Could the gung-ho stock market be preparing for a nap?
Last week’s series of record-setting days for the Standard & Poor’s 500 index that sent it within a hair of 2,170 took a serious breather on Friday amid a mixed earnings bag out of the banking sector. While banks including Citigroup (ticker: C) and U.S. Bancorp (USB) put up healthy beats, most results were off from last year, including Wells Fargo & Co. (WFC), which was punished for a mere match of Street expectations.
The next couple of weeks feature a thick slate of earnings reports that likely will be what determines whether the S&P 500 can stay aloft. While the big financials will finish up today and tomorrow, we look ahead to a few other sectors for major reports that could push and pull on the market this week.
Netflix (NFLX). Netflix shares have been on the rise for a couple of weeks, but the company still will head into its second-quarter earnings report Monday with a healthy dose of analyst skepticism.
Last week, UBS cut its price target on NFLX shares to $130 per share from $141. About a week before that, on June 6, Jefferies actually did downgrade Netflix, from “hold” to “underperform” and dropped its price target from $120 to $80. Jefferies pointed out that “the domestic subscriber growth trajectory may be somewhat flatter than the market’s current expectations,” while UBS expressed worry about softness in southern Europe, France and Germany.
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Naturally, investors will also be interested to see if Netflix comments on any potential effects from the Brexit. Needham & Co., for one, believes that a third of EU and U.K. subscribers are at risk.
Meanwhile, analyst estimates reflect the idea that Netflix must continue to pay for growth. Revenues are expected to improve 28.4 percent to $2.11 billion, but earnings are expected to shrink from the year-ago period’s 6 cents to just 2 cents.
Yahoo (YHOO). To paraphrase a popular catchphrase by Washington Nationals radio play-by-play man Charlie Slowes, remember where you are tonight so you can remember where you were when Yahoo reported its final earnings report as its own publicly traded entity.
Sure, it’s not a sure thing that Yahoo will sell itself off, but it still feels imminent, especially with the final deadline for buyout bids falling on the same day as its second-quarter earnings report.
Yahoo is expected to report an earnings decline of 38 percent to 10 cents per share on a revenue drop of 13 percent to $1.08 billion — fairly indicative of the no-growth situation that has brought Yahoo and CEO Marissa Mayer to where they are today, looking at a buyout as its primary hope of saving the company.
Johnson & Johnson (JNJ). While Johnson & Johnson has had itself one heck of a 2016, analysts have provided ho-hum expectations that could allow JNJ’s good times to keep on rollin’ with an easy beat.
JNJ shares are up nearly 20 percent year-to-date in nearly a straight line, thanks to a pair of strong earnings in its last two quarters, a flight to quality and dividends in the midst of chaos amid February’s market dip, and June’s post-Brexit panic. A number of factors have improved its results, including growth in cancer medication Imbruvica and multiple myeloma drug Darzalex, as well as type 2 diabetes drug Invokana.
Continued strength here could help the company hurdle tame earnings expectations. The Street currently sees JNJ earning $1.68 per share, off 3 cents from the year-ago-period, and generating $17.98 billion in sales, which would be a mere 1.1 percent improvement.
One thing to watch for on the downside is any impact from currency headwinds on second-quarter performance or guidance for the rest of the year.
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Intel Corp. (INTC). INTC has finally put up enough of a run lately to bring shares in the black for the year. The question for investors is whether Wednesday afternoon’s second-quarter earnings report will botch that.
Wall Street isn’t expecting much out of Intel for the quarter. Revenue estimates are for $13.54 billion (2.6 percent higher from last year), and profits are expected to shrink by 2 cents per share to 53 cents. Citigroup, for one, expects Intel to provide a beat-and-raise report, pointing to positive notes on both notebook shipments and PC supply chain data.
Intel has been maligned for years in large part because of its over-reliance on the PC space (which is in perpetual decline) and the company’s inability to have a significant presence in the mobile space. That wasn’t helped any by this spring’s revelation that the company was killing off some of its mobile products, which was followed up by reports that Intel is cutting back investment in the Android operating system.
That doesn’t mean Intel is completely dead in the mobile space. INTC got a nice bump in June on news that the next Apple (AAPL) iPhone will use Intel modems in some versions instead of Qualcomm’s (QCOM) products. Meanwhile, Intel is making a big push to make its mark on the driverless car space via a partnership with Mobileye (MBLY) and BMW, announced earlier this month.
General Motors Co. (GM): This year hasn’t been particularly kind to the automakers, but General Motors is walking into Thursday morning’s earnings release with a few more bumps and bruises than others.
GM has suffered lousy monthly sales data all quarter, with sales slipping 1.6 percent in June, plunging 18 percent in May (in part because of fewer selling days) and falling 3.5 percent in April. Despite this, the company still is expected to post a 1 percent improvement in sales for the quarter, and earnings are expected to jump from $1.29 per share to $1.49.
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That might end up doing more good than harm for GM, which while off almost 10 percent this year has surged with the rest of the market out of the post-Brexit valley. A disappointment could send shares back lower, as could any guidance pertaining to any Brexit effect on sales. And while we won’t see it in second-quarter numbers, GM will be eating into its earnings a bit as it counters weak Silverado sales with incentives averaging $7,962 — more than 75 percent higher than June’s discounts.
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5 Stocks to Watch This Week: NFLX YHOO JNJ INTC GM originally appeared on usnews.com
