Editor’s note: InvestorPlace’s Earnings Reports to Watch is updated weekly. Please check back next week for our latest .
Stocks are spiking again as chatter of a potential resolution to the trade war boosts the market. It remains to be seen whether those gains hold; so far, the U.S.-China dispute has caused short-term volatility, but little apparent long-term impact on the market.
If a trade deal doesn’t get done, or if the initial burst of optimism fades, stocks may well return to their stagnant ways heading into 2020. After all, external catalysts seem limited. The Federal Reserve A trade war resolution is technically possible, but seems unlikely just a few days before the currently imposed deadline. Conflict in Washington won’t be resolved until November (and probably not then, either). And earnings season remains a month away.
But earnings reports next week create almost a mini-earnings season, with key companies in several industries reporting. With Christmas and New Year’s Day falling on a Wednesday, some companies may have moved up their releases, creating an surprisingly full roster of earnings reports to watch. That roster might not be full enough to actually move markets, but there’s certainly enough here to at least give some clues as to where the market might move once 2020 arrives.
Earnings Reports to Watch: Hexo (HEXO)
Earnings Report Date: Monday, December 16, before market open
Hexo (NYSE:) desperately needs a good report on Monday morning. Fiscal fourth-quarter earnings — which only arrived barely six weeks ago — were close to disastrous. Revenue, excluding help from an acquisition, declined sequentially for the second consecutive quarter. The report was nowhere good enough to reverse the long and steep decline in Hexo stock from its April highs.
Meanwhile, Hexo’s cash burn is becoming a worry. A 70 million CAD convertible bond issuance this month is a near-term help, but Hexo probably will have to raise capital again. A higher HEXO stock price would make that much easier — and to drive that bounce, Hexo needs to deliver better results at some point.
But this is a big report for the cannabis sector as well. Earnings last month were ugly across the board, with leaders Canopy Growth (NYSE:) and Aurora Cannabis (NYSE:) both disappointing and sending marijuana stocks tumbling.. Most of those stocks, including HEXO, have regained the losses, but for the sector to truly bottom, the news needs to get better. A solid report from Hexo would be a step in the right direction.
Earnings Report Date: Tuesday, December 17, after market close
FedEx (NYSE:) isn’t the economic bellwether it once was. But this still is a report investors will watch closely. FedEx should give some color on retail activity in the key holiday season, particularly in terms of smaller firms trying to compete with behemoths Amazon (NASDAQ:) and Walmart (NYSE:). FedEx has its finger on the pulse of business-to-business spending as well.
But this is also a key release for FedEx itself. FDX stock touched a three-year low in October before a recent 15% rally. With shares trading at less than 12x forward earnings, investors are still treating this as a company likely to post declining profits, and valuing FedEx stock at a discount to rival United Parcel Service (NYSE:).
FedEx needs to change the narrative surrounding its stock, and, as with Hexo, a strong report next week would be a good place to start.
General Mills (GIS)
Earnings Report Date: Wednesday, December 18, before market open
General Mills (NYSE:) is another giant trying to reclaim past glory. GIS stock touched a six-year low last December, but has bounced 41% as turnaround hopes and struggling consumer packaged goods names managed to rebound.
But GIS looks a bit wobbly heading into earnings, thanks to a 3.1% decline on Wednesday. Shares have traded sideways for close to nine months now. There’s perhaps a growing realization that General Mills still faces headwinds in key categories like cereal and yogurt — and it still has a lot of work left to do in its turnaround.
In that context, Wednesday morning’s report can re-inspire confidence, or resurrect old worries. And with Conagra Brands (NYSE:) reporting on Thursday morning, there are two key earnings reports in the CAG space. CAG stock, too, has stalled out, meaning that the two releases could help set the tone for the entire sector heading into 2020.
Micron Technology (MU)
Earnings Report Date: Wednesday, December 18, after market close
Micron Technology (NASDAQ:) has gone in different directions after its last two earnings reports. Shares soared after fiscal-third-quarter earnings in June, though to my eyes, the numbers weren’t quite as good as investors seemed to believe. The stock after the fiscal-fourth-quarter report in September, largely due to a disappointing outlook.
But MU stock has managed to claw back those losses, and heads into earnings not far from a 15-month high. To keep these levels, both earnings and guidance need to be solid. The case for Micron stock is that profits are nearing a bottom, and the Q1 report needs to be constructive on that point. Anything less, and the optimism that has driven a 50% bounce since June could fade, and with it, MU stock could also fade.
Rite Aid (RAD)
Earnings Report Date: Thursday, December 19, before market open
Rite Aid (NYSE:) stock is heading in the wrong direction again. After a 90%-plus decline, shares finally found a bottom in late August, and more than doubled in roughly ten weeks. A new CEO and a both contributed to the optimism.
But the stock has reversed in the last six weeks, dropping over 35%. And that puts quite a bit of pressure on Thursday’s Q3 release. Turnaround hopes under new leadership already seem to be dimming. A stretch of buying across the sector appears to have come to an end, with Walgreens Boots Alliance (NASDAQ:) and CVS Health (NYSE:) seeing similar reversals in recent weeks.
If Rite Aid disappoints next week, a $3 billion debt load will continue to weigh on RAD stock. But if the company can follow better Q2 results with another quarter of improvement, turnaround hopes can return.
Given its high debt and thin margins, RAD is clearly a . And so investors should at least expect volatility next week.
Darden Restaurants (DRI)
Earnings Report Date: Thursday, December 19, before market open
Restaurant stocks like Darden Restaurants (NYSE:) have struggled lately. DRI stock has been no exception; even with a recent bounce, the stock is down 8.5% from mid-September highs. A revenue miss in the company’s fiscal first quarter has been a key catalyst.
Both that Q1 report and the struggles in the sector make Darden’s second-quarter release a key test. Darden has been one of the great turnaround stories in the market over the past few years, but a soft quarter could raise fears that material improvements are at an end. With DRI stock till trading at 17x forward earnings, and with the economy heading into year eleven of an expansion, recent gains can reverse quickly if Darden disappoints again.
Meanwhile, Darden’s report could impact other stocks in its industry. Big names in the space have also weakened, with Starbucks (NASDAQ:), McDonald’s (NYSE:) and Yum! Brands (NYSE:) all off their highs. Casual dining rival Brinker International (NYSE:) has fallen sharply in recent sessions. The sector as a whole needs a dose of optimism, and a good report from a category leader certainly would qualify.
Earnings Report Date: Thursday, December 19, after market close
Earnings reports next week save the biggest company for last, with Nike (NYSE:) releasing fiscal-second-quarter earnings on Thursday after the close. Unlike several consumer names, Nike doesn’t need to change sentiment surrounding its stock: shares reached an all-time closing high on Wednesday. Goldman Sachs last week to its “Conviction Buy” list.
Nike’s results simply need to keep the momentum going. With Wall Street projecting a 7.4% increase in revenue and earnings growth just shy of 10%, Nike has room to beat estimates. The question for Nike stock might be whether that will be enough, with shares trading at a pricey 28x next year’s consensus earnings per share.
That valuation makes NKE stock an interesting test for the market as well. Are investors willing to keep paying ever-higher prices for quality stocks? Or have valuations finally neared a peak? Those questions have dogged this bull market for some time. The reaction to Nike earnings might suggest how the market will answer those questions in 2020.
As of this writing, Vince Martin did not hold a position in any of the aforementioned securities.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.