What will likely be the most bizarre earnings season ever arrives in just a few weeks. Corporate earnings reports next week will give a preview of what’s to come.
To be sure, earnings this week seemed surprisingly normal. Nike (NYSE:NKE) and Micron (NASDAQ:MU) both rallied nicely after their earnings reports this week. Micron even gave guidance for the coming quarter, as historically has been its practice.
Of course, the rally in both stocks largely coincided with the market as a whole (though NKE has outperformed). Companies facing greater impacts from the coronavirus may have much less to say going forward. Many already have pulled existing guidance.
Still, in this environment investors will take whatever news they can get. Even negative news might be preferable to the uncertainty that still exists.
And so earnings reports next week should be watched closely. There aren’t giants reporting, but the breadth in the earnings calendar is useful. Investors should be able to get a sense of what business is like on the ground right now across sectors, and an early feel for the commentary that will be delivered when earnings season begins in mid-April.
Chewy (NYSE:CHWY) should deliver guidance for fiscal 2020 (ending next January), and will put real numbers to what no doubt is soaring demand in e-commerce. Also, CarMax (NYSE:KMX) will be the first major company in the automotive space to report amid this pandemic.
In tech, BlackBerry (NYSE:BB) releases fiscal fourth quarter results after the close on Tuesday, and as a low-priced value play the reaction to that report might be an interesting test of investor sentiment. Apparel company PVH (NYSE:PVH), which trades at barely 8 times trailing earnings, could provide another opportunity to gauge attitudes toward the market’s cheapest names.
Overall, though, these three earnings reports are the most important to watch.
Earnings Reports to Watch: McCormick (MKC)
Earnings Report Date: Tuesday, March 31, before market open
First, we’ll get an updated view from a consumer food leader. We heard from General Mills (NYSE:GIS) back on March 18 — but the country has changed notably just in the last nine days. Between McCormick’s report and Q3 earnings from Conagra Brands (NYSE:CAG) on the same morning, investors should see how supply chains are working and how much sales growth has been driven by U.S. consumers stocking up.
Second, the response in McCormick stock should be interesting. MKC was one of many quality stocks whose valuation seemed to have outrun its fundamentals before this selloff. The valuations assigned many of those stocks — MKC was the most expensive consumer food play in the market — suggest the current selloff includes a much-needed correction, not just short-term worries.
And so, post-earnings trading will be intriguing as well. Based on fundamentals, even after its selloff MKC stock is not cheap relative to trailing (and pre-pandemic) profits. As such, its trading next week might suggest whether investors are ready to get back to paying dearly for quality.
Walgreens Boots Alliance (WBA)
Earnings Report Date: Thursday, April 2, before market open
Pharmacy stocks like Walgreens Boots Alliance (NASDAQ:WBA) were cheap before this selloff — and they’re cheaper still. Though Rite Aid (NYSE:RAD) stock has held up somewhat year-to-date, dropping about 2%, WBA and CVS Health (NYSE:CVS) both have fallen over 20% in 2020.
But the two giants caught a bid on Thursday — and earnings from Walgreens next week could keep the momentum going. Walgreens should be receiving a short-term boost to front-end sales as so many other retailers close. Some of the cost pressures that have impacted the industry for years may start to recede.
Those pressures are just one of the factors that have weighed on the sector for years now. For WBA stock to rally, Walgreens needs to start changing the narrative. And a strong report on Thursday would be a good first step.
WBA is one of the cheapest large-cap stocks in the market: among Dow Jones Industrial Average components, only Goldman Sachs (NYSE:GS) has a lower forward price-to-earnings multiple. If Walgreens can convince investors that it can survive this crisis — or, better yet, thrive during it — the stock might finally find a bottom for good.
Constellation Brands (STZ) (STZ.B)
Earnings Report Date: Friday, April 3, before market open
What has the coronavirus done to sales of Corona beer, for which Constellation holds the exclusive license for U.S. sales? How is cannabis demand faring in Canada for Canopy Growth (NYSE:CGC), in which Constellation owns a nearly 50% stake?
Are liquor store sales holding up as bars and restaurants shutter nationwide? And is the pandemic accelerating the long-running shift to craft beer, or pausing it?
The answers to those questions probably are unknowable right now, even to Constellation management. But they are the kind of questions that U.S. corporations are going to receive as earnings reports arrive in the coming weeks.
These are unchartered waters, and we’re all just trying to swim as best we can.
Vince Martin has covered the financial industry for close to a decade for InvestorPlace.com and other outlets. As of this writing, he had no positions in any securities mentioned.