DAL - 7 Earnings Reports to Watch Next Week
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Editor’s Note: This article is regularly updated to bring you the latest information.
Earnings season begins next week at an important time for the market. The Dow Jones Industrial Average and S&P 500 are at all-time highs; the NASDAQ Composite is on its way after recovering most of a late February/early March selloff.
The question seemingly would be: can corporate earnings keep the momentum going? But, of course, this same exact scenario has held for years now.
With the notable exception of last year’s plunge, driven by the novel coronavirus pandemic, earnings have been good enough to keep major indices moving higher. And even last year’s recovery clearly got help from better-than-expected (or worse-than-feared) corporate earnings reports.
Will this time be different? It doesn’t seem likely. A return to normalcy looms. Consumer spending has held up reasonably well, and first-quarter earnings may well show improving sentiment for business customers as well.
Overall, history may well repeat. And if it does, these seven companies will kick earnings season off the right way.
- Aphria (NASDAQ:APHA)
- JPMorgan Chase (NYSE:JPM)
- Wells Fargo (NYSE:WFC)
- Bed, Bath & Beyond (NASDAQ:BBBY)
- PepsiCo (NASDAQ:PEP)
- Taiwan Semiconductor (NYSE:TSM)
- Delta Air Lines (NYSE:DAL)
Now, let’s dive in and take a closer look at each one.
Earnings Reports to Watch: Aphria (APHA)
Earnings Report Date: Monday, April 12, before market open
While major indices have performed well in recent weeks, a few ‘hot’ sectors have seen pullbacks. The cannabis space is a prime example: the ETFMG Alternative Harvest ETF (NYSEARCA:MJ) trades off 35% from February highs.
Admittedly, those highs got some help from Reddit-driven rallies in a few cannabis names, APHA among them. But earnings reports from Canopy Growth (NASDAQ:CGC) and Aurora Cannabis (NYSE:ACB) clearly popped the bubble. More recently, Sundial Growers (NASDAQ:SNDL) has faded by one-third since its fourth-quarter release on March 17.
What we saw in those reports was a clash between optimism toward the future — particularly given hopes for U.S. legalization — and still-soft results in the present. None of the major Canadian players has yet been able to change that trend.
Aphria has a chance to do so ahead of its pending merger with Tilray (NASDAQ:TLRY). A big quarter should move both stocks — and potentially the entire sector as well.
JPMorgan Chase (JPM)
Earnings Report Date: Wednesday, April 14, before market open
Financials are roaring into earnings next week. JPM stock, for instance, is just off all-time highs.
The driver has been suddenly higher interest rate expectations. Big banks like JPMorgan Chase and Bank of America (NYSE:BAC), in particular, have seen narrow lending spreads for years now. Higher interest rates means higher spreads and, at least in theory, higher profits going forward.
The task for banking executives next week is relatively simple: keep that optimism intact. There are some stumbling blocks.
Unemployment remains high, raising some modest concern about default rates. Losses related to the implosion of Archegos Capital may reach as high as $10 billion. Credit Suisse (NYSE:CS) already has booked a $4.7 billion loss, but other institutions may soon disclose their own hits.
So there are some worries. But, again, there’s a lot of optimism as well. JPMorgan Chase earnings should show investors which side to take.
It’s long been my choice for the best big bank, and likely has the most influential report. JPMorgan Chase’s broad reach and long history of solid execution (and earnings beats) means any stumbles usually are driven by external factors.
As long as JPMorgan Chase is humming along in this uncertain environment, other financials at least have a chance to do the same.
Earnings Reports to Watch: Wells Fargo (WFC)
Earnings Report Date: Wednesday, April 14, before market open
Of course, no matter the environment, banks have to execute. On that front, Wells Fargo has long succeeded.
WFC has been the worst-performing of the big bank stocks — until recently. Shares have rallied more than 80% just since late October. The improving rate environment, combined with the massive room for internal improvement after a series of scandals, has made WFC stock a popular pick.
Given Wells Fargo’s still-shaky credibility, it would not take much to dent that optimism. And so, particularly after the steep rally, Wells needs something close to a flawless quarter.
That kind of report would support hopes that the bank can keep catching up to the likes of JPMorgan Chase and BofA. Anything less, and investors rightly will wonder if the long-running execution problems inside Wells will negate the improvements outside its walls.
Bed, Bath & Beyond (BBBY)
Earnings Report Date: Wednesday, April 14, before market open
Bed, Bath & Beyond obviously isn’t the biggest retailer out there. But its concepts do have a broad demographic reach. And any information on the retail front is valuable at this point.
After all, this remains an unprecedented situation for brick-and-mortar retailers. Yes, stores are reopening, but the market share gains e-commerce companies made in 2020 likely aren’t going to reverse.
Investors still see potential: BBBY stock itself has tripled since July. And Wall Street expects solid earnings next fiscal year.
That said, this also is a company that had more than its share of struggles before the pandemic arrived. BBBY’s gains thus highlight the risk to the broader rally in retail: that investors and analysts are ignoring the long-term structural problems and instead focusing on the short-term benefits from a return to normalcy. Bed Bath & Beyond earnings could show that the optimism is correct — or make that risk more apparent.
Earnings Reports to Watch: PepsiCo (PEP)
Earnings Report Date: Thursday, April 15, before market open
For investors trying to gauge where, exactly, the economy sits at the moment, Pepsi earnings should be useful.
After all, the two core businesses — beverages and snacks — serve both grocery stores and restaurants. There are obvious questions for both markets.
On the grocery side, food stocks generally have struggled for months now. The quick and steep boost from initial lockdowns has faded, leaving questions about what performance looks like in 2021 and beyond. In the away-from-home channel, most restaurants and venues still aren’t operating at full capacity. Results should improve sequentially but still look weak relative to past trends.
Pepsi earnings should give color on both channels. That color will be enormously valuable at this point.
Taiwan Semiconductor (TSM)
Earnings Report Date: Thursday, April 15, before market open
Taiwan Semi might have the most important earnings report next week. Amid a chip shortage, the company is ramping its capital expenditures to build capacity. That capacity will be utilized for the likes of Advanced Micro Devices (NASDAQ:AMD) and Apple (NASDAQ:AAPL), who is believed to be Taiwan Semi’s largest customer.
Despite the shortage and the huge investments, some investors aren’t quite convinced. TSM stock has pulled back since February, and has lagged the Philadelphia Semiconductor Index (NASDAQ:SOXX) so far this year. AMD stock trades below early August levels; AAPL stock has been flattish since September.
There’s an opportunity here for TSM stock to run to new highs after a big quarter. There’s room for a bullish read-across to AMD and AAPL as well.
Of course, there’s risk. Semiconductor stocks for the most part have been roaring for months now, thanks to the myriad long-term trends (autonomous vehicles, Internet of Things, etc.) that should drive significant demand. Taiwan Semi is one of the few companies that could cast doubt on that thesis with any kind of stumble.
In other words, it doesn’t take a position in TSM stock to keep a close eye on Taiwan Semi earnings.
Earnings Reports to Watch: Delta Air Lines (DAL)
Earnings Report Date: Thursday, April 15, before market open
The first of the major airlines to report, Delta will set the tone for a sector that’s benefited from the so-called “reopening trend.”
The U.S. Global Jets ETF (NYSEARCA:JETS) has rallied 60% since late October. DAL stock has done a bit better. Investors not only see normalcy on the horizon, but a massive short-term boost as vaccinations spread and stuck-at-home consumers pay up big to venture out.
That thesis makes some sense. But valuations are a concern. DAL stock, for instance, now is down less than 15% from pre-pandemic levels. That’s with the airline — like its peers — taking on billions of debt simply to make it through 2020.
At this point, recovery thus probably isn’t quite enough to keep the rally going much longer. U.S. airlines need to give investors more. Delta has the first opportunity to do so.
On the date of publication, Vince Martin did not have (either directly or indirectly) any positions in the securities mentioned in this article.
After spending time at a retail brokerage, Vince Martin has covered the financial industry for close to a decade for InvestorPlace.com and other outlets.
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