The peak of earnings season has come and gone — and it’s been a good one. Of the companies in the S&P 500, 73% have beaten earnings estimates this season.
Turning toward the latest Earnings Insight from FactSet, Senior Earnings Analyst John Butters notes that the estimated growth rate for the broader market sits right around 5%.
Those companies with more exposure to Asia have been outperformers, while geopolitical tensions and market forces have weighed on investors minds during the summer lull.
While we’re out of the thick of earnings season, there are still a few companies out there with key earnings reports next week. For these three companies, earnings will be crucial — but for very different reasons.
Earnings to Watch: Cracker Barrel (CBRL)
Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) had been one of the better-performing restaurant stocks — until recently. CBRL stock has been in a steady downturn since early July, falling 13% over that time. Clearly, the Street’s pessimism toward restaurant stocks as a whole has made its way to one of the sector’s better performers.
The recent decline sets up a nice potential bounce for CBRL after its earnings report before the open on Wednesday. Analyst expectations don’t look particularly high, with consensus per-share earnings of $2.14 toward the lower end of the company’s guidance of $2.10-$2.20, and implying just 6.5% growth year-over-year. The Street sees revenue growing 2.5% year-over-year, a modest acceleration from levels reached so far in fiscal 2017, but hardly a high bar to clear.
It certainly looks like CBRL is a perfect candidate for a “relief rally”. The share price has come down and expectations are modest. If Cracker Barrel can post solid earnings, the industry-led declines of the past few weeks can reverse. And if the company can show why it’s long been one of the best stocks in the restaurant sector, there’s a chance for a return to $165, a level that has proven to be resistance so far this year.
Earnings to Watch: United Natural Foods (UNFI)
The focus on fiscal fourth-quarter earnings at United Natural Foods, Inc. (NASDAQ:UNFI) likely won’t be on the company’s numbers. It will be on the post-earnings conference call.
The call will be the first held by UNFI since Amazon.com, Inc. (NASDAQ:AMZN) announced its intention to buy Whole Foods Market. That acquisition could have a major impact on United Natural Foods, who has been the primary distributor to Whole Foods for over 18 years.
In fact, some 35% of UNFI revenue comes from Whole Foods. Street analysts surely will be aggressive in trying to understand what communications United Natural Foods has had with Amazon — and ‘none’ just as surely won’t be the right answer. As I wrote last week, it’s still not clear how much Amazon is cutting Whole Foods prices, but betting against Amazon makes little sense. Whatever Amazon’s strategy turns out to be, investors are nervous that the price cuts will pressure margins at UNFI as well.
The discussion will likely focus on the broader grocery space as well, which continues to struggle. Industry giant Kroger Co (NYSE:KR) trades at a three-year low after disappointing earnings on Friday morning. Deflation continues to be a problem for both UNFI and its customers.
Fundamentally, it does look like UNFI has room to post an earnings beat. Analysts are expecting flat earnings on nearly 7% revenue growth. Fiscal 2018 expectations look similarly muted, with profits expected to decline year-over-year.
Good Q4 numbers and above-Street guidance for fiscal 2018 could give UNFI stock a boost. But with the entire grocery industry, not just UNFI, looking like a ‘falling knife’, even a good earnings report may be only a temporary reprieve for UNFI.
Earnings to Watch: Oracle (ORCL)
While stocks like Apple Inc. (NASDAQ:AAPL) and Tesla Inc (NASDAQ:TSLA) seem to have garnered the headlines this year, Oracle Corporation (NYSE:ORCL) quietly has had an impressive 2017. ORCL stock is up a whopping 34% year-to-date.
I recommended ORCL stock back in January, and I don’t see any reason to back off that call just yet, even after the big gains. Oracle might have been a bit late to the cloud — but it’s doing a fine job of catching up. Cloud revenue grew 60% in fiscal 2017, contributing to a strong year overall for Oracle.
Even after the gains, however, ORCL stock still looks reasonably cheap. The stock trades at just 17.5x fiscal 2018 consensus EPS estimates. Many of those Wall Street analysts have upgraded Oracle since its last earnings report — which bodes well for a Q1 beat, and further upside in ORCL.
As long as cloud growth continues, ORCL has room to run. With a 1.5% dividend as a sweetener, investors should bet that Oracle’s strong 2017 will continue.
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.