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Investors might be hoping for a quiet Thanksgiving week ahead — but there will be news. Even in a short week, there are several key earnings reports on the earnings calendar.
So far, earnings season perhaps has been a disappointment — albeit a modest one. Broad markets are down from late September peaks – but have recovered some of their October losses. The news admittedly is worse in small caps, at least measured by the Russell 2000 (NYSEARCA:IWM), which have struggled the last few sessions and are down 10%+ from September peaks.
But overall earnings have been strong, and in a market at all-time highs, a correction isn’t exactly shocking. The big risk seems to be: what happens next? The hope from investors was that strong earnings reports could offset external worries about tariffs, trade and higher interest rates. With the earnings calendar – except for retail – lightening into the end of the year, stock- and sector-moving releases will be tougher to find.
All told, there’s still reason to be cautious into the end of the year – and plenty of reasons to pay close attention, even ahead of the holidays. Retail earnings season kicked off with Walmart (NYSE:WMT) this week, and several leaders report next week. Two key and struggling areas of the market will look for a glimmer of hope in earnings reports as well. Indeed, there’s more going on next week than an investor might think.
Earnings Report Date: Monday, Nov. 19, before market open
Chinese stocks have been hammered — and JD.com (NASDAQ:JD) has been one of the worst performers. JD shares are down 41% this year and have fallen by more than half from late February levels.
This is a stock in desperate need of a bounce — and Monday might provide that bounce. JD has increased spending to invest in its business of late, which should lower expectations on the earnings side. In terms of revenue, despite all the fears surrounding the Chinese economy, growth has been solid, with a 36% increase and a consensus beat in the Q2 report.
And there are some signs that Chinese stocks, and JD, are ready to bottom. JD itself has stabilized over the past couple of weeks. Alibaba (NYSE:BABA), boosted by a strong Singles’ Day, has rallied double-digits
I still believe JD has value longer-term. A strong Q3 report on Monday can start to reverse the narrative – and get the stock moving back in the right direction. But if investors sell good news – or JD doesn’t deliver – it clearly becomes time to re-evaluate.
Campbell Soup (CPB)
Earnings Report Date: Tuesday, Nov. 20, before market open
Tuesday’s report for Campbell Soup (NYSE:CPB) itself isn’t terribly compelling. It’s pretty clear at this point that Campbell is going to be a multi-year turnaround play, particularly with hopes of a sale likely dashed at this point. The company is facing an activist effort from Third Point, which means the same managers discussing the business on the Q1 call may be gone by Q3.
Still, Campbell, on the whole, is an increasingly relevant story to other CPG manufacturers – and perhaps to grocers like Walmart and Kroger (NYSE:KR) as well. Increasing evidence suggests the consumer products space is changing for good, and that could leave brands like Campbell’s out in the cold.
In the changing food space, the success — or failure — of companies like Campbell’s is up for debate. And while I don’t expect miracles from the fiscal first-quarter report, I do wonder if, at some point, sales declines accelerate. Consumer preferences are becoming increasingly clear – and they don’t include canned soup. Can a company like Campbell’s, then, buy its way out of the problem? Is there a pivot here? Or are we destined to see the shrinkage of this, and many other, classic American brands?
Again, Campbell’s report isn’t going to answer those questions on its own. But it’s going to give more important data about the health of the industry and its brands – which is meaningful to anyone who owns a stock in the CPG sector or in the grocery space.
Foot Locker (FL)
Earnings Report Date: Tuesday, Nov. 20 after market close
There are a few big reports in retail this week beyond that of Foot Locker (NYSE:FL). Electronics leader Best Buy (NYSE:BBY) and off-price giant Ross Stores (NASDAQ:ROST) release fiscal Q3 earnings as well.
But Best Buy can’t really move any other stocks — it basically has no peers in its vertical at this point — and the off-price channel by all accounts is doing just fine. The reports will matter to BBY and ROST — but are unlikely to move any other stocks.
For Foot Locker, though, the Q3 report gives a potential preview of what the footwear business, and mall retail, look like now – and how the key holiday season might shake out. Foot Locker stock is a good proxy for mall traffic since it really has little control of its assortment (it’s Nike (NYSE:NKE) and Adidas (OTCMKTS:ADDYY) who largely make the choices).
Nike stock has pulled back of late — so its shareholders should be watching the Foot Locker report as well. If Foot Locker shows strength, that’s a good sign not only for FL, but for NKE, potentially ADDYY and even Under Armour (NYSE:UA, NYSE:UAA), not to mention the myriad mall retailers.
But with Nike’s US sales recovering of late, a bad print from Foot Locker casts a very wide shadow. If Foot Locker can’t sell in-demand Nikes in malls, what chance do struggling mid-tier mall-heavy apparel retailers have? Anyone involved in U.S. retail, then, needs to keep a close eye on Tuesday’s report – and perhaps take an even closer look over the holiday weekend.
As of this writing, Vince Martin has no positions in any securities mentioned.
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