7 Earnings Reports to Watch Next Week

There are several earnings reports next week that stand out from the crowd

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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.

Earnings season begins next week. And it’s obviously an important stretch for the market. Broad indices are trading at new all-time highs on Thursday, which suggests expectations are reasonably elevated as the earnings calendar picks up.

Meanwhile, many companies that report on a calendar-year basis will deliver not only fourth-quarter results, but guidance for 2020. In a market already pricing in a strong year, disappointing outlooks would undercut investor confidence.

So earnings reports next week will be closely watched, ahead of an bigger slate the following week. And it’s difficult to predict exactly how those reports will be received. After all, the last reasonably significant decline in U.S. stocks began at the start of earnings season in late July. Three months later, third-quarter earnings reports catalyzed the year-end rally.

This stretch of the earnings calendar thus seems like a rubber match. And it begins with an interesting group of earnings reports next week across sectors and across the value/growth continuum.

The airline sector, which underpins my pick for the Best ETF of 2020, sees reports from the likes of American Airlines (NYSE:AAL), Southwest Airlines (NYSE:LUV) and United Airlines (NYSE:UAL) after a strong report from Delta Air Lines (NYSE:DAL) this week.

That key sector should highlight consumer confidence, as should apparel play VF Corporation (NYSE:VFC). Texas Instruments (NASDAQ:TXN) kicks off earnings from the currently hot semiconductor space.

But these seven earnings reports look like the most important next week. They include some big names in some important sectors, whose results could signal how the rest of earnings season will play out.

Earnings Reports to Watch: International Business Machines (IBM)

Earnings Reports to Watch: International Business Machines (IBM)
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Earnings Report Date: Tuesday, January 21, after market close

For International Business Machines (NYSE:IBM), Q4 earnings likely will come down to guidance and Red Hat. IBM stock has been rangebound for over four years now, and still trades about one-third below 2013 highs. A lack of growth has been the key reason why.

The Red Hat acquisition is supposed to change that, and make IBM a more legitimate player in the cloud. It’s still early in the integration of that deal, which only closed in July, but investors will be looking to the 2020 outlook for a key data point in terms of early performance.

The concern ahead of Tuesday’s release is that the need for growth is nothing new. Third-quarter results in October were similarly important, yet IBM’s revenue disappointed and IBM stock fell on the release.

As a result, IBM firmly is a “show me” story at this point. It will take both a strong quarter and a positive outlook to change that, and drive IBM stock out of its rangebound ways.

Netflix (NFLX)

Netflix (NFLX)
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Earnings Report Date: Tuesday, January 21, after market close

Fourth quarter earnings from Netflix (NASDAQ:NFLX) likely will have the broadest impact of any release next week.

To be sure, Netflix’s numbers obviously will matter to NFLX stock itself. Options markets at the moment are pricing in a nearly 8% move by the end of next week. Netflix’s subscriber numbers have been soft on occasion, most notably in the second quarter and the figure will be closely watched. With competition ramping, Netflix likely has even less room for error than it has in the past.

But that competition means the results will matter to other names as well. The “streaming wars” are ramping up. Disney (NYSE:DIS) already has disclosed strong subscriber numbers for its Disney+ service. AT&T (NYSE:T) and others have their own services on the way. Tuesday’s release could show whether Netflix has an insurmountable lead — or whether its rivals have a legitimate opportunity to take market share.

Even outside the sector, the report will matter, given that NFLX is one of the largest and most well-covered stocks in the market. Does NFLX catch a bid after a strong quarter? Or are we, as some fear, at a point where valuations are simply too stretched, particularly among high-flyers? Investors should watch post-earnings trading in NFLX closely, because it could signal the broader sentiment towards valuation and growth at this point in the bull market.

Johnson & Johnson (JNJ)

Johnson & Johnson (JNJ)
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Earnings Report Date: Wednesday, January 22, before market open

For Johnson & Johnson (NYSE:JNJ), the goal on Wednesday morning is pretty simple: no surprises. JNJ stock has rallied nicely in recent weeks, as the company seems to have put its myriad legal and regulatory issues in the rear-view mirror, at least for now.

To keep the rally going, J&J likely needs to provide an earnings beat, which shouldn’t be terribly difficult: The company has topped Street expectations on both lines for nine consecutive quarters. And it needs to avoid any new disclosures about additional liabilities or earnings accruals relative to its legal exposure.

That combination should be enough. JNJ stock still is reasonably cheap, at just 16x forward earnings. A 2.6% dividend yield is attractive in an environment where the 10-year Treasury offers just 1.8%. Getting back toward normal has been unquestionably good news for JNJ stock; now, the company just needs to keep it that way.

Abbott Laboratories (ABT)

Abbott Laboratories (ABT)
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Earnings Report Date: Wednesday, January 22, before market open

Abbott Laboratories (NYSE:ABT) is an interesting name to watch next week. Despite the market rally, ABT stock has been surprisingly stuck, with resistance holding just below $90 going back to this summer. Heading into Wednesday morning’s release, shares are nearing that resistance again, setting up an interesting report.

A solid gain after earnings could set up a technical breakout. Any weakness, however, and resistance gets even firmer. ABT stock obviously is unlikely to soar or plunge following the report, but post-earnings trading in the stock likely sets its near-term direction.

But as with Netflix, here too the reaction to earnings will be interesting. The valuations assigned growth stocks like NFLX have garnered much of the headlines. But at 24x forward earnings, ABT is one of many “safe” stocks receiving historically high multiples. Are investors willing to pay those multiples — or something even higher — for anything less than a perfect quarter?

Procter & Gamble (PG)

Procter & Gamble (PG)
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Earnings Report Date: Thursday, January 23, before market open

That same question applies to consumer giant Procter & Gamble (NYSE:PG). To be sure, the huge rally in PG stock, which has risen 80% in less than two years, makes some sense. A long-running turnaround effort finally has gained traction and driven earnings growth.

But at the same 24x forward multiple as ABT, PG stock has a historically high valuation. The last time shares garnered anything close to 24x was in the early to mid-2000’s, when P&G’s international opportunity was far newer and far larger.

As a result, P&G seemingly has little room for error on Thursday morning. And its trading could read across to peers like Colgate-Palmolive (NYSE:CL), as well as the likes of Abbott Labs and even Microsoft (NASDAQ:MSFT). In this bull market, investors have steadily paid higher and higher prices not just for growth, but for quality. It’s fair to wonder if and when that ends.

Comcast (CMCSA)

Comcast (CMCSA)
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Earnings Report Date: Thursday, January 23, before market open

The question for Comcast (NASDAQ:CMCSA) at the moment is: can it catch up? That’s true for CMCSA stock, which has mostly lagged both the broader markets and particularly peer Charter Communications (NASDAQ:CHTR). And it’s true for the company’s Peacock streaming service, which launches in April.

As far as CMCSA stock goes, the key figure to watch might be video subscribers. “Cord-cutting” clearly accelerated in 2019. Faster erosion of that subscriber base won’t impact just Comcast stock, but suppliers like AMC Networks (NASDAQ:AMCX) and Discovery Communications (NASDAQ:DISCA).

The other key area to watch will be on the content side. NBCUniversal, whose intellectual property underpins Peacock, too is struggling with cord-cutting. Valuations assigned the likes of AMCX and DISCA show that investors are pricing in steady declines in revenue and profits for media companies.

A poor report from Comcast would amplify cord-cutting concerns for both the distribution and content businesses, particularly if Netflix’s U.S. subscriber numbers impress. With Comcast stock near all-time highs, the streaming launch still three months away, and Netflix earnings on Tuesday, it’s easy to see a bearish narrative emerging next week. Comcast doesn’t need a perfect quarter, but it does need to avoid the perfect storm.

Intel (INTC)

Intel (INTC)
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Earnings Report Date: Thursday, January 23, after market close

Texas Instruments does have the first of the chip sector’s earnings reports next week with its Q4 release on Wednesday afternoon. But Intel (NASDAQ:INTC) has the most important. Like many semiconductor stocks, INTC has rallied nicely in recent months. And investors may discount TXN earnings to some extent, given that company’s soft guidance in October proved to be an outlier in the industry.

Intel’s report on Thursday is likely to move the sector. The question is in which direction. Again, many chip plays have gained, with higher-growth names like Advanced Micro Devices (NASDAQ:AMD) and Nvidia (NASDAQ:NVDA) soaring. The narrative among investors clearly has returned to a focus on future drivers like 5G, automotive and cloud over near-term cyclical worries.

The mission for Intel is to keep that narrative intact. Weak demand among cloud providers hit the sector early last year, and that end market no doubt will be the point of focus on Intel’s Q4 conference call. First quarter guidance will be key as well.

As with many companies in this bull market, it’s probably enough for Intel to simply not give investors a reason to sell. If the company does, however, that selling pressure likely will spread to the rest of its industry, at least in regular trading on Friday.

As of this writing, Vince Martin did not hold a position in any of the aforementioned securities.


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