Top US stocks: NIKE, Costco and Accenture

NIKE and Costco report after the closing bell, Accenture and Blackberry beat expectations, Salesforce ups its guidance, Alphabet sues regulators in India, the EU considers approving Pfizer booster jabs, and the White House tries to address the shortage in semiconductors.

USA (1)

NIKE

NIKE is scheduled to release first quarter earnings after US markets close today, with investors hoping it can build on the record set of results in the last quarter as demand for athleisure wear remains strong, its push online with its direct-to-consumer model progresses, and wholesale income recovers as more physical retailers reopen their stores.

Analysts are expecting revenue to rise to $12.46 billion from $10.59 billion the year before. Diluted EPS is forecast to increase to $1.12 from $0.95. Notably, NIKE has beaten expectations in seven out of the last eight quarters, and several analysts believe it can beat topline forecasts once again in the first quarter.

The major concern that NIKE will need to alleviate is how it is coping with the driver shortage and supply chain challenges that is plaguing the wider economy at present, especially as it heads into the key holiday season. There are also some fears over supplies as cases of the Delta variant rise in China, a key production hub for the business, and amid reports of problems in Vietnam where factories have been forced to close due to the spread of the virus.

Costco

Costco is also scheduled to release fourth quarter earnings today, with markets anticipating the wholesaler and retailer to have benefited from buoyant consumer spending, underpinned by stimulus cheques and back-to-school spending.

Still, its monthly sales updates have shown a marked slowdown in growth over recent months and estimates from Bloomberg suggest comparable sales growth will come in at just 8% in the fourth quarter compared to the 21% increase reported in the third quarter as it comes up against tougher comparatives. 

Analysts are expecting fourth quarter revenue to rise 14.8% to $61.29 billion from $53.38 billion the year before, with EPS to increase to $3.58 from $3.13. Investors will want to see how Costco is addressing inflationary and supply chain problems.

Accenture

Accenture beat earnings expectations and posted a buoyant outlook when it released fourth quarter and full year results this morning, driven by growing demand for its cloud and security services and products.

Revenue jumped 24% in the fourth quarter to $13.4 billion and EPS increased 11% to $2.20. The topline was in-line with what Wall Street had expected while earnings came in slightly ahead of the $2.18 forecast. Consulting revenue was up 29% while Outsourcing revenue grew 19%.

The company said it delivered record revenue and bookings over the full year and revealed it had increased its quarterly dividend by 10% to $0.97 and approved a new $3 billion share buyback programme.

Accenture said it is expecting revenue to grow by 12% to 15% at local currency in the new financial year to the end of August 2022, with EPS of $9.90 to $10.18 versus the $9.16 delivered in the recently-ended year.

Blackberry

Blackberry beat expectations when it released second quarter earnings after the closing bell yesterday as it warned significant supply chain pressures will continue to weigh on the business over the coming quarters and announced the departure of its chief operating officer.

Revenue fell to $175 million from $266 million the year before, but was better than the $163.5 million forecast by analysts. Cybersecurity revenue was flat year-on-year at $120 million and IoT revenue rose to $40 million from $31 million, but that was not enough to offset the anticipated fall in licensing revenue as it continues to negotiate the sale of part of its patent portfolio. It reported an adjusted loss per share of $0.06, turning from an $0.11 profit last year, but that was also marginally better than the $0.07 loss Wall Street anticipated.

Blackberry warned that significant headwinds, such as the chip shortage reducing demand from the automotive sector for its QNX platform, will continue over the next two quarters. It also said president and COO Tom Eacobacci will leave at the end of the month and said it has appointed John Giamatteo as the new boss of its cybersecurity unit.

Salesforce

Salesforce shares are in play today after it raised its guidance this morning.

The company said it is now expecting annual revenue of between $26.25 billion and $26.35 billion in the current financial year, up from its previous range of $26.20 billion to $26.30 billion. That was better than the $26.31 billion pencilled in by analysts.

It also provided guidance for the next financial year to end in 2023, with revenue to grow further to a range of $31.65 billion to $31.80 billion, and said it is targeting an operating margin of 3.0% to 3.5% in the 2023 financial year and adjusted margin of 20%.

Alphabet

Alphabet’s Google is suing the Competition Commission of India for leaking confidential information from the antitrust investigation being carried out into the company, intensifying relations between the US tech giant and one of its fastest-growing markets.

Reports in recent weeks have shown the CCI has found evidence that Google has abused its position in the market using its Android mobile phone operating system, prompting Google to demonstrate how Android has led to more competition and innovation rather than less.

However, Google said yesterday that it is legally challenging the CCI at the Delhi High Court to ‘prevent any further unlawful disclosures of confidential findings’ and is ‘protesting against the breach of confidence which impairs Google’s ability to defend itself and harms Google and its partners’.

Pfizer

European regulators are set to make a decision as to whether the coronavirus vaccine developed by Pfizer and BioNTech should be used to provide booster shots as the bloc continues its fight against the virus, according to reports from Reuters.

The report, citing an unnamed source, said this will be the first jab to be considered by the European Medicines Agency for booster shots, following in the footsteps of the US which approved a third dose of the jab for older citizens. The EMA is expected to make a decision ‘for the beginning of October’, according to the source.

The report also said that Moderna was expected to submit data to the EMA this month to try and get approval for booster shots. Moderna’s CEO Stephane Bancel said yesterday that the pandemic could be over in a year as capacity ramps-up over the next six months to ensure there are enough vaccine supplies for everyone around the world.

Semiconductor stocks

A number of representatives from the likes of Intel, Apple, Microsoft, Samsung, General Motors, Ford and Stellantis are meeting virtually with the White House today to discuss how to address the global chip shortage plaguing several major industries, according to unnamed sources.

Secretary of Commerce Gina Raimondo is reported to be leading the meeting alongside the director of the National Economic Council Brian Deese. Topics for discussion include how the Delta variant could threaten chip supplies further and how semiconductor firms can collaborate to improve the supply shortage.

General Motors

General Motors has announced it is making a $300 million investment in Chinese self-driving startup Momenta as it bolsters its position in the fastest-growing electric and self-driving car market in the world.

The company announced it was investing a staggering $35 billion into electric and self-driving tech between 2020 and 2025, with substantial amounts being funnelled into China to expand design and engineering capacity and its ability to update software wirelessly.

Momenta believes the enhanced safety of self-driving cars can save one million lives in China over the next decade alone.

Boeing

Boeing has upgraded its forecast for the level of demand it expects to see in China over the next 20 years, stating it is pursuing a $1.47 trillion opportunity.

The planemaker said it believes China will need 8,700 new planes by 2040, a slight improvement from forecast of 8,600 made this time last year. It said the increase in travel will be driven by the economic growth and the growing middle-class, which is expected to double over the next two decades. The forecast assumes annual traffic will grow by around 5.4% and that around two-thirds of future deliveries will be made to help the industry meet this growth, with the other third to replace older models.

‘The rapid recovery of Chinese domestic traffic during the pandemic speaks to the market’s underlying strength and resilience,’ said the head of Boeing Chinese marketing unit Richard Wynne. ‘In addition, there are promising opportunities to significantly expand international long-haul routes and air freight capacity. Longer term, there is the potential for low-cost carrier growth to further build on single-aisle demand.’

Analyst Recommendations: Roku and Joby Aviation

Streaming firm Roku was upgraded to Buy from Neutral by Guggenheim and given a target price of $395 – above the $325 it trades at before the opening bell today.

Joby Aviation, the vertical takeoff specialist that recently went public, was given an Overweight rating as Morgan Stanley started coverage of the stock, stating it has major upside potential.

AIG, also known as American International Group, had its price target raised to $65 from $60 by RBC, which said its recent $6 billion buyback and its pending exit from the life and retirement business as catalysts for the stock.

Needham started coverage on Biogen with a Buy rating and a $400 price target, underpinned by high expectations for sales of its controversial Alzheimer’s drug Aduhelm.

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