Earnings season is winding down but investors will still have plenty to watch next week as key companies across various sectors provide updates that could offer valuable insights into market trends.
In the tech sector, AI darling Nvidia is expected to offer a glimpse into the ongoing impact of the artificial intelligence (AI) hype on the semiconductor industry, potentially revealing whether enthusiasm for AI is translating into tangible growth.
Meanwhile in London, financial services firm Prudential will show investors if it has managed to turn around its performance. Shares in the company have slumped amid less than stellar performance of the Hong Kong and China economies.
CrowdStrike will also report its results in the cybersecurity arena, with investors eager to see how the company behind the recent global outage is performing.
In the sneaker fashion world, Foot Locker is seeing analysts upgrading its stock ahead of earnings but Wall Street still expects a quarterly loss.
Here’s what to look out for:
Nvidia (NVDA) — Reports second-quarter results on Wednesday 28 August
All eyes will be on Nvidia (NVDA) next week, as the chip giant at the heart of the AI boom, is set to release its second-quarter results on 28 August.
Not only does Nvidia hold an 80% to 95% share of the market for high-powered AI chips, according to Reuters, but it is also the world’s third-largest company by market capitalisation at $3.04tn (£2.31tn), having briefly held the top spot back in June.
The AI darling is the single best performer in the S&P 500 (^GSPC) index and a leading member of the Philadelphia Semiconductor index — known as the SOX (SOX=F) — point out AJ Bell’s head of financial analysis Danni Hewson and Dan Coatsworth, investment analyst for the platform.
Nvidia is also part of the so-called ‘Magnificent Seven’, which alongside other tech heavyweights including Apple (AAPL) and Microsoft (MSFT), is a group of stocks that make up more than a third of the S&P 500’s stock market value and a fifth of the FTSE All-World (AW01.FGI) equity index’s market capitalisation.
“These seven names have gone a long way to helping equity markets go higher, so if they stumble then the effects could be felt widely,” say Hewson and Coatsworth.
Nvidia shares are up 149.87% year-to-date, though the stock sold off heavily in July and into early August. The share price has recovered some ground since then but fell 3% in yesterday’s trading session ahead of the highly anticipated earnings report next week.
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“From a fundamental, earnings point of view, Nvidia has demolished consensus estimates and raised guidance for each of the past five quarters, which helps to explain its stellar share price performance,” say Hewson and Coatsworth.
Nvidia said it expects revenues of $28bn for the second-quarter, which is more than double the $13.5bn it reported for the same period last year. If Nvidia CEO Jensen Huang offers any steer on the third quarter, Hewson and Coatsworth say the current consensus forecast on revenue is $30.7bn, versus $18.1bn for Q3 last year.
Based on Huang’s guidance for gross margins, operating expenses and tax charges, Hewson and Coatsworth said this implies a net profit of $15bn for the second quarter, which is more than double the figure reported last year, but broadly flat on the previous quarter. They said this also suggests headline earnings per share (EPS) of $0.63 for Q2, up from $0.61 in the first quarter.
Looking ahead, they said that analysts will be keeping an eye out for comments from Huang on reported delays in the launch of Nvidia’s new Blackwell chips.
“Production of Blackwell was due to ramp up in the second half of this year, as Nvidia looks to maintain its technological lead by quickly improving upon the Hopper chipset,” Hewson and Coatsworth said.
Prudential (PRU.L) — Reports first-half results on Wednesday 28 August
Another company reporting on Wednesday is financial services firm Prudential, which has seen its shares fall by nearly a third over the past year, slumping to 12-year lows.
AJ Bell’s Hewson and Coatsworth said that the shares have been “dragged down by markets’ disappointment with how the economies of Hong Kong and China are failing to show markedly improved momentum after the conclusion of their lengthy lockdowns imposed because of Covid-19.”
They explained that Prudential is now a play on demand for financial services in Asia and Africa, following the spin-off of fund manager M&G (MNG.L) in 2019, a fundraising in Hong Kong in 2021 and its 2022 demerger from Jackson Financial (JXN).
“Prudential’s long-term strategy is to position itself for both population growth as well as increased prosperity and the rise of the middle class, as this is potentially the sweet spot for increased demand for financial products and services,” Hewson and Coatsworth said.
Hong Kong was Prudential’s most profitable market in 2022, followed by Singapore, Mainland China, Malaysia and Indonesia, with it highlighting India, Vietnam, Thailand, Taiwan and the Philippines as high-growth markets.
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Prudential’s CEO Anil Wadhwani, who took the reins earlier last year, set out two new financial objectives, one of which was to achieve a compound growth of 15% to 20% in new business profit between 2022 and 2027.
New business profit jumped 45% to $3.1bn in 2023, but Hewson and Coatsworth note that this was flat in the first quarter of 2024 on a constant currency basis, despite the firm pointing to a headline figure of 11% growth “excluding economic impacts” on a constant currency basis.
Another metric that they said would be in focus is Prudential’s operating profit, which on an adjusted basis came in at $2.9bn in 2023, up 8% on the previous year.
Prudential paid out a dividend of 20.47 cents (16.5p) per share in 2023, with Hewson and Coatsworth saying that analysts expect a 6% increase in these distributions to the equivalent of 17.5p a share. The company announced a 2023 first interim dividend of 6.26 cents, or 5.16p, per share.
Hewson and Coatsworth said that another figure that investors will be looking at is Prudential’s annual premium equivalent, as a measure of new business written. This increased by 37% to $5.9bn in 2023 and grew by 7% on a constant currency basis in the first quarter of this year, “thanks to a tough base for comparison in Hong Kong and China and a slowdown in Vietnam”.
CrowdStrike (CRWD) – Reports second quarter results on Wednesday 28 August
CrowdStrike is set to report its second-quarter financial results on Wednesday, 28 August with the market keenly focused on the aftermath of the July IT outage that has significantly impacted the company’s valuation.
The cloud-based security company is expected to post quarterly earnings of $0.98 per share in its upcoming report, which represents a year-over-year change of +32.4%, according to Zachs Research. Revenues are expected to be $958.66m, up 31% from the year-ago quarter.
The cybersecurity leader has seen its market value sharply decline after its involvement in a Microsoft-related IT disruption that caused widespread chaos. The incident, attributed to “a single content update for Windows hosts”, led to severe disruptions across various sectors, including airlines, emergency services and media outlets globally, according to CrowdStrike president George Kurtz.
In the wake of the outage, businesses affected have initiated legal action against both CrowdStrike and Microsoft. Notably, Atlanta-based Delta Air Lines (DAL) has filed claims, citing losses ranging from $350m to $500m after being forced to cancel more than 6,000 flights.
As investors await CrowdStrike’s earnings call, they are particularly interested in how the ongoing legal challenges will impact the company’s financial health. However, Wedbush analysts have suggested that the financial damage may be less severe than initially anticipated.
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According to legal experts cited by Wedbush, CrowdStrike’s potential liabilities from Delta’s lawsuit are likely to be in the “single-digit” millions, thanks to favourable user contracts that limit the company’s exposure to claims for revenue losses and liability.
Despite these reassurances, there are concerns that the reputational damage from the outage could lead to a loss of future business, a risk that may weigh on CrowdStrike’s long-term prospects.
Citi (C) analysts said that CrowdStrike won’t come out of the incident “unscathed” given higher discounts, lower negotiating leverage, and litigation costs it now faces.
Citi has revised its outlook on Foot Locker, increasing the price target from $27 to $33, while maintaining a Neutral rating on the stock. This change comes in anticipation of Foot Locker’s second-quarter earnings report on Wednesday before the US bell.
Citi’s analysis say Foot Locker may outperform consensus expectations for both sales and earnings per share in the second quarter.
Its optimism is driven by stronger-than-expected comparable store sales and gross margins, bolstered by the robust performance of several key brands in Foot Locker’s portfolio, including Adi Terrace, New Balance, Hoka, and On.
Despite underperformance from Nike (NKE), Foot Locker’s largest brand, Citi believes the retailer will show a positive inflection in comparable sales for the second quarter, recovering from last year’s promotional pressures that negatively impacted gross margins.
The retailer is expected to report a quarterly loss of $0.09 per share, reflecting a year-over-year decline of 325%. However, revenues are projected to reach $1.88bn, marking a 0.9% increase compared to the same quarter last year, according to Zachs Research.
Foot Locker’s management is expected to reaffirm its fiscal year 2024 guidance, though third-quarter projections may come in below consensus due to anticipated weaker gross margins.
Recent analyst actions showcase a range of views on Foot Locker’s prospects. Following a disappointing first-quarter performance in 2024, Morgan Stanley downgraded the stock from Equalweight to Underweight, lowering the price target to $18 due to a more cautious outlook for 2024 (EPS, driven by expectations of a decline in both top-line growth and gross margins).
Argus also maintained a Hold rating on Foot Locker, expressing caution about near-term earnings pressure as the company navigates a strategic transformation. Conversely, Jefferies, Barclays and Telsey Advisory Group have raised their price targets to $26, $27, and $27, respectively, recognising Foot Locker’s recent performance.
Other companies reporting next week include:
Monday 26 August
No major companies reporting
Tuesday 27 August
CNOOC (600938.SS)
BHP (BHP.L)
Vinci (DG.VI)
Wednesday 28 August
Hochschild Mining (HOC.L)
Cosco Shipping (CICOF)
Air China (AIRYY)
China Construction Bank (601939.SS)
Wuliangye Yibin (000858.SZ)
Ageas (AGS.BR)
Brunello Cucinelli (8BU.F)
NetApp (NTAP)
Bath & Body Works (BBWI)
Abercrombie & Fitch (ANF)
Campbell Soup (CPB)
Kohl’s (KSS)
JM Smucker (SJM)
Thursday 29 August
South32 (S32.AX)
Qantas (QAN.AX)
Pernod Ricard (RI.PA)
Delivery Hero (DHER.HM)
Friday 30 August
Dell (DELL)
Marvell (MRVL)
Dollar General (DG)
Brown-Forman (BF-B)
Best Buy (BBY)
Birkenstock (BIRK)
You can read Yahoo Finance‘s full calendar here.
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