Weekly Preview: Fed In Focus as Tapering Fears Mount
Next week, the Fed's policy statement, updated forecasts and Press Conference with Chairman Ben Bernanke will be closely watched. Key earnings from companies including FedEx (NYSE: FDX), Micron Technology (NASDAQ: MU), and Oracle (NASDAQ: ORCL) will also be watched.
Earnings from transportation giant FedEx will be closely watched as well as earnings from tech giant Oracle. In addition, semiconductor manufacturer Micron Technology's earnings will be closely watched as a proxy for the health of the chip market and demand in the broader PC market.
FedEx is expected to report fourth quarter and full year results on Wednesday, June 19. The company is expected to report fourth quarter earnings per share of $1.97 vs. $1.99 a year ago on revenue of $11.45 billion vs.$11.00 billion a year ago. Full year earnings per share are expected to be $6.05 vs. $6.59 a year ago on revenue of $44.4 billion vs. $42.7 billion a year ago.
Analysts Ken Hoexter and Victoria Zhang at Bank of America Merrill Lynch weighed in ahead of the earnings release. They have a Buy rating and $120 price target on the stock.
“Next Wednesday, FedEx reports F4Q13 earnings, which we target to be at the lower end of its implied 4Q13 EPS range of $1.92-$2.12 (it currently has a $6.00- $6.20 target for F2013). We are at $1.91, a touch below consensus given the continued trade down to International Economy services.”
“Key to the release will be its F2014 outlook, as it sets its year-ahead outlook with year-end results. We believe the Street is anticipating a $6.60-$7.20 F2014 range, a 10-20% increase off the bottom of its F2013 target (we are at $7.25).”
Analysts at Goldman Sachs were a bit more cautious heading into the earnings release. However, they reiterated their Buy rating and $114 price target Thursday in a note.
“Global airfreight flows have been mixed, with bellwether terminals such as HACTL pointing to softer-than-anticipated throughput. HACTL recently reported a 0.2% yoy decline in total throughput in May. From Mar-May, throughput was flat at +0.2% yoy due to weakness on the East/West routes which we think provides a negative guide for FDX's international express volumes, given that HACTL data tends to correlate with Memphis international throughput.”
“The challenge for FDX is to adjust its cost structure to support the strong growth from international deferred. We would expect further rationalization of service frequencies on the East/West routes. We cut our 4QFY13 estimate to $1.95 from $2.17 and reduce our FY14-15 estimates by 1%-7%, as we trim our Express revenue estimates by 2%-3% and incorporate increased D&A expense related to the early retirement of aged fleet.”
Justin Yagerman at Deutsche Bank is also bullish on the stock. The bank has a Buy rating and a $125.00 price target on the stock.
“FDX will report FQ4 EPS on June 19, 2013 and the company will host a conference call at 8:30AM ET. We are now modeling FQ4 EPS of $1.95 and guidance of $1.90-2.10. Our FQ4 EPS estimate excludes $0.94 of costs associated with FDX's voluntary buyout program. We expect the company to issue its FY2014 outlook and to discuss in more detail expected savings from its profit improvement plan.”
Semiconductor maker Micron Technology is expected to report earnings on Wednesday as well. Analysts expect Micron to report third quarter earnings per share of $0.02 vs. a loss of $0.32 per share a year ago on revenue of $2.24 billion vs. $2.17 billion a year ago.
The analysts at Bank of America weighed in ahead of the earnings. The team led by Simon Dong-je Woo and Jennifer Kim Friday raised its price target on the stock to $18 from $13 and maintained its Buy rating on the stock.
“We raise our PO from $13 to $18, fully reflecting the Elpida M&A, which is widely expected to be complete in a couple of months. The legal process in Japan has ended; only the US court's approval is left. Incremental FV/share should be $4-5 (EPS may rise $1; NAV may be $4-5bn), by our estimates.”
“Net-net, our new research indicates substantial shareholder value creation (Elpida FY14 results: Sales $4bn, OPM 30%, depreciation 80% below normal levels, minimal tax, etc). We raise FY14E EPS (up by 23%) to a 10-year high of $2 (P/E only 6x) – consensus (Bloomberg) is at only $1.”
Sterne Agee also raised its price target on the stock ahead of earnings. Analyst Vijay Rakesh boosted the price target on the stock from $13 to $15 on Tuesday headed into earnings.
“MU will report F3Q13 (May) earnings on June 19. We have raised our MayQ estimates and now are looking for MayQ Revenue/EPS of $2.19B/$0.02, in line with consensus, though we believe there should be further upside. Nonetheless, we believe there is potentially more anticipation of Elpida deal closure before the August Analyst Day than the upcoming June 19 earnings.”
Software giant Oracle is expected to report earnings Thursday. The company is expected to report fourth quarter earnings per share of $0.87 vs. $0.82 a year ago on revenue of $11.12 billion vs. $10.95 billion a year ago. For the full fiscal year, Oracle is expected to report earnings per share of $2.68 vs. $2.46 a year ago on revenue of $37.46 billion vs. $37.22 billion a year ago.
Goldman Sachs weighed in on the stock on Tuesday ahead of earnings. They have a Buy rating and $42.00 price target on the stock.
“We are modeling revenue of $11.1bn (+2% yoy) in line with consensus and non-GAAP EPS of $0.88, which is $0.01 ahead. Guidance was for revenue to fall within a range of - 1% to +4% yoy reported and constant currency and non-GAAP EPS of $0.85-0.91. As for the key metric, we are forecasting license revenue of $4.26bn, +6% yoy vs consensus of $4.22bn (+5%).”
“We expect a solid quarter with slight upside as not only do we believe that ORCL benefited from a strong pipeline, but also continued to work through execution challenges that existed in F3Q13. However, given the continued challenging IT spending backdrop coupled with what we expect will be conservative guidance for the company's F1Q14, we are lowering our license forecast for the quarter.”
The team at Morgan Stanley also released a note this week ahead of earnings. They have a Buy rating on the stock and a $39.00 price target.
“Oracle has beaten the midpoint of its 4Q license guide for the past 10+ years and we don't expect any less this year, but neither does the Street, turning attention squarely to FY14. After two years of low single digit organic cc license growth, consensus looks to numerous product cycles to accelerate growth to 8% in FY14.”
“We're slightly more cautious at 5.5%, as our third deep-dive customer survey on Fusion Apps indicates some waning momentum and we model limited impacts from the upcoming database release. However, our work suggests ORCL could drive low to mid-teen EPS growth and potentially a higher multiple on; 1) a return to HW growth, 2) 100 bps of annual margin expansion and 3) continued aggressive share repurchases.”
“Although the beats have been getting smaller, Oracle has surpassed the midpoint of its license guide every 4Q for >10 years by an average of 7%. Implied seasonality is in-line with long-term averages and should benefit from 3Q deals that slipped into 4Q. Looking out, FY14 consensus appear more aggressive, forecasting close to 8% organic cc license growth or >2x the rate seen over the past two years, although is back-end loaded, with expects for only 4% in 1Q on an easy comp.”
Key Economics Releases
The economics calendar kicks off Monday with the Empire State Manufacturing Index as well as the NAHB Home Price Index. Overnight, Chinese foreign direct investment data as well as the monthly change in home prices are expected.
Tuesday brings the German Zew Economic Sentiment Index followed by the U.S. CPI and housing starts.
Wednesday, the data heats up as Japanese trade data is released overnight followed by MBA Purchase Applications in the U.S. However, all eyes will be on the Federal Reserve.
The Federal Reserve will issue its interest rate decision and update its economic forecasts at 2:00 pm eastern Wednesday, followed by the press conference of Chairman Bernanke at 2:30. Comments on tapering and interest rate hikes will be watched closely in all of the events.
Wednesday night, the Flash HSBC China Manufacturing Index is due out followed by the Flash Manufacturing and Service PMIs Thursday morning from France, Germany, and the broad Eurozone. British retail sales are also expected Thursday morning ahead of U.S. data.
Thursday, U.S. data kicks off with weekly jobless claims and the Flash Manufacturing PMI followed by Existing Home Sales, Leading Indicators and the Philly Fed Survey.
Friday's U.S. calendar is empty although Canadian retail sales data is expected and do note that Friday is a quadruple witching day.
Earnings Expected From: China Sunergy (NASDAQ: CSUN), IHS (NYSE: IHS), Korn/Ferry International (NYSE: KFY), and SciClone Pharmaceuticals (NASDAQ: SCLN).
- Economic Releases Expected: Italian trade balance, Empire State Manufacturing Index, NAHB Housing Market Index, the Weekly 3- and 6-month bill auctions, Chinese FDI and Chinese home prices.
Earnings Expected From: Adobe (NASDAQ: ADBE), China Cord Blood (NYSE: CO), FactSet Research (NYSE: FDS), John Wiley & Sons (NYSE: JW-A), and La-Z-Boy (NYSE: LZB).
- Economic Releases Expected: Japanese Industrial Production, Japanese Capacity Utilization, British PPI, German ZEW Economic Sentiment Index, U.S. Building Permits, Housing Starts, U.S. CPI, the Redbook, the weekly 4-week bill auction and the Japanese trade balance.
Earnings Expected From: Actuant (NYSE: ATU), ChinaEdu (NASDAQ: CEDU), CLARCOR (NYSE: CLC), FedEx (NYSE: FDX), Jabil Circuit (NYSE: JBL), Micron Technology (NASDAQ: MU), Red Hat (NYSE: RHT) and Steelcase (NYSE: SCS).
- Economic Releases Expected: Canadian Wholesale Sales, MBA Purchase Applications, FOMC Interest Rate Decision, FOMC Forecasts, Ben Bernanke Press Conference, New Zealand GDP and the Flash HSBC China Manufacturing PMI.
Earnings Expected From: Kroger (NYSE: KR), Methode Electronics (NYSE: MEI), Oracle (NASDAQ: ORCL), Pier 1 Imports (NYSE: PIR) and Rite Aid (NYSE: RAD).
- Economic Releases Expected: German PPI, Flash Manufacturing and Service PMIs from France, Germany, and the Eurozone, British Retail Sales, Irish GDP, weekly jobless claims, U.S. Flash Manufacturing PMI, Bloomberg Consumer Comfort Index, Existing Home Sales, Philly Fed Survey, Leading Indicators and a 30-Year TIPS auction.
Earnings Expected From: CarMax (NYSE: KMX), Carnival (NYSE: CCL) and Darden Restaurants (NYSE: DRI).
- Economic Releases Expected: Eurozone current account, Canadian retail sales and it is Quadruple Witching expiration in the U.S.
Latest Ratings for FDX
|Sep 2014||Cowen & Company||Upgrades||Market Perform||Outperform|
© 2014 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.