As we move into the first full week of the current earnings season there are some big names scheduled to release their quarterly numbers. Last week the financial kicked things off with quarterly reports from bank giants Wells Fargo (WFC) and JP Morgan (JPM), and early results have been mixed.
This week will feature more financial stocks and we will also start to see reports from big names in other industries as the earnings season really gets under way. This will be a shortened week with the markets closed on Friday for Good Friday, but the reports we see this week will certainly set the tone for the current earnings season when the market reopens next week and the earnings reports start to come rapidly.
Last quarter the earnings season was upbeat, but it did raise concerns over slowing earnings growth. The vast majority of companies reported better than expected numbers last quarter, and the market has chosen to focus on the better than expected results for the time being, but companies are going to need to continue putting up better than expected numbers for traders to remain bullish into the summer months.
Here are a few of the big names to watch out for this week as they give us a little clearer insight into what to expect in the weeks to come.
Aluminum giant Alcoa (AA) was once considered the ultimate bellwether stock. While tech and bank stocks are now viewed with great importance, Alcoa remains a very important stock to watch as we head into the earnings season since aluminum is used in such a wide range of sectors and has been a focal point in the ongoing trade war between the U.S. and China. After a strong 2017, AA stock endured a tough 2018 and shares fell steadily in the second half of the year as President Trump increased pressure on China with steel and aluminum tariffs. The stock found support at the start of the year but has been stuck in a sideways pattern for the last three months while the overall market has shown strength. The uncertainty over the trade war with China will likely continue to keep a ceiling on the stock. In January the company reported mixed results with a positive earnings surprise and slightly weaker than expected quarterly sales. The consensus calls for Alcoa to post a loss of 17 cents per share, but the street has higher expectations with a whisper for a loss of just 11 cents for the quarter. A better than expected set of numbers could lead to significant upside in the stock with analysts having an average price target of $44.50 on the aluminum maker versus its current price of $27.95. Alcoa will report after the market close Wednesday.
American Express (AXP)
While the big banks have for the most part failed to participate in the recent bull market, payment processors like American Express (AXP) have been showing amazing strength. AXP is currently trading at $110.43, which is just shy of its 52-week and all-time high of $114.55. despite trading just under its all-time high, the stock remains very attractively priced with a forward P/E of 12.2 and earnings are expected to rise at an average annual rate of 15% over the next five years. Last quarter the company delivered a strong earnings beat of $2.32 versus the consensus $1.80 while sales fell slightly short of expectations. The market focused on the big earnings beat and pushed shares to a record high in March. Analysts have forecast the company to post earnings of $2.00 for the recent quarter, but the street believes another positive earnings surprise is in store, with a whisper number of $2.06. Another earnings beat should drive the stock to a new high, and analysts have an average price target of $116.42 on the stock. American Express will report before the market open Thursday.
Morgan Stanley (MS)
It has been a mixed start to the earnings season for the financial sector. Earnings have been better than expected, while revenues have struggled to keep pace with estimates. Charles Schwab (SCHW) delivered a beat on both the top and bottom line in its Q1 report, and if Morgan Stanley (MS) is able to do the same the stock has a lot of upside potential. MS has trended higher over the last month but remains an attractive buy with a forward P/E of just 8.7. The company has shown strong earnings growth of 17% per annum over the last five years and looking ahead analysts see profits rising at an annual rate of 10.8% over the next five years. Last quarter Morgan Stanley broke a 10-quarter streak of positive earnings surprises with a bottom line miss, but the street does not expect to see another miss in the Q1 numbers. The consensus calls for earnings of $1.17, but the street has a higher whisper number of $1.23, which would allow the stock to build on its recent gains given the low valuation and strong growth estimates. MS is currently trading at $46.13 with an average price target of $53.25. Morgan Stanley reports ahead of the opening bell on Wednesday.
With U.S. consumers shifting away from sugary soft drinks, you could easily assume that Pepsi (PEP) stock has struggled to keep pace the overall market. You would be wrong, and in fact PEP has not only managed to reward investors with steady gains, shares are currently trading just pennies below their all-time high. Pepsi has done a fantastic job growing its snacks and non-carbonated segments to balance out falling soda sales and has managed to report annual earnings growth of 6.6% over the last five years. Looking ahead analysts expect Pepsi to continue growing the bottom line, but at a slightly slower pace of 6.7% per annum over the next five years. Last quarter the company delivered earnings in-line with the consensus while sales were slightly higher than expected. Pepsi has a strong earnings track record and the street expects the company to deliver a positive earnings surprise for Q1 of $0.95 per share versus the consensus $0.92. PEP is trading at $123.21, which is above its $120.71 average price target, but you can expect to see analysts adjust their targets upward if the company is able to deliver the earnings beat the street expects for the quarter with shares now trading at just 14 times earnings. Pepsi reports Wednesday morning before the opening bell.