Wolfe Research Flags Yum Brands, Nike, Chewy And Megacap Tech Stocks For Earnings Risk

According to CNBC, Wolfe Research said some of the market's biggest stocks could be vulnerable to earnings disappointments and expects choppy trading to continue amid an uncertain macroeconomic backdrop. Chief investment strategist Chris Senyek wrote last Wednesday that earnings misses may keep triggering a larger number of stock blow-ups, and the firm's screen flagged Yum Brands, Nike, Chewy, Amazon and Meta Platforms on low earnings-quality scores. Wolfe said Yum Brands had an Earnings Quality score of 10 and cited M&A activity and a recent CFO change as warning signs. The firm also pointed to Taco Bell's sales hit from a cyclospora outbreak linked to shredded iceberg lettuce, after Yum reported mixed second-quarter results and said trends began to improve. Nike received an Earnings Quality score of 17, with Wolfe highlighting a CFO change as an additional risk. JPMorgan downgraded Nike to underweight from neutral earlier this month, and analyst Matthew Boss said the company's "Win Now" turnaround plan is likely to weigh on financial results for the next few years. Chewy scored 2 on Wolfe's scale, with the firm citing M&A activity, a CFO change earlier this year and a wide gap between GAAP and non-GAAP earnings. Wolfe said Chewy's non-GAAP earnings per share were a median 146% higher than GAAP earnings over the past 12 quarters. The warning comes ahead of Chewy's fiscal second-quarter results due before the market opens on Wednesday, Sept. 9, as the company expands beyond its core retail business and pursues its planned purchase of veterinary-clinic operator Modern Animal. Wolfe's screen also showed Amazon and Meta Platforms with Earnings Quality scores of 5 each.