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5 Earnings Reports to Watch This Week

Vince Martin

Earnings season is upon us again — and it’s a big one. The market has traded sideways for several months now, and a solid batch of earnings reports could be just the catalyst to move broad markets back to new all-time highs.

Of late, investors have alternated between optimism toward a strong U.S. economy and fears about higher interest rates and potential trade wars. Moving the headlines to what should be at worst a solid earnings season could be good news for U.S. equities.

After all, there’s still a lot to like. Lower tax rates will help the majority of reporting companies. The economy looks like it’s at — or getting very close to — full employment. The effect of inflation in areas like labor and commodities bears watching, and could pressure margins and profit growth. But overall it seems like the majority of earnings reports should be good news.

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This week kicks off the season — led by several key financials. But leaders in both the consumer and industrial spaces should also signal the health of their respective sectors. Strong reports from these five companies could send their stocks higher and also give investors reason for confidence heading into the next few weeks.

5 Earnings Reports to Watch: PepsiCo (PEP)

5 Earnings Reports to Watch: PepsiCo (PEP)

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Earnings Report Date: Tuesday, before market open

PepsiCo (NASDAQ:PEP) has had a roller-coaster 2018. As of late January, PEP stock traded at an all-time high. By early May, it reached a 29-month low. An ugly start to the year for consumer products stocks was a key culprit. Not even a solid Q1 report in April could stem the bleeding.

Pepsi stock has rallied into earnings, however, rising 14% from those May lows. It can keep the momentum going with another beat on Tuesday. But caution might be advised. CPG stocks have struggled this year — for good reason, as I wrote in May. The new Bubly line, meant to compete with LaCroix from National Beverage Corp. (NASDAQ:FIZZ), needs to be a win — and may not be. Declining soda consumption, particularly relative to diet varieties, presents another long-term headwind.

PEP has outperformed rival The Coca-Cola Co (NYSE:KO) for years now. It may still do so going forward. But given the pressures on the industry, that doesn’t necessarily mean PEP stock is going up … either on Tuesday or beyond.

5 Earnings Reports to Watch: Fastenal (FAST)

Should You Buy the Earnings Dip in FAST Stock? 3 Pros, 3 Cons

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Earnings Report Date: Wednesday, before market open

One sector that has been notably weak this year has been construction. Distributor Fastenal Company (NASDAQ:FAST) could buoy the space with strong results on Wednesday morning.

After all, FAST sales are a key data point relative to demand from builders and contractors. As such, it’s possible that a good quarter for Fastenal could do as much — if not more — to help other stocks than its own. Strong revenue results will suggest confidence from Fastenal’s suppliers and a continuation of solid growth in the industry.

And with those suppliers not threatened by Amazon.com (NASDAQ:AMZN), investors might see less risk in them. FAST does trade at a seven-month low, so a good report can help its own stock. But investors across the sector will be watching closely as well.

5 Earnings Reports to Watch: J.P. Morgan Chase (JPM)

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Earnings Report Date: Friday, before market open

After a huge post-election run, financials have weakened – and that includes J.P. Morgan Chase (NYSE:JPM). JPM actually trades at a seven-month low at the moment.

It’s difficult to see why. Fed rate hikes, which should help net interest margin for JPM and other banks, seem likely to be on the expected pace. Federal Reserve stress tests went well, leading Josh Enomoto to recommend JPM as one of three bank stocks to buy.

I agree with Enomoto; I recommended JPM myself back in March. I still like Bank of America (NYSE:BAC) best in this sector, but investors can’t go wrong with JPM, either. And a strong earnings report on Friday should remind investors why this is a stock worth owning long-term.

5 Earnings Reports to Watch: Wells Fargo (WFC)

5 Earnings Reports to Watch: Wells Fargo (WFC)

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Earnings Report Date: Friday, before market open

For Wells Fargo (NYSE:WFC), Friday’s Q2 release will be less about what the company is doing right – and more about what it’s doing better. Wells continues to struggle with its past scandals, with the Fed deciding back in February to cap its asset growth as a result.

Strong numbers will help the stock’s cause. But the quarter — and the earnings call — will be more about restoring investor confidence. Wells Fargo’s largely new management will try and make the case that the bank is headed in the right direction.

On that front, I’m still skeptical. Particularly with JPM and BAC on sale, there are simply easier ways to make money in the financial space. It will take quite a bit from Wells Fargo’s Q2 report to suggest that past failures truly are behind the company.

5 Earnings Reports to Watch: Citigroup (C)

5 Earnings Reports to Watch: Citigroup (C)

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Earnings Report Date: Friday, before market open

Citigroup (NYSE:C) similarly has taken a hit of late. The stock actually touched an 11-month low last month before a modest rebound. And the low price sets up a potentially interesting report of its own on Friday morning.

After all, C stock looks like the cheapest of the big banks. It still trades below book value and at barely 9x 2019 EPS estimates. A recently boosted capital return program will add to buybacks and move the stock’s dividend yield to nearly 2.7%.

But Citi has its own regulatory issues to worry about. It still feels much more like a turnaround play than JPM or BAC. It’s not executing as well as those peers in either consumer or investment banking.

That leaves room for upside if Citigroup can improve its operations. That’s what investors will be watching for on Friday — and if they like what they hear, C stock could become a near-term outperformer.

As of this writing, Vince Martin has no positions in any securities mentioned.

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