• January 28, 2023

Weekly Preview: Earnings to Watch This Week (COUP, CRWD, FDX, NKE)

D.Despite another week of volatile trading, both the Dow Jones Industrial Average and the S&P 500 index ended Friday’s trading session at all-time highs. And while the tech-heavy Nasdaq Composite index was lower on Friday, the fact that all three major averages posted weekly gains underscores the optimism investors still have about the strength of the economic recovery.

But is that optimism out of place, especially as the soaring bond yields that sparked the recent sell-off rose to a high for the year? On Friday, the Dow rose 293.05 points, or 0.9%, to close at 32,778.64, another all-time high. The blue chip index was developed by Boeing (BA), which flew more than 17 points on Friday and achieved an increase of 6.82%. Walmart (WMT) and JPMorgan Chase (JPM), up 1.51% and 1.19% respectively, added the Dow. Another record close was the S&P 500 index, adding 4 points, or 0.1%, on Friday to end the session at 3,943.34.

The Nasdaq, meanwhile, fell 78.81 points, or 0.6%, to 13,319.86. As mentioned earlier, bond yields, which hit an annual high on Friday, put tech stocks under pressure. The 10-year note rose around 10 basis points on Friday and ended at 1.63%. As such, DocuSign (DOCUMENTARY), which lost 6.61% on Friday, despite earnings being reported on Thursday that not only weighed on sales and profits, but also gave an optimistic forecast. Declines in other work-from-home winners like CrowdStrike (CRWD) and Zoom Video (ZM) also put pressure on the Nasdaq.

However, dip buying investors encountered these declines and took advantage of these opportunities to add stocks ahead of the economic recovery. This would explain why all three benchmarks posted weekly gains, led by the Dow, which rose 4.1%. Despite the technical route, the Nasdaq was up 3.1% for the week while the S&P 500 was up 2.6%. In other words, there is still a lot of confidence in the market, especially stocks that have been destroyed by the lockdowns caused by the pandemic.

Investors have started morphing into these names (cyclical) as vaccine rollouts accelerate and the economy prepares to reopen. According to the CDC, around 30% of the US population has received at least one dose of vaccine. Combined with President Joe Biden, who signed the $ 1.9 trillion COVID-19 relief package on Thursday, there are plenty of reasons to point out that the worst of the pandemic is behind us. The question remains, while the economic recovery has shown resilience, where is the market going next?

Economists forecast robust growth of 6% for the US economy in 2021. Is this realistic? Is that what the market is already pricing in? Time will tell how realistic the market’s growth forecasts will be. However, FedEx results, often viewed as a measure of global economic activity, provide an insight into likely developments over the next few quarters. FedEx is one of several stocks I’ll be watching this week.

Coupa software (COUP) – Reports after the end, Tuesday March 16.

Wall Street predicts Coupa will lose 11 cents per share on sales of $ 145.66 million. This compares to the same quarter last year, which made 21 cents per share on sales of $ 111.45 million.

What to Remember: Coupa, a provider of cloud-based business expense management software, fell 21% over the past month on its way to technology and software stocks. Investors are concerned about the possibility of slower growth and higher valuation, which Coupa recently brought to 40 times projected sales. With the goal of becoming a leading provider of Business Spend Management (BSM), Coupa makes money analyzing large amounts of corporate transaction cost data and looking for spending patterns and areas of inefficiency. The platform helps customers with actionable insights that can lead to better inventory management, smarter buying decisions, and lower spending at the same time. With a total addressable market of $ 56 billion and growing, this could now be a solid opportunity to buy in the face of the recent decline, especially as customers become more integrated. But on Tuesday, Coupa’s sales and earnings growth must match expectations for its share price.

CrowdStrike (CRWD) – Reports after close of trading Tuesday March 16.

Wall Street expects CrowdStrike to make 8 cents per share on sales of $ 250.44 million. This is comparable to the same quarter of the previous year, in which 2 cents per share were lost on sales of USD 152.11 million.

What to Remember: Software stocks have been under pressure in the past few weeks. Among the biggest declines were beneficiaries, which rose sharply in 2020 during the pandemic. However, as vaccines become more prevalent, the market has become increasingly concerned about these names, including cybersecurity stocks like CrowdStrike, which are up as much as 380% over the past year. Valuation concerns have been raised, but it’s hard to imagine that cybersecurity won’t be a critical part of corporate spending in a post-pandemic world. There will continue to be a need for better security as organizations continue to embrace digitization while making cybersecurity a top operational priority. The market is currently valued at $ 200 billion and is expected to grow to an average annual growth rate of about 10% over the decade. Hence, it would be a mistake to disconnect from CrowdStrike during this pullback.

FedEx (FDX) – Reports after close of trading Thursday, March 18.

Wall Street expects FedEx to make $ 3.28 per share on revenue of $ 19.93 billion. This compares to the same quarter last year when earnings were $ 1.41 per share on revenue of $ 17.49 billion.

What To Look For: Can FedEx Make A Profit? Thanks to stronger-than-expected business activity, particularly domestic parcel capacity, the stock rose more than 140% over the past year. Investors now want to know what the company can do to keep the momentum going? Stocks are down around 12% from their 52-week high. Revenue for the Express segment, the company’s largest company, grew more modestly than that of the Ground and Services business in the last quarter. However, there are signs of a recovery in air freight demand which should help ease some of the pressure. In addition, the mass distribution of vaccines and the reopening of the economy in the coming quarters should bode well for FedEx. On Thursday, investors will want to hear the same level of optimism about the profitability improvements across FedEx’s various segments.

Nike (FROM) – Reports after the end, Thursday, March 18th.

Wall Street expects Nike to make 76 cents per share on sales of $ 11.05 billion. This compares to the same quarter last year when earnings were 53 cents per share on sales of $ 10.1 billion.

What to Look For: Nike stocks are up 7% over the past week and have held their own as one of the top performing names in retail. Notably, stocks are up around 70% over the past year, despite the economic devastation the pandemic has inflicted on consumers. Some might suggest that Nike shares are now too far ahead of company fundamentals. At the same time, however, Nike is benefiting from the fact that consumers around the world have developed an increased focus on health and wellness. As such, known for its strong brand name and innovation, Nike is well positioned on Wall Street to capitalize on the increased demand for products such as shoes and apparel. The company needs to reaffirm that confidence with strong sales forecasts, especially after the vacation quarter.

The views and opinions expressed are those of the author and do not necessarily reflect those of Nasdaq, Inc.

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Jack

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