28 March – 1 April | Lululemon, BioNTech and Inflation

March has been a volatile month, but we’re almost on the other side! Now it’s time to look ahead at the coming weeks. One analyst at investment bank Stifel thinks the S&P 500 will rise 7% by the end of April. However, we’ve got a complicated few weeks before we get there. Even the best analysts still don’t know how to navigate the geopolitical tensions in Europe, so it’s important to remember that the markets can remain unpredictable in the current conditions.

This week, let’s look at inflation data and two stocks that will report earnings.

Can Lululemon beat expectations (again)?

Lululemon, the favourite brand among yogis and pilates aficionados, will report earnings for the fiscal fourth quarter on Tuesday, March 29.

Lululemon has beaten expectations for the last three quarters in a row. Can they do the same again? We’ll find out soon. Wall Street expects revenue to grow 23% from a year earlier, while earnings-per-share should climb 27%.

Lululemon has also embraced some new product ideas recently. The brand has just launched its very first range of sneakers: a move that could increase revenue in the coming quarters. And if that wasn’t enough, Lululemon just acquired Mirror: a company that sells an interactive mirror-screen to level up your workouts.

Is BioNTech healthy?

You might recognise the BioNTech name for its recent collaboration with Pfizer on the Covid-19 vaccine. The German pharmaceutical company will report its earnings on Wednesday March 30.

The company has beaten analyst expectations recently thanks to the global vaccine rollout. And there could be more to come. During the fourth quarter, the FDA (American drug agency) approved the vaccine for 12-17 year olds, and to 5-11 year olds in some cases. Finally, BioNTech/Pfizer are also working on a vaccine candidate specific to the Omicron variant.

Despite the promising developments, shares of BioNTech have plunged 41% since the start of the year. That’s quite a crash when you consider the pharmaceutical industry as a whole is down only 19.2%. Could this week’s earnings call spark a turnaround? Analysts expect earnings-per-share of $8.12, which would be a 334.22% growth year-on-year. BioNTech’s revenue could reach $4.37 billion, an increase of 960.53% compared to the previous quarter.

The inflation situation

Last week, a US Federal Reserve official announced that inflation, already at historic highs, could accelerate through the end of 2022 with an estimated peak at the start of winter in the US.

Here in the eurozone, inflation rose by 5.9% (year-over-year) in February, and the latest estimates for March will be published on Wednesday 30 March. It should remain more or less unchanged, hovering around 5%. The European Central Bank has also revised its inflation forecasts higher. They originally estimated 3.2% for 2022 but it’s now 5.1%. As for 2023, they estimated 1.8% but it’s now 2.1%.

So, how does this impact the market? First, any company that relies on raw materials will be affected, such as oil companies (Shell, Chevron, ExxonMobil) and gas companies in Europe such as Engie in France. 

Agri-food companies are also struggling as the price of materials rise sharply. The price of wheat, for example, has increased by 37%, partly because Russia and Ukraine together account for 30% of global wheat exports. The price of rapeseed and soy is also rising sharply.

Many of these companies will pass on the rising prices to customers. Two leading food companies, Archer Daniels Midland and Bunge, have done exactly this and managed to reassure investors. Their share prices have risen in March as a result.

However, it’s a trickier situation for companies like Danone which depends mostly on dairy products. Danone requires large amounts of cereal crops to feed its livestock, which is costing them more in raw materials. But they have less room to raise prices for customers. The company’s shares are down 6% recently. 
You’ll probably hear more and more about inflation over the coming months. But how can you invest during periods like this? Well, there are ETFs available specifically for this purpose. On BUX Zero, you can invest in the USD Inflation-Linked Bonds ETF (Lyxor) which tracks inflation-linked Treasury bonds. They’re designed to offset the rise in inflation. Although, of course, returns are not guaranteed

Economic and earnings calendar

Monday – EU bond sale. Quarterly figures from Quadient.

Tuesday –  Consumer Confidence Index in Germany (April) and France (March). Quarterly figures from Micron, Lululemon.

Wednesday – Business Confidence Index in the Netherlands and Spain (March). Inflation rate in Spain (March). Economic and industrial sentiment in the euro zone (March). Inflation estimate for the euro zone (March). Inflation rates in Belgium and Germany (March). Weekly unemployment figures in Germany (March). Quarterly figures from BioNTech, Exor.

Thursday – Inflation rate in France (March). Unemployment rate in Germany (March) and in the euro zone (February). Quarterly figures from Blackberry.

Friday – Manufacturing PMI in the Netherlands, Spain, France, Germany, Eurozone and US (March). Year-on-year inflation rate in the euro zone (March). US unemployment rate (March).

We’ll be back next week for another edition of the BUX Breakdown. In the meantime, have a great week on the markets!

The BUX Breakdown was written by Clémentine Pougnet.

All views, opinions, and analyses in this article should not be read as personal investment advice and individual investors should make their own decisions or seek independent advice. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication.