AREC - Stocks To Watch: Bright Lights On Big Banks

2023-03-25 09:30:00 ET

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Banks will dominate the headlines again next week with the earnings and economic calendars light. The Senate Banking Committee will hold a hearing on bank failures, with the witness list including FDIC Chairman Martin Gruenberg, Federal Reserve Vice Chairman Michael Barr, and Treasury Undersecretary Nellie Liang. While some reports indicate stress on bank deposits is less severe than what was implied by the recent price action in bank stocks, the trading around Deutsche Bank (DB) indicates investors are still on a hair trigger. Seeking Alpha contributor Logan Kane has a key breakdown on if the Deutsche Bank (DB) should be considered a canary in the coal mine or sell-off based on irrational fear. Taking a broader view, Goldman Sachs economists expect the stress on small and midsize banks to result in tighter lending standards, which they estimate will impose a 0.25 to 0.50 percentage point drag on GDP growth or the equivalent to the impact of 25-50 basis points of rate hikes. Against that backdrop, Federal Reserve officials will be back out on the street making speeches again. Even though Federal Reserve Chairman Jerome Powell reiterated that rate cuts are not the base case scenario for the central bank, Treasury yields and futures markets appear to be pricing in several rate cuts for later in the year and a terminal rate no higher than 5.25% to 5.50%. The economic calendar for the week ahead includes updates on the Case-Shiller house price index, pending home sales, GDP, and the closely-watched PCE price index.

Earnings spotlight: Monday, March 27 - Carnival (CCL) and PVH (PVH). Read Seeking Alpha contributor Stone Fox Capital's breakdown on what to expect with Carnival's report.

Earnings spotlight: Tuesday, March 28 - Lululemon (LULU), McCormick (MKC), Walgreens Boots Alliance (WBA), Micron (MU), and Dave & Buster's Entertainment (PLAY). Read Seeking Alpha contributor Quad 7 Capital's earnings preview on Micron.

Earnings spotlight: Wednesday, March 29 - RH (RH), Cintas (CTAS), Paychex (PAYX), and EVO Payments (EVOP). Read analysis on the upside for Cintas from Seeking Alpha contributor Allen Greathouse.

Earnings spotlight: Thursday, March 30 - EVgo (EVGO), BlackBerry (BB), Rumble (RUM), and Duck Creek Technologies (DCT). Ahead of the BlackBerry earnings, Seeking Alpha contributor Dilantha De Silva crunches the numbers on what the company's IP portfolio is worth.

Volatility watch: Luminar Technologies (LAZR) and Faraday Future Intelligent Electric (FFIE) head into the week with a high percentage of short interest outstanding. Options trading has spiked over the last week again on First Republic Bank (FRC) and Silvergate Capital (SI). Keep an eye on Virgin Orbit (VORB) with a rescue deal said to be imminent and Deutsche Bank (DB) with weekend drama possible.

Dividend watch: The list of expected dividend changes is very light. TJX Companies (TJX) is forecast to boost its quarterly payout to $0.3325 from $0.2950 and Glacier Bancorp (GBCI) is forecast to hike its payout to $0.34 from $0.33. See Seeking Alpha's list of Quick Dividend Stock Picks.

Spinoffs watch: The IPO and SPAC markets have almost ground to a halt, but there are a number of spinoffs on the way that could give investors a crack at a new company. Kellogg (K) plans to spin off its North American cereal business, Johnson & Johnson (JNJ) will set free its consumer health segment, BorgWarner (BWA) plans to spin off its internal-combustion engine operations, Madison Square Garden Entertainment (MSGE) intends to separate the Live Entertainment business, American Resources (AREC) has filed for a planned spinoff of its ReElement Technologies division into a standalone public company, and industrial company Crane Holdings (CR) is splitting in two via a spinoff. The timing of most of the spinoffs is still uncertain.

Lululemon earnings preview: Lululemon (LULU) will report earnings on March 28 with analysts calling for a revenue tally of $2.70B and an EPS mark of $4.26. The Canada-based retailer guided for a gross margin in the quarter of between 90 and 110 basis points due in part to markdown activity, although there have been some indications in recent weeks that promotional activity has been pulled back. On Wall Street, Citi issued a 30-day positive catalyst watch on LULU ahead of the report. Wells Fargo also turned incrementally more bullish with the stock seen trading at a discount to its history of earning a high-growth multiple. On Seeking Alpha, contributors Felix Fung and Geoffrey Seiler have also taken bullish stances on Lululemon (LULU) ahead of earnings day. See the consensus estimates on LULU and earnings history.

Corporate events: Vail Resorts (MTN) will hold an investor conference on March 28. The event is being circled by analysts as a potential catalyst with recent ski visitor data trending strong and snowfall still high across most of Vail's resorts. Intel Corporation (INTC) will hold an investor webinar on March 29 to provide an update on the company's Data Center and AI business. The tech giant also plans to review its data center product roadmap. Rogers Corporation (ROG), agilon health (AGL), and Conduent Incorporated (CNDT) all have investor events scheduled for March 30 that could swing shares. Check out Seeking Alpha's Catalyst Watch for more events scheduled for next week.

Quant ratings: Stocks with recent quant rating changes include United States Steel (X) to Strong Buy from Hold, GameStop (GME) to Buy from Hold, and Visteon (VC) to Buy from Hold. See the stocks with the very highest rated Seeking Alpha Quant Ratings .

Notable conferences: The most interesting conference of the week might be the Jefferies eVTOL Summit with appearances expected from Blade Air Mobility (BLDE), Vertical Aerospace (EVTL), EHang Holdings (EH), Amprius Technologies (AMPX), Archer Aviation (ACHR), and Joby Aviation (JOBY). Other major conferences include Stifel 2023 CNS Days, the New Street Research Fiber to the Future Conference, the J.P. Morgan Retail Round-Up Conference, the H.C. Wainwright Autoimmune & Inflammatory Disease Conference, and the Maxim Group Electric Vehicle & Auto Tech Virtual Conference.

Box office: The U.S. box office is set for a strong weekend with Lions Gate Entertainment's (LGF.A) John Wick: Chapter 4 forecast to bring in $65M to $70M. The movie also debuts during the weekend in 71 other territories worldwide, including the U.K., Germany, Australia, Italy, France, Spain, and Mexico. The biggest news for the movie theater sector may be the report that Apple (AAPL) will increase its push into original entertainment content by investing $1B annually into movies that will debut in theaters. Read more about Apple's movie goals .

Barron's mentions: The publication turned the spotlight on Dollar General (DG) after digging out that four states have fined the retailer a total of more than $1M for price inaccuracies in 2021 and 2022 after a wave of consumer complaints. The rapid expansion of Dollar General is noted to have also led to a variety of operational and regulatory issues including the pricing errors. Amid the banking crisis, preferred banks stocks are called an attractive way for investors to keep exposure to the sector. Preferreds are noted to offer a lower-risk way to invest in banks than common shares, which could be especially appealing due to the uncertainty with bank stocks. The iShares Preferred and Income Securities (PFF) is a catch-all for bank preferred stocks and yields 6.58%. In the healthcare sector, Humana (HUM) gets callout as an attractive option. Humana appears to be on track to exceed profit targets and recently announced that it would exit the employer-based insurance business to free cash to invest in more profitable operations. At the moment there is strong bipartisan support to keep Medicare premiums elevated, which is a positive for Humana.

Sources: EDGAR, Bloomberg, CNBC, Reuters

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