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There are not many earnings reports of note this week but there are three that I will be following: Coupa Software (COUP) on Tuesday afternoon and Nike (NKE) and Federal Express (FDX) on Thursday afternoon.
Let’s start with COUP (Market Cap $20.5 Billion), a business spending cloud platform based only a few miles north of me in San Mateo, CA. When COUP reported 3Q20 Earnings on December 7, 2020, they also provided guidance for full year 2020. They are looking for Revenue between $523 and $524 million and Non-GAAP Diluted EPS of between 47 cents and 49 cents. COUP stock closed Friday at $277.51. Doing the math, we get a Price to Current Year Revenue ratio of 39x and a Price to Current Year EPS ratio of 578x. Clearly, COUP falls into what I call the Speculative Growth category with tremendous good news about its future priced in at these levels.
It’s also exactly the kind of stock that has been punished in recent weeks as a result of rising interest rates. In fact, COUP is -24.9% over the last three weeks. Reaction to its report will give us insight into whether the market is ready to resume buying Speculative Growth or has moved on from it.
Let’s move on to NKE (Market Cap $220 Billion) now. NKE doesn’t provide guidance so we’ll have to value if off of trailing earnings. In the previous four quarters, excluding the COVID-quarter (1Q20), NKE earned $4.19 Diluted EPS. Its stock closed Friday at $140.45 for a trailing Price to Diluted EPS multiple of 33x. NKE falls into the Reopen Value category. Unfortunately, like most of the stocks in this category, NKE has run up in anticipation of the reopen and is already essentially pricing in a full recovery. The market has been rotating from Mega Cap Growth and Speculative Growth into Reopen Value. The reaction to NKE’s report will give us insight into whether they’re going to continue to push these stocks up, regardless of valuation.
Lastly, let’s take a look at FDX (Market Cap $73 Billion). FDX also does not provide guidance so we’ll have to value it on trailing earnings as well. Excluding the COVID-quarter, FDX earned $14.74 in the previous four quarters. Its stock closed Friday at $270.20 for a trailing Price to Trailing Diluted EPS multiple of 18x. It’s tougher to categorize FDX because it has been a Pandemic Beneficiary due to so many consumers shifting to online shopping. On the other hand, the reopening should help its business deliveries. So FDX is a sort of hybrid.