Thursday, January 26, 2023

The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features a real-time update on the ongoing Q4 earnings season and new research reports on 16 major stocks, including Duke Energy Corporation (DUK), Lululemon Athletica Inc. (LULU) and Cenovus Energy Inc. (CVE). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.

You can see all of today’s research reports here >>>

Q4 Earnings Season Scorecard

Including all the earnings reports that came out before the market's open Thursday, January 26th, we now have Q4 results from 127 S&P 500 members or 25.4% of the index's total membership. Total earnings for these 127 index members are down -3% from the same period last year on +7.6% highre revenues, with 73.2% beating EPS estimates and 70.1% beating revenue estimates.

The earnings and revenue growth pace for these 127 index members represent a deceleration from what we had seen from this group in the first three quarters of 2022.

With respect to the beats percentages, there is a clear divergence between EPS and revenue beats.

The Q4 EPS beats percentage of 73.2% compares to 20-quarter average of 79.9% for this for this group of companies, with the range over the period of 89.9% at the high end and 66.9% and the low end. The Q4 revenue beats percentage of 70.1% compares to the 20-quarter average of 69.5%, with the high-low range over the period of 82.7% and 59.1%, respectively. 

Estimates for the current period (2023 Q1) have been coming down lately, though the pace and magnitude of estimate cuts are not unusual.

The expectation currently is that S&P 500 earnings in Q1 would decline by -5.1% from the same period last year on +2.8% higher revenues. The -5.1% earnings decline in 2023 Q1 represents a drop from -4% on January 6th and -2.9% in mid-December 2022.

For more details about the Q4 earnings season and the evolving corporate earnings picture, please check out our weekly Earnings Trends report >>>>Digging Into the Early Q4 Earnings Season Scorecard

Today's Featured Analyst Reports

Shares of Duke Energy have modestly underperformed the Zacks Utility - Electric Power industry over the past year (-0.5% vs. +1.0%), but they have handily outperformed the S&P 500 index (-0.5% vs. -9.1%).

Duke Energy is a premier utility service provider, which remains focused on expanding its scale of operations and implementing modern technologies at its facilities by investing heavily in infrastructure and expansion projects.

During the 2022-2026 period, the company plans capital investments of $63 billion and $130 billion. It has lowered its carbon emissions by 44% since 2005. It expects project load growth to surge by 1.5%-2% in 2022.

(You can read the full research report on Duke Energy here >>>)

Lululemon Athletica shares have outperformed the Zacks Textile - Apparel industry over the past year (+2.2% vs. -15.2%). The company reported 10th straight quarter of earnings surprise in third-quarter fiscal 2022, while sales beat estimates for the third straight quarter. The top and bottom-line also grew year over year on continued business momentum. Results also outpaced our estimate in the quarter.

Lululemon Athletica’s growth was aided by robust traffic trends in both stores and e-commerce. On a three-year CAGR basis, traffic was up 9% in stores and more than 41% in e-commerce. The company is capitalizing on the importance of physical retail and the convenience of online engagement.

However, management’s commentary on elevated inventory levels at the end of the quarter hurt sentiment. lululemon continues to grapple with soft gross margin owing to elevated costs.

(You can read the full research report on Lululemon Athletica here >>>)

Cenovus Energy shares have outperformed the Zacks Oil and Gas - Integrated - Canadian industry over the past year (+32.0% vs. +24.4%). The company has operations in the prospective oil-sand development in Alberta, wherein it has been employing a specialized technique for drilling and extracting oil. From 2020 to 2024, the company expects to see compound annual production growth of 2-3%.

On top of that, disciplined capital investment and production growth will enhance its funds. For 2022, Cenovus expects total upstream production of 780,000-810,000 Boe/d, the midpoint of which suggests an improvement from last year’s reported figure. Coupled with higher oil price, increased production will boost its bottom line.

However, the company’s balance sheet has more debt exposure than the industry. Also, Cenovus discontinued its practice of crude price hedging as it realized steep losses on its existing risk management program. As such, the stock warrants a cautious stance.

(You can read the full research report on Cenovus Energy here >>>)

Other noteworthy reports we are featuring today include Imperial Oil Limited (IMO), Rollins, Inc. (ROL) and NVR, Inc. (NVR).

Director of Research

Sheraz Mian

Note: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here>>>