Earnings This Week: GameStop, C3.ai and UK housebuilders

Corporate earnings calendar: September 4 - 8

It is fairly quiet in the US this week, partly thanks to the bank holiday on Monday. We will have updates out grocer Kroger, cybersecurity play Zscaler, software firms Sprinklr and UiPath, as well as meme stock GameStop and AI-favourite C3.ai.

In the UK, the industry to keep an eye on is housing. We have updates out from Barratt Developments, Berkeley Group and Cairn Homes and investors are bracing for bad news as UK home prices continue to slide. There are also results out from cybersecurity firm Darktrace, insurer Direct Line and gambling software maker Playtech.

Ashtead, a UK company now listed in the US, will grab attention on both sides of the Atlantic.

Below is a full calendar outlining all the key earnings we are watching next week:

GameStop stock: Q2 earnings preview

GameStop is still facing a big task. It needs to escape the red, but that is all the more difficult when you aren’t growing.

Sales are forecast to be up just 0.3% in the second quarter at $1.139 billion. Demand for hardware remains the main problem. Many gamers upgraded to the latest consoles whilst stuck at home during the pandemic and the entire industry is increasingly shifting to a digital world less reliant on consoles. Sales of collectibles are also set to fall for the second consecutive quarter. The bright spot is software as demand for games remains more resilient.

GameStop may still be loss-making but it is on the right path. Its net loss is predicted to come in at $49.4 million, which would be less than half the loss we saw last year. That is down to a sharper focus on costs and much lower spending. GameStop is currently spending less than $10 million in capex each quarter, but is still burning through cash and eating into its cash position, which stood at $1.3 billion at the end of April.

GameStop shares have underperformed this year, but the stock has just celebrated its best weekly performance after six consecutive weeks of declines.

C3.ai stock: Q1 earnings preview

C3.ai shares suffered in August amid a broader selloff that involved AI stocks facing their first reality check since exploding in value amid the hype around the technology this year. The stock is trading almost three times as high as it was at the start of 2023 but is down about 33% from the peaks we saw back in June.

The bar has therefore come down since the start of August as valuations and AI excitement have tempered, but it is still high ahead of the results. The company has stirred plenty of excitement about its prospects, but pressure is building on it to start delivering. Revenue is forecast to rise 9.6% in the first quarter of its new financial year to $71.6 million – which is a relatively underwhelming number for a company that is supposed to be a small but fast-growing company operating in the hottest space on Wall Street. Sales were up just 0.1% in the last quarter! Investors will expect topline growth to start accelerating from this very low base going forward.

C3.ai delivered a rare quarter of positive free cashflow in the previous quarter, but it is set to burn through almost $32 million this quarter. Its adjusted loss per share is expected to come in at $0.17, which would widen from the $0.12 loss seen the year before.

Ashtead stock: Q1 earnings preview

This is a big financial year for rental giant Ashtead, which is embarking on its final year of its ‘Sunbelt 3.0’ long-term plan. Its expansion in North America continues to power ahead both with new greenfield sites and by buying-up small chains, allowing it to capitalise on resilient demand for equipment.

Ashtead is expected to report a 17% year-on-year rise in revenue in the first quarter to $2.64 billion, with rental revenue – which accounts for the bulk – seen rising 16%. It has seen a significant uptick in rental demand as consumers and businesses invest less in their own plant. Canada is leading growth, while the UK continues to become a less and less important part of the business but continues to grow nonetheless.

Adjusted pretax profit is forecast to increase 9.8% to $609.5 million, with adjusted EPS seen rising 11.4% to $1.05.

UK housebuilder stocks: Earnings previews

We have updates out from Barratt Developments, Berkeley Group and Cairn Homes this week.

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. Meanwhile, inflationary pressures continue to push up costs.

The industry is not optimistic that we will see much of an improvement in 2023. Ultimately, they need the Bank of England to pivot and for interest rates to start falling before mortgages become more affordable. We expect them to have seen conditions deteriorate further in recent months and issue an equally bleak outlook for the rest of 2023.

Barratt Developments has already revealed that it built fewer houses in the year to the end of June 2023, but revenue should still edge slightly higher to £5.3 billion. Adjusted pretax profit is forecast to fall to £881.3 million from £1.05 billion the year before.

Berkeley Group will be delivering a trading update rather than results. The company has said it remains confident of meeting its goals over this year and next despite the uncertain and volatile environment. It has said it will match supply to demand. The main thing to look out for is any change in guidance.

Smaller housebuilder Cairn Homes has already said it made around EUR215 million in revenue in the first half. It has had a better time versus larger rivals because demand for its houses has remained exceptionally strong in the current environment, with its sales pipeline still growing and prices holding steady. It has already reiterated its full year outlook and said it will pay an interim dividend of 3.1 euro cents and launched a EUR40 million buyback – so room for surprises is limited.

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