Editor’s note: InvestorPlace’s Earnings Reports to Watch is updated weekly. Please check back next week for our latest earnings picks.
U.S. stocks keep rising, with all three major indices at all-time highs. Those gains represent a welcome change in pattern for the market. After all, the fear just a few weeks ago was that history might repeat.
Last year’s fourth quarter saw equities plunge amid cyclical fears. The peak of last quarter’s earnings season led to a 6% decline in major indices in just six sessions.
This time has been different, however. Earnings reports have been well-received. Cyclical fears appear to have receded, as housing stocks continue to soar and even major industrials have gained nicely.
That said, risks remain. The trade war remains unresolved. The U.S. presidential election is less than a year away, which combined with an impeachment process could increase volatility in the equity market. And with the U.S. economy now in an unprecedented eleventh consecutive year of expansion, fears that a recession is “due” can return at any time.
Meanwhile, the earnings calendar might lack some of the market’s biggest names — but it’s hardly empty. A number of key companies release earnings reports this week and next, as companies on the retail fiscal calendar report. Next week’s reports look particularly important, as they include leaders from several key sectors.
More good news from those leaders can keep the rally going — or, in one case, provide some hope for a sector that has been the worst in the entire market this year. But there are enough major companies releasing earnings next week to dim investor optimism if there’s any sign of weakness.
Rockwell Automation (ROK)
Earnings Report Date: Tuesday, Nov. 12, before market open
Rockwell Automation (NYSE:ROK) isn’t the best-known name to report next week, but the company’s fiscal fourth quarter report on Tuesday morning could move some of the market’s most widely-held stocks.
After all, industrial names have been some of the biggest beneficiaries of earnings season. General Electric (NYSE:GE) rallied nicely. 3M (NYSE:MMM) bounced back after a huge earnings plunge in April. Honeywell (NYSE:HON) has broken out to a new all-time high.
Industrial stocks are gaining despite the fact that U.S. manufacturing clearly is in a recession. That seeming contradiction of weakening demand and higher stock prices makes Rockwell’s guidance for fiscal 2020 an important data point.
After all, investors clearly are pricing in a rebound for the group. And few companies have a better picture of forward demand than Rockwell, who serves manufacturers through both software and motor components and other products. If Rockwell’s guidance is strong, that could confirm the rising investor sentiment toward many of its customers. But if Rockwell undercuts that sentiment, it could be a sign that many industrial stocks have rallied far enough — or too far.
D.R. Horton (DHI)
Earnings Report Date: Tuesday, Nov. 12, before market open
Housing and construction stocks like D.R. Horton (NYSE:DHI) have been some of the market’s best performers this year. DHI stock has gained 47.8% so far this year. It hasn’t been alone. Shares of rival Lennar (NYSE:LEN) have increased 47%. The iShares U.S. Home Construction ETF (BATS:ITB), my pick for the Best ETF of 2019, is up 46%.
Those gains alone would add import to and increase expectations for any earnings report from D.R. Horton, the country’s largest homebuilder. But specific aspects of this release magnify its significance.
After all, D.R. Horton will detail its outlook for fiscal 2020, which can move not just homebuilding stocks but residential construction suppliers and distributors. And that outlook comes at a critical point: housing-related stocks actually have weakened in recent weeks despite strength in the broad market. It’s for this very reason Louis Navellier — a savvy investor who made a name for himself picking undervalued stocks — recommends that his subscribers buy “bulletproof” stocks.
In less than a month, DHI shares have pulled back over 6%, and LEN almost 8%. The ITB ETF has retreated almost 5%. Either sentiment has weakened and/or valuation fears are starting to return.
Whatever the precise cause, the sector clearly looks a bit wobbly as the rest of the market gains. The outlook from D.R. Horton thus will either assuage investor fears or stoke them.
Cisco Systems (CSCO)
Earnings Report Date: Wednesday, Nov. 13, after market close
Cisco Systems (NASDAQ:CSCO) heads into Wednesday’s fiscal first quarter report in a strong position. CSCO stock has rallied from an important pivot point on its chart, moving off a multiple bottom and above moving averages. There’s a clear path for CSCO stock to continue its breakout to $50 and beyond.
From a broader standpoint, CSCO seems to be one of the few value names left in a tech sector at all-time highs. The stock trades at less than 14x next year’s EPS estimates, a seemingly soft multiple for a tech giant.
Technically and fundamentally, Cisco stock can move higher. But Cisco needs to deliver on Wednesday afternoon — and there’s some sign of weakness in the industry. Fellow networking play Arista Networks (NYSE:ANET) plunged 24% last week after disappointing guidance for the calendar fourth quarter.
A strong quarter from Cisco — and, given Arista’s stumble, a solid outlook — would show that Arista’s problems are specific to that company, and calm long-held investor worries about networking industry demand. That almost certainly drives Cisco shares higher, and given valuation and the technical setup could catalyze a longer rally.
Anything less, however, and industry fears return, which almost certainly interrupts the recent bounce in CSCO stock.
Canopy Growth (CGC)
Earnings Report Date: Thursday, Nov. 14, before market open
Cannabis stocks like Canopy Growth (NYSE:CGC) have had a disastrous 2019. CGC stock is down 63% from its 52-week high, and other pot stocks have fallen even further.
The one piece of good news is that the earnings calendar provides the industry a chance to drive some sort of positive sentiment heading into 2020. Reports from Cronos (NASDAQ:CRON) before the open on Tuesday and Tilray (NASDAQ:TLRY) after that day’s close precede Canopy’s Thursday morning release.
At this point, the three cannabis companies simply need to deliver any kind of good news. Commentary on pricing will be closely watched, as it’s clear that investors are starting to price in oversupply in the Canadian market. Commentary on the regulatory front, where a backlog of applications has slowed industry growth, will be another focal point.
But one question at the moment is whether even good news will be enough to drive a long-awaited rebound. Aphria (NYSE:APHA) posted back-to-back impressive quarters, including guidance for EBITDA profitability, yet APHA stock trades near the lows too.
As I wrote last month, I’m skeptical the bottom is in for CGC stock and other pot plays. But the sector at least has a chance to prove skeptics like myself wrong. Though as bearish as sentiment remains, it likely will take three monster earnings reports to do so.
Earnings Report Date: Thursday, Nov. 14, before market open
The dominance of Walmart (NYSE:WMT) in brick-and-mortar retailing means its results always are important. The company’s sheer size makes it an indicator of the health of the U.S. consumer. Walmart’s commentary on pricing moves grocery stocks like Kroger (NYSE:KR) and can impact the share prices of its suppliers as well.
This time around, however, the report has a little extra significance. KR shares soared this week after a bullish forecast at its Analyst Day. Walmart’s results could support that company’s optimism — or undercut that stock’s gains.
In contrast, shares of major consumer packaged goods suppliers like Procter & Gamble (NYSE:PG) and General Mills (NYSE:GIS) look a bit wobbly. Fears of pricing pressure and private-label penetration have dogged that group for some time, and Walmart earnings could re-ignite those worries. To counter these fears, buy dividend-paying stocks that can thrive in most markets — i.e. bulletproof stocks. Louis has spent the past two decades helping people like you and I beat the market, and he doesn’t intend to stop now. Want to know what’s on his buy list? Here’s the secret.
More broadly, this is a market at all-time highs in an economy that is almost solely reliant on the U.S. consumer for growth. Weakness in Walmart results would raise new questions about the health of that consumer, and thus the health of the economy going forward.
Meanwhile, for Walmart stock itself, the report looks important. WMT stock sits at an all-time high at the moment after a 28% gain. The company’s successful e-commerce strategy has positioned it as a legitimate competitor to Amazon (NASDAQ:AMZN). In other words, expectations are rising. Walmart has to meet those expectations to keep its rally going. But how it does so may have an effect on many other stocks in the market.
Earnings Report Date: Thursday, Nov. 14, after market close
Chipmaker Nvidia (NASDAQ:NVDA) has basically no room for error on Thursday afternoon. Save for a stumble by Texas Instruments (NASDAQ:TXN), results across the sector have been strong. A poor quarter from Nvidia followed by beats from Intel (NASDAQ:INTC) and Advanced Micro Devices (NASDAQ:AMD) raises real concerns about market share and competition.
With NVDA stock approaching a 52-week high heading into the report, those concerns are not priced in. The third quarter earnings report a year ago, when NVDA stock plunged on weak guidance, shows what the downside can be if Nvidia disappoints.
That said, I wrote this week that I expect Nvidia stock to keep rallying. The strength in the sector suggests Nvidia should comfortably beat expectations. And this has been a second-half story all year. Increasingly it seems like that story is going to play out. But if it doesn’t, NVDA stock is going to see some ugly trading on Friday.
Earnings Report Date: Friday, Nov. 15, before market open
Chinese retailer JD.com (NASDAQ:JD) heads into its third quarter report in a strong position. JD stock finally has broken through resistance at $32 and now trades at a 15-month high. At 27x forward earnings, valuation still isn’t prohibitive, and a strong quarter can keep the rally going.
Like NVDA, however, JD has little room for error. Larger rival Alibaba (NYSE:BABA) delivered an impressive quarter last week. Pinduoduo (NASDAQ:PDD) is nipping at JD.com’s heels. The market understands that an apparently slowing Chinese economy may have an impact. But any market share losses will be untenable with JD stock at a 52-week high.
This also is a case where the reaction to earnings might be as important as the results themselves. PDD has skyrocketed in recent weeks. BABA is at a six-month high. Investors clearly are coming around to Chinese stocks. A good quarter from JD.com and a good gain for its stock would suggest that sentiment can continue to improve. Anything less could be a problem for JD shares — and for other Chinese names as well.
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As of this writing, Vince Martin has no positions in any securities mentioned.