Earnings This Week: Disney, Rivian and Alibaba

Corporate earnings calendar: August 7 - 11

We are past the peak of the US earnings season but there are still plenty of results to keep you busy over the coming seven days. Electric vehicle makers Rivian, Lucid Group and Li Auto will report, alongside ride-hailing app Lyft. House of Mouse Disney, delivery giant UPS, pharma outfit Eli Lilly and gaming platform Roblox also feature.

It is also worth noting that, while not in the calendar, Berkshire Hathaway reports results on Saturday August 5.

In the UK, we have updates scheduled-in from gambling giant Flutter Entertainment, shipping firm Clarksons, holiday provider TUI, hotelier IHG, insurer Hiscox, housebuilder Persimmon, food delivery app Deliveroo and mining giants Antofagasta and Glencore.

Elsewhere, there will be results out from Chinese behemoth Alibaba, Japan’s Softbank and Germany’s Deutsche Telekom.

Alibaba stock: Q1 earnings preview

This will be a big year for Chinese giant Alibaba as it begins to break itself up into six different business units in the hope of unlocking value following a tough few years plagued by headwinds, including but not limited to pandemic disruption and regulatory pressure, that have severely knocked its valuation. This will ultimately see Alibaba spin-off business units covering retail, cloud computing, ecommerce, local services and food delivery in China, logistics, and digital media and entertainment. That will leave Alibaba with its core Taobao and Tmall ecommerce platforms and stakes in the businesses it spins-off and lists. We are likely to see the first spin-offs this financial year, although it could take years to complete them all.

Plus, although growth stalled in the last financial year and took some of the shine off Alibaba’s investment case, analysts believe we will see an acceleration this year as the Chinese economy livens up, having delivered a disappointing rebound since reopening and abandoning its Covid-19 restrictions. The easier comparatives will also help. Revenue is forecast to rise 8.6% year-on-year to RMB223,241 million in the first quarter and adjusted EPS per ADS is seen rising 20% to RMB14.09 – with its core ecommerce operation in China forecast to return to sales growth for the first time in over a year! We could also hear more about AI, having recently launched new large-language models, according to media reports.

Disney stock: Q3 earnings preview

Disney shares are currently in the doldrums, lingering not far above 2023-lows. In fact, it wouldn’t take a lot for the stock to flirt with the lows we saw when markets tumbled at the start of the pandemic and hit its lowest level since 2014! The stock has fallen out of favour because growth has been slowing down and earnings have been declining over the past year as the boom in demand in 2021 and 2022 unwinds. Overall revenue is forecast to rise 4.7% from last year to $22.5 billion and adjusted EPS is seen declining 7.9% to $1.00. That would be the slowest topline growth delivered in over two years, and a fourth consecutive quarter of lower earnings.

This backdrop has forced Disney to make a big push to turn its streaming operations profitable, which has been made all the more difficult when you consider Disney+ has been losing subscribers in recent months. Disney+ is forecast to lose another 3.2 million subs in the third quarter and end the period with 155.1 million, although ESPN+ and Hulu are still growing. Its Direct-to-Consumer division that homes its streaming activities is forecast to report an operating loss of $777.3 million in the third quarter and Wall Street doesn’t believe it will escape the red for over a year!

Meanwhile, its theme parks and resorts is expected to see sales come in flat in the third quarter, although Disney’s pricing power means profits should keep climbing and counter the losses it is seeing in streaming.

CEO Bob Iger has agreed to stay on for another two years, during which he will need to find a successor. Notably, reports suggest he has recently brought back two former executives as advisers, with the primary task to help sort out its TV networks and ESPN+. We could see Disney offload its TV channels if it can find a buyer willing to pay the right price, and it has said it wants a partner to help drive ESPN+ forward. That means M&A could be a theme this week.

UPS stock: Q2 earnings preview

UPS has been under the spotlight in recent weeks because strike action threatens to severely disrupt its business and push up costs. The Teamsters union, which represents about 330,000 UPS workers, reached a deal offering better pay and conditions late last month and members are now voting on whether to accept it. We won’t know the result until later in August and this will linger over the company during its results.

A deal signed-off by union members would be welcome, but this will add to cost pressures that are already hitting its bottom-line. Revenue is forecast to 7.1% lower than last year at $22.99 billion and adjusted EPS is forecast to decline 24% to $2.50. That would mark the third consecutive quarterly sales drop and the second successive period of lower earnings and markets don’t see it returning to growth until 2024. We may see UPS take action to offset the cost increases. The hope is that the second quarter marks the trough and that things will improve before a proper recovery starts to take shape next year.

Rivian stock: Q2 earnings preview

We already know that Rivian produced 13,992 vehicles in the second quarter and delivered 12,640 of them to customers. Rivian is aiming to ramp-up output this year in order to produce 50,000 vehicles in 2023, over double what we saw last year, and maintaining this guidance is vital to prevent spooking investors. The other metric most closely watched is costs as investors gauge how things are improving as it scales-up production, especially as Rivian is still burning through considerable sums.

Rivian has said it could book annual Ebitda losses of $4.3 billion in 2023 and will continue to burn through north of $1 billion in the second quarter. It is expected to burn through over $4 billion in 2023, which can be more than covered by its $12 billion cash balance. However, Wall Street thinks it won’t be generating cash until as late as 2028!

Wall Street is expecting quarterly revenue to hit $1.00 billion for the first time. The adjusted Ebitda loss is seen coming in at $1.1 billion and its net loss at $1.47 billion.

Lucid stock: Q2 earnings preview

Lucid Group produced 2,173 vehicles in the second quarter and delivered 1,404 of them to customers. Lucid Group is further behind in the race as it is seeking to produce just 10,000 vehicles in 2023, marking a mild lift from the 7,200 sold in 2022 when it started production.

Notably, Lucid has been producing more vehicles than it has sold for six consecutive quarters and that build up of inventory may start to become more of a concern, especially as competition (especially on price) is fierce right now. It has to keep ramping-up output if it wants to bring down costs and minimise cash burn, but that will become hard to justify if demand falters. Lucid is a pricier brand than rivals and that may be a hindrance in the current environment with cheaper options available. Quarterly revenue is forecast to come in at $176.6 million and its adjusted Ebitda loss is forecast to come in at $596 million.

Lucid Group had around $3.4 billion in cash at the end of the first quarter and has said it thinks this can fund the company through to until ‘at least’ the second quarter of 2024, suggesting a potential fundraising of some type will start to be talked about later this year or in early 2024.

Lyft stock: Q2 earnings preview

Lyft has underperformed this year. The ride-hailing service has seen its margin crunched as it has been forced to lower prices in order to compete against larger rivals, and yet it is still losing ground. Top dog Uber reported a landmark profit just this week and said its ride-hailing service saw a 38% jump in revenue in the latest quarter. Meanwhile, Lyft is expected to report a sales rise of just 2.9% - the slowest growth in over two years - to $1.02 billion. Adjusted Ebitda is expected to fall 64% from last year to $28.3 million.

That challenging backdrop comes at a time when the top brass have been shuffled, leaving Lyft in an uncertain position. This will be the first set of results since new chief financial officer Erin Brewer came onboard, soon after its two co-founders relinquished their roles as CEO and president and reverted to non-executive positions. With this in mind, some analysts have said they believe Lyft could explore strategic options.

Flutter share price: H1 earnings preview

Flutter Entertainment, which owns an array of gambling and sports betting brands on both sides of the Atlantic including Paddy Power, Betfair, Sky Betting, Tombola and FanDuel, is increasingly pivoting toward the US, where a deregulation of gambling markets is creating big opportunities. The US is driving growth. For example, US revenue was up 92% in the first quarter while the rest of the business rose just 8%, and that trend will have continued in the second. This is what is prompting Flutter to complete an additional listing in the US later this year, although it plans to keep its primary listing in London.

Analysts believe Flutter Entertainment will report a 36.8% year-on-year rise in revenue in the first half to £4.63 billion and a 59% rise in adjusted Ebitda to £759.3 million. It is expected to report a £98.9 million profit after tax, having booked a £112.2 million loss the year before. The growth profile remains strong as it continues to enter new US markets and begins reaping profits from the ones established early on.

M&A is a key theme across the gambling industries and room for a big expansion is encouraging larger players to buy smaller rivals. It is worth noting that rival Entain also reports results this week, having recently agreed to buy Polish firm STS.

TUI share price: Q3 earnings preview

Demand for travel has remain buoyant as holidaymakers make up for the time lost during the pandemic and TUI has seen strong momentum in bookings for the summer, despite a big hike in prices. TUI is already carrying more passengers today than it was before the pandemic, and the priority now is to sort out the bottom-line.

Quarterly revenue is forecast to rise 12% to EUR4.96 billion and underlying Ebit – its headline measure – is seen coming in at EUR149 million. Although this wouldn’t be the first positive Ebit since the pandemic, it is expected to mark a turning point as markets believe it can now remain profitable going forward as the summer travel season takes off. That provides some hope, reinforced by the capital raise earlier this year that shored-up its balance sheet. Positive updates from rivals provides scope for TUI to raise its outlook this week.

IHG share price: H1 earnings preview

Another travel stock to watch is hotelier IHG, which will be reporting its first set of results since its new CEO Eli Maalouf came aboard at the end of June. She was leading the Americas business before taking the top job, replacing long-time boss Keith Barr who decided to return to the US.

Revenue is predicted to rise 22% from the year before to $1.03 billion and adjusted EPS is seen rising 34% to 163 cents. Reported operating profit is expected to jump 24% to $468.3 million. That will be driven by improved capacity levels and higher prices. The strongest growth is likely to come from the Americas, EMEAA and China, and the recovery in business travel should also help.

Notably, comparatives are harder in the second half compared to the first and the outlook remains clouded by an uncertain economic picture, but the travel industry has proven resilient. A slowdown in the US could be a worry.

Persimmon share price: H1 earnings preview

The housing market remains challenging as higher interest rates, having just been hiked for the 14^th successive time and hit a 15-year high, continues to put the property ladder out of reach of more people. Persimmon said earlier this year that it was encouraged by a normalisation in cancellation rates and a rebound in enquiries, but the biggest problem is that demand from first-time buyers has faltered as they wait for rates to peak. Persimmon is more exposed to first-time buyers than some of its rivals, and this may cause it problems that competitors can mitigate. Persimmon has warned that a deterioration in conditions would lead to it failing to hit the top end of its goal to build 8,000 to 9,000 homes this year, which would already mark a steep decline from what we saw in 2022. Inflationary pressures are also not helping considering build costs are rising at a faster pace than house prices, which are now starting to fall.

Persimmon is forecast to report a sharp 34% drop in revenue in the first half to £1.11 billion, prompted by the sharp pullback in building work. Average selling prices are seen coming in flat now that they have peaked, but investors should anticipate falls in the second half. Lower volumes, flat prices and higher costs is expected to see pretax profit more than halve from last year to £219 million. The long-term investment case remains intact, but the short-term outlook is troubled for the entire industry and Persimmon could find itself having a harder time than others until mortgage rates start to come down.

Deliveroo share price: H1 earnings preview

Deliveroo has lost users in 2023 as the boom in demand seen since the start of the pandemic continues to unwind, and those that are still using it are ordering less now that they can eat out again. Growth has been slowing for some time but this would mark the first time that Deliveroo reports declines, which has the potential to spook investors. Its international segment is already in decline, but its performance in the UK has been more resilient.

Revenue is forecast to be up just 1.8% in the first half to £1.03 billion. Adjusted Ebitda – its headline metric – is expected to come in at £18.1 million after turning positive last year. It is expected to report a pretax loss of £45.7 million, which would be narrower than the £147 million loss seen the year before.

Deliveroo is aiming to deliver a low-to-mid-single-digit increase in gross transaction value and adjusted Ebitda of £20 million to £50 million over the full year, and said its earnings will be weighted to the second half. The economic landscape remains potentially troublesome as any downturn could see food delivery among the first to be axed by consumers, although Deliveroo has shown commitment to its promise to focus on profitable and cash-generative growth.