It's set to be another busy week for the corporate earnings calendar, with chipmaker Advanced Micro Devices (AMD, $92.88), fintech firm Block (SQ, $74.00) and online sports betting company DraftKings (DKNG, $13.22) among the notable names reporting.
The second-quarter earnings season is proving to be "particularly important," says Argus Research analyst Jim Kelleher. This is because the April-through-July time frame "included highly dynamic conditions for inflation, interest rates, the war in Europe and resurgent COVID." And if companies are able to grow or maintain earnings in the face of these headwinds, it's likely that strong growth will resume once they subside.
Through July 22, the blended earnings per share (EPS) growth rate for S&P 500 companies, which includes those that have reported and consensus estimates for those that have yet to report, is 4.8%, according to John Butters, senior earnings analyst at FactSet. This will mark the lowest earnings growth rate since the fourth quarter of 2020 (4.0%) if it holds, but it is still higher than the 4% increase in EPS expected at the end of June.
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AMD is Well-Positioned for Growth, Says Analyst
Advanced Micro Devices is one name expected to deliver impressive year-over-year growth on both the top and bottom lines when it unveils its second-quarter earnings report after the Aug. 2 close. Analysts, on average, are anticipating EPS of $1.03 for the semiconductor stock, up 63.5% year-over-year (YoY). And revenue is expected soar 69.6% to $6.5 billion.
"We continue to see AMD as well-positioned to gain share in servers and also PCs," says Wedbush analyst Matt Bryson (Outperform, the equivalent of Buy). As for the former, Bryson says Advanced Micro Devices currently offers a superior product that will continue to outperform Intel (INTC). And the latter offers competitive advantages to other devices in the notebook market, he adds.
Analyst: Block "Undervalued" Ahead of Q2 Earnings
BofA Global Research analyst Jason Kupferberg says Block shares are "undervalued" heading into the company's second-quarter earnings report, set to be released after Thursday's close. This, he says, is because the quality of SQ's business model continues to be high, but sentiment – mostly due to selloff in Bitcoin – is too negative.
Indeed, SQ stock is down roughly 54% for the year-to-date amid a similar slide in Bitcoin. But, Kupferberg says it's the company's Cash App business that remains the most important driver of Block's share price. For Q2, the analyst sees gross profit for the money transfer app to be 20% higher year-over-year and up 84% compared to Q2 2019.
Overall, consensus estimates for Block's second quarter are for earnings of 17 cents per share (-74.2% YoY) and revenue of $4.4 billion (-6.4% YoY).
DraftKings' Loss Expected to Widen in Q2
DraftKings will round out the week's earnings calendar when it unveils its second-quarter results ahead of Friday's open. Analysts, on average, are targeting a per-share loss of 83 cents (-9.2% YoY) and revenue of $435.1 million (+46.2 YoY).
Truist Securities analyst Barry Jonas (Hold) things Q2 numbers for gaming stocks "should be fine," but the outlook seems less certain. However, DraftKings is on the path to profitability sometime next year, he adds, though investors seem impatient given the negative sentiment surrounding the stock (DKNG is down nearly 52% for the year-to-date).
BofA Global Research analyst Shaun Kelley is also on the sidelines on DKGN, as evidenced by his Neutral (Hold) rating. When DraftKings reports earnings, Kelley's focus will be on three things: Costs – namely fixed and labor, given the broader macro environment; the core online sports betting product offering given FanDuel's strong hold/share; and the potential impact of trends from the Ontario market. The analyst will also be looking for updates on California's measure to legalize online gambling, which is on the state's ballot in November.
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