Earnings season pretty much has come to an end and it’s been a good one. There have been a couple of stumbles — perhaps most prominently Facebook (NASDAQ:FB) and Twitter (NYSE:TWTR) — but overall performance has been solid.
Indeed, it’s been solid enough to push the S&P 500 to a new all-time high and continue the longest bull market in history. But before investors get too complacent — or celebrate too much — there still are a few key earnings reports ahead this week that will shape key sectors.
In retail, a giant will try and keep the good news going after companies like Walmart (NYSE:WMT) and Target (NYSE:TGT) posted strong reports. An iconic American food company will try and jumpstart a turnaround, and the results of a strategic review could echo across its industry. And a software leader will try and live up to one of the many elevated valuations in that sector.
Earnings season may be over, but these 3 earnings reports are worth paying close attention to next week.
3 Earnings Reports to Watch: Best Buy (BBY)
Earnings Report Date: Tuesday, August 28 before market open
Best Buy (NYSE:BBY) is in an interesting spot ahead of its fiscal Q2 report on Tuesday. BBY has taken part in the broad rally in retail, gaining about 50% from November lows. It’s added to those gains of late, rising 10% in the last month alone. It’s coming off a strong fiscal 2018 (ending January), and crushed consensus estimates with a 7.1% same-store sales increase in Q1.
Combine Best Buy’s performance with numbers from big-box retailers that already have reported, and expectations seem likely to be very high next week. And so a repeat of the post-Q1 trading — when BBY stock actually fell despite a seemingly monster quarter — seems possible. Consensus FY19 EPS estimates are at $5.01 — ahead of the company’s $4.80-$5.00 guidance given after Q1.
And so Best Buy most likely has to raise full-year EPS guidance simply to avoid from falling in trading Tuesday. But if Best Buy can beat expectations, there’s room for the rally to continue. The stock still trades at a reasonable 15x forward earnings, and those estimates could rise after a strong Q2. If Best Buy has finally silenced the doubters (and I’ve been one of them) there’s a path for BBY to challenge $100. Another earnings beat would be a solid step in that right direction.
3 Earnings Reports to Watch: Salesforce.com (CRM)
Earnings Report Date: Wednesday, August 29 after market close
But it’s the market reaction that may be more informative than the numbers themselves — and not just for CRM stock. Even by the standards of a dearly valued software sector, CRM stock looks expensive. It’s a company with a $109 billion market cap — and a 54x forward P/E multiple, a rare combination.
With the broad market as a whole just off all-time highs — and up 300%+ from crisis-era lows — the obvious question is how long the rally has to go, and just what prices investors are willing to pay. The reaction to a strong report from salesforce.com might give a clue as to how much more upside the rest of the market truly has.
3 Earnings Reports to Watch: Campbell Soup (CPB)
Earnings Report Date: Thursday, August 30 before market open
Q4 numbers from Campbell Soup Company (NYSE:CPB) won’t be the only news from the company on Thursday. Campbell started a strategic review back in May in tandem with the resignation of CEO Denise Morrison. The company will announce the results of that review on Thursday in addition to fourth quarter earnings.
And as Dana Blankenhorn pointed out in June, that review could lead to a breakup of the Campbell’s business, particularly with pressure from activist Dan Loeb. So it’s not just CPB shareholders that will be watching closely on Thursday. Kraft Heinz (NASDAQ:KHC) reportedly has some interest in buying Campbell — and could be interested in any pieces that shake free should CPB look to prune its portfolio. Others in the space could be buyers as well. It’s possible that news from CPB on Thursday could reverberate around the entire U.S. food industry.
Meanwhile, the numbers will matter too. CPB has rallied 24% since hitting a 5-year low in early June. Much of that enthusiasm is coming from hopes that the company can improve its profits – and perhaps its balance sheet through asset sales. If Campbell’s instead gives investors a double whammy on Thursday – poor numbers and little or no news from the strategic review – those lows could be in the stock’s future again.
As of this writing, Vince Martin has no positions in any securities mentioned.