The bulk of the current earnings season is already behind us, and so far the reports have been fair. Earnings growth has slowed but the majority of companies have reported numbers in-line or better than expected.
For the S&P companies that have already reported, earnings have grown around 1% while revenue has increased 4.2% year over year. Last quarter earnings growth was around 15% with sales up 6.4%, so the slowdown is real.
Despite the slow growth, the market has remained upbeat. One reason is because companies face tough comparables due to last year’s Trump cuts. Another reason is strength in the overall economy, in particular the jobs market. Last month the economy added 263,000 jobs and unemployment fell to 3.6% which is the lowest level since December 1969.
As the stock earnings season winds to a close, focus will move more to the overall economy on the trade dispute between the U.S. and China, but there are still plenty of big name stocks left to report that could drive the market moving forward. Here are a few top stocks to watch this week as they release their most recent quarterly earnings numbers.
Walt Disney (DIS)
Entertainment giant Walt Disney (DIS) reports its fiscal second-quarter numbers after the market close Wednesday. Analysts expect Disney to post earnings of $1.59 per share on revenue of $14.58 billion. During the same period last year the company earned $1.84 and reported revenue of $14.55 billion. The dark cloud over Disney is ESPN subscriber losses due to cord-cutting, but strength in the company’s other segments, in particular its studio success, is keeping strength in the stock. Disney’s latest blockbuster, Avengers: Endgame shattered all previous box office records at its open.
Disney has grown its earnings 10.2% annually over the last five years, and analysts see profits rising 4.3% per annum over the next five years. Disney has posted better than expected profits and revenues the last two quarters, and the street expects another earnings beat for Q2 with a whisper number of $1.65 for the quarter. DIS trades at $134.65, with a forward P/E of 20 and analysts have an average price target of $141.31 on the stock.
Electronic Arts (EA)
Video game maker Electronic Arts (EA) posts fiscal fourth-quarter numbers after the market close Tuesday. Wall Street has forecast earnings of 96 cents per share on sales of $1.2 billion, down from $1.28 on $1.58 billion during the same period last year. The company’s biggest competitor, Activision (ATVI) already reported, with positive surprises on both the top and bottom line, but the company issued weaker than expected guidance due to increased competition. This could be a positive indicator that Electronic Arts will show good numbers due to strong acceptance of its new “Apex Legends” game. Both companies are dealing with the massive popularity of “Fortnite” which continues to remain the most popular video game on the market.
Last quarter EA reported disappointing numbers but the street expects a positive surprise this quarter with a whisper number of $1.02 for the quarter. EA trades at $92.13 with a forward P/E of 20 and analysts have an average price target of $109.71 on the stock.
Cybersecurity specialist Symantec (SYMC) will report its fiscal fourth-quarter numbers after the market close Thursday with the consensus calling for earnings of $0.39 per share on revenue of $1.21 billion. During the same period last year the software company earned $0.46 on sales of $1.23 billion. Symantec has struggled to grow earnings in recent years, with profits down 3.7% per annum over the last five years, but analysts see improvements in the future with earnings expected to rise at an annual rate of 10.6% over the next five years.
Symantec has a good earnings track record, with positive surprises on both the top and bottom line each of the last four quarters and the street expects another earnings beat with a whisper number of $0.41 for Q4. The stock has a low valuation with a forward P/E of 13, which is due to falling earnings in recent years. The valuation will not attract investors on its own, but if the company is able to keep posting positive surprises and earnings begins to grow quicker than expected there is a lot of upside in the stock. Cybersecurity is a major concern for both companies and individuals which should help bring strength back into the stock moving forward. SYMC trades at $23.29 with an average price target of $22.29.
Fast food chain Wendy’s (WEN) is scheduled to release its first-quarter numbers before the market opens Wednesday. Analysts forecast earnings of $0.12 per share on revenue of $399.9 million. During the same period last year Wendy’s earned $0.11 on sales of $380.6 million. Despite a consumer shift to a healthier menu Wendy’s has managed to show Wall Street average annual earnings growth of 12% over the last five years and analysts expect profits to rise 10.3% per annum over the next five years. The stock’s valuation is a bit high with shares trading at 24 times future earnings but if the company can deliver the earnings growth analysts expect the stock should remain solid.
Wendy’s has posted positive earnings surprises the last two quarters, but sales were below estimates each quarter. WEN is currently in the upper end of its 52-week range, and for the stock to break to a new 52-week high traders will want to see strength on both the top and bottom line. The street expects an in-line quarter with a whisper number of $0.12, so any positive earnings surprise and a strong revenue number will push the stock higher. WEN is trading at $18.54 and analysts see modest upside with an average price target of $19.27.