Weekly Market Preview: High Expectation Ahead of First Quarter Earnings (BAC, PEP, AA, NFLX)
The stock market rally “can go on for years,” according to JPMorgan Chase (JPM) CEO Jamie Dimon. "There’s no law that says it has to stop,” Dimon told analysts on Friday on the call following JPMorgan’s strong quarterly results. The rest of the market certainly took notice.
Stocks rose near record territory Friday, lead by the banking sector which provided upbeat results and strong outlook for 2019. The sector’s rosier-than-expected view of the state of the economy serves as a catalyst for what is likely to come during the first quarter earnings season from industry bellwethers, negating previous concerns of domestic and global economic slowdown. But that wasn’t the only reason investors were excited.
Shares of Walt Disney (DIS) surged as much as 12% Friday, pushing the Dow higher, after the media giant announced details about its upcoming streaming service, dubbed Disney+. The service, which is said to rival Netflix (NFLX) will cost $6.99 per month, or $69.99 for an annual plan. Fans can expect the service to be ready on Nov. 12, delivering a combination of original content and offerings from Disney's extensive libraries as well as content it now owns via its Fox acquisition.
Disney’s rally helped the Dow Jones Industrial Average to gain 269.25 points, or 1% higher to close at 26,412.30. The S&P 500 index added 19.09 points, or 0.7%, to finish at 2,907.41, while the tech-heavy Nasdaq Composite Index climbed 36.80 points, or 0.5%, to close at 7,984.16. And there’s a good chance that these gains are here to stay, if the earnings results by some of the nation’s largest banks serve as indication.
These earnings results, combined with solid outlook, suggests that the so-called “headline risks” in equities and concerns about valuation may be premature this earnings season. In that vein, here are a few stocks to keep an eye on.
Bank of America (BAC) - Reports before the open, Tuesday, Apr. 16
Wall Street expects BAC to earn 65 cents per share on revenue of $23.3 billion. This compares to the year-ago quarter when earning were 62 cents per share on revenue of $23.27 billion.
What to watch: Bank of America has beaten earnings estimates in ten straight quarters, and the company’s stock has been rewarded handsomely, gaining 22% year to date. And with better-than-expected results just released from JPMorgan and Wells Fargo (WFC) expectation are high from BofA investors. Specifically, with loan and deposit growth being among the major objectives investors are hoping will impress Wall Street. Meanwhile, analysts will want to see to what extent can other parts of the business such as investment banking, support top-line growth and sustainable profits.
PepsiCo (PEP) - Reports before the open, Wednesday, Apr. 17
Wall Street expects PepsiCo to deliver EPS of 92 cents per share on revenue of $12.7 billion. This compares to the year-ago quarter when earnings came to 96 cents per share on $12.56 billion in revenue.
What to watch: The company is adjusting to consumers’ need for healthier beverage choices with low salt, low sugar, and more natural ingredients. On Wednesday the company must address fears about its growth drivers, while delivering the type of guidance that suggests confidence about the company’s competitive position. That said, Pepsi — which possesses a number of venerable brands, offers an impeccable dividend track record — remains a hallmark blue-chip investment holding.
Alcoa (AA) - Reports after the close, Wednesday, Apr. 17
Wall Street expects Alcoa to lose 11 cents per share on revenue of $2.81 billion. This compares to the year-ago quarter when earning were 77 cents per share on $3.09 billion in revenue.
What to watch: Shares of the aluminum giant have decline 4.26% over the past five days. And that’s partly because the aluminum giant is expected to deliver a year-over-year decline in earnings on lower revenues when it reports results for the quarter ended March 2019. The overall decline in metal stocks have been driven by the US-China trade war that has sliced into demand, given that China is world’s largest consumer of metals. Any lifting of tariffs, as reports suggest, could boost materials stocks. As such, investors will listen to clues about what Alcoa management says about outlook for 2019.
Netflix (NFLX) - Reports after the close, Wednesday, Apr. 17
Wall Street expects Netflix to earn 57 cents per share on revenue of $4.5 billion. This compares to the year-ago quarter when earning were 64 cents per share on $3.7 billion in revenue.
What to watch: As is often the case, Neflix’s Q1 results will be the first among its FAANG peers — Facebook (FB), Amazon (AMZN), Apple (AAPL) and Google (GOOG , GOOGL), which have all rebounded nicely during the first three months of the year. For Netflix, however, the movie streaming giant will look to bounce back after Friday’s 4.45% decline amid the unveiling of Disney’s streaming platform. While analysts remain positive that Netflix’s first-mover advantage won’t disrupt the long-term growth story that remains intact, the company could allay those concerns by delivering solid subscriber additions for both domestic and international markets and upbeat guidance.