Weekly Preview: Earnings to Watch This Week 4-7-24 (DAL, JPM, TLRY, WFC)

Buoyed by an encouraging jobs report and a willingness among traders to overlook a surge in interest rates, stocks staged a recovery on Friday after suffering the Dow Jones Industrial Average's most severe downturn in over a year.

Friday’s jobs report was also a positive catalyst for stocks. According to the Labor Department, payrolls grew by 303,000 for the month of March. This figure surpassed expectations of an increase of 200,000. Additionally, wages rose 0.3% for the month, and 4.1% from the previous year, aligning with forecasts. Meanwhile, the unemployment rate ticked down to 3.8% from 3.9%, while the labor force participation rate inched up to 62.7% from 62.5%.

The strong jobs data continued to point to a labor market that has shown remarkable resilience to the Fed's aggressive monetary policy tightening cycle. The figures also mean that the Fed will likely not be in any rush to cut interest rates. In this case, it’s often a matter of good news for the economy isn’t always good news for stocks. Investor sentiment appears divided, torn between applauding a strong jobs reports and robust economy to underpin further growth in corporate earnings and hoping for a softer job market, which could prompt the Federal Reserve to initiate interest rate cuts.

But stocks rose Friday following Thursday’s 530-point decline in the Dow, which extended the Dow's losing streak to four consecutive sessions. On Friday, the Dow rose 307.06 points to close at 38,904.04. Gains in Apple (AAPL), Salesforce (CRM), Intel (INTC) and IBM (IBM) powered the blue chip index. With all eleven sectors in positive territory, the S&P 500 Index added 57.13 points to close at 5,204.34, while the tech-heavy Nasdaq Composite rose 199.44 points to end the session at 16,248.52.

The Nasdaq was powered by gains in Apple (AAPL), Meta Platforms (META), Nvidia (NVDA) and Amazon (AMZN). Despite Friday’s rebound, all three major averages declined on a weekly basis. For the week, the Dow fell 2.27%, suffering its worst weekly decline of the year. The S&P 500 slid 0.95%, while the Nasdaq gave up 0.8%.

Investors are grappling with what to make of the strong economic data, eliminating the fear of a recession coupled with the desire for the Fed to cut interest rates. Clearer signs will be revealed this week as we approach the new earnings season. Here are the stocks I’ll be watching.

Tilray Brands (TLRY) - Reports before the open, Tuesday, Apr. 9

Wall Street expects Tilray to report a per-share loss of 5 cents on revenue of $198.62 million. This compares to the year-ago quarter loss of 4 cents per share on revenue of $145.59 million.

What to watch: Investors who have waited patiently for Tilray to make new highs have been rewarded. The stock has surged more than 50% over the past thirty days, while climbing 18% in six months. The shares are up 14% year to date, besting the 9% rise in the S&P 500 index. But expand that horizon by twelve months and the picture is not as rosy. The shares have underperformed the broader index, rising just 5% compared to the S&P 500 index’s 27% rise.

Although the Canadian cannabis company continues to make financial and fundamental improvements, its long-term success closely hinges on legalization on the federal level. Tilray and other cannabis companies are highly dependent on the U.S. government to do two things: One is to legally reclassify marijuana and/or Congress must pass the long-awaited SAFE Banking Act or similar legislation. The latter would open the cannabis industry to more investment opportunities.

While TLRY's management has expanded the company’s reach into international markets, investors are still waiting for the company to show it can compete effectively in the Canadian cannabis market, where it has had to deal with not only slumping prices, but also competition from the black market. The company has pivoted slightly by slowing down production at cannabis facilities to raise cash, while at the same time diversifying its business into wellness products and beverages. As such, the company's ability to move the business beyond the hope of the U.S. legalizing cannabis will be a key question on Tuesday's .

Delta Airlines (DAL) - Reports before the open, Wednesday, Apr. 10

Wall Street expects Delta to earn 35 cents per share on revenue of $12.55 billion. This compares to the year-ago quarter when earnings were 25 cents per share on $11.84 billion in revenue.

What to watch: Thanks to a resurgence in business and holiday travel activity, airline stocks were one of the strongest sectors in 2023, outperforming the broader S&P 500 index. Delta Airlines have been one of the beneficiaries of a robust global travel demand, pushing Delta stock almost 30% higher over the past six months, including 15% year to date, besting the 9% rise in the S&P 500 index. What’s more, over the past year, the sock has risen 36%, besting the broader index’s 27% rise.

But there’s still tons of value here, given Delta’s strong footing in both the domestic and international air travel markets. according to the International Air Transport Association, the global airline industry is poised to earn net profit $25.7 billion in 2024, which would equate to a 10% rise year over year. Meanwhile, operating profit is projected to reach $49.3 billion in 2024, which is expected to be an $8.6 billion jump from last year. Just as impressive, the industry is expected to enjoy a 7.6% jump in revenue, reaching a record $964 billion in 2024.

Close to 5 billion people are expected to travel in 2024, compared the pre-Covid record of 4.5 billion people in 2019, all of which bodes well for Delta in the new year. Ahead of the Q4 report, investors will focus on management’s commentary to detect any bullishness in booking pricing, capacity growth from both domestic and international travel, where it has reported a gradual recovery. As such, Delta remains one of the better bargains in transportation stocks.

JPMorgan Chase (JPM) - Reports before the open, Friday, Apr. 12

Wall Street expects JPMorgan to earn $3.88 per share on revenue of $38.8 billion. This compares to the year-ago quarter when earnings came to $4.10 per share on revenue of $39.34 billion.

What to watch: With gains of close to 40% over the past six months, shares of JPMorgan Chase have been one of the better performing stocks in the financial sector. The stock is up 16% year to date, besting the 9% rise in the S&P 500 index. JPMorgan’s consistency and operating efficiency is being rewarded for its ability to navigate economic headwinds to return value to shareholders. Spanning over the past decade, JPMorgan has grown earnings per share by more than 130%.

In 2023, JPMorgan delivered revenue of $149.81 billion which is roughly 22% growth year over year. In 2024, analysts expect revenue of $150.84 billion which is around the business's historical growth rate which is strong considering the recent interest hikes. Consensus EPS estimates for 2024 is anticipated to land at $14.79 denoting that it is believed that EPS growth will be -8.9% year over year due to a combination of factors, including pressure placed on profit from slower revenue growth and higher expenses to be incurred in 2024.

Meanwhile, the bank continues to manage deposits and funding sources in an efficient manner, keeping the loan-to-deposit ratio below 100% for the past decade, highlighting the banks' ability to secure deposits. In terms of valuation, at the current valuation of $197 per share, JPMorgan stock seems fairly valued and is no longer a bargain for investors who are looking for exposure in the banking sector. But the stock should be held, especially when factoring its 2.35% dividend yield, which has grown at an average of almost 8% over the last five years.

Wells Fargo (WFC) - Reports before the open, Friday, Apr. 12.

Wall Street expects Wells Fargo to earn $1.09 per share on revenue of $20.19 billion. This compares to the year-ago quarter when earnings were $1.23 per share on revenue of $20.73 billion.

What to watch: Over the past six months, Wells Fargo stock has been one of the better performers within the financial sector, rising some 47% compared with a 22% rise in the S&P 500 index. The stock has risen 16% year to date, while the S&P 500 index has risen 9%. The strong year-to-date start comes on renewed investor enthusiasm that the Federal Reserve will remove the bank’s asset cap.

As to whether the gains will continue, some analysts aren’t so sure. Last week, analyst David Konrad of Keefe, Bruyette & Woods downgraded Wells Fargo to Market Perform from Outperform. "Although we share this enthusiasm, we believe the stock is set for a consolidation phase given expectations for NII (net interest income) to underperform peers and trough in 1H25," Konrad wrote in a note to clients.

Nevertheless, Wells Fargo still has some attractive qualities, particularly from a balance sheet perspective where the bank is not only fundamentally strong, but also offer an attractive dividend yield of 2.47% for investors who are looking for stable income. What’s more, Konrad expects the bank to resume stock buybacks which he says should provide support for shares. "With a CET1 ratio of 11.4%, WFC is in a strong position for continued buybacks," Konrad said.

In terms of execution, the bank has showed improve financial performance, achieving not only strong revenue growth, but also diligent costs management to navigate inflationary headwinds by focusing on ways to lower expenses, and realize more efficiency. On Friday the bank will need another top- and bottom-line beat and confident guidance to affirm this bullish thesis.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

Stocks Economy