Earnings Previews: Palo Alto Networks, VFC
Shortly after Monday’s opening bell, the Dow Jones industrials traded down 0.11%, while the S&P 500 was up 0.23% and the Nasdaq 0.57% higher.
Before U.S. markets opened on Monday, Zim Integrated Shipping reported a miss on both the top and bottom lines. Shipping volume declined by 10.5% year over year, and the average rate for a 20-foot-equivalent unit (TEU) fell by 62.6%. The company’s net loss was $58 million. As a result, Zim is not paying a dividend for the quarter, and that is what really hurts. Shares traded down almost 15% early on Monday.
After U.S. markets close on Monday or before they open on Tuesday, Zoom Video and Lowe’s are set to report quarterly results.
Here is a look at what to expect when these three companies report quarterly results after markets close Tuesday.
Palo Alto Networks
Palo Alto Networks Inc. (NYSE: PANW) is a global supplier of cybersecurity platforms, including both hardware and software, along with subscription security and other professional services. Over the past 12 months, the share price has increased by nearly 30%, thanks to a jump of more than 35% in 2023.
In an interview last Friday, CEO Lee Klarich noted that his company had been using machine learning (ML) technology for a decade and that the company can’t just take [large-language models, like OpenAI’s GPT] “out of the box, slap it on something and say, ‘Here you go.’” In Klarich’s view, generative AI “doesn’t necessarily solve the real hard problems,” like network security.
Analysts remain strongly bullish on the stock, with 38 of 45 brokerages having a Buy or Strong Buy rating. At a recent share price of around $189.00, the stock’s upside potential based on a median price target of $225.00 is 19%. At the high price target of $275.00, the upside potential is 45.5%.
For its third quarter of fiscal 2023, Palo Alto Networks is expected to report revenue of $1.72 billion, which would be up 3.7% sequentially and by 23.7% year over year. Adjusted EPS are forecast at $0.93, down 11.4% sequentially but up 55% year over year. For the full fiscal year ending in July, analysts are looking for EPS of $4.00, up almost 59%, and revenue of $6.89 billion, up 25.2%.
Palo Alto Networks stock trades at 47.1 times expected 2023 EPS, 40.7 times estimated 2024 earnings of $4.64 and 34.8 times estimated 2025 earnings of $5.43 per share. Its 52-week trading range is $132.22 to $203.44, and Palo Alto Networks does not pay a dividend. Total shareholder return for the past 12 months was 29.7%.
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Apparel maker V.F. Corp. (NYSE: VFC) has had a tough year. The owner of brands like North Face, Timberland and Vans has seen its share price fall by nearly 58% over the past 12 months, far worse than the industry’s break-even performance. Shares posted their all-time high in January of 2020, just ahead of the COVID-19 pandemic and the disruption that caused. Since then, the stock is down almost 80%.
While that kind of performance might sink many firms, VFC has the strength to keep paying a handsome dividend. If the company can raise its dividend this year, it will join the ranks of the Dividend Kings, companies that have raised their dividend payments for 50 consecutive years, twice the time required to join the Dividend Aristocrats.
Twelve of 23 analysts rate the stock a Hold, and nine have a Buy or Strong Buy rating. At a share price of around $19.00, the upside potential based on a median price target of $27.00 is about 42%. Based on a high price target of $60.00, the potential upside on the shares is 68.3%.
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Analysts are forecasting fiscal fourth-quarter revenue of $2.73 billion, down 22.8% sequentially and 3.2% lower year over year. Adjusted EPS are tabbed at $0.14, down more than 87% sequentially and down 68.9% year over year. For the 2023 fiscal year that ended in March, analysts anticipate EPS of $2.08, down 34.6%, on sales of $11.6 billion, down 2.1%.
The company’s stock trades at 9.2 times expected 2023 EPS, 8.7 times estimated 2024 earnings of $2.19 and 7.3 times estimated 2025 earnings of $2.62 per share. Its 52-week range is $18.78 to $51.40. The company pays an annual dividend of $1.20 (yield of 6.29%). Total shareholder return for the past year was negative 54.95%.
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