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What to look for when Lowe’s Companies reports Q2 earnings

Lowe’s Companies (NYSE: LOW) is scheduled to report its earnings results for the second quarter on Wednesday before the market opens. The results will be hurt by the convergence of cost pressure, a significant transition in merchandising organization, and ineffective legacy pricing tools and processes.

The company’s products revenue will be benefited by the in-store and online merchandise purchases, while services revenue will be driven by the professional installation services made through subcontractors. The majority of revenue for goods and services will be recognized in the quarter following revenue deferral.

The company’s future success depends on its ability to adapt the business concept to respond to customers’ changing shopping habits and demands as the home improvement retail environment is rapidly evolving. The results will be impacted by the failure to identify changing trends, business concept adaptation, implement change, growth and productivity initiatives.

What to look for when Lowe's Companies reports Q2 earnings
Photo Courtesy: Lowe’s Companies

The company has relied on the public debt markets to fund portions of its capital investments and the commercial paper market and bank credit facilities to fund its working capital needs. The company’s credit strength depends on liquidity and access to capital that relies on efficient, rational and open capital markets.

Analysts expect the company’s earnings to fall by 3.40% to $2.00 per share while revenue will rise by 0.30% to $20.96 billion for the second quarter. In comparison, during the previous year quarter, Lowe’s posted a profit of $2.07 per share on revenue of $20.89 billion. The company has surprised investors by beating analysts’ expectations thrice in the past four quarters.

Read: Analog Devices Q3 earnings preview

For the first quarter, Lowe’s reported a 2% increase in earnings helped by a tax benefit arising from its sale of the assets of Mexico retail operations. Total sales rose by 2.2% and comparable sales grew by 3.5%. Comparable sales for the US home improvement business increased by 4.2%.

For fiscal 2019, the company expects total sales growth of about 2% and comparable sales to increase by about 3%. The earnings are predicted to be in the range of $5.54 to $5.74 per share and adjusted earnings are anticipated to be in the range of $5.45 to $5.65 per share.

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iQiyi stock plunges after reporting Q2 results

Chinese streaming platform iQiyi (NASDAQ: IQ), a video streaming unit of Baidu (NASDAQ: BIDU), reported second quarter 2019 results after the market closed today. For the second quarter, iQiyi’s revenue surged 15% to RMB 7.1 billion (US$1.0 billion) backed by a 50% jump in subscriber base. Loss per share came in at RMB 3.22 ($0.49). iQiyi stock was trading down more than 10% immediately after the company’s earnings announcement.

iQiyi (IQ) stock plunges after reporting Q2 2019 earnings resultsNet loss attributable to iQiyi widened to RMB 2.3 billion (US$339.0 million) from a net loss of RMB 2.1 billion in the second quarter of 2018.

Membership services revenue jumped 38% to RMB 3.4 billion (US$497.1 million). Content distribution revenue declined 4% to RMB 517.9 million (US$75.4 million) due to the delay of certain content launches during the quarter.

Online advertising services revenue decreased 16% year-over-year to RMB 2.2 billion (US$320.6 million), hurt by the challenging macroeconomic environment in China, the delay of certain content launches and slower-than-expected recovery of in-feed advertising.

Read: Netflix stock plunges on big miss in paid subscriber additions in Q2

At the end of the second quarter, iQiyi had 100.5 million subscribers, of which 98.9% were paid members.

iQiyi versus Netflix subscribers trend

For the third quarter of 2019, iQiyi expects revenue to be between RMB 7.21 billion (US$1.03 billion) and RMB 7.63 billion (US$1.09 billion), representing a 4% to 10% growth from the third quarter of 2018.

“We achieved continued revenue growth in the second quarter despite some recent challenges facing our industry. Our membership business generated solid growth with subscription revenues increasing 38% year-over-year, driven by our strong content slate during the quarter,” said CFO Xiaodong Wang.

iQiyi’s parent Baidu also reported its second quarter results earlier today. Baidu stock rose about 9% in the extended trading hours as it posted better-than-expected results for the recently ended quarter.

Shares of iQiyi have gained 22% so far this year, while they have lost 31% in the trailing 12 months.

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