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You might think the earnings calendar would be quiet the week before Christmas. But that’s actually not the case: there are several important earnings reports on the way next week.
Indeed, there are enough big names reporting to hope for a little bit of market momentum heading into 2019. Admittedly, it’s probably too late to hope for a so-called “Santa Claus rally,” but there’s enough on the earnings calendar to drive some optimism toward the U.S. consumer, in particular.
Strong results from Darden Restaurants (NYSE:DRI) on Tuesday could inspire renewed confidence in restaurant stocks. Any sign of life from General Mills (NYSE:GIS) — whose shares are down 37% this year, and trade at a six-year low — will boost other struggling consumer packaged goods plays.
And those don’t even look like the most important releases on this week’s earnings calendar. A tech giant reports on Monday. The day after, a key semiconductor company will try and calm investor fears about a negative cyclical turn. On Thursday, a consumer bellwether should give some early clues as to the strength of the Christmas shopping season.
The holidays may be on the way — but investors shouldn’t go on vacation just yet.
Earnings Report Date: Monday, Dec. 17, after market close
I asked the question back in February: Is Oracle Corporation (NYSE:ORCL) the next Microsoft (NASDAQ:MSFT) or the next IBM (NYSE:IBM)? Is it ready to adapt to the new “cloud” world like Microsoft — or is doomed to see market share erode, like Big Blue?
Oracle hasn’t really answered the question yet. The stock fell sharply after third-quarter earnings in March on worries about its cloud strategy. Nine months later, ORCL stock trades back at those post-earnings levels.
That sets up a potentially key Q2 earnings report on Monday afternoon. The clock is ticking as smaller competitors take market share. For ORCL stock, no news is bad news.
Oracle simply has to start driving some optimism toward its cloud efforts. And from that standpoint, the second-quarter earnings report should set the tone for ORCL heading into 2019. A strong report can bolster a turnaround narrative. Another stumble, however, and investors will start to wonder if ORCL stock is worth the wait.
Earnings Report Date: Tuesday, Dec. 18, after market close
The market has decided that Micron Technology (NASDAQ:MU) earnings already have peaked — and it has sold off MU stock as a result. MU has trended downward steadily since late May, losing more than 40% of its value over that stretch.
For what it’s worth, I think the market has it half right. Micron earnings likely are headed downward, as prices for both NAND and DRAM memory recede from peaks. But as I argued this week, even declining earnings look more than priced in — and I expect support to hold coming out of the report.
After all, an earnings report beat and positive commentary toward 2019 pricing could lead to a “relief rally.” That said, anything less, and the current trend likely holds into the New Year, setting up an important report. Indeed, the options markets are pricing in about a 9% move in MU stock next week. There could be some fireworks here — and the reaction to Micron earnings likely will reverberate around the chip space.
Source: rodrigofranca via Flickr
Earnings Report Date: Thursday, Dec. 20, after market close
There aren’t a lot of earnings reports that can move the entire market. But fiscal Q2 numbers from Nike (NYSE:NKE) could shape broad market trading on Friday — and into the end of the year.
Admittedly, Nike’s numbers aren’t necessarily a barometer of holiday shopping strength: Nike’s second quarter ends on Nov. 30. But this is one of the largest consumer companies in the U.S., and investors in the sneaker space and beyond will be listening closely to management commentary on demand over the past few weeks.
But this also is a rather important report for Nike itself. The company’s turnaround in North America has been gaining steam over the past few quarters. Still, the stock dipped even after a Q1 beat in late September. And valuation, at 23x forward EPS, still looks close to full.
With NKE stock mostly range-bound since mid-October, the reaction to second quarter earnings should shape trading into 2019. Another beat might well confirm that Nike is back on track, and that Nike stock is worth paying up for. Any stumble, however, makes recent strength in the U.S. look more like a result of easy comparisons – and make investors wonder if NKE stock still deserves its premium.
As of this writing, Vince Martin has no positions in any securities mentioned.
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