I don’t know if you’ve taken a look at an earnings calendar of late, but there are tumbleweeds rolling through. That’s because 99% of the S&P 500 have taken the earnings plunge.
It’s been one heck of a season, too, with earnings growth tracking the highest since the third quarter of 2011, according to FactSet Earnings Insights. Of course, the big names have mostly reported their first-quarter earnings, so we’re looking at only a handful of companies on tap next week. But they’re no slouches.
Those companies include H & R Block Inc (NYSE:HRB), Kroger Co (NYSE:KR) and Jabil Inc (NYSE:JBL). They’re not very high-volume stocks (with KR stock boasting the most volume at 8.7 million), but they do act as important bookends in theri respective sectors as we prepare to embark into the second-quarter season in July.
Here’s what to expect next week:
Earnings Reports to Watch: H&R Block (HRB)
Tax company H&R Block has moved higher over the past year, but took a rocky path to get there. Shares are sitting around 21% higher than they were this time last June, but suffered a couple pretty notable slides in August and January. Next week, H&R Block will report earnings and expectations are substantial.
For the most recent three months, Wall Street expects H&R Block to earn $3.53 per share, which would represent 12% year-over-year growth. That’s right in line with the company’s long-term growth expectations, too. While a decline is expected next quarter, for instance, full-year growth and long-term growth are both slated for 10%.
H&R Block beat Wall Street’s expectations in each of the past two quarters, too, while the $3.53 consensus is a dime higher than the average just three months back. Such earnings growth is especially important to dividend investors betting on H&R Block. Despite the run, HRB yields around 3.5%. I expect a strong earnings report to turn even more dividend-hungry investors bullish on this pick.
Earnings Reports to Watch: Kroger (KR)
Kroger, the Cincinnati-based grocer, has been sliding steadily over the past year, to the tune of a total loss north of 16%.
The company has been trying to stay competitive it what’s notoriously a tough industry (buying Harris Teeter, for instance). But the tough reality is that the grocery business is crowded and margins are narrow. (Kroger sports a profit margin south of 2% and can’t seem to grow earnings.)
When Kroger reports next week, earnings are expected to drop 18% year-over-year, despite 3% sales growth. Over the next five years, 6% growth is expected, but even that leaves Kroger with a PEG ratio of 2 — that’s double what investors would consider a good deal.
Unfortunately, even with an “earnings” beat next week, it’s hard to bet that the worst is over for Kroger stock.
Earnings Reports to Watch: Jabil Inc (JBL)
Jabil provides engineering, manufacturing and intelligent supply chain solutions to companies in a variety of industries — automotive, packaging, healthcare, retail and more.
It’s proven lucrative of late; JBL stock is the best performer on this list by a landslide. This year alone, Jabil has gained 33%, contributing to the 60%-plus climb of the past year.
When Jabil reports earnings next, an expansion of 70% year-over-year is on tap … despite the fact that the company’s only on tap for a 2% top-line expansion. Longer term, growth is expected to level out to 12% annually — not bad, considering the stock is trading for a multiple of the same level.
All Jabil has to do to keep chugging higher is to perform as expected, which is precisely what I expect come next week.
Hilary Kramer is the editor of GameChangers, Breakout Stocks, High Octane Trader, Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.
