Top US stocks: Applied Materials, Robinhood and Macy’s

Applied Materials reports later today, Robinhood’s outlook disappoints, Macy’s and Kohl’s raise their guidance, NVIDIA delivers record results, Cisco misses expectations, Estee Lauder is confident it can keep up the momentum, and is Amazon about to open its own big-box stores?

USA (1)

Applied Materials

Applied Materials is scheduled to release third quarter earnings after the markets close today, with Wall Street forecasting strong growth as demand from semiconductor firms continues to rise.

Net sales are expected to rise to $5.93 billion from $4.39 billion the year before, at the midpoint of the company’s guidance range. Net income is expected to grow to $1.59 billion from $841 million, with adjusted diluted EPS to increase to $1.77 from $1.06.

Applied Materials, known for selling fabrication equipment and services as well as software to chip makers like TSMC and Samsung, has been experiencing strong growth this year and said it expects to outperform the wider market. The stock has risen over 93% over the past 12 months as investors seek greater exposure to the semiconductor market. Brokers currently see over 26% potential upside to the current share price.

Robinhood

Robinhood shares are expected to come under pressure today after warning that trading activity will stall further in the third quarter after posting slower growth in user numbers during the second.

Net revenue jumped 131% to $565 million in the second quarter and it turned to a net loss of $502 million from a $57.6 million profit. That was better than the $521.8 million and $514.1 million loss expected by Wall Street. It said interest among its customers in cryptos had reached record highs and that its ability to offer investors access to IPOs was proving popular.

However, it only added 3.6 million users in the quarter compared to 6 million in the previous quarter. It also warned the third quarter will see activity fall due to ‘seasonal headwinds and lower trading activity’, which will see lower revenue and fewer new funded accounts. 

It tried to address concerns around payment-for-order-flow, which drives the majority of revenue, by stating that it does not believe it will be banned in the US but admitted it would be ‘a terribly difficult revenue stream to replace’. The chairman of the SEC, Gary Gensler, has said he is looking closely at PFOF and there are proposals on the table that could possibly lead to an outright ban in the US – like it already is in the likes of the UK and Canada.

Macy’s

Macy’s shares are in focus today after the department store delivered faster sales growth in the second quarter than expected, raised its guidance for the full year and reinstated its dividend.

Net sales rose to $5.64 billion from $3.55 billion the year before, with comparable sales jumping 61.2% as shoppers flocked back to stores. That was well ahead of the 41.1% rise that analysts had expected. Adjusted diluted EPS came in at $1.29, turning from an $0.81 loss last year.

Macy’s said it is now expecting net sales of $23.55 to $23.95 billion in 2021 and adjusted diluted EPS of $3.41 to $3.75 over the full year. That was upgraded from its previous target for revenue of $21.73 to $22.23 billion and EPS of $1.71 to $2.12. That would be an improvement from 2020 when earnings were hard hit during lockdown, but still below pre-pandemic levels.

Kohl’s

Fellow retailer Kohl’s also hiked its full year guidance after beating expectations in the latest quarter as people eagerly returned to stores as restrictions eased.

The retailer said revenue rose 30.5% in the second quarter to $4.44 billion, marking a slowdown from the first but still ahead of the $4.02 billion forecast by analysts. It said it delivered record diluted EPS of $2.48 compared to just $0.30 the year before when the pandemic weighed on its performance.

The company said it is now anticipating net sales will grow by a percentage in the low 20s and annual EPS will be between $5.80 to $6.10. It was previously targeting mid-to-high teens topline growth and EPS between $3.80 to $4.20. It said the accelerated performance means many of the goals it intended to achieve by 2023 will be delivered by the end of this year.

NVIDIA

NVIDIA released another set of record results after the markets closed yesterday, smashing past expectations and prompting upgrades from a number of brokers as demand for its chips in gaming consoles and data centres continues to gain momentum.

Revenue rose 68% to hit a new record of $6.51 billion and GAAP net income rose 24% to $2.37 billion, beating the $6.33 billion in revenue and $2.09 billion in earnings expected by Wall Street. The earnings were also significantly better than the record-breaking first quarter of 2021. It said it is expecting third quarter revenue of $6.8 billion, which was also ahead of the $6.53 billion expected by the markets.

However, that was overshadowed by doubt over its proposed $40 billion takeover of UK company Arm, as it warned talks with regulators were taking longer than expected and could go beyond its 18-month timeframe and that some Arm licensees have expressed concerns or objected to the deal. It said it still confident that the deal will be approved and that regulators will ‘recognise the benefits of the acquisition to Arm’.

Cisco

Cisco said order growth reached its highest level in over a decade during the final quarter of its financial year and that it delivered record operating cashflow, although just missed analyst expectations.

Revenue rose 8% in the fourth quarter to $13.1 billion, coming in at the top end of its target range, while GAAP EPS rose 15% to $0.71. The topline was slightly better than expected while earnings just missed the $0.72 forecast by analysts. That meant full year revenue edged up 1% year-on-year to $49.8 billion and EPS fell 5% to $2.50, also coming in just below Wall Street expectations.

Cisco said it expects to deliver 5% to 7% revenue growth in the new financial year and GAAP EPS of $2.72 to $2.84. For the first quarter it is targeting 7.5% to 9.5% revenue growth and EPS of $0.61.

Estee Lauder

Estee Lauder smashed expectations and its own guidance in its recently-ended financial year after making a strong finish as demand for beauty products and perfumes rebounds as restrictions are eased and the economy reopens.

Revenue rose 13% to $16.22 billion in its recently-ended financial year and EPS jumped to $7.79 from just $1.86 last year. That was well ahead of the company’s own guidance and better than the $16.04 billion and $5.58 in EPS forecast by Wall Street.

Estee Lauder said it expects the strong recovery in demand to continue in the new financial year. It said net sales are to be up 17% to 19% in the first quarter and EPS should be between $1.49 to $1.61. Makeup and haircare is expected to bounce back as restrictions ease and people head outside more, while the reopening of physical stores will also help overall sales. The restart in travel will also be beneficial.

Tapestry

Tapestry said sales and earnings both surpassed pre-pandemic levels in the final quarter of its financial year and said it expects to keep up the momentum over the next 12 months.

The owner of brands including Coach, Kate Spade and Stuart Weitzman said revenue more than doubled in the fourth quarter to $1.62 billion from $714.8 million the year before, with GAAP EPS of $0.69 turning from a $1.06 loss the year before. Analysts had expected revenue of $1.56 billion. For the full year, net sales rose 16% to $5.75 billion and EPS of $2.95 turned from a $2.34 loss.

The company said it is aiming to deliver revenue of $6.4 billion in the current financial year and EPS of $3.30 to $3.35. Tapestry said its conviction that it has further room to grow is underpinned by its plans to return over $750 million to shareholders in the new financial year.

Goldman Sachs

Goldman Sachs has agreed to buy Dutch insurance firm NN Group for EUR1.7 billion in cash as it aims to expand overseas and broaden its asset management platform.

NN Group is the biggest insurance company in the Netherlands and operates in 18 countries with a strong presence in Europe and Japan, providing retirement services, pensions, insurance, banking and investment services to around 18 million customers. This will help Goldman Sachs wean itself off earning money from providing advice on deals and from trading activity. The deal should be completed in the first quarter 2022.

‘This acquisition allows us to accelerate our growth strategy and broaden our asset management platform. NN Investment Partners offers a leading European client franchise and an extension of our strength in insurance asset management,’ said David Solomon, chairman and CEO of Goldman Sachs.

Amazon

Amazon is planning to open a number of large physical retail stores in the US that will operate like department stores, according to reports in the Wall Street Journal.

Ohio and California have been flagged as possible places for initial sites, which are expected to be around 30,000 square feet in size and offer products from a variety of well-known brands. Amazon has become known for its digitally-led business model but is reported to be keen to capitalise on the number of people flocking back to stores and has demonstrated appetite to open physical outlets in sectors such as pharmacies and groceries. It also runs pop-up shops across the country.

The news could prove a threat to existing big-box retailers like Walmart, Target, Home Depot and Lowe’s – all of which have posted strong growth as restrictions eased and people headed out to shop once again.

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