W - Stocks To Watch: Spotlight On Inflation Reads UPS Disney Alibaba Wayfair And Kellogg

2023-08-05 11:00:00 ET

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The pace of earnings slows down in the week ahead, although powerhouse reports and potentially sector-rattling updates are due in from Skyworks Solutions (SWKS) ( preview ), United Parcel Service (UPS), Disney (DIS) ( analysis ), and Alibaba (BABA) ( preview ). So far, just under 80% of S&P 500 firms have beaten Q2 consensus EPS estimates, while only 59% of firms have beaten revenue expectations. That current percentage of revenue beats is the lowest level in three years. The economic calendar features fresh updates on inflation, with the July Consumer Price Index report due out on August 10 and the Producer Price Index report set to be released on August 11. The bond market could also be in the spotlight next week, with the auctions of three- and 10-year notes and 30-year bonds going off at higher amounts than originally forecast and yields generally on the rise. Wayfair (W) and Kellogg (K) hold key investors events, while the Def Con hacker convention will give AI systems a serious test on vulnerabilities.

Earnings spotlight: Monday, August 7 - Tyson Foods (TSN), Lucid Group (LCID), Skyworks Solutions (SWKS), Paramount Global (PARA), and Palantir Technologies (PLTR).

Earnings spotlight: Tuesday, August 8 - Eli Lilly (LLY), United Parcel Service (UPS), Coupang (CPNG), Li Auto (LI), and Datadog (DDOG).

Earnings spotlight: Wednesday, August 9 - Disney (DIS), Trade Desk (TTD), Roblox (RBLX), Wynn Resorts (WYNN), and Brookfield Asset Management (BAM).

Earnings spotlight: Thursday, August 10 - Alibaba (BABA), US Foods (USFD), and Ralph Lauren (RL).

Earnings spotlight: Friday, August 11 - Spectrum Brands (SPB) and Soho House (SHCO)

Volatility watch: Short interest on Fisker (FSR) and Blink Charging (BLNK) are at high levels heading into their earnings reports. Options trading volume is elevated on Yellow (YELL) and AEye (LIDR) once again.

IPO and spinoff watch: Vitro Biopharma (VTRO) is expected to price its $10M IPO next week after a long delay. The biotech firm is developing stem cell based treatments for various serious medical conditions. The quiet periods expire on Apogee Therapeutics (APGE) and Sagimet Biosciences (SGMT), which will free up analysts to post ratings.

Dividend watch: Companies projected to boost their quarterly dividend payouts include Nordson (NDSN) to $0.74 from $0.65, Badger Meter (BMI) to $0.25 from $0.23, and Martin Marietta (MLM) to $0.70 from $0.66. See Seeking Alpha's list of Quick Dividend Stock Picks.

UPS preview: United Parcel Service (UPS) will report Q2 earnings on August 8, with analysts anticipating revenue of $23.1B and EPS of $2.50 to be churned up by the shipper in the quarter. UPS is expected to report a slight decrease in U.S. package revenue deliveries, and average revenue per package is expected to be $14.04. An operating margin of 12.50% is anticipated, which would mark a sequential improvement from the 11.1% level seen in Q1. The biggest focus of the earnings report and conference call with management could be an update on the expected impact of the new labor contract with the Teamsters union. While a costly strike with the Teamsters was averted, UPS could now face a financial headwind if higher labor costs are not easily absorbed or passed on to customers. Several Wall Street firms turned more cautious on UPS ahead of earnings day, including Credit Suisse with a downgrade to a Neutral rating from Outperform. Options trading implies a share price swing of 5.5% after UPS reports. UPS rallied 3.7% after its Q1 earnings report. The stocks that correlate closest to UPS on earnings day are Expeditors International (EXPD), FedEx (FDX), and Hub Group (HUBG).

CPI preview: The consumer price index report for July will be released. Economists forecast headline CPI will be up 0.2% month-over-month and be up 3.2% year-over-year. Core CPI is forecast to rise 0.2% month-over-month and be up 4.8% from a year ago to match the pace from June. For core inflation, Bank of America forecast a 0.1% month-over-month rise, which would result in the year-over-year rate declining by two-tenths to 4.6% to mark the lowest rate of inflation since September of 2021. "Moreover, it would also result in the three-month annualized rate slowing to 3.0% from 4.1% in June, a marked improvement from the 6.1% annualized pace last July," noted the firm. The CPI numbers will factor into the latest projections on the direction of the Federal Reserve. At publication time, fed funds future trading implied only a 14% probability of rate hike at the September FOMC meeting.

Spotlight on Wayfair: Online retailer Wayfair (W) will hold its Investor Day with financial analysts and institutional investors at its Boston headquarters on August 10. Members of Wayfair's senior leadership team will present an updated view of the company's business strategy, followed by a live Q&A. The event follows closely after Wayfair's (W) strong Q2 earnings report. The outlook from Wayfair was strong enough to attract a double upgrade from Wells Fargo. Gordon Haskett also pointed out that the retailer significantly pulled back on promotional activity in June from April/May levels. The Investor Day presentation from Wayfair is expected to focus on long-term targets. Bank of America expects Wayfair (W) management to lay out a framework for long term growth that includes achieving sustainable mid-single-digit EBITDA margins.

Corporate events: Kellogg Company (K) will host an Investor Day on August 9 for institutional investors and analysts at the New York Stock Exchange. Ahead of the planned company split into two businesses, the presentations will include management teams for both Kellanova and WK Kellogg Co. outlining each company's respective strategy, capital structure, capital allocation priorities, and financial outlook. Later in the week, the Def Con hacker convention has more potential stock market implications than in the past. Five teams of hackers will be in a sanctioned competition to successfully remotely infiltrate and hijack a U.S. government satellite while it's in space. In addition, companies such as OpenAI, Microsoft (MSFT), Google (GOOG), Nvidia (NVDA), and startups Anthropic, Hugging Face, and Stability AI have all agreed to provide their AI models for a hacking test. Def Con 2023 is being called the first instance of a live hacking event of a generative AI system at scale. See a detailed list of key events for next week in Seeking Alpha's Catalyst Watch .

Conference schedule: The conference that may turn the most heads next week could be the JPMorgan Auto Conference. The two-day JPMorgan Auto Conference will include presentations from Westport Fuel Systems (WPRT), AEye (LIDR), Carvana (CVNA), Aptiv (APTV), Gentherm (THRM), Stoneridge (SRI), Arbe Robotics (ARBE), BlackBerry (BB), Cepton (CPTN), Innoviz Technologies (INVZ), American Axle & Manufacturing (AXL), Hertz Global (HTZ), Luminar Technologies (LAZR), Dana (DAN), Adient (ADNT), and Aeva Technologies (AEVA). The JPMorgan event will also feature executives with Ford Motor (F) taking part in a fireside chat to discuss continued delivery of the Ford+ plan to grow and create value in a new era of connected and electric vehicles. Other conferences scheduled for the week include the KBW Keefe, Bruyette & Woods Community Bank Investor Conference, BTIG Biotechnology Conference, Needham Virtual Industrial Tech, Robotics, & Clean Tech 1x1 Conference, Wedbush PacGrow Healthcare Conference, and Oppenheimer 26th Annual Technology, Internet & Communications Conference.

Quant ratings: Stocks with recent quant rating changes include Dorian LPG (LPG) to Strong Buy from Hold, Nestlé S.A. (NSRGY) to Strong Buy from Hold, and Bloomin' Brands (BLMN) to Hold from Buy. See the stocks with the very highest rated Seeking Alpha Quant Ratings.

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