Editor’s note: InvestorPlace’s Earnings Reports to Watch is updated weekly. Please check back next week for our latest earnings picks.
Earnings season is over, but corporate reports continue. In fact, a number of interesting companies report earnings next week, including a number of key consumer names.
News from that sector is particularly useful at the moment. Broad market indices have posted modest gains this week after some scary trading, particularly in tech. But the tech-heavy NASDAQ Composite still looks shaky, with declines of over 1% on both Wednesday and Thursday. Clearly, valuation concerns haven’t been put to rest.
Meanwhile, it’s the U.S. consumer that may need to prop up this economy, and this market. But a contentious presidential election looms. Congress and the White House continue to debate a second stimulus package. It wouldn’t be stunning if consumers pulled back over the next few months. It also wouldn’t be good news.
Along with earnings next week, we should get commentary on consumer trends from several major companies. Homebuilder KB Home (NYSE:KBH) will try and follow a strong release from Lennar (NYSE:LEN) on Monday. Cannabis company Aurora Cannabis (NYSE:ACB) aims to jumpstart its sector, as it did last quarter. Retailers AutoZone (NYSE:AZO) and Rite Aid (NYSE:RAD) will highlight trends in specialty retail.
Costco (NASDAQ:COST) reports as well. That company already has reported sales, which makes its reports somewhat anticlimactic. But commentary from one of the best management teams in the business is valuable in any market.
For where this market sits, there seem three earnings reports next week that truly stand out. These are the companies to watch most closely:
Earnings Report Date: Tuesday, September 22, after market close
There isn’t a better company to hear from in this environment than Nike, one of the world’s great consumer businesses. Nike management will have good knowledge of on-the-ground trends in brick-and-mortar retail. Nike’s digital sales trends should show how permanent the shift to e-commerce might be. The company’s worldwide reach means it can highlight demand internationally as well.
NKE stock also provides an interesting test for the market. Yes, Nike is one of the world’s great companies. But NKE stock is as expensive as it’s been in years, trading at 35x forward earnings. A “sell the news” reaction to a strong Nike print could suggest that investor nervousness about market valuations persists.
Earnings Report Date: Wednesday, September 23, before market open
It wasn’t just tech stocks that sold off during the recent market swoon. Indeed, GIS stock has pulled back 11% in the last ten trading sessions.
That trading sets up an important fiscal first quarter release for General Mills on Wednesday morning. Consumer staples stocks like GIS rallied nicely off March lows amid “stay at home” orders. The slow return to normalcy may not be good news for the group.
Meanwhile, General Mills itself still has a lot to prove. Categories like yogurt and cereal have faced steadily weaker demand. GIS stock is up just slightly above 1% over the past five years, though it has paid a solid dividend. Investors at best were lukewarm toward the stock before the pandemic. General Mills needs to provide a reason for optimism once it’s over.
Earnings Report Date: Thursday, September 24, before market open
Darden is the most valuable chain restaurant operator in the U.S. — and one of the best. So its fiscal Q1 release on Thursday morning should set the near-term tone for the entire sector.
Expectations will be low. Darden said in June that same-restaurant sales for the first few weeks of Q1 were down by one-third. That’s with over 90% of dining rooms open.
DRI stock has risen since then, so investors are expecting further improvement. If Darden can deliver, there’s room for a continued rally, given that Darden shares remain 28% below February highs. The sector would benefit as well.
But a miss here would be a big issue. In that event, investors start to wonder if the pressure on the industry is more than a short-term problem. That likely means the steady rally from March lows heads into reverse.
On the date of publication, Vince Martin did not have (either directly or indirectly) any positions in the securities mentioned in this article.