's retail stores are open so operations are somewhat back to normal. It also has a wholesale business that is holding up well. But as you'd expect, it is the company's e-commerce platform that is responsible for much of the recent growth. Investments in the digital platform are paying off driving strong growth in direct-to-consumer sales.
Last week BTIG reiterated its 'Buy' rating on Deckers and gave it Street-high $412 price target. The analyst expects another impressive report ahead driven by strong digital sales during the holiday quarter. This wouldn't be surprising given that the company has beat EPS forecasts in each of the last 11 quarters.
In Decker's last two quarters earnings per share increased 57% and 32% and the stock has in turn marched to new high after new high. With multiple leading brands in categories that consumers are gravitating towards, the strong profit growth is likely to persist. When Deckers reports earnings on February 4th, investors should be all hands on deck.
Before you consider Sony, you'll want to hear this.
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