The peak weeks of earnings season are now behind us and so far investors have very little to hang their hats on. The season started with better-than-expected results from the airlines and has continued with strong numbers from the tech sector. This week, retailers and the remaining tech companies take the stage with hopes of maintaining the momentum of the past few weeks.
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Ahead of this week's reports, earnings revisions activity has been running rampant in both directions. Earnings momentum ahead of a report is often predictive of a beat or a miss. NVidia is the one standout this week, fielding the largest upward revisions ahead of its report, while Yelp, SolarCity and Kohl's are trending downward given their inability to deliver sustainable growth.
Year-to-date stock performance
It's not surprising why investors are so bullish with regards to NVidia. The company has delivered steadily improving revenue growth on higher adoption of its graphics cards in gaming and high-end computers. It also doesn't hurt that shares are up 79 percent year-to-date and more than 150 percent in the past 12 months. With a strong pipeline and small shift to high growth markets like data centers, NVidia's advantage is unparalleled.
Nonetheless, NVidia's bread and butter is and will continue to be its graphics card. The company has been gaining traction in the gaming industry on the back of its strong line-up of advanced graphic cards. The recently released GeForce GTX 1080 and 1070 are already winning over hardcore gamers with their next-generation technology. NVidia's staunch lead in the GPU market bodes well for earnings this quarter.
Analysts are looking for earnings per share of 41 cents on $1.37 billion in revenue, according to the Estimize consensus data. Both estimates have been revised up by 5 percent since NVidia's last report in May. Compared to the same period last year, earnings and revenue are expected to increase by 20 percent and 19 percent, respectively.
On the downside, Yelp, SolarCity and Kohl's have seen the biggest negative revisions. Waning demand has pushed share prices and financial growth into dangerous territory
SolarCity has been the worst of the bunch. The company has struggled in recent years as cheaper energy sources shake up the solar industry. It's over-reliance on residential projects has been the largest driver of low margins and unprofitability.
SolarCity recently announced that it installed 201 megawatts during the second quarter, a significant improvement from expectations and the previous year. Despite some good news, SolarCity also lowered its full-year guidance on lower bookings in the first half of the year. It is now expecting to install between 900 and 1,000 megawatts of rooftop solar panels, down 100 to 200 megawatts from its previous guidance.
The announced takeover by Tesla will likely overshadow the report, but it is still important that SolarCity hits its numbers to keep the stock afloat
Analysts are looking for a loss of $2.53 per share on $137.07 million in revenue, according to the crowdsourced consensus data. Compared to a year earlier earnings are expected to decline by 55 percent while sales could grow by as much as 34 percent. Shares are down more than 50 percent in the past 12 months with no signs of improving in the foreseeable future.
Yelp joins SolarCity tomorrow with its second-quarter report after the market closes. Ahead of its report, Citigroup downgraded the stock from buy to neutral citing decelerating revenue growth and pressure on margins. According to the note, the over-exuberant stock movement is unwarranted given its poor financial performance. Moreover, Yelp faces stiff competition from major tech companies including Uber, Google, and Facebook. These companies are ramping up their efforts to gain a bigger position in the market, thereby hurting Yelp's earnings outlook.
Analysts at Estimize are looking for a 7-cent loss per share, down 230 percent from the same period last year. That estimate has dropped nearly 80 percent since Yelp's last report in May. Revenue is anticipated to come in 27 percent higher at $169.83 million, a significant slowdown from previous quarters.
Kohl's caps things off with its second-quarter report Thursday, before the market opens. Last quarter, both bottom- and top-line growth underwhelmed investors, dropping by 51 percent and 4 percent, respectively. The sluggish consumer environment is largely to blame for waning demand and negative comparable-store sales. Its turnaround strategy, started in 2014, has also hit its first roadblock, raising concerns that future quarters could get worse.
The crowd is looking for earnings per share of $1.03 on $4.15 billion in revenue. Earnings per share estimates have been cut by 5 percent since Kohl's last report in May. Compared to a year earlier, earnings and revenues are projected to decline by 2 percent.
The final weeks of Q2 earnings season are closing on a positive note, but investors still aren't in the clear. Estimate revisions activity is pointing to more potential losers this week than winners.
How do you think these names will report? Be included in the Estimize consensus by contributing your estimates here!