Barron\'s - 16.09.2019

September 16, 2019 BARRON’S 15

A SOFT LANDING?

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The FOMC announces its monetary-policy

decision. Wall Street widely expects the central

bank to cut its federal-funds rate by a quarter of a percentage point, to 1.75%-2%.

Wednesday

Monday 9/

Japanese marketsare closed in ob-

servance of Respect for the Aged Day.

Coca-Cola holdsan investor meeting

in London to discuss its approach to

sustainability.

The Federal ReserveBank of New

York releases its Empire State Manu-

facturing Survey for September. Econ-

omists forecast a 3.5 reading, roughly

even with the previous two months’

data.

Tuesday 9/

Adobe, Chewy,andFedExreport

quarterly results.

KLA and Mascohold investor days

in New York.

The 74th United NationsGeneral

Assembly convenes in New York.

The National Associationof Home

Builders releases its NAHB/Wells

Fargo Housing Market Index for

September. Consensus estimates are

for a 66 reading, even with August. The

survey suggests home builders are still

bullish about the single-family housing

market for the next six months.

Wednesday 9/

General Mills reportsearnings for

the first quarter of fiscal 2020.

The Census Bureaureports residen-

tial-construction data for August. Ex-

pectations are for a seasonally adjusted

annual rate of 1.25 million housing

starts, up from July’s 1.19 million.

Building permits are seen coming in at

1.3 million, about even with July’s data.

Thursday 9/

Darden Restaurantsholds a

conference call to discuss earnings.

The Bank of Englandand Bank of

Japan announce their monetary-policy

decisions. Both central banks are ex-

pected to keep their key short-term

interest rates unchanged at 0.75% and

negative 0.1%, respectively.

Nike holdsits annual meeting of

shareholders in Beaverton, Ore.

Navistar InternationalandSeagate

Technologyhold investor days in

Lisle, Ill., and New York, respectively.

The Conference Boardreleases its

Leading Economic Index for August.

Economists forecast a 0.1% rise, after

a0.5%jumpinJuly.

The National Associationof Real-

tors reports existing-home sales for

August. Consensus estimates are for a

seasonally adjusted annual rate of

5.4 million, even with July’s figure.

Friday 9/

The Federal Reservereleases its

Financial Accounts of the United

States for the second quarter. In the

first quarter, household net worth

jumped 4.5%, to $108.6 trillion, the

largest quarterly gain since 2004. Net

worth is unlikely to rise as much in

the second quarter. The S&P 500

returned 4.3%, after a 13.6% gain in

the March quarter.

ATrouble

Area in Tech

After leading the tech parade for much of the year,

software stocks have run into some turbulence. The

S&P 500 software index, a group headlined byMicro-

soft,Salesforce.com, andAdobe,isdownover4%

since peaking in July, underperforming the rest of tech.

As the momentum trade seized up this past week,

software stocks were hit particularly hard. The iShares

Expanded Tech-Software Sector ETF (ticker: IGV) fell

1.5% on Monday even as the broad market squeezed out

a gain.

Barron’swarned that software stocks were looking

frothy, just as they peaked in July. Much of the group

has little or no earnings to report, and, at the time, the

average stock was valued at more than seven times an-

nual sales versus just two times for the S&P 500. Since

the story, the iShares software ETF is down 7%.

Software investors will get some new data to digest

next week when Adobe reports earnings on Tuesday

after the market’s close. The Photoshop creator is down

11% from its July peak, even though Wall Street is ex-

pecting another strong quarter from the software giant,

with 20%-plus revenue growth and a 14% gain in year-

over-year earnings, to $1.97 per share.

The company has a history of outperforming those

estimates. Adobe’s per-share earnings have come in

ahead of consensus estimates in 20 of the past 21 quar-

ters, according to FactSet. During that period, Adobe

shares are up 312%. At a recent $278, the stock trades at

30 times projected earnings for the next 12 months, just

below a five-year average multiple of 31.—Evie Liu

Cooling Off

Sincepeakinginmidsummer,the

iSharesExpandedTech-Software

SectorETF(IGV)hasdeclined7%.

But Still Hot

Wall Street expects Adobe sales

to be up more than 20% for a

15th straight quarter.

Jan. ’

2017

Q

2018

Q

2019

Q

2018

Q

May Sept.

1

220

$

2

$3 billion

3Q consensus

forecast

180

160

0

200

Source: FactSet

Source: FactSet

Quarterly revenue

Day Consensus Estimate Year Ago

T

Adobe (3Q) $1.97 $1.

Apogee Enterprises (2Q) 0.61 0.

Fedex (1Q) 3.18 3.

Cracker Barrel Old Cuntry Str (4Q) 2.48 2.

More Earnings on Page M

Coming Earnings

Day Consensus Est Last Period

T August Industrial Production 0.2% -0.2%

W August Housing Starts 1,250,000 1,191,

TH August Existing Home Sales 5,380,000 5,420,

August Leading Indicators 0.0% 0.5%

Unless otherwise indicated. a-Advanced; f-Final; p-Preliminary;

r-Revised

Source: FactSet

Consensus Estimate

For more information about coming economic reports - and

what they mean - go to Barron’s free Economic Calendar at

Elias Stein http://www.Barrons.com

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