No rest for the weary. Results season is here! Walgreens released results last week and a few more came out ahead of Friday morning’s big bank reports.
A small stock of basic consumption flies under the radar, but the stock could be on the move after its Monday night report. Are PriceSmart stocks a buy here or should you just window shop? Let’s look at this.
Wall Street Horizon Earnings Timing and Cadence
According to CFRA Research, PriceSmart (NASDAQ: PMMT) owns and operates American-style warehouse clubs in the United States, Central America, the Caribbean and Colombia. Its warehouse clubs sell locally and regionally sourced produce, staples, farm-fresh produce, private label consumer goods, prepared foods and fresh baked goods under the Member’s Selection brand.
The $1.9 billion market capitalization California-based grocery and consumer staples retailer is trading at a near-market 12-year GAAP price-to-earnings ratio month of 18.6 and pays a small dividend yield of 1.4%, according to The Wall Street Journal.
PriceSmart beat earnings in October while reporting online revenue figures. Stocks were already on the mend after hitting a low earlier in the month following this news. Impressively, total membership reached an all-time high, with sales increasing 12.1% year-on-year. What has lowered the PSMT more recently is the news that CEO Sherry Bahrambeygui to resign starting February 3. The stock fell further to close out 2022 despite some strength in the consumer staples sector. In total, the PSMT is down more than 13% over the past 52 weeks, compared to a 0.5% total return gain in XLP.
On valuation, PSMT trades at 16.5 times 2023 operating profit using the CFRA research consensus estimate of $3.79. Earnings per share are then expected to rise at a steady pace in 2024 to $4.11. Sales growth is expected in its upcoming Q1 report and a multi-year revenue CAGR of nearly 10% is attractive in a volatile macro environment.
As a food retailer, it’s important to pay attention to margins, and an operating margin of 4.1% is a bit above the peer average, which is good to see. Overall, I consider the stock to be quite estimated here but growth This seems good.
PriceSmart: earnings outlook and key profitability ratios
Looking ahead, corporate events data provided by Wall Street Horizon points to a confirmed Q1 2023 earnings date of Monday, Jan. 9 AMC. On Tuesdays at noon ET, the leadership team hosts their quarterly conference call, and you can listen live here. The volatility catalysts don’t stop there, however. PSMT is holding a shareholders’ meeting on Friday, February 3.
Corporate Events Calendar
The angle of options
Digging into the upcoming earnings report, data from Option Research & Technology Services (ORATS) shows a consensus EPS forecast of $0.97, which would be roughly unchanged from the $0.98 earnings per share realized in the same quarter a year ago.
The company has a history of mixed earnings beat rates and shares typically range from -10% to +10% following each quarterly report. Without liquid options, it is difficult to assess an expected change in stock price after earnings with this discount store stock.
PSMT: Flat EPS growth seen
The technical grip
The chart of PSMT should not be over-analyzed. My main indicator here is a descending 200 day moving average on the below 3 year zoom. This tells me that the trend is firmly down despite a pair of big bear market rallies over the past year.
What is bullish, however, is that the stock has pulled back from a high near $105 to around $60 – which is the lower zone of an important volume-per-price range. Maybe the stock is finding natural buyers here, but with stocks mired in a 2yr downtrend, I’d really like to see the PSMT climb above the November peak on high volume with a rise in the 200dma .
PMMT: An Extended Downtrend
PSMT’s assessment is fair, so techniques are the final arbiter. With a bearish headline, I’m on hold at the moment, but I’ll turn more bullish if the headline shows signs of stabilizing. Perhaps the next earnings report will be that catalyst.