Earnings This Week: Adobe, Oracle and THG

Corporate earnings calendar: September 11 - 15

The US calendar is quiet this week, with Oracle and Adobe atop the agenda. Outside of earnings, there are some other major events we have included in the calendar as they could be significant. We have Apple launching the new iPhone 15 on Tuesday, while Arm is expected to complete the biggest US IPO since 2021 when it goes public on Thursday.

The UK calendar is busier, with updates due out from housebuilders Vistry and Redrow, Primark-owner AB Foods, engineer Dowlais and ecommerce outfit THG.

Below is a calendar outlining all the key earnings and events to watch next week:

Apple stock: iPhone 15 preview

All eyes are on Apple ahead of the ‘Wonderlust’ event, when it is expected to unveil four new iPhone 15 models – the standard, Plus, Pro and Pro Max – as well as new versions of it Watches and AirPods.

The buildup to the event has been soured as markets fret over reports China is banning government workers from using iPhones at work.

That has triggered fears that Apple’s sales in China, which accounts for 17% to 18% of company’s revenue, will come under pressure if consumers decide it’s easier to switch to a domestic brand. Domestic competitors such as Huawei, which has just unveiled a new flagship phone boasting speedy data transfers and 5G speeds, are eagerly waiting to welcome any customers that abandon the iPhone. 

Bank of America has said the move could see Apple sell 5 million to 10 million fewer iPhones in China each year, while Wedbush is far more bullish and believes it could knock just 500,000 units off annual sales in the country. Based on estimates from the two brokers that it sells around 45 million to 50 million iPhones in China each year, those warnings suggests the ban could knock anywhere between 1% to 20% off its annual volumes in China.

So, the question is whether downside risk has increased ahead of the event, or if the selloff this week has been overblown and offers a dip to take advantage of?

You can read more on what to expect from the event and the implications of the threat stemming from China, as well as our latest technical analysis, in How Will the New iPhone 15 Impact Apple Stock and the Nasdaq 100 Outlook?

Arm IPO: What you need to know

The IPO market has been in a drought in recent years but could be revived when British semiconductor firm Arm completes its listing in the US this week, which is set to be the biggest since Rivian went public back in 2021.

We already know that Arm will price its shares at between $47 to $51 per share, with the exact pricing expected to be decided on Wednesday. That will see it raise up to $4.87 billion and should give it a valuation of about $52 billion! That valuation has dropped from up to $80 billion, and is  far below the $64 billion price tag earned when its current owner Softbank bought the remaining shares in Arm it didn’t already own earlier this year. It is, however, a large premium to the $32 billion spent by Softbank on taking Arm private back in 2016!

Valuation is key. Arm is still aiming for what appears to be a lofty valuation considering it earned just $524 million in net profit in the year to the end of March, when sales fell. A wave of other companies are waiting to go public but will be watching Arm’s listing closely to see if it can not only earn a valuation good enough for investors cashing out but also provide upside potential for IPO investors.

You can find out more about the listing in Everything You Need to Know About the Arm IPO and read more on how its listing could impact the wider market in Can Arm and Instacart Revive the IPO Market?

Adobe stock: Q3 earnings preview

Adobe has been climbing higher this year, having raised its outlook in the previous quarter as demand for its array of software remains strong. It has not been immune to the slowdown in enterprise IT spending but has proven more resilient than some of its peers, and the company is well-placed to benefit from new AI catalysts given the popularity of generative AI for images, text and voice.

Adobe today hit its highest level since January 2022 after Mizuho Securities upgraded the stock to Buy, lifting its target price to $630, after outlining that its fundamentals are improving and rising confidence it can get a boost from AI.

Revenue is forecast to deliver record revenue of $4.86 billion in the third quarter, up 9.8% from the year before. Adjusted operating profit – its headline measure – is expected to rise 13.4% to $2.21 billion and adjusted EPS is seen rising 17% to $3.98.

Oracle stock: Q1 earnings preview

Oracle has seen growth slowdown over the past year or so, but revenue still hit new record highs in the recently-ended financial year and it has also kept improving profitability.

It should be a strong start to the new year. Revenue is forecast to rise 9% from the year before to $12.47 billion, with its cloud services arm continuing to counter subdued demand for hardware. It too is seeing an influx of demand for its cloud services to power generative AI workloads and Oracle is also providing GPU clusters to Wall Street’s favourite stock of 2023 and the posterchild of AI, NVIDIA. Yet, Oracle is yet to experience its own AI moment like NVIDIA considering it continues to trade at a substantial discount to its rivals.

Adjusted EPS is expected to rise 11.8% to $1.15. Growth is expected to remain pretty stable this year compared to what we saw in the last.

Vistry and Redrow: Earnings previews

This has been one of the toughest years for UK housebuilders in what is usually a reliable earner. Higher interest rates have made getting a home all the more expensive and moved the property ladder further away for more first-time buyers. Fewer people are therefore on the move, especially into new builds, and this is causing house prices to fall at their fastest rate since the financial crisis. 

The outlook remains gloomy. Ultimately, the industry is bunkering down by building fewer houses and less land as they wait for the Bank of England to pivot, cut rates and bring mortgage rates down. Markets are hopeful we will see cuts next year, but the lag of monetary policy means it may be some time before we see any tangible improvement on the ground.

Still, we are seeing a divergence in performance. Vistry Group is actually up 24% since the start of the year. That is partly because weekly sales rates in the first half were actually up from last year thanks to its efforts to sell homes in bulk to the likes of housing associations and local authorities. Still, it did build fewer homes in response to more challenging conditions. Revenue is forecast to rise 31% to £1.74 billion and adjusted pretax profit is seen jumping 64% to £311 million – although only a couple of brokers have supplied estimates. Vistry is aiming to deliver annual adjusted pretax profit of £450 million, so watch out for any changes.

Meanwhile, Redrow is trading largely where it was at the start of the year, which isn’t that bad a performance considering how challenging conditions have become in 2023. It is forecast to report a 3.9% drop in annual revenue to £2.05 billion, in line with guidance as a result of lower completions, while adjusted pretax profit is forecast to drop 10.8% to £365.6 million as margins come under some pressure, although inflationary pressures are easing and the impact has so far been mild. Redrow withdrew its guidance for the new financial year amid the dramatic changes in the market, so investors will want to see if they have any better visibility.

THG share price: H1 earnings preview

THG has had a rather wild year in 2023, having proven highly volatile thanks to takeover interest (that failed to materialise) and a strategic review.

The company announced in July that it was exiting loss-making businesses to streamline and reduce costs, which saw it dump THG OnDemand and ProBikeKit. We may hear more news on the review this week.

Revenue is expected to fall 6.4% from last year to £1.00 billion. This will be largely down to its Ingenuity platform and soft demand for beauty, countered by a more resilient performance in nutrition.

Adjusted Ebitda should be up around 51% at £49 million, with its operating loss seen narrowing to £56.2 million from £89.2 million as margins improve. That is also helping it work toward its goal of being free cashflow generative next year. Sticking to that goal and improving margins is critical if it wants to avoid injecting any fresh doubt over its outlook

Notably, THG said its plans to join the premium segment of the Main Market after the rights attached to the special share held by its CEO expired, so keep a lookout for any signs on timing.

AB Foods share price: FY earnings preview

Associated British Foods, best known for owning clothing chain Primark but also boasting an agri-business providing ingredients and commodities like sugar, is poised to report a strong set of annual results this week despite some tough comparatives from the year before.

The company is forecast to deliver a 17.1% rise in annual revenue to £19.90 billion. Primark has gone from strength-to-strength since bouncing back from the pandemic, aided by demand unwavering in the face of higher prices. Investors will want to hear how its international expansion in Europe and the US is going. Its food businesses have also delivered strong growth thanks to price increases – with particular strength from its sugar business that has benefited from strong demand in Africa.

AB Foods upped expectations in the third quarter and said adjusted pretax profit would be “moderately ahead” from the year before, and analysts have pencilled-in a 5.7% rise to £1.43 billion. Keep an eye on news about buybacks, with AB Foods having returned £319 million of its £500 million programme at its last update back in June.

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