After suffering huge losses during the final days of 2018, suddenly it seems all is good again for stock investors. The U.S. and China appear to be inching closer to a trade deal that could remove the uncertainty that’s been shadowing markets for months. Indeed, on Friday, President Donald Trump confirmed this, then added that he might extend the March 1 deadline for imposing tariffs on Chinese goods.
This alone has the potential to spur this bull run on for another year. Another powerful signal came from U.S. consumer sentiment which rebounded from a two-year low, further fueling the rally in stocks that sent the S&P 500 to a 10-week high.
Though global trade continues to dominate markets, there remain some big earning reports scheduled for the coming week. We’re focusing on three stocks which could see some volatility after their companies announce Q4 2018 numbers and release future outlooks.
The world’s largest brick-and-mortar retailer is scheduled to report its fourth-quarter earnings on Tuesday, Feb. 19, before the market opens. On average, analysts see $1.33 a share profit on the sales of $138.66 billion.
One of the biggest worries Walmart (NYSE:WMT) investors continue to pay attention to is how the retailer will keep improving its margins when costs continue escalating. Along with controlling costs, Walmart also needs to show that its e-commerce strategy is well on track to counter online competitors, including Amazon (NASDAQ:AMZN) as well as digital upstarts that are attracting millennial shoppers in droves.
Given these challenges, in our view, Walmart’s quarterly report card thus far has been impressive. A turnaround in same-store sales, which started in the third-quarter of fiscal 2015, has gained pace in the company’s fiscal 2019.
As of its most recent report on Nov. 15, 2018, comparable store sales rose yet again, for a total of 16 consecutive quarters. Walmart shares, which closed at $99.99 on Friday, have gained 7.3% so far this year. We believe the stock will see additional gains if the retailer continues to show strong growth in the same-store sales and further expansion in its e-commerce business.
2. CVS Health
CVS Health (NYSE:CVS) reports on Wednesday, Feb. 20, before the market opens. Concerns persist regarding the integration costs on its $69-billion merger with Aetna (NYSE:AET), which closed in late November, making the merged entity one of the largest health care insurance and benefits companies in the industry.
The merger is a way for CVS to beef up its brick-and-mortar operations with the services side of the industry, a response to Amazon’s efforts at taking on the healthcare industry. Though investors have liked this deal, integration challenges could force the company to lower its guidance for 2019.
During the past three months, CVS stock has fallen 12%, massively underperforming the S&P 500. However, good news on the Aetna merger and signs of cost controls could push the stock higher, breaking the bearish spell. Trading at $69.53, the stock remains well below analysts’ 12-month consensus price target of $88.57 a share.
For Wednesday’s earnings report, consensus estimates call for CVS to post $2.05 a share profit, up from $1.92 a year ago. Sales are likely to jump 13% to $54.58 billion.
Price action may be extraordinarily volatile after online furniture retailer Wayfair (NYSE:W) reports its Q4 earnings on Friday, Feb.22, before the markets open. Analysts have honed in on the company’s growing losses, worsening free cash flow and surging market spending.
When the company reported its Q3 earnings in November it missed expectations. Shares plunged 17% afterward.
Though the stock has since recovered those losses, at $122.11 per share as of Friday’s close, it’s still trading 23% below its 52-week high of $151.2. As well, risks to downside still remain elevated: analysts expect losses to widen to $1.28 a share from $0.58 during the year-ago period. However, sales are likely to expand by 37% to $1.97 billion.
There’s little doubt the company has mastered the art of selling big-ticket furniture items online globally. Still, it has yet to show how it can do this profitably. The stakes for Wayfair to show a path to profitability quickly, are high, especially when bigger rivals, such as Amazon, are getting ready to enter the online furniture sales arena.