NetApp (NTAP)
NetApp beat on both revenue and earnings and raised its full-year guidance. The stock first rose, then fell about 9%.
The weak point was free cash flow, which dropped 35% even as earnings and revenue rose. The open question: how well does NetApp turn its profits into cash? Expectations coming in were high, so a big beat-and-raise was already priced in.
Adjusted earnings per share came in at $2.58, above forecasts. Revenue topped $2 billion. The stock entered the day up more than 60% year-to-date and a bit over 50% year-over-year, so investors pulled back once they looked at the cash flow.
Outlook for the current quarter: adjusted EPS of $2.54 to $2.64, above consensus, and revenue between $2.03 and $2.08 billion, near where the last quarter landed. Management expects growth to continue. Some analysts cut price targets; those on the neutral side see the valuation as fully baked in.
Five Below (FIVE)
Five Below posted strong sales growth and raised full-year guidance for the second time this year. Shares rose about 4%.
Squishy toys drove it. The chain appeals to kids and tweens and works as a bargain spot, holding up well as retailers split into winners and losers. On a year-to-date basis the stock is up about 25%; year-over-year, up more than 60% with today's move.
Earnings per share came in at $1.68, better than expected. Revenue jumped 23% to more than $1.25 billion, also beating forecasts. Management pointed to strong demand for trending products like squishy toys. Five Below's edge is spotting a trend early and stocking up merchandise tied to it, which other value retailers are missing. The company is heading into back-to-school season, already underway in parts of the country, then the holidays. If it keeps beating expectations, shares should keep rising.
Victoria's Secret (VSCO)
Victoria's Secret beat earnings estimates and raised its full-year outlook, but sales came in short of expectations. Shares fell about 10%.
The stock entered the day with high expectations, up more than 40% year-to-date, possibly around 50%, and even higher year-over-year. The revenue miss was small, $1.61 billion versus $1.62 billion expected, but it was still a miss and got punished for it. Adjusted EPS came in much better than expected at 95 cents.
Part of the problem: a tariff refund boosted results, more than $140 million in refunds. A recurring worry this earnings season is what happens to the durability of earnings once those refunds stop, and how much of the growth is organic. This same question is showing up across many companies, not just retail. For now, investors are selling first and asking questions later.
