Earnings Watch: Expectations remain high

Usually we only highlight the major companies reporting earnings but in this week’s Earnings Watch we focus on names we don't usually focus on.

Toll Brothers

Reports FY18 Q4 earnings on Tuesday (aft-mkt) with analysts expecting EPS $1.83 up 55% y/y and revenue at $2.35bn up 16% y/y. It has been a tough year for Toll Brothers with the stock price down 31% mostly driven by lower sentiment on US housing as rising interest rate expectations have slowed housing starts and permits. Last quarter showed better than expected orders intake and margins are still stable despite concerns over cost headwinds. The earnings release is the first since Fed chair Powell’s latest speech slowing interest rate expectations, so any comments from management on the US housing market given these developments are of interest to investors in general.

Lululemon Athletica

Reports Q3 earnings on Wednesday (aft-mkt) with analysts expecting EPS $0.69 up 24% y/y and revenue at $736mn up 19% y/y. This is a highly anticipated earnings release as many momentum traders have been buying into the incredible strength this year as the share price has risen 69% despite ongoing weakness across the board in the US equities. The stock is richly valued at 12-month trailing EV/EBITDA ratio at 24.2 which is almost double global equities. High valuations always increase the risk over an earnings release so we expect volatility to be high around this earnings release.

Momo

Reports Q3 earnings on Wednesday (bef-mkt) with analysts expecting EPS $0.53 up 18% and revenue at $533mn up 50% y/y. Momo is a social media company based in China and has been profitable for the past four years showing margin expansion. The company has historically surprised against earnings estimates. The stock price typically moves around 11% over the earnings release.

The table below shows the 30 largest companies reporting earnings this week.