News

Earnings from Club consumer, health and bank stocks will be our main focus in the week ahead

Published

6 months ago

April 15, 2023

Corporate earnings won’t have to share the spotlight with major inflation data in the week ahead as they did during this past week’s up-and-down market. Despite solid quarters from major banks, the S & P 500 and Dow Jones Industrial Average closed modestly lower Friday. The Dow rose 1.2% in its fourth straight positive week thanks to Thursday’s powerful rally. It was a similar story Friday for the S & P 500 and the tech-heavy Nasdaq , though their weekly advances were smaller and they were their fourth in the past five weeks. Three Club holdings report their March quarterly results this coming week before the true onslaught comes later this month and in May. In addition to tracking the headline earnings-per-share (EPS) and revenue numbers (see the estimates above), we’ll be looking for updates on major company-specific themes from Johnson & Johnson (JNJ) before the bell Tuesday, Morgan Stanley (MS) on Wednesday and Procter & Gamble (PG) on Friday. At J & J, supply chain improvement on the consumer side along with any updates on the pending spinoff of that unit into a separate publicly traded company called Kenvue would be welcome news. We don’t expect much of a surprise on pharmaceuticals. We’re more interested in how the medtech division is doing now that China has been reopening after Covid. Delayed procedures there should be starting back up, a phenomenon we saw here in the United States when pandemic lockdowns ended. Pharma and medtech will make up the remaining company that keeps the Johnson & Johnson name. From Morgan Stanley, we suspect Friday’s bank earnings foreshadow a good release. However, investment banking activity was no doubt restrained during the period as ongoing macroeconomic uncertainty has kept the IPO market under pressure. Another area of focus includes fee-based revenue. We also want to hear management’s broader thoughts on the economy and the health of the financial sector following the industry fallout that started with the failure of Silicon Valley Bank last month. When it comes to household products giant P & G, we know it has pricing power so product mix and volumes are the thing to watch as far as sales dynamics. We’re looking for any sign that abating input cost inflation (lower commodity prices) is or will soon lead to margin expansion as previously passed-through price increases remain. Lastly, with over half of sales coming from outside the U.S., foreign exchange commentary will also be of interest. Between these three names and commentary gleaned from other non-Club holdings, we should come away with a much more real-time view of the health of the consumer and inflationary dynamics than can be provided by any backward-looking economic report. This past week, we spoke about the importance of listening to what industry players aside from those you’re invested in as a way to analyze the competitive landscape. Here are some of those other earnings reports and the economic numbers out in the week ahead. Monday, April 17 Before the bell: Charles Schwab (SCHW), M & T Bank (MTB), State Street (STT) 10 a.m. ET: NAHB Housing Market Index (April) Tuesday, April 18 Before the bell: Bank of America (BAC), Bank of NY Mellon (BK), Goldman Sachs (GS), Lockheed Martin (LMT) After the bell: Netflix (NFLX), United Airlines (UAL) 8:30 a.m. ET: Housing Starts and Building Permits (March) Wednesday, April 19 Before the bell: Abbott Labs (ABT), Baker Hughes (BKR), Citizens Financial (CFG), Travelers (TRV), US Bancorp (USB) After the bell: Alcoa (AA), IBM (IBM), Tesla (TSLA) Thursday, April 20 Before the bell: American Express (AXP), AT & T (T), Blackstone (BX), DR Horton (DHI), Fifth Third Bancorp (FITB), Huntington Bancshares (HBAN), KeyCorp (KEY), Nucor (NUE), Philip Morris (PM), Snap-On (SNA), Union Pacific (UNP) After the bell: CSX (CSX), PPG Industries (PPG), Seagate Technology (STX) 8:30 a.m. ET: Weekly Initial Jobless Claims 8:30 a.m. ET: Philadelphia Fed Index (April) 10 a.m. ET: Existing Home Sales (March) 10 a.m. ET: Leading Indicators (March) Friday, April 21 Before the bell: Freeport-McMoRan (FCX), SAP (SAP), SLB (SLB) Looking back It was a huge week for inflation and consumer data as well as the Federal Reserve. On Wednesday morning, the consumer price index for March rose 0.1% month-over-month, half the estimated gain, and up 5% year-over-year, slightly lower than expected. On Wednesday afternoon, the latest Fed minutes revealed central bank economists expect the banking crisis that started with the failure of Silicon Valley Bank last month will likely tip the economy into a mild recession this year. On Thursday morning, the cooler-than-expected producer price index for March provided further evidence that inflation continues to moderate. Initial claims rose to 239,000 for the week ending April 8, slightly higher than expected. On Friday morning, March retail sales dropped 1%, double the expected decline. Ex-autos fell 0.8%, also double the expected drop. Bond yields up despite the softer data. Also, on Friday, the first of our two financials reported earnings. Wells Fargo ‘s (WFC) first-quarter earnings and revenue beat estimates. The bank bought back $4 billion worth of shares in Q1. At the end of the week, the market odds of another quarter-point interest rate hike stood at around 80% for the Fed’s May meeting. The other 20% was for central bankers to hold rates steady. By sector, financials led to the upside, powered by Dow stock JPMorgan (JPM), which soared more than 7.5% on Friday. Energy and industrials were also higher. Real estate led to the downside, followed by utilities and technology. As of Friday’s settle, the U.S. dollar index fell below 102, adding to a major slide in the past month, which may not have helped companies in the first quarter but may help in future quarters, especially for our multinationals like P & G. Gold remained at just above $2,000 per ounce. WTI crude prices were in the low $80s per barrel, while the yield on the 10-year Treasury was around 3.5%. Club trades of the week We made just one trade this past week, in a market that was overbought , purchasing 25 shares of Palo Alto Networks (PANW). Jim Cramer’s Charitable Trust, the 35 stock holdings manage for the Club’s portfolio, owns 250 shares of PANW, increasing its weight to 1.8% from 1.62% in our portfolio. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Procter & Gamble’s products include Crest toothpaste.

Tiffany Hagler-Geard | Bloomberg | Getty Images

Corporate earnings won’t have to share the spotlight with major inflation data in the week ahead as they did during this past week’s up-and-down market.

Source: CNBC

Follow us on Google News to get the latest Updates