Despite some positive signs on the US economic front, the equity sell-off continued last week. On Friday the S&P 500 tested its February lows, erasing gains made earlier in the week. And the Dow sank, losing almost 500 points.
It appears that nothing can persuade investors to buy stocks this December unless there are positive developments on the US-China trade tension front. The steep slide that began in October continues, with all major indices now in correction territory.
There’s no sign risk-averse sentiment will change this coming week. Indeed, investors are likely to avoid taking any long positions before the year-end holidays.
However, fundamentals specific to individual stocks could still drive some shares. Here are three major US companies that could see significant activity this week.
1. Johnson & Johnson
Friday was certainly an ugly day for investors with positions in global healthcare giant Johnson & Johnson (NYSE:JNJ). The stock plunged more than 10%, after a Reuters report said the company knew for decades that asbestos was sometimes present in its baby powder.
JNJ Weekly TTM
In July, a jury ordered the company to pay $4.69 billion to women who claimed asbestos in the products caused them to develop ovarian cancer. The fact that the revelation may not have been new might increase the company’s liability if the number of court cases against the company surges.
This development is certainly negative for shares of J&J, which closed at $133 on Friday. Still, according to Wells Fargo analyst Lawrence Biegelsen, the drug maker’s liability could ‘only’ reach $6.5 billion even if the current number of cases were to double.
We believe, therefore, that the market reaction was overblown and the stock might recover some of its lost value this coming week. After such a strong sell-off in the course of a single day, J&J shares now seem undervalued, providing long-term income investors an entry point to take advantage of its rock-solid dividend.
2. Micron Technologies
Chipmaker Micron Technologies (NASDAQ:MU) will report fiscal 2019, first-quarter earnings on Tuesday, December 18, after the close. Analysts are expecting EPS of $2.94 on sales of $8.02 billion.
MU Weekly TTM
An array of headwinds are hitting the company simultaneously, including overall demand weakness for chipmakers; the U.S.-China trade war; and specific to Micron, a probe by Chinese authorities that, according to a recent report by the Financial Times, has found ”massive evidence” of antitrust violations against Micron and a couple of other companies.
Micron’s latest report and conference call will provide further insight into the sector’s deepening woes, and the outlook for next year. Micron shares, trading at $34.20 as of Friday’s close, have lost about half of their value since their May high, just above $64.
Sportswear powerhouse Nike (NYSE:NKE) will report its fiscal 2019, Q2 earnings on Thursday, December 20 after the market closes. Analyst expectations are for EPS of $0.46 on revenue of $9.17 billion.
NKE Weekly TTM
Nike has staged a significant comeback this year. Shares—which closed at $72.53 on Friday—reached an all-time high of over $86 in September, as the Oregon-based company’s sales growth revived in North America. After three quarters during which US sales contracted, consumers flocked back to malls this year, encouraged by a strong economy, tax cuts and rising wages.
This rebound in its domestic market sales comes at a time when Nike remains a potent brand overseas, where the company generates more than half its revenue. But the slowing Chinese economy, coupled with dwindling overall global growth concerns, have started to weigh on this solid income stock, which has lost 16% of its value since September.
Its upcoming earnings report will be very important. It should show investors that the company’s strong top- and bottom-line growth will remain intact amid ongoing trade tussles.