Daily Update - April 5, 2023

Selected highlights of the day:

By: Matthew Otto

Retail delivers bullish wind


Acuity Brands sees the light

Acuity Brands reported a 3.8% increase in net sales to $943.6 million in Q2 FY 2023, with operating profit up 9.0% to $111.5 million, and adjusted diluted earnings per share up 19.1% to $3.06; the company also generated strong cash flow from operations and continued to repurchase shares. Net sales were up 3.2% to $890.8 million, and ISG net sales were up 16.4% to $58.2 million.

  • Goldman Sachs analyst Brian Lee maintains a Neutral rating and lowers his price target from $201 to $173.
  • Baird analyst Timothy Wojs maintains a Neutral rating and drops his price target from $192 to $175.
  • Wells Fargo analyst Joseph O’Dea maintains an Overweight rating however, he lowers his price target from $193 to $180.
  • UBS analyst Chris Snyder lowers the price target from $193 to $170.

Hardware is not far behind

MSC Industrial Supply has reported financial results for its fiscal 2023 second quarter ended March 4, 2023. The company’s net sales increased by 11.5% YoY to $961.6 million, operating income stood at $114.3 million, and net income attributable to MSC reached $79.1 million, or $1.41 per diluted share, up from $69.9 million or $1.25 per diluted share in the same quarter last year. On an adjusted basis, net income attributable to MSC was $81.3 million, or $1.45 per diluted share, compared to $72.3 million or $1.29 per diluted share in the year-ago quarter. Erik Gershwind, President and Chief Executive Officer, said that the company’s “outperformance against the IP Index” is expected to continue.

  • JP Morgan analyst Patrick Baumann maintains a Neutral rating and raises the price target from $80 to $86.
  • Stephens & Co. analyst Tommy Moll reiterates an Overweight rating and maintains a $100 price target.
  • Loop Capital analyst Chris Dankert maintains a Hold rating and raises the price target from $82 to $89.
  • Baird analyst David Manthey maintains an Outperform rating and raises the price target from $95 to $104.

META platforms recipes a positive nudge

  • Jefferies analyst Brent Thill raised the price target to $250. Thill keeps his stock forecasts above the stock price for the FaceBook owner since he started covering it in the last five years including during the drop last year.
  • Argus analyst Joseph Bonner upgraded Meta Platforms from Hold to Buy and increased the price target from $240 to $270.

Walmart confirms no worsened conditions

Walmart has reaffirmed its first-quarter and current fiscal-year guidance, indicating that it has not noticed a significant change in consumer attitudes. The company, often considered a litmus test for consumer health, had already given softer-than-expected guidance in its recent earnings report, but this update has been welcomed by investors. The guidance update was issued as part of Walmart’s two-day meeting with investors, where it reiterated its commitment to grow sales by 4% and operating income by more than that over the next three to five years. Walmart also outlined its plans for growth, which include diversifying its earnings streams, scaling high-return investments, and growing its online and physical business model.

Fiscal 2024 Full-Year Guidance:

Walmart is also reaffirming its full-year guidance for fiscal year 2024, which includes consolidated net sales growth of approximately 5%, along with expected growth in both Walmart U.S. and Sam’s Club. Walmart also expects capital expenditures for fiscal year 2024 to be approximately $14 billion.

  • Stephens & Co. analyst Ben Bienvenu reiterates Walmart with an Overweight and a $170 price target.
  • Telsey Advisory Group analyst Joseph Feldman maintains an Outperform and a $160 price target.
  • Goldman Sachs analyst Kate McShane keeps a Buy rating and $164.00 price target.

Apple faces regulatory challenges in the EU

According to Reuters, Germany’s antitrust regulator, the Bundeskartellamt, has decided that Apple’s market dominance makes it worthy of measures to curb its power. The regulator has designated Apple a “company of paramount significance for competition across markets,” and based on this decision, it can target practices that pose a threat to competition and practices that effectively prevent them. The regulator’s decision allows it to take action against Apple’s comprehensive digital ecosystem, which the regulator believes has a high significance for competition not only in Germany, but also in Europe and worldwide. Apple plans to appeal the decision and stated that the cartel office’s designation misrepresents the fierce competition it faces in Germany and discounts the value of a business model that puts user privacy and security at its core. The Bundeskartellamt has also designated Google parent Alphabet and Facebook owner Meta as companies of paramount significance for competition across markets.

  • BOFA Securities analyst Wamsi Mohan has maintained a Neutral rating on Apple but has increased the price target from $158 to $168.