Money & Markets Week Ahead for the week of June 20, 2021: It’s an even lighter week for quarterly earnings reports. I look at the upcoming Sprinklr IPO and analyze the earnings of payroll and benefits company Paychex Inc. We’ll also get data related to the pace of the economic recovery.
Here’s more of what to watch in the week ahead on Wall Street:
On the IPO Front
There are a few initial public offerings (IPOs) on the calendar this week.
Sprinklr Inc. plans to price its IPO on Thursday. It will list on the New York Stock Exchange under the ticker symbol CXM.
What it is: Sprinklr is a software startup company that provides software to help businesses with marketing, advertising and customer engagement.
The software uses artificial intelligence to help its clients sift into unstructured data to create a unified view of each customer.
It touts Microsoft Corp. (Nasdaq: MSFT) and McDonald’s Corp. (NYSE: MCD) as a few of its clients. In all, it has about 1,200 customers, including 50% of Fortune 100 companies.
According to its S-1 filing with the Securities and Exchange Commission, Sprinklr’s software platform performs 10 billion predictions every day using more than 750 pre-built artificial intelligence models.
In 2020, Sprinklr generated $339.6 million in total revenue — between subscriptions and professional services. That was up from $278.5 million generated the year before.
In the three months ending April 30, 2021, the company reported total revenues of $96.7 million compared to $81.6 million reported in the same three months of 2020 — an 18.5% increase in top-line revenue.
The company increased its year-over-year net losses from $39.1 million in 2019 to $41.2 million in 2020.
A majority of its operating expenses were from sales and marketing efforts as well as general and administrative expenses.
The offering: The company plans to sell 19 million shares at a price range of $18 to $20 per share.
The intent is to raise around $361 million with the offering.
According to Renaissance Capital, at a midpoint of $19 per share, Sprinklr would see a market value of $5.5 billion.
Morgan Stanley, Goldman Sachs, Citi, Wells Fargo Securities and Barclays are all bookrunners on the deal.
The skinny: This company has a very impressive client list already.
But, like a lot of tech startups, it’s increasing expenses while generating revenue .
Its net loss per share of common stock held steady at around $0.46 per share from 2019 to 2020. Ideally, you’d like to see that loss drop year over year.
The price point the Sprinklr IPO isn’t bad, but the increased losses outpacing the increased revenue is a cause for concern.
The Sprinklr IPO is one I would watch rather than dive into right away.
Deeper Dive: Paychex Inc. Earnings
Human resources outsourcing company Paychex Inc. (Nasdaq: PAYX) will report its quarterly earnings this week.
Friday, the company will release its earnings for the quarter ending May 30, 2021.
The Rochester, NY company provides human resources, payroll and benefits services to small and medium-sized companies in the U.S. and Europe.
Paychex Earnings Remain Consistent
Paychex has been consistent with its quarterly earnings per share.
However, in the last three years, the quarter ending in February has seen a much higher EPS than in previous quarters.
Take those quarters out, and Paychex has an average quarterly EPS of around $0.63 per share.
The company has met or beaten Wall Street expectations for EPS in 14 of the last 15 quarters.
Paychex Quarterly Revenue Pattern Same as EPS
Its quarterly top-line revenue is consistent with its earnings.
February quarters see much higher revenue than other quarters.
Paychex has beaten analysts’ revenue projections in the last 15 quarters.
Wall Street is projecting the company to report earnings of $0.66 per share on revenue of $966.9 billion.
The skinny: Paychex has done a nice job keeping its quarterly revenue and earnings consistent.
The company’s best year from 2017 to 2020 was 2019. But the company slipped in 2020 due to the COVID-19 pandemic.
Wall Street expectations are in line with previous quarters’ performance. That trend likely continues this quarter.
Money & Markets Week Ahead: Data Dump
Investors will get more inflation-related news this week when the U.S. Bureau of Economic Analysis reports the quarter-over-quarter change in the U.S. gross domestic product, or GDP.
GDP measures the annualized change in the inflation-adjusted value of goods and services produced by the economy.
U.S. Gross Domestic Product Recovers 2020 Losses
After two years of minimal quarterly increases, COVID-19 sent U.S. GDP tumbling in 2020.
In the first two quarters of the year, GDP fell a combined 36.4%.
Things rebounded in the last two quarters, with GDP rising a combined 37.7%. That put GDP virtually back in line with quarters prior to 2020 — signaling a strengthening of the economic recovery.
The two previous estimates for Q1 2021 GDP was a 6.4% quarter-over-quarter change. Analysts are holding to that 6.4% increase.
To finish off the Money & Markets Week Ahead, here’s a look at some of the key earnings reports due out this week:
Great Southern Bancorp Inc. (Nasdaq: GSBC)
Digerati Technologies Inc. (OTC: DTGI)
Korn Ferry (NYSE: KFY)
AeroVironment Inc. (Nasdaq: AVAV)
Concentrix Corp. (Nasdaq: CNXC)
HB Fuller Co. (NYSE: FUL)
Winnebago Industries Inc. (NYSE: WGO)
Nike Inc. (NYSE: NKE)
FedEx Corp. (NYSE: FDX)
Bed Bath & Beyond Inc. (Nasdaq: BBBY)
Rite Aid Corp. (NYSE: RAD)
Paychex Inc. (Nasdaq: PAYX)
CarMax Inc. (NYSE: KMX)
That’s all for this week.
Until next time…
Matt Clark, CMSA®
Research Analyst, Money & Markets
Matt Clark is the research analyst for Money & Markets. He’s the host of our podcast, The Bull & The Bear, as well as the Marijuana Market Update. He is a certified Capital Markets and Securities Analyst with the Corporate Finance Institute. Before joining the team, he spent 25 years as an investigative journalist and editor — covering everything from politics to business.