- It will be a quiet week in terms of earnings being released by corporate America this week.
- Despite an empty agenda a few large but relatively unknown companies are scheduled to release earnings.
- Please consider the risks when investing in shares over earnings, only maintain positions if you are a long-term investor.
With the slow summer months having definitely kicked in across global markets, few names are expected to report their earnings this week. Among the most noticeable businesses, which are scheduled to release their earnings, are Constellation Brands (NYSE:STZ), Paychex (NASDAQ:PAYX) and Acuity Brands (NYSE:AYI).
While none of these earnings are expected to move general markets in a significant way, given that none of these firms can be considered as true bellwethers, news flow will of course be interesting to those investors having investments in any of these names.
The following is a quick overview of the expectations from each of those earnings.
The producer and importer of beer, wine and spirits is set to release its quarterly earnings on Wednesday, the 2nd of July, before the market open.
Analysts are looking for earnings of $0.93 per share, which compares to reported earnings of just $0.38 per share last year. Sales are seen around $1.41 billion, more than double the amount reported in 2013.
Of course, investors in Constellation Brands have seen huge returns following the acquisition of the remaining 50% stake in the 50/50 joint venture with Modelo (OTC:GPMCY) regarding its Crown Imports joint venture, giving it control of Corona in the United States. Ever since shares have roughly quadrupled from levels around $20 in the middle of 2012 to current levels, which are approaching $90 per share. Strong momentum has sent shares up 70% over the past year and up 25% already so far in 2014. As such, investors clearly have high hopes for further growth.
Following the deal and acceleration of growth, Constellation has been trading at premium valuations amidst a leveraged balance sheet. Any signs of weakness or a disappointing outlook could result in quite a number of investors potentially taking some profits off the table.
Paychex, the provider of payroll, human resource and benefits outsourcing solutions to the small- and medium sized businesses is scheduled to report its earnings on Tuesday, the 1st of July, after the market close.
Analysts are anticipating earnings to come in at $0.40 per share, up two pennies compared to last year. Revenues are seen up by 5.5% to $617.3 million, but expectations for the quarter are likely not sky high. Shares are actually down 3% over the past quarter and down 10% so far this year.
The company has shown steady growth over the past decade, yet a premium valuation during the internet boom prevents shares from approaching its all-time highs around $60 per share. The company has a strong and very profitable business, yet steep past valuations have limited returns to investors in recent years to below market standards. Still, investors are happy to put their money in the stock, as Paychex's quarterly dividend of $0.35 per share provides investors with a 3.4% dividend yield.
Acuity, the designer, producer and distributor of lighting solutions will release its quarterly earnings on Tuesday, the 1st of July, before the start of trading.
Investors are anticipating further earnings growth with earnings seen around $1.12 per share. This compares to last year's earnings of $0.97 per share as the anticipated growth has pushed shares up already 25% so far this year, and up by 80% over the past year.
While the company has seen flat revenue growth over the past decade, growth has been encouraging in recent years. This has pushed up the valuation a lot with shares advancing from levels of $50 as recent as 2012 to highs of $146 earlier this year. Despite the growth and very strong balance sheet, shares have rapidly become more expensive which does leave investors with downside risks if earnings or the guidance falls short to consensus estimates.
Takeaway For Investors
As always, earnings reports do have the potential to move stock prices a lot, especially with expectations for some of these names having increased a lot in recent times.
While things are looking good for corporate America in general, the lack of revenue growth is a major concern for many, as share repurchases and margin expansion have fueled operating margins to date. To sustain earnings growth, revenues will have to increase going forward.
Please consider the risks when investing in companies when holding your positions over their earnings release, unless you are a truly long-term investor with a long time horizon. Good luck!