01 July 2016 at 14:30 GMT
- Next week sees Samsung, PepsiCo earnings in focus
- Samsung poised to outperform on smartphone saturation
- PepsiCo shares appear expensive considering sentiment
We expect Samsung shares to outperform following
next week's earnings release. Photo: iStock
By Peter Garnry
Another off-earnings season week is starting Monday, but the coming week will nevertheless be big on releases. Samsung reports its Q2 figures on Wednesday with analysts expecting EPS at 37,309, down 13.7% from same period last year despite revenue expected to be up 4.9%.
Source: Saxo Bank, Bloomberg
Samsung shares listed in London are up 20% year-to-date and have lately accelerated on news that the mobile segment (46% of revenue in FY15) will beat estimates driven by strong sales of the new S7 Galaxy.
Channel checks in Asia seem to indicate that demand has overwhelmed Samsung and production is behind current demand while the opposite has been the case for Apple due to their much higher price point.
We believe the current estimated revenue growth in FY16 of 2.4% y/y is way too pessimistic and that Samsung will widely beat this negative sentiment as the smartphone market has entered its saturation phase with more focus on price than premium features.
Samsung weekly chart since 2011:
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Source: Saxo Bank
Another interesting company reporting earnings next is PepsiCo as it will give a good insight into consumer demand in selected emerging market countries such as Mexico, Russia and Brazil.
Revenue growth went negative (minus 5.4%) in FY15 driven by the weaker USD, but the trend was already underway. PepsiCo is suffering from the same health trend as Coca-Cola and in our opinion, investors are overpaying for PepsiCo’s stock at 22.5x forward EPS.
PepsiCo weekly chart since 2011:
Source: Saxo Bank
The full table with information on next week’s earnings releases can be found in the attached PDF.
— Edited by Michael McKenna