InvestorPlace - Stock market News, Stock Advice & Trading Tips
Once again, earnings season is here. And, once again, major market indices are at all-time highs — making these earnings reports to watch even more enticing.
It’s deja vu all over again, as the saying goes. For most of the past 11 years, stocks have kept rising, and earnings reports have been good enough to keep the rallies intact.
At the moment, this market doesn’t look much different. Big banks kicked off earnings season this week with a slew of strong reports. The economy is in better shape than might be expected at this point. Despite selloffs in a few ‘hot’ sectors, and another brief bout of interest rate worries, investor sentiment too remains positive.
Basically, corporate earnings just need to keep the party going. That’s particularly true over the next few weeks, as the earnings calendar features some of the world’s largest companies across the market’s biggest and most important sectors. They’re the kind of companies whose reports can move entire sectors — and, in a few cases, perhaps the entire market.
For the next few weeks, earnings reports will take center stage. For next week, these are the seven earnings reports to watch:
- Coca-Cola (NYSE:KO)
- IBM (NYSE:IBM)
- Johnson & Johnson (NYSE:JNJ)
- Procter & Gamble (NYSE:PG)
- Netflix (NASDAQ:NFLX)
- AT&T (NYSE:T)
- Intel (NASDAQ:INTC)
Now, let’s dive in and take a closer look at each one.
Earnings Reports to Watch: Coca-Cola (KO)
Source: focal point / Shutterstock.comEarnings Report Date: Monday, April 19, before market open
In an uncertain environment, the broad reach of the world’s largest beverage company makes earnings next week important for almost every investor.
After all, both of the company’s channels are in uncharted waters. In supermarkets, the question is how food and beverage companies will fare against the enormously difficult comparisons of last year’s first quarter, and March specifically. In takeaway, the return to normalcy no doubt is providing some help — but how much?
Coke earnings should give some color on both sides of the business — and not just for Coke, but its rivals and peers.
It’s an important release for Coca-Cola itself. KO stock still hasn’t clawed back all of the losses it suffered in February and March of last year. Shares in fact are more than 10% off their all-time highs.
That creates an obvious opportunity. A Coca-Cola that is back to normal should lead to a KO stock that too is back to normal. Add in a dividend yield over 3% and investors would see double-digit returns. If Coca-Cola convinces investors that normalcy is just around the corner, those returns may arrive relatively quickly.
IBM (IBM)
Source: Laborant / Shutterstock.comEarnings Report Date: Monday, April 19, after market close
Every earnings report is key for IBM. The company is in the midst of a multi-year turnaround which still hasn’t gained real traction.
Shares still are down more than one-third from 2013 highs in a market where tech stocks have soared. IBM saw revenue decline for 22-consecutive quarters before breaking the streak in the fourth quarter of 2017. The top line turned south again before the acquisition of Red Hat added inorganic growth.
But now Red Hat should be integrated, and bulls see IBM’s cloud business as a potential growth driver. That optimism was enough to push IBM stock to a 52-week high late last month before a recent, modest pullback.
After the really, expectations certainly aren’t sky-high, but the market no doubt is expecting progress. Anything less, and the “same old IBM” narrative likely follows earnings next week. It’s hard to see how that narrative leads to another round of new highs.
Earnings Reports to Watch: Johnson & Johnson (JNJ)
Source: Alexander Tolstykh / Shutterstock.comEarnings Report Date: Tuesday, April 20, before market open
The market quickly looked past the pause in J&J’s Covid-19 vaccine announced this week. After opening down 3% on Tuesday morning, JNJ stock now is essentially flat for the week.
There no doubt will be some analyst questions on the first quarter conference call about the vaccine. But investor attention likely will focus on the rest of the business, given J&J isn’t making much profit on the vaccine.
And there are real questions to be answered. J&J’s medical device business struggled in 2020, with revenue down more than 10% amid lower elective surgeries. A rebound there could signal a bottom and lift other stocks with similar exposure. The same is true for the skin health and beauty businesses within J&J’s consumer products segment.
And of course the pharmaceutical remains J&J’s largest, at about 60% of revenue. Products like Stelara and Remicade are far more important to the company’s bottom line than is the Covid-19 vaccine.
With normalcy returning here in 2021, J&J does seem set up for a good quarter. And that could boost optimism toward a long-term case that remains attractive.
Procter & Gamble (PG)
Source: Jonathan Weiss / Shutterstock.comEarnings Report Date: Tuesday, April 20, before market open
CPG (consumer packaged goods) companies like P&G were early and obvious winners from the pandemic. A surge in supermarket revenue and consumer stockpiling led to unusually high growth.
But normalcy is returning — which isn’t necessarily great news for P&G and its industry. Toilet paper sales, for instance, have plunged this year as many consumers still are working through purchases made last year.
Those trends set up a big fiscal third quarter release for P&G on Tuesday morning. PG stock has rallied in recent weeks after fading to an eight-month low in early March. A 23x forward price-to-earnings multiple is well above recent levels. And Q3 is the first of several quarters in which the company will face difficult, pandemic-driven, year-prior comparisons.
Particularly with PG up about 12% in six weeks, Q3 results need to be strong ahead of more difficult compares in fiscal Q4 and fiscal Q1. If they’re not, PG stock could stumble after the release — and bring other CPG stocks with it.
Earnings Reports to Watch: Netflix (NFLX)
Source: Alex Ruhl / Shutterstock.comEarnings Report Date: Tuesday, April 20, after market close
Netflix too seems like an obvious pandemic winner. Early on, NFLX stock was treated as such, as it rallied quickly off March 2020 lows and touched an all-time high in early July.
Since then, however, NFLX has been stuck. One obvious reason why is that investor attention has turned to other streaming plays such as Roku (NASDAQ:ROKU) and direct Netflix competitors Disney (NYSE:DIS) and ViacomCBS (NASDAQ:VIAC,NASDAQ:VIACA).
But earnings haven’t necessarily helped, either. NFLX stock did jump after January’s Q4 report despite a bottom-line miss, but the gains receded in a matter of weeks. Subscriber growth slowed in Q3, which the company attributed to the spike in sign-ups amid the pandemic.
With normalcy returning, earnings next week can set the 2021 narrative. A blowout quarter in the face of so much new competition establishes Netflix as the king of streaming, with other services simply fighting for second place. Any weakness, particularly in the subscriber count, might suggest that those new platforms are pulling Netflix subscribers away.
With the forward earnings multiple down to a more reasonable 43x, NFLX stock is cheap enough to break out if its dominance appears assured. And with incremental margins from additional subscribers driving the expected profit growth, it’s expensive enough to plunge if top-line momentum slows. This looks like a big quarter for NFLX stock — and big enough to move other streaming names as well.
AT&T (T)
Source: Roman Tiraspolsky / Shutterstock.comEarnings Report Date: Thursday, April 22, before market open
One of those new Netflix competitors, of course, is AT&T. The telecommunications giant launched its HBO Max streaming service in May. Despite clearing 60 million worldwide subscribers by the end of last year, HBO Max hasn’t done much for T stock.
Of course, nothing has done much for the stock, which actually is down 2% over the past decade. Investors have received a generally healthy dividend, which now yields 7%. But in terms of share price appreciation, AT&T stock has been the definition of ‘dead money’.
Something needs to change. It’s hard to see what that will be. HBO Max’s growth has been impressive, but the streaming business is cannibalizing revenue from DIRECTV as well as WarnerMedia’s TNT and TBS cable channels. In wireless, AT&T continues to lose share to Verizon Communications (NYSE:VZ), which reports on Wednesday morning, and a now-larger T-Mobile (NASDAQ:TMUS).
Simply put, beyond the dividend yield AT&T hasn’t given investors a good reason to own T stock. It needs to start doing so, and Thursday morning would be a fine time to start. AT&T needs to print sustainable growth either in wireless or in WarnerMedia as a whole. Of course, as the last few years show, that’s easier said than done.
Earnings Reports to Watch: Intel (INTC)
Source: Pavel Kapysh / Shutterstock.comEarnings Report Date: Thursday, April 22, after market close
Earnings next week look absolutely crucial for Intel. INTC plunged after back-to-back earnings reports last year amid yet another stumble in its move to the 7nm node. News in December that Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) were developing their own chips ended a relief rally and sent the stock back to the lows.
Yet earlier this month INTC threatened its highest level since a brief 2000 peak amid the dot-com bubble. A better-than-expected Q4 release in January certainly helped. But the chip shortage has proved a catalyst as well. In this environment, Intel’s owned manufacturing capacity gives it an edge over ‘fabless’ rivals Advanced Micro Devices (NASDAQ:AMD) and Nvidia (NASDAQ:NVDA).
In other words, Intel has gotten a reprieve. It’s an advantage the company absolutely must take advantage of. With INTC still trading at 14x forward earnings, the stock is cheap enough that the rally can continue if Intel doesn’t give investors a reason to sell.
That might seem like a low bar to clear — but Intel’s recent history suggests otherwise.
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.
More From InvestorPlace
Why Everyone Is Investing in 5G All WRONG
It doesn’t matter if you have $500 in savings or $5 million. Do this now.
Top Stock Picker Reveals His Next Potential 500% Winner
Stock Prodigy Who Found NIO at $2… Says Buy THIS Now
The post 7 Earnings Reports to Watch Next Week appeared first on InvestorPlace.