Editor’s note: InvestorPlace’s Earnings Reports to Watch is updated weekly. Please check back next week for our latest earnings picks.
The earnings calendar is surprisingly full next week. And next week’s earnings reports, including several from big names, come at an interesting time for the market.
After all, U.S. stocks saw their first real stumble in almost two months this week. A three-session decline that began on Friday took nearly 2% off the S&P 500. Investors started buying the modest dip on Tuesday afternoon, though flat trading on Thursday suggests even that optimism has faded.
In other words, equities look a little shaky heading into the rest of the year. Next week’s earnings reports could change overall sentiment — or at least signal just how confident, or worried, the market truly is.
That said, reports from two big names don’t have quite the juice they might normally have. Adobe (NASDAQ:ADBE) already has released guidance for fiscal 2020, with its shares gaining nicely on that news. There’s likely little in the way of surprises coming when it reports on Thursday.
Costco Wholesale (NASDAQ:COST) released sales for its fiscal fourth quarter this week, and doesn’t give guidance. It’s worth keeping an eye on shaky trading of late, but there, too, earnings don’t seem likely to drive a major move.
Still, there are plenty of other key earnings reports to watch next week. Several retailers report as the important (and shortened) holiday shopping season ramps up. A pair of big value plays in tech will try to maintain recent momentum. And a leader in one of the market’s hottest sectors will try and avoid a pothole. Next week seems potentially important for a market that seems to have cooled off, and these earnings reports could have a lot to do with where stocks go from here.
Earnings Reports to Watch: AutoZone (AZO)
Source: Robert Gregory Griffeth / Shutterstock.com
Earnings Report Date: Tuesday, December 10, before market open
AutoZone (NYSE:AZO) isn’t the biggest company reporting next week. Its fiscal first quarter earnings report isn’t going to move the markets, and may not even generate all that much in the way of headlines.
Still, AutoZone earnings bear watching. At the least, they could move shares of rivals O’Reilly Automotive (NASDAQ:ORLY) and Advance Auto Parts (NYSE:AAP), which like AZO sit in an interesting spot at the moment.
All three stocks fell rather sharply in 2017 amid fears of online competition from the likes of Amazon (NASDAQ:AMZN). They’ve since rebounded — AZO stock has more than doubled from late 2017 lows — but there’s a question of just how much rally is left.
Indeed, the three names have traded relatively flat in recent months. As a result, this is a sector that looks like it needs a catalyst; blowout AutoZone earnings certainly would qualify.
Meanwhile, AZO stock looks like an interesting test for the market after earnings. Fears of online competition persist. Valuation is attractive relative to the market, but seems to make sense given external risks. Are investors willing to focus on valuation over risk? If they are with AZO, they might be elsewhere in the market too.
American Eagle Outfitters (AEO)
Source: Helen89 / Shutterstock.com
Earnings Report Date: Wednesday, December 11, before market open
American Eagle Outfitters (NYSE:AEO), too, isn’t one of the largest companies reporting next week. It’s not even the largest apparel retailer: that honor goes to Lululemon (NASDAQ:LULU), which also releases third quarter earnings on Wednesday afternoon.
But Lululemon is an outlier in retail given its impressive growth. American Eagle, on the other hand, is one of many retailers trying to adapt to the “new normal.” Lately, that hasn’t been good news for AEO stock, which has declined 22% so far this year and sits not far from a two-year low.
That weakness seems surprising given what American Eagle has delivered over the past two years. As a company, American Eagle has performed better than most, and maybe all, other mall-heavy retailers. Its aerie brand has posted spectacular same-store sales growth. The namesake brand has outperformed many of its peers. Earnings have risen.
And yet shares keep heading in the wrong direction. In that context, American Eagle earnings look important for the entire apparel retail sector.
If American Eagle Outfitters posts another solid earnings report next week, AEO stock has to rally. Because if it can’t get at least a bounce at this valuation, investors will rightly wonder if the industry’s other, often weaker, stories are worth buying. Meanwhile, if American Eagle disappoints (particularly relative to its outlook for the holiday season), that’s a concerning data point at a critical time for the industry.
Mall retailers need good news from American Eagle next week. Anything less could be a big problem at close to the worst possible time.
Source: Jonathan Weiss / Shutterstock.com
Earnings Report Date: Thursday, December 12, after market close
Oracle (NYSE:ORCL) might well make a big move next week. ORCL stock has lacked much in the way of direction going back to April. Shares have pulled back in recent sessions. Investors don’t seem to have much confidence in Oracle stock right now, with a push/pull between an attractive valuation and worries about whether the business can adapt to the new environment in tech.
Indeed, recent trading suggests the key question I asked about ORCL stock last year remains unanswered: Is Oracle the next Microsoft (NASDAQ:MSFT) or the next IBM (NYSE:IBM)? Fiscal second quarter earnings on Thursday afternoon won’t definitely answer that question, but a solid report could convince investors that the company is at least on the right track.
And that would be enough, with ORCL stock still trading at less than 13x earnings. With Broadcom (NASDAQ:AVGO) also reporting on Thursday afternoon, investor appetite for value plays in tech will be tested. That has, of course, been a sector where investors have strongly favored growth. Strong earnings from Oracle and Broadcom might be a modest step toward the long-awaited shift back to value.
As of this writing, Vince Martin did not hold a position in any of the aforementioned securities.