The market continues to look for direction following a very volatile October. After a fairly strong start to November, the bears are once again driving the major indexes lower as we head into the final phase of the current earnings season.
So far the earnings season has been a positive one, but concerns over the sustainability of earnings growth, rising interest rates, and a trade war with China continue to weigh on the market.
Overall economic conditions remain favorable, but with so much uncertainty in the market, traders have been quick to sell off stocks on any signs of weakness in their quarterly reports.
The majority of companies have already reported, but there are still plenty of big names companies left to report. This week will feature reports from some big names in tech and retail.
Here is a closer look at five quarterly reports that the market will be paying close attention to this week.
Mega-retailer Wal-Mart (WMT) is scheduled to report its third-quarter results November 15. The company is expected to post earnings of $1.02, but the street has a slightly higher whisper number of $1.03 for the quarter. Wal-Mart’s quarterly report is always important since the company is the nation’s biggest retailer, but with the holiday shopping season upon us, this week’s report will be closely watched for a clearer picture on the overall sector headed into the crucial holiday season.
Wal-Mart dodged the October selloff that hit the majority of stocks and shares have trended steadily since mid-summer with the run being fueled by back to back quarterly reports that showed better than expected results on both the top and bottom line. Investments in improving its customer experience and growing its online business have been paying off, and last quarter the company grew online sales by 40% and reported a 4.5% rise in U.S. same store sales. If Wal-Mart can put up comparable numbers for the most recent quarter, you can expect the stock to build on recent gains through the remainder of the year.
Chip maker NVIDIA (NVDA) had been one of the hottest stocks in the market up until early October. The market became concerned over a slowdown in the semiconductor sector, and NVDA stock got crushed. Since hitting a record high of $292.76 on October 2, the stock has fallen 30%. A disappointing quarterly report from competitor Advanced Micro Devices during the month stoked fears and drove AMD sharply lower which pulled the rest of the sector down in sympathy. The recent stock selloff has lowered the stock’s valuation significantly, so there is the chance of a nice rally as long as results are in-line with estimates.
NVIDIA tends to issue conservative guidance and the street is expecting an earnings beat. The consensus calls for earnings of $1.73 but the street has a whisper number of $1.80 for the quarter. NVIDIA reports its third-quarter results after the market close November 15 and its report will have a big impact on not only NVDA shares but the entire chip sector.
Macy’s (M) reports its third-quarter results November 14. The company will report before the market open, with the consensus calling for earnings of $0.13 for the quarter. Macy’s has posted better than expected profits the last five quarters, and the street expects another earnings beat this quarter with a whisper number of $0.18 for the quarter. During the same period last year Macy’s had earnings of $0.23. Mall-based retailers have struggled to grow profits, and Macy’s is no exception with earnings falling 9% per annum over the last five years. Analysts expect things to improve moving forward, but still forecast earnings will fall on average 0.8% annually over the next five years.
The stock has a low valuation with a P/E of just 10 but the company’s inability to grow profits worries Wall Street and has lowered expectations. M is currently trading at $37.78 but even with the recent pullback in the stock analysts continue to feel shares are overvalued and have an average price target of just $35.45. If Macy’s is able to deliver blockbuster numbers analysts will likely revise their estimates higher, but Macy’s is going to have a hard time convincing Wall Street until earnings start to rise.
Cisco Systems (CSCO) took a hit in October with the overall market, but the stock has already recovered most of its recent losses and is once again trading just shy of its 52-week high. The company will report its fiscal first-quarter numbers November 14 after the market close with the consensus calling for earnings of $0.72 per share. Cisco has posted better than expected earnings and sales the last three quarters, and the street expects another earnings beat with a whisper number of $0.74 for the recent quarter. During the same period last year, the company earned $0.61. Analysts continue to see upside in the stock. CSCO is currently trading at $47.11 and analysts have an average price target of $51.88 on the stock.
NetApp (NTAP) will report its fiscal second-quarter earnings after the market close November 14. Analysts forecast earnings of $0.99 per share, up from $0.81 during the same period last year. NetApp has posted better than expected sales and profits each of the last five quarters with a nine-quarter streak of better than expected earnings. The street expects another earnings beat for the recent quarter with a whisper number of $1.06 for the quarter.
Like most tech stocks, NTAP sold off in October, but the stock has already started to recover as strength returned to the overall market. The company is a major player in the cloud, and as its focus moves from on-premises storage to the cloud the company is expected to show strong earnings growth. NetApp is expected to grow earnings by 27% during the current year and looking ahead analysts forecast average annual earnings growth of 17% over the next five years. The stock has a forward P/E of 16.5 which justifies additional upside as long as the company is able to continue hitting or surpassing analyst estimates. NTAP currently trades at $79.86 with an average price target of $83.83.