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7 Earnings Reports to Watch Next Week


earnings reports - 7 Earnings Reports to Watch Next Week

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Editor’s note: InvestorPlace’s Earnings Reports to Watch is updated weekly. Please check back next week for our latest earnings picks.

The earnings calendar heats up again next week. Retail earnings reports take center stage, but next week’s earnings also include other companies on the same fiscal calendar (with years ending on or around Jan. 31).

For retail in particular, earnings reports look key. Increasingly, there’s a “now or never” aspect to the more challenged categories in the industry like department stores and mall retailers. A macroeconomic expansion will reverse at some point. And the holiday season this year is six days shorter, adding a potential headwind.

For that group, it may be forward guidance rather than backward-looking numbers that drive trading. Positive outlooks despite the compressed shopping period would drive buying in a group that still looks like one of the cheapest in the market. Soft guidance, however, could be yet another negative catalyst for many stocks that trade at or near multi-year lows.

Several larger retailers — the ones that can move entire sectors on their own — report fiscal third-quarter numbers next week as well. Meanwhile, a pair of growth stocks that have gone in different directions could give clues as to trading in a group that’s been shaky despite broad market strength.

This is a week that can shape trading for the rest of the year. With broad markets at all-time highs, next week’s earnings could drive further strength or red flags. They could also support what looks like a long-awaited shift from growth to value. On both fronts, these are the seven key earnings reports to watch next week.

Home Depot (HD)

Retail Stocks to Buy for the Long Run: Home Depot (HD)

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Earnings Report Date: Tuesday, Nov. 19, before market open

In terms of broad market impact, Home Depot (NYSE:HD) has the most important report on the earnings calendar this week. Home Depot’s dominance in home improvement makes it a bellwether for construction spending by both consumers and professionals. That in turn means Home Depot earnings can move stocks in and around the housing industry.

That impact will be amplified by recent trading in housing and construction stocks. HD stock itself is near an all-time high. The iShares U.S. Home Construction ETF (BATS:ITB), my pick for the Best ETF of 2019, has gained 50%, and sits barely off its own peak reached briefly in early 2018.

On both fronts, there’s some cause for caution. Both Home Depot stock and the sector, as measured by the exchange-traded fund, have flattened out in recent sessions. HD stock in particular seems to have a questionable valuation, as investors are treating it more as a defensive play than the cyclical stock it is. The earnings multiples assigned stocks in the rest of the industry have expanded significantly in the last eleven months.

To support rising share prices, both Home Depot and the industry need a blowout report, or something close, on Tuesday morning. And given that Home Depot actually cut its guidance after its Q2 report in August, there’s an obvious risk that Home Depot’s Q3 can lead the group lower.

TJX Companies (TJX)

Retail Stocks to Buy for the Long Run: TJX Companies (TJX)

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Earnings Report Date: Tuesday, Nov. 19, before market open

There’s really just one objective for TJX Companies (NYSE:TJX) with its Q3 release on Tuesday morning. It’s the same objective as it’s been for TJX earnings reports for a couple of years now: no surprises.

After all, off-price has been surprisingly immune to the challenges facing other brick-and-mortar retailers. Online penetration remains minimal. Same-store sales continue to rise at a steady clip. As a result, after sideways trading in 2016-2017, TJX stock has rallied nicely and returned to its place as one of the market’s great long-term investments.

At the moment, off-price is the one retail category that investors trust almost unconditionally. TJX needs to keep it that way. A similarly strong report from rival Ross Stores (NASDAQ:ROST) on Thursday afternoon would help. Good numbers likely will lead to post-earnings upgrades by Wall Street — TJX is nearing the average target, and ROST actually is above it — and keep the rally going. Anything less, however, and the bulletproof nature of off-price may be questioned again.

Lowe’s (LOW)

Retail Stocks to Buy for the Long Run: Lowe's (LOW)

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Earnings Report Date: Wednesday, Nov. 20, before market open

Like Home Depot, Lowe’s (NYSE:LOW) has an important third-quarter earnings release next week. Lowe’s Q3 doesn’t have quite the same potential to move the market given its smaller share relative to Home Depot. And its ongoing turnaround suggests that strength, or weakness, in Lowe’s results may have more to do with operational changes within the company than broader trends affecting the industry.

That said, it’s precisely because of that turnaround that Q3 numbers are important. LOW stock tanked after first-quarter results undercut optimism toward the company’s new strategy, and soared after second-quarter numbers resurrected bullish sentiment.

From that sense, Q3 is a bit of a rubber match. Another strong result suggests the company is gaining traction. A weak report relative to Home Depot, however, confirms Lowe’s second-place status. The LOW stock price is trying for the fourth time to clear $115 and hold its gains. That won’t happen without good news on Wednesday morning.

Target (TGT)

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Earnings Report Date: Wednesday, Nov. 20, before market open

Like Lowe’s, Target (NYSE:TGT) reinvented itself to try and compete with the category leader, in its case Walmart (NYSE:WMT). Those efforts have been a roaring success so far: TGT stock has gained 64% this year thanks in large part to a 20.4% spike after a blowout second-quarter report in August.

For Q3, Target simply needs to keep the momentum going. With the company’s role in the new omni-channel world seemingly secure, and valuation reasonable at 16x forward earnings, there’s room for upside if Target simply can avoid a stumble in the third quarter and give a reasonably positive outlook for the key holiday season. But after the big gains, and with investors clearly convinced Target is a legitimate rival to Walmart, anything less could lead to a significant selloff.

Pinduoduo (PDD)

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Earnings Report Date: Wednesday, Nov. 20, before market open

Third-quarter results from Chinese e-commerce play Pinduoduo (NASDAQ:PDD) likely will echo across the market next week. Pinduoduo provides increasingly stiff competition to JD.com (NASDAQ:JD), who reports tomorrow. A big quarter from Pinduoduo that follows any stumble from JD.com could knock JD shares from their current 52-week high.

Trading in PDD stock after Wednesday’s report might also highlight investor appetite for high-flying growth names. Even with a recent pullback, PDD has more than doubled since July. We’ve seen several similar high-quality growth stocks decline on little or no news, with Shopify (NYSE:SHOP) and Roku (NASDAQ:ROKU) the two highest-profile examples. If investors are willing to pay 70x forward earnings for PDD even with China and trade war risks, that might be a sign that broader demand for growth stocks will return.

And for PDD itself, this is a big report. Sales increased 228% in the first quarter and 159% in Q2. The Street is looking for growth of 124% in Q3. Obviously, there’s not much room for error, particularly given the existing dominance of Alibaba (NYSE:BABA) and JD.com in the market. A big quarter from Pinduoduo establishes PDD stock as the country’s preeminent growth play. Anything less, and the 100%-plus gains seen in the last four months can quickly, and sharply, reverse.

Macy’s (M)

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Earnings Report Date: Thursday, Nov. 21, before market open

Department stores simply need some good news, and Macy’s (NYSE:M) would be the best company to deliver it. It’s still the best-known and most widely held stock in the group. And its struggles of late give it the most potential to improve both in terms of its operations and its stock price.

After all, M stock in late August touched a nine-year low. The few bulls left often focus on the value of the company’s real estate rather than its operations.

It might seem like there is some hope for Macy’s given a report from one of its peers. Dillard’s (NYSE:DDS) gained 14% in early trading Thursday after its third-quarter earnings report beat estimates. But Dillard’s same-store sales stayed flat, with profit improvement seemingly attributable more toward corporate belt-tightening than customer (and pricing) strength. The post-earnings spike may have come from a short squeeze rather than sustainable investor optimism.

For long-term gains, the category probably needs more than that from Macy’s and from Kohl’s (NYSE:KSS), who also reports next week. In this macro environment, department stores need to be able to drive some growth. If they can’t do so now, investors rightly will wonder if they ever will.

Splunk (SPLK)

10 Tech Stocks to Buy Now for 2025

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Earnings Report Date: Thursday, Nov. 21, after market close

Of all the earnings reports next week, fiscal Q3 results from big-data play Splunk (NASDAQ:SPLK) might be the most important without seeming like it. As noted relative to PDD, growth stocks have somewhat oddly struggled despite rising broad markets. SPLK stock hasn’t been immune: It’s pulled back about 16% from late July highs.

And as I wrote last month, this is a stock that looks like an interesting test of just what valuation investors are willing to pay. SPLK hardly looks cheap on an absolute basis at nine times revenue and 52x forward earnings. But those multiples are not out of line with those that growth stocks have received in recent years.

In other words, with a strong report Splunk stock can rally — if investors again are willing to pay up for growth. But if those same investors fade an earnings beat, that’s another piece of evidence that investor preferences are shifting to value over growth. Right now, sentiment doesn’t seem particularly bullish: SPLK traded down 5% on Thursday thanks to a downgrade from smaller firm Cleveland Research.

A selloff in SPLK in regular trading Friday might not make headlines. But it could be important. It would bode poorly for growth names, who are increasingly likely victims of tax-loss selling over the last few weeks of 2019. In that sense, the Splunk earnings report isn’t going to move markets, but it might provide a valuable clue as to where those markets are going to move for the rest of the year.

As of this writing, Vince Martin has no positions in any securities mentioned.

Article printed from InvestorPlace Media, https://investorplace.com/2019/11/7-earnings-reports-to-watch/.

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