As we reach the heart of first-quarter earnings season, here are five stocks I will be watching this week.
Results form these companies are due out Thursday and Friday.
Activision (May 2)
After suffering a price target cut in March, Activision Blizzard, Inc. (ATVI) hasn't had the best couple of months.
The gaming company had a stellar couple of years, in terms of both revenue and net income growth, before it began to hit some turbulence.
My complaint had previously been the stock was just too expensive. The last year changed all that. With a couple of missed earnings estimates, and the repositioning of many valuations during December, Activision shares have lost about half of their value.
However, now that it's trading with a trailing P/E of about 20.45x last year's earnings, Activision stock might be positioned well for good news. I'm not entirely sure where that news will come from in the first quarter, as there haven't been any big titles or developments launched to my knowledge.
Nevertheless, the stock is much more affordable these days.
Dunkin' Brands (May 2)
Dunkin' Brands Group, Inc. (DNKN) finished 2018 with a 15.23% decline in net income year over year.
On a per-share basis, earnings fell 7.97% to $2.71 per diluted share. The stock has a trailing P/E of around 27.74x those full-year earnings.
Dunkin's big problem is the balance sheet. They have to maintain a certain level of growth in order to justify investing in a company with a total equity deficit of $712 million. And that $3.02 billion is a lot of debt for a company with $596 million in cash on hand.
We'll see if they renew the growth story in their first quarter results.
Planet Fitness (May 2)
Planet Fitness, Inc. (PLNT) stock has been on absolute fire over the last five years.
Revenues grew 33.25% in 2018 to $572.9 million, with 165% growth in net income to $88.02 million. Planet Fitness faces the same problem as Dunkin', though. The company has a lot of debt, and runs a deficit on the balance sheet.
This stock requires continued strong momentum, or the ugly balance sheet could have negative connotations. I view it very much as a reactionary trade this week. If the company reports good things, I think this stock will run. On the flip side, bad news could be equally powerful in changing course for this stock.
Under Armour (May 2)
If that guidance holds true, it would mean that UAA is trading around 65x forward earnings. It truly boggles my mind that a stock like Under Armour, operating in a market with so many comparable products and competitors, can be trading that high.
To me, it removes much of the potential from a return to profitability. The premium is too high in my eyes, and UAA will have to deliver some serious earnings surprises in order to create a bull case for the stock.
Fiat Chrysler (May 3)
I tend to judge auto sales based off of their U.S. performance.
My primary reason is our market is where car companies have the most opportunity to sell their cash-bearing pickups and SUV's.
To the "Big Three," trucks are everything. Fiat Chrysler Automobiles N.V. (FCAU) reported 24% growth of its Ram brand of trucks in January. While the coveted Jeep brand declined 2%, it was largely due to the phasing out of certain vehicles like the Jeep Patriot.
The Wrangler set a sales record, and increased sales 11% year over year. Total sales rose 2%. In February, the company reported similar performance for its big money trucks and Jeeps, while total sales decreased 2%. March took a turn, where many Jeep names declined by double-digit percentage rates. The Grand Cherokee did buck the trend, seeing sales increase 26%. Ram pickups grew 15%. Total auto sales declined 7%.
Fiat Chrysler's first-quarter earnings will come down to how the cash benefits of big-ticket items like Ram trucks fared in countering the fallout in overall auto sales.