U.S. Markets close in 5 hrs 57 mins

3 Things to Watch in the Stock Market This Week

Demitrios Kalogeropoulos, The Motley Fool

Stocks notched significant gains last week, so that both the S&P 500 (SNPINDEX: ^GSPC) and the Dow Jones Industrial Average (DJINDICES: ^DJI) are back in record territory, having risen by just under 10% so far in 2018.

^SPX Chart

^SPX data by YCharts.

Nike (NYSE: NKE), McCormick (NYSE: MKC), and CarMax (NYSE: KMX) step into the spotlight with earnings reports set to publish over the next few days. Below, we'll look at the trends that investors will be watching for in these upcoming earnings announcements. 

Nike's growth pace

Nike will announce its results on Tuesday, and investors have every reason to expect good news from the sports apparel titan. It recently returned to sales growth in the core U.S. market after almost two years of modest declines, and management expressed optimism back in June that this positive momentum will build into its new fiscal 2019. Its international geographies are doing well, too, led by China and its 35% spike last quarter.

A jogger running a trail.

Image source: Getty Images.

Nike's profitability will be a trend to watch, since that metric is supposed to keep marching higher with the help of a huge influx of innovative product releases. Rising gross profit margins will also be supported by healthier inventory levels in the U.S., and by a shift toward the direct-to-consumer business.

These gains were likely partly offset by elevated marketing spending around the World Cup this summer, but Nike should still express optimism on Tuesday that both sales and profitability trends are improving this year.

McCormick's pricing power

Spicing and flavorings giant McCormick has bucked the negative trend in the consumer packaged-foods industry with a lot of help from its $4 billion acquisition of the hit French's and Frank's condiment franchises. That purchase allowed sales to jump 19% last quarter even though its core spice business expanded by a more modest 3%.

Investors are looking for both segments to show growth in the quarter that just closed, in a demonstration of both McCormick's attractive food niche positioning and its strong global marketing and distribution infrastructure. Look for profit margins to continue expanding, too, as sales shift toward the more profitable condiment brands.

Shareholders likely won't hear about any stock repurchase on Thursday, since the company has suspended that capital return channel while management focuses on paying down the debt to fund last year's acquisition. Healthy cash flow is supporting McCormick's dividend, though, which increased for the 32nd consecutive year in 2018.

CarMax's customer traffic

CarMax's shares have rebounded over the past few months after the auto retailer announced improving operating results in late June. Yes, sales fell at its existing locations in the fiscal first quarter, but the chain's 2.3% decline marked a solid improvement over the 8% slump in the prior quarter. CarMax revealed a few other metrics that investors were happy to see, including steady gross profit per vehicle and a quickly growing store base.

A smiling man receives the key to his new car.

Image source: Getty Images.

CEO Bill Nash and his team have pointed to pricing challenges as a key factor keeping a temporary lid on sales growth. New-car dealerships have been aggressive in their promotions lately, and that posture makes used cars relatively less attractive.

Executives predicted that this pressure will ease itself back to normal over time, and the best confirmation of that will be if improved customer traffic trends show up in Wednesday's results. In the meantime, look for the retailer to continue expanding its sales base to better blanket the country and press its scale advantage as the country's biggest auto seller.

More From The Motley Fool

Demitrios Kalogeropoulos owns shares of Nike. The Motley Fool owns shares of and recommends CarMax. The Motley Fool recommends McCormick and Nike. The Motley Fool has a disclosure policy.