This Week's Big Quarterly Reports

Monday, December 9, 2019 2:46 PM | Michael Fowlkes

2019 is almost in the books, and it has been very strong for the market. The major indexes are all trading just shy of their all-time highs, and investor confidence remains high.

Interest rate cuts and rising hopes of a trade deal between the U.S. and its biggest trading partner China have both helped drive the market higher as we head into the new year. The current earnings season has been strong but there are still plenty of big names left to report before the end of the year and several this week.

This week's big reports come from a diversified group of stocks including from the auto sector, technology sector and retail. With the markets at record highs, investors have priced stocks for perfection putting additional pressure on each quarterly report. Another strong week of reports will help push the market higher into the final days of the year, while a string of disappointing numbers would pull shares lower based on current valuations.

Here are this week's biggest reports.

Lululemon Athletica (LULU)

Atheltic apparel maker Lululemon Athletica (LULU) reports its third-quarter numbers this week. Look for the quarterly report after the market closes on Wednesday. LULU has been a top performer in the market this year with shares up 90% on the year. If the company is able to deliver another solid set of quarterly numbers the stock is likely to build on its recent gains, but with a forward P/E of 41 the stock is currently priced for perfection and could quickly move lower on any negative news. Analysts forecast earnings of $0.93 per share, but the street expects a big beat with a whisper number of $0.98. With so much optimism built into the stock at this time, current shareholders may want to have an exit strategy in place just in case the news disappoints and LULU starts to give back some of its recent gains. LULU trades at $232.07 with an average price target of $217.96.

Adobe (ADBE)

Software maker Adobe (ADBE) is scheduled to report fiscal fourth-quarter numbers after the market closes on Thursday. Ahead of the report analysts expect the company to post earnings of $2.26 and the street is looking for a small earnings beat with a whisper of $2.30 for the quarter. Adobe has a good earnings track record with better than expected earnings and sales each of the last eight quarters. The stock is up 36% on the year, and another solid quarterly report should push shares even higher. ADBE is trading at $308.43 with an average price target of $311.52. The stock has a forward P/E of 31.6 with earnings expected to rise at an annual rate of 19.3% over the next five years.

AutoZone (AZO)

Auto parts retailer AutoZone (AZO) will report fiscal first-quarter numbers before the market opens on Tuesday. Analysts expect the company to post earnings of $13.69, while the street expects a slightly higher number with a whisper of $14.02 for the quarter. AutoZone has enjoyed a strong year in 2019 with shares up 40% year to date. The stock sold off following an earnings miss in September, but shares quickly regained their footing and shares are once again trading just shy of their all-time high heading into the upcoming release. A strong economy continues to boost the auto sector and driving shares of auto-parts retailers higher as well. Earnings are up 14.5% per annum over the last five years and analysts expect profits to continue growing at an annual rate of 10.3% over the next five years. AZO is trading at 16 times future earnings at $1,172.15 with an average price target of $1,182.31.

American Eagle (AEO)

Specialty teen retailer American Eagle (AEO) is expected to release its third-quarter numbers before the market opens on Wednesday. The consensus for the quarter calls for earnings of $0.48 while the street expects a small earnings beat with a $0.49 whisper number. AEO stock has struggled in 2019, with shares down 20% since the start of the year, and is currently trading in the lower end of its 52-week range. The company has shown impressive annual earnings growth of 22% over the last five years, but looking ahead growth is expected to slow to a modest 3.8% per annum over the next five years. The stock's valuation is attractive with shares trading at just 10 times earnings, but the slowing growth forecast will continue to weigh on the stock moving forward. If the company is able to hit its whisper number the stock will start to move higher, but any sign of weakness will keep AEO hovering near its low. AEO trades at $15.46 with an average price target of $19.00.

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