Chewy Q1 Earnings Preview: Analyst Bullish On Pharmaceutical Growth, Will Company Beat EPS For Thirteenth Straight Quarter?

Chewy Inc. (CHWY) is expected to report Q1 revenue of $3.08 billion and EPS of $0.19, compared to guidance of $3.06-$3.09 billion revenue and $0.30-$0.35 EPS. Analysts are focused on the growth of Autoship customers and expansion into high-margin segments like pharmacy and advertising, with JPMorgan maintaining an Overweight rating and a $36 price target, citing recurring revenue and rising profitability. Several other firms adjusted their ratings and price targets, and the stock, up 34% YTD, closed Tuesday at $45.46.

Analysis

Chewy Inc. is set to announce its first-quarter financial results, with analysts forecasting revenue of $3.08 billion, representing an increase from $2.88 billion in the prior year's first quarter and aligning with the company's guidance of $3.06 billion to $3.09 billion. Notably, the consensus earnings per share (EPS) estimate is $0.19, which is below Chewy's own guidance of $0.30 to $0.35 per share, despite a strong history of exceeding EPS expectations for twelve consecutive quarters and revenue estimates in seven of the last ten. The company's growth is significantly driven by its Autoship program, which constituted over 80% of sales and grew 21.2% to $2.62 billion in the fourth quarter, alongside strategic expansion into higher-margin areas like pharmacy and sponsored advertisements. JPMorgan maintains an Overweight rating and a $36 price target, citing this recurring revenue base, improving profitability, and expecting 104,000 net customer additions in Q1 with a 6% year-over-year net sales growth, further supported by a 4% year-over-year increase in web traffic per SimilarWeb data. Other analysts, including Mizuho (downgrade to Neutral, PT raised to $47), UBS (Neutral, PT raised to $43), Jefferies (downgrade to Hold, PT raised to $43), and Barclays (Overweight, PT raised to $50), have also adjusted price targets upwards, indicating a generally positive outlook despite some rating changes. Chewy's stock, trading at $45.46 after a 2.3% decrease on Tuesday, has demonstrated substantial gains, up 34% year-to-date and over 100% in the last year. Key focus areas for the upcoming report will be the continued strength of Autoship, growth in high-margin segments, and any updates to full-year guidance.

Key Decisions for Investors

• Investors should closely monitor the Q1 report for continued momentum in Autoship customer sales and evidence of successful expansion into high-margin segments like pharmacy and advertising, which are crucial for sustaining profitability.
• Pay particular attention to the reported EPS; a figure beating the company's own guidance of $0.30-$0.35, rather than just the analyst consensus of $0.19, would be a significant positive catalyst given the company's consistent beat history.
• Carefully assess management's commentary on full-year guidance and progress on international expansion, as these will be key indicators for future growth potential and market sentiment, especially considering the stock's significant recent run-up.