Tuesday, September 1

Thursday, September 3

Friday, September 4

Ambarella, Inc. (AMBA)

The Estimize Consensus calls for EPS of $0.85 vs. Wall Street’s $0.81. The Estimize Consensus predicts revenue of $84.97M compared to the Street’s $79.80M.

What to watch for: Ambarella, developer of HD video compression and image processing products, has experienced a rapid increase in stock price, 150% over the past year. One of their biggest clients, GoPro, uses Ambarella SoCs (System on Chip) for their HD cameras and is responsible for that rally, with AMBA stocks reacting positively to GoPro’s better-than-expected Q2 earnings. SoC heavy products such as the GoPro HERO4 collection also accounted for more than 50% of revenue, confirming high sales for Ambarella. Also, the recent hype in drone technology further expand the market for Ambarella, increasing investor confidence.

However, the stock experienced its first major price drop on August 20th as Qualcomm announced that they will be developing their smartphone SoCs for drone applications as well. The stock took another hit last week as a result of China’s currency devaluation as Ambarella products will now be more expensive. So whether or not Ambarella can regain its upward momentum depends on its earnings Tuesday.

Dollar Tree  (DLTR)

The Estimize Consensus calls for EPS of $0.68 vs. Wall Street’’s $0.67 and guidance of $0.66. The Estimize Consensus predicts revenues of $2.4B compared to the Street’s estimate of $2.55B and guidance of $2.20B.

What to watch for: Dollar Tree is now the largest deep-discount retailer in the country, after it’s acquisition of Family Dollar Stores, they now operate 13,500 stores nationwide, vs. competitor Dollar General’s 11,000. That acquisition is huge for DLTR and should help with operational and distribution efficiencies as the company charges forward with store expansion plans, especially into new markets, as well as with their omni-channel development to capture the online market. Dollar Tree stores typically occupy small neighborhoods, too small for Wal-Marts. But the discount wars are heating up as Wal-Mart and even Target eye smaller neighborhoods. Wal-Mart plans to open up 200 smaller stores this year alone, bringing the total up to 700 of its 3,200 stores worldwide. Target is further behind, but has made opening up their TargetExpress stores a main priority going forward. The dollar store industry has been strong recently, with DLTR’s stock up about 9% YTD.

VeriFone Systems (PAY)

The Estimize Consensus calls for EPS of $0.46 in-line with Wall Street and a penny higher than corporate guidance. The Estimize Consensus predicts revenues of $499.9M compared to Wall Street’s estimate of $502.8M and guidance of $497.5M.

What to watch for: VeriFone produces electronic payment terminals and makes money from customer transactions. The company is poised to do well for the rest of the year as demand rises for Europay, Mastercard, Visa (EMV) terminals and as mobile payments increase in popularity. Newer credit cards have EMV chips that help protect a holder from fraud. Starting in October, all merchants are required to use the latest payment terminals that support EMV chips as opposed to the older systems that only read magnetic strips. Those that don’t will be liable for fraud that takes place in point-of-sale transactions, a liability previously taken on by credit card issuers. Near field communication, the technology that allows two devices to communicate via radio waves when in close vicinity, is another area that will benefit the company. This is the technology that enables mobile wave-and-pay phone payments at merchant registers through apps such as Google Wallet and Apple Pay.

Medtronic, Inc. (MDT)

The Estimize Consensus calls for EPS of $1.04 vs. Wall Street’s $1.01. The Estimize Consensus predicts revenues of $7.08B compared to Wall St.’s Estimate of $7.03B.

What to watch for:  The stronger dollar has been a source of stress for many multinationals for the past year, and Medtronic may feel even more of a pinch as they derive 40% of their sales from abroad. However, one bright spot it the recent acquisition of Covidien which now makes Medtronic the largest medical device producer in the world with a market cap of $104B. The acquisition was officially completed in January and famously survived the White House crackdown on corporate tax inversion, with Medtronic buying Ireland-based Covidien and thereby lowering their yearly tax corporate tax rate to 12.5% from 35%. Not only was this the largest “medtech” deal ever, but it was the largest tax inversion. The company maintains the acquisition was just as much about corporate strategy as it was about taxes. Since the completion of the takeover, MDT stock is off about 4.5%.

Jobs Data

On Friday we get an important read on U.S. employment as Nonfarm Payrolls, Unemployment and Average Weekly Earnings are reported for the month of August.

Change in Nonfarm payrolls: Nonfarm payrolls had a rough second quarter, with readings from both June and July missing the Estimize consensus and falling MoM by 11.15% and 6.93%, respectively. For August, the Estimize community are predicting a reading of 232.5, a MoM increase of 8.14%. Nonfarm payrolls represent around 80% of the workforce in the United States and therefore is a good representation of the health of the US private sector.

US Average weekly earnings: After putting  up lackluster numbers for most of the year, average weekly earnings came in at $864.65 in July, the highest level of the year, and the second highest MoM increase of 0.49%, just behind January’s increase of 0.57%.  Despite the latest increase, wage growth is still not where it should be at this point in the recovery considering how far unemployment and nonfarm payrolls have come. Estimize predicts an August reading of $866.72 representing a slight MoM growth rate of 0.24%.

Unemployment rate: For June, Estimize predicts unemployment will remain unchanged at 5.3% for the third consecutive month. The unemployment rate has been on a gradual decline from its peak of 10% in October 2009, following the global financial crises.

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Alcoa - Wednesday

First quarter earnings kick off this week with Alcoa (AA) reporting Wednesday. The aluminum giant has launched earnings season with a roar in each of the past three quarters on top and bottom line beats. 

This week Estimize contributors are predicting that Alcoa will top the consensus from Wall Street by 3 cents per share while hoisting a major victory on revenues. Estimize analysts are looking for $6.09 billion in sales while Wall Street is forecasting $5.86 billion.

Rite Aid - Wednesday

Rite Aid (RAD) is the first of two major pharmacy chains set to reveal financial results for the first part of the year this week. Rite Aid’s fundamentals and stock price have been boosted in part by moderate gains to same-store sales over the past several months. January, February, and March same store sales improved 4.8%, 3.3%, and 4.3% respectively compared to last year. 

Estimize contributors are looking for $6.783 billion in sales, which would only be a 3.3% gain overall. On the bottom line Estimize contributors expect Rite Aid to come out 2 cents per share ahead of Wall Street’s view. Estimize contributors have predicted a 2 cent beat vs. Wall Street in the previous two periods only to have their expectations topped both times. 

Family Dollar - Wednesday

Family Dollar (FDO) also participates in the earnings season opening salvo on Wednesday. The discount retailer’s investors ended a long saga in January by approving a merger with Dollar Tree (DLTR). Dollar Tree’s chief rival Dollar General (DG) had also been soliciting Family Dollar for a potential takeover.

Ahead of its still pending merger, Family Dollar will report earnings Wednesday before the opening bell. The consensus from Wall Street is that Family Dollar’s second fiscal quarter earnings will drop from 80 cents per share last year to 73 cents. Contributing analysts on Estimize only expect a penny better at 74 cents in EPS. Estimize contributors are setting the bar even lower on revenue, expecting a marginal miss against Wall Street’s projection.

Walgreens Boots Alliance - Thursday

The freshly merged Walgreens Boots Alliance (WBA) will report earnings Thursday. Walgreens Boots Alliance was formed by combining the largest drugstore chain in the United States with the largest pharmaceutical wholesaler in Europe.

In addition to reporting results for this quarter Walgreens Boosts Alliance has promised to announce full year guidance. This will help investors wrap their heads around how much money the super-giant drug seller is making. The consensus from Estimize $27.8 billion in sales this quarter and 95 cents in earnings per share. These estimates are slightly higher than Wall Street’s view which projects $27.7 billion in revenue and 94 cents per share in profits. 

Constellation Brands - Thursday

Our final featured earnings report this week comes from Constellation Brands (STZ). The beer, wine, and liquor importer’s stock has been on a roll since it acquired full ownership of Crown Imports back to 2012. That acquisition gave Constellation the rights to sell Groupo Modelo products in the United States, which include Corona. 

The deal helped fuel massive fundamental growth a year and a half ago. In the past 2 years Constellation has achieved 2 periods of triple digit revenue growth and one quarter of more than doubling its profits.  Now that the Grupo Modelo products are an integrated part of Constellation’s portfolio, there won’t be opportunity for the same gigantic growth. 

Analysts on Estimize are forecasting small to medium sized beats against the Wall Street consensus Thursday. Estimize contributors expect revenues to jump 5.6% higher than reported in the same quarter of last year while profits rise by a meaty 18.5%. 

Dollar General Corp’s (DG) last earnings release had quite a bit for investors to process, though most of it was pretty solid.

At the top of the list was the company’s plan to open 730 new stores and relocate or remodel another 875 this year to keep pressure on rival discounter Dollar Tree Inc (DLTR). Next year, Dollar General plans to open another 900. 

Dollar General currently has 11,800 stores nationwide, so you’re talking about a 14% jump in the number of open stores in just two years. That’s an ambitious plan, and Wall Street took the news well. Dollar General was up about 4% on the announcement and is up a good 5% year-to-date. 

The company needed to do something. Dollar General lost out in its attempt to buy a third dollar-store rival, Family Dollar Stores, Inc (FDO), to Dollar Tree. So to make up for lost market share to the new combined Dollar Tree-Family Dollar, Dollar General is going on the offensive with the expansion blitz. 

Dollar stores have come to fill an important retail niche, particularly since the Great Recession hit seven years ago. With wage growth stagnant, dollar stores have helped working-class and middle-class Americans keep their budgets manageable. 

Even Wal-Mart Stores, Inc (WMT) — yes, the mighty, invincible Walmart — has acknowledged the competitive threat that the deep discounters pose to its business. (When Walmart isn’t even cheap enough, you know that times are tough.) 

However, I question the wisdom of going on an expansion blitz when there is seemingly already a dollar store on every corner. And yes, I’m also trying really hard to avoid making a cheesy reference to Clint Eastwood’s A Fistful of Dollars.   

But for now, Dollar General is wildly profitable. In its earnings announcement this week, earnings per share rose 16% and revenues rose a stellar 10%. Some of this was due to expansion, but the crucial same-store-sales metric rose 4.9%. Guidance for the next quarter was a little lower than Wall Street had expected, but still very solid. Dollar General expects revenue growth of 8% to 9% for the full year.

Dollar General’s margins have also remained stable (see chart), indicating that management has done a decent job of managing its growth and keeping rivals in check. If the dollar-store niche is starting to get saturated, it certainly isn’t showing up in its results yet. 

So, where does Dollar General go from here? The stock is not “cheap,” per se — trading at 22 times trailing earnings and 1.2 times sales. To put that in perspective, Walmart trades for 16.2 times earnings and 0.5 times sales. But I have every reason to believe that DG stock has further to run, at least in the short term. 

To start, despite its break-neck expansion efforts, Dollar General is taking its responsibilities to shareholders  seriously. It’s adding $1 billion to its existing share repurchase program, and — even better — it’s initiating a quarterly dividend of 22 cents starting next month. That’s only a 1.2% dividend yield at current prices, but it’s an important start. And once Dollar General slows its store expansion, it will have more cash on hand to boost its payout. 

Another thing to keep in mind is that Dollar General is a counter-cyclical stock. If you buy the argument that the U.S. economy is reaching “escape velocity” from the Fed’s accommodative policy, then you probably don’t want to own Dollar General. 

But if you share my view — that times remain quite challenging for most of Dollar General’s working and middle-class customers in this era of stagnant wage growth — then Dollar General’s outlook is bright for at least the next several quarters. 

Its shoppers may eventually tire of pinching pennies and may want to trade up. But we’re not quite there yet, and we might not be for another couple years. 

In the meantime, Dollar General offers a growing business that just initiated a dividend.

Tomorrow morning, discount retailer Dollar General releases Q4 results. Estimize is looking for a miss on this one, with a consensus estimate of $1.16, a penny below the Wall Street expectation. Revenue estimates of $4.95B are just about in-line with Street estimates.

With the discount wars heating up, Dollar General is about to face an onslaught of competition. It is currently the largest deep-discounter in the country, but that will all be changing soon. After its failed bid to acquire Family Dollar stores, competitor Dollar Tree was able to snatch them up; the resulting entity will now have 13,500 stores nationwide vs. Dollar General’s 11,000. But it’s not only pure-play competitors that Dollar General has to worry about, with big-box chain stores such as Wal-Mart and Target now eyeing smaller neighborhoods. The small, low-income neighborhood was once solely the turf of deep-discounters, places that were too small for larger retailers, where residents could not afford traditional grocery stores and didn’t have enough gas money to drive to stores in neighboring towns. With the retail market already so saturated with super-sized stores, companies like Wal-Mart and Target have no choice but to open smaller locations, and both of these retailers have committed a lot of capital to do so. The challenge for Dollar General will be to find ways to grow amidst increasing competition and shrinking market share.

Aware of the growing competition, Dollar General has tried to broaden its product offering, now stocking tobacco products, as well as beer, wine and liquor where permitted. However, Wal-Mart’s new Neighborhood Markets will be stocking fresh fruits and vegetables, and many will have gas stations as well. It’s about to get a lot more difficult for the deep-discounters to compete.

Despite all this, Dollar General’s stock is up 1% this year, and up 21% over the past 52 weeks as it reaps the same benefits that other retailers do, ie: lower gas prices and an improving jobs market. The fundamentals look strong in the short-term, but over the long-term this is a company that will be squeezed if they don’t change quickly enough.

Tuesday - Micron Technology

Micron Technology (MU) leads a handful of notable names reporting earnings this week on Tuesday. Last year Micron posted record earnings on revenue that came in 80% higher than 2013’s yearly results.

In the first 3 years of the decade Micron struggled to meet expectations as the demand for PC’s fell hindering Micron’s DRAM flash memory business. Demand for PCs is continuing to fall overall, but in 2013 Micron Technology's business picked up speed.

In the quarter reported 1 year ago Micron saw its revenue rise 120% year over year. When Micron reports Tuesday it will be going up against its highest comp in the past 2 years by far, yet the Estimize community still predicts that sales will grow by another 13%. On the bottom line Estimize contributors are forecasting 94 cents in earnings per share, which would be a 20% jump higher from the 77 cents reported this time last year.

Tuesday - Sonic

Drive-in fast food joint Sonic (SONC) is also slated for a Tuesday afternoon report. The purveyors of slushes and hot dogs have been getting by just fine lately despite the issues that plague the industry as more consumers switch from greasy burgers to healthier fast casual alternatives like Panera Bread (PNRA) and Chipotle (CMG).

Sonic has managed to squeeze out earnings 1 cent per share higher than the Wall Street consensus in each of its last 3 earnings periods. Tuesday analysts on Estimize are looking for a 4th straight period where earnings narrowly top the Street’s view.

Earnings of 17 cents per share would reflect a 4 cent (31%) gain compared to the 13 cents in EPS announced in Sonic’s first fiscal quarter of last year.

Wednesday - Monsanto

Analysts on Estimize are looking for big numbers from Monsanto (MON) on Wednesday. The Estimize consensus expectation is for the agricultural and chemical company to report earnings of 47 cents per share, which is 13 cents (38%) higher than the Wall Street Consensus.

In the past 2 years Monsanto has beaten the Street’s consensus by 13 cents or more 2 times including once in the company’s first fiscal quarter of the year two years back.

For Monsanto’s upcoming report we are seeing the largest ever differential in earnings expectations between Estimize and Wall Street for the agricultural chemical company. The consensus on Estimize is telling us that the market may be pricing in higher expectations ahead of Wednesday’s report. Shares of Monsanto have risen 9% over the past 3 months.

Thursday - Family Dollar

Contested takeover target Family Dollar (FDO) will announce its quarterly earnings on Thursday. In December Family Dollar delayed a shareholder vote to sell itself to competitor Dollar Tree (DLTR). CEO Howard Levine is urging investors to take the deal, but has failed to muster the required the number of votes to his side. The vote is now scheduled for January 22.

Rival Dollar General (DG) is also vying to acquire Family Dollar and has extended its $9.1 billion hostile takeover offer until the end of January.

While the spotlight is on the imminent takeover drama, Family Dollar does report quarterly earnings this week as well. Family Dollar’s profits have shrunk in 4 consecutive quarters as Family Dollar has missed the Estimize consensus each period over the past year. All the while sales have remained close to flat, changing year over year between -6% and +4% in each period.

Thursday the Estimize community is predicting that earnings will drop from 68 cents per share last year to 60 cents per share this year. Estimize contributors predict that first quarter revenue will grow by 2% compared to last year.

Thursday - Bed Bath and Beyond

Specalty retailer Bed Bath and Beyond (BBBY) also reports Thursday. In its past 2 quarters year over year earnings have been flat and up 1% respectively. This week Estimize contributors are predicting that the bed and bath retailer will beat the Street’s EPS consensus by 2 cents per share, coming in a solid 9 cents per share (8%) better than last year’s FQ3 results.

On the top line revenue has grown by 2% and 4% respectively in the past 2 quarters. The Estimize community is looking for sales that are in-line with Wall Street’s estimate and again 4% higher than last year’s result.

Family Dollar shareholders put off their vote on Dollar Tree.

Of the few shareholders there, several were scratching their heads that the board hadn't given an ear to Dollar General, who I'm told has had no direct contact with FDO since the Dollar Tree announcement this summer.

But the reason for the postponement is interesting: there was a quorum (a minimum number of interested parties needed for a vote according to by-laws), yet they couldn't get enough votes to pass the proposal. So they put it off until January 22nd, rather than scrap it.

That leaves the door open to four options as I see it: 

1. FDO's board rallies the troops and gets the deal done.

2. FDO's board fails, and goes ahead with Dollar General.

3. FDO takes another offer from another company (... Walmart maybe?)

4. FDO goes it alone.

Options 1 and 4 leave operations in Matthews and thousands of jobs in the Charlotte area. But option 4, as UNC Finance Professor Emeritus Ben Nunnally told me today, they'd probably have to make significant cuts.

Though he did say Family Dollar's leadership IS smart. They've built this business once, they can do it again.

...with sharp selling early, paring losses midday, but resumed its downward momentum into the bell to fresh lows (Nasdaq remained weak throughout following MCHP/JNPR lower guidance crushing semi’s). The S&P 500 nearing its 200 day moving average to the downside (about 1904-05), which it has not breached since November 2012.

Major averages posted their third straight weekly decline, led by a big drop in Materials, Industrials and of course Energy (the laggard). Commodities bounced of multi-year lows early, but still posted a dreadful week. Defensive sectors (safety or dividend plays) held up the best this week, led by Staples, Utility and Healthcare. One notable, the VIX rose above 20 for first time since February (big week of earnings coming up) – also, Transports touched down another 2% at one point (Columbus day Monday, bond markets closed – equities open).

After a hectic economic data calendar last week, the only major data release in the U.S. this week is the FOMC minutes on Wednesday, Oct. 8th at 2 pm. Though earnings season does kick off this week, next week is when we get the bulk of the first large company reports.

The Bank of Japan’s monetary policy statement will be released on Monday night, and the 110 level in USD/JPY is the spot to watch. Aside from that, there are few major data releases in any of the major markets.

Aside from economic data, politics will start to garner more headlines. The Brazilian elections yesterday have set the stage for a runoff between Rousseff and Neves later this month. The U.S. midterm elections are now about a month away. Meanwhile, the evolving situation in Hong Kong remains in focus in Asia.

As for single stocks, here are the main events for the week, including the major earnings releases to start earnings season:

Monday, October 6th

ADBE financial analyst briefing at 6pm

Tuesday, September 7th

SPLK investor and analyst meeting

YUM earnings after the close

Wednesday, October 8th

COST earnings before the open

MON earnings before the open

AA earnings after the close

Thursday, October 9th

PEP earnings before the open

TWC extraordinary shareholders meeting

FDO earnings after the close

Friday, October 10th

FAST earnings before the open