10
Companies to Watch
Q3 2023
Following our list of 50 Companies to Watch in January and a second-quarter update in April, we’re back with 10 for the third quarter based on scenarios from Bloomberg Intelligence analysts. The companies in the spotlight, including Adidas, Alphabet and Cheesecake Factory, span sectors and regions and come from a larger group of high-confidence Focus Ideas that BI analysts identify on an ongoing basis. Each scenario outlines important catalysts coming in the next few months that support our case.
For more information on Bloomberg Intelligence, please visit www.bloomberg.com/bi
Adidas
Outlook ☀️
As the sportswear giant transitions to new Chief Executive Officer Bjorn Gulden, Bloomberg Intelligence considers analysts’ expectations to be too conservative. The consensus is for a mid-single-digit sales decline this year and a 9% rebound in 2024, but BI says that underappreciates opportunities for Adidas in product innovation, expansion into local sports, celebrity partnerships and its digital push. To succeed in the second half of 2023, the company needs to clear excess inventory, focus on lifestyle category trends and regain momentum in China.
—Poonam Goyal
Data Sheet
Market cap
$33.5B
Estimated annual sales
$23B
Forecast sales growth
-6%
CEO
Bjorn Gulden
Legal name
Adidas AG
Triggers
- The Women’s World Cup in Australia and New Zealand in July and August offers a showcase for the brand.
- Second-quarter results in August should demonstrate that new initiatives to regain market share are underway.
Alphabet
Outlook ☀️
Many of the investors seeking to climb aboard the artificial intelligence bandwagon are focusing on the semiconductors needed for rapid innovation in the field. But Alphabet is also well positioned to reap the rewards. Generative AI is driving demand for the company’s cloud computing services, and ChatGPT is proving less of a threat to Google search than analysts have feared. Combined with recent cost cuts and strong YouTube growth, BI expects a positive surprise in profit margins for Alphabet through 2024.
—Mandeep Singh
Data Sheet
Market cap
$1572B
Estimated annual sales
$247.5B
Forecast sales growth
6%
CEO
Sundar Pichai
Legal name
Alphabet Inc.
Triggers
- Second-quarter results expected in late July should demonstrate continued enterprise demand from generative AI workloads.
- YouTube Shorts continues to drive ad impression expansion, and improved ad pricing augurs search-ad spending growth, even with a slight headwind on search volume from ChatGPT.
Bill
Outlook ☀️
Digital payment adoption is key for Bill, a leader in US business-to-business payments for small to midsize companies, where about 40% of transactions are still made by cash or check. While decelerating revenue growth and Intuit’s entry into the field will be challenges for Bill, BI analysts expect the company’s strong relationships with accounting firms and financial institutions position it to maintain its place at the top of the industry.
—Niraj Patel
Data Sheet
Market cap
$11.8B
Estimated annual sales
$1.2B
Forecast sales growth
36%
Chairman/CEO/Founder
Rene Lacerte
Legal name
Bill Holdings Inc.
Triggers
- Bill’s fiscal fourth-quarter results, expected in August, should portend rising profitability in 2024 and support the argument that Intuit is less of a threat than many fear.
- Intuit’s analyst day in September will likely highlight its comprehensive business-to-business payment offering, but BI expects little impact on Bill’s business.
Cheesecake Factory
Outlook ☁️
BI thinks Cheesecake Factory is serving up too much optimism for same-store sales growth. Analysts’ consensus is for an expansion this year of almost 5%, which would require a significant jump in the average unit’s volume, an already-high $12 million. These lofty growth expectations compare with 1% to 2% annualized expansion from 2010-19. The slowing economic backdrop makes disappointment even more likely.
—Michael Halen
Data Sheet
Market cap
$1.7B
Estimated annual sales
$3.5B
Forecast sales growth
6%
Chairman/CEO/Co-Founder
David Overton
Legal name
Cheesecake Factory Inc.
Triggers
- Consensus expectations are that second-quarter same-store sales growth will be 4.7%, but BI’s scenario analysis indicates the restaurant chain will miss that by 300 to 400 basis points when it reports its results in July.
Erste Group Bank
Outlook ☀️
Worries remain high across central and eastern Europe about repercussions from Russia’s invasion of Ukraine, but the region’s economic outlook is solid. BI expects this strength to drive resilient lending and improving profitability for Vienna-based Erste Bank. Consensus estimates for pretax profit look about 10% too conservative for the bank, which has business spanning Austria, Croatia, the Czech Republic and elsewhere in the region.
—Tomasz Noetzel
Data Sheet
Market cap
$14.8B
Estimated annual sales
$10.5B
Forecast sales growth
15%
CEO/Chief Retail Officer
Willibald Cernko
Legal name
Erste Group Bank AG
Triggers
- Second-quarter results on July 31 should showcase healthy credit growth and loan quality across the countries where the bank operates.
- Expectations for additional European Central Bank tightening even as the Czech central bank maintains policy rates should support higher lending margins.
Givaudan
Outlook ☁️
One of the world’s largest makers of flavors and fragrances, Givaudan faces some factors that BI thinks will make 2023 less rosy. Customer volumes are weakening, and stubbornly high inflation is keeping costs high. A sizable cut in spending on research and development—the lifeblood of ingredient companies—suggests fewer new product initiatives to drive sales growth.
—Duncan Fox
Data Sheet
Market cap
$29.7B
Estimated annual sales
$8B
Forecast sales growth
2%
CEO
Gilles Andrier
Legal name
Givaudan SA
Triggers
- Half-year results coming in late July will likely demonstrate deteriorating volumes and pricing power along with lower research and development investment.
Industrial & Commercial Bank of China
Outlook ☁️
China’s rate-cutting policy stands in sharp contrast to the actions of central banks in the US and Europe, creating a risk of disappointment for investors in Industrial Bank of China. As commercial and mortgage loan pricing declines, Beijing’s call for lower deposit rates may not yield much help near term. Taken together, these factors suggest a profit squeeze for ICBC that isn’t reflected in consensus estimates for 2023.
—Francis Chan
Data Sheet
Market cap
$227.7B
Estimated annual sales
$121.6B
Forecast sales growth
3%
Chairman/Executive Director
Chen Siqing
Legal name
Industrial & Commercial Bank of China Ltd.
Triggers
- First-half results due in late August risk showing further profit margin erosion.
- China’s prime loan rate appears likely to be cut further by the People’s Bank of China, given recent weak economic statistics.
Intuitive Surgical
Outlook ☀️
The use of robots by surgeons is on the rise, to the point where it’s now the standard of care in prostatectomies and weight-loss procedures. With its Da Vinci surgical system, Intuitive is a prime beneficiary from this shift. BI’s scenario analysis points to an estimated 20% revenue growth in 2023 for the company, versus a consensus of 15%.
—Matthew Henriksson
Data Sheet
Market cap
$115.4B
Estimated annual sales
$7.1B
Forecast sales growth
14%
CEO
Gary Guthart
Legal name
Intuitive Surgical Inc.
Triggers
- Second-quarter earnings in July look set for another better-than-consensus result, propelled by strong procedure growth.
- The company is expected to launch its next-generation robotic system during the third or fourth quarter.
KE Holdings
Outlook ☁️
Analysts’ consensus points to a V-shaped recovery in the Chinese housing market, driving a 10%-plus recovery in new-home transaction revenue for China’s largest online real estate agent this year. BI expects something more like an L-shaped trajectory: Developers continue to suffer from restrained financing, and housing supply and demand remain weak, leading to a 30% miss in 2023 earnings for KE.
—Kristy Hung
Data Sheet
Market cap
$20.2B
Estimated annual sales
$10.9B
Forecast sales growth
21%
Chairman/CEO/Executive Director/Co-Founder
Peng Yongdong
Legal name
KE Holdings Inc.
Triggers
- First-half revenue, expected to be released in mid-August, is poised to fall short of consensus estimates.
- A new property support package in China threatens lower agent commissions on transactions, after they were already capped last year in an effort to reduce costs for purchasers.
Vinci
Outlook ☀️
Investment in the energy transition and a recovery in travel look set to power better-than-expected results for the French infrastructure company involved in airports, toll roads and construction. Decarbonization policy initiatives in Europe, the US and beyond are spurring revenue growth, and passenger traffic is rebounding at London Gatwick, Vinci’s largest airport concession. BI’s analysis points to a surprisingly positive operating profit of more than 15% for this year and next.
—Sonia Baldeira
Data Sheet
Market cap
$69.8B
Estimated annual sales
$72.1B
Forecast sales growth
7%
Chairman/CEO
Xavier Huillard
Legal name
Vinci SA
Triggers
- Second-quarter results in July will indicate how well the airport and energy transition businesses are progressing.
Illustrations by Asya Demidova
Sales figures are for 2023.
Market value as of June 20, 2023.