The end of the Q1 2025 earnings season is approaching.
Tonight is the last big report. Lululemon $LULU is scheduled to report earnings after the close today, and we're expecting fireworks. Its Q4 2024 earnings reactions (~+16%) was one of the best ever.
The market is expecting the company to report revenues of $3.58B and earnings per share of $5.85.
As we're writing this, the stock is trading at its high of the day (~+3%).
Stay tuned...
For now, let's talk about the earnings reactions from Wednesday.
Here are the latest earnings stats from the S&P 500 👇
*Click the image to enlarge it
Cintas $CTAS had the best earnings reaction. They reported revenues of $2.61B versus the $2.60 estimate and earnings per share of $1.13 versus the $1.06 estimate.
Paychex $PAYX had the 2nd-best earnings reaction. They reported in-line revenues and earnings per share of $1.49 versus the $1.48 estimate.
Finally, Dollar Tree $DLTR also had a positive earnings reaction. They reported revenues of $5B versus the $8.24 estimate and earnings per share of $2.29 versus the $2.20 estimate.
Now, let's dive into the data and look at the technical setups 👇
CTAS closed at the low of the day:
Cintas reported a double beat and was rewarded for it. The price closed up nearly 6% with a reaction score of 5.22.
The company achieved its highest gross margin ever during the quarter. It's now over 50%.
In addition to the great quarter, the management team raised its forward guidance for 2025.
Everything about this report was fantastic.
However, this wasn't enough to appease the market. Has all of this good news already been baked into it?
We think so.
Q4 2024 was what tipped us off. The company reported a fine quarter, but the stock had its worst earnings reaction since 2009. Yuck!
We think the path of least resistance is sideways for the foreseeable future. A close below 180 would shift our bias to the downside.
PAYX had its 3rd consecutive positive earnings reaction:
Paychex reported mixed results and closed near its all-time high. The price rallied over 4% with a reaction score of 5.07.
The company expanded its operating margin by 180 basis points year-over-year. This was driven by their investments in automation and technology, which are beginning to pay off.
They also announced a definitive agreement to acquire Paycor. This solidifies their market position, and the market loves it.
The stock is emerging from a multi-year accumulation pattern and appears poised to continue climbing higher.
If PAYX is above 140, the path of least resistance is higher for the foreseeable future.
DLTR has been punished for 7 of its last 11 earnings reports:
Dollar Tree reported mixed results, but the market rewarded it. The price rallied over 3% with a reaction score of 2.94.
The company announced the sale of Family Dollar for $1B. They bought it in 2015 for $9B.
We think this will be written about in textbooks one day as a great example of a failed acquisition.
This stock is a total disaster, and we think it's only a matter of time before it resolves this multi-decade distribution pattern.
The path of least resistance for DLTR will shift from sideways to lower if and when it closes below 60.
