Wall Street Breakfast: The Week Ahead

Economic reports in the week ahead

The energy market will be in focus next week in the wake of an OPEC+ meeting that begins over the weekend. Investors will react to the group’s update on production plans, as well factor in the impact of European Union’s sanctions on the purchases of Russia’s seaborne crude exports and a potential G-7 price cap on Russian oil. Global central banks will also be in the spotlight with the Reserve Bank of Australia and the Bank of Canada both anticipated to raise interest rates, although FOMC members in the U.S. will be quiet as a part of a blackout period ahead of the December 14-15 meeting. In one of the last Fedspeak updates, New York President John Williams said he thinks the FOMC has a ways to go on raising rates. Meanwhile, economists think Friday’s strong jobs report is likely to generate more calls for a 75 -point hike from some Fed officials at the December meeting. Fed watchers will also key on the upcoming producer price index report next week as an inflation gauge. Outside the focus on oil and interest rates, key earnings reports for the week ahead include updates from AutoZone (NYSE:AZO), Costco (NASDAQ:COST), and Lululemon (NASDAQ:LULU). A busy week of corporate events includes key investor meetings for Southwest Airlines (LUV), Norfolk Southern (NSC), and Glencore (OTCPK:GLCNF), as well as a wave of tech and media companies appearing at the UBS Global TMT Conference.

Earnings spotlight: Monday, December 5 – GitLab (NASDAQ:GTLB).

Earnings spotlight: Tuesday, December 6 – AutoZone (AZO), MongoDB (MDB), Signet Jewelers (SIG), Stitch Fix (SFIX), and Guidewire Software (NYSE:GWRE).

Earnings spotlight: Wednesday, December 7 – Brown-Forman (BF.A), Campbell Soup (NYSE:CPB), GameStop (GME).

Earnings spotlight: Thursday, December 8 – Costco (COST), Broadcom (NASDAQ:AVGO), Lululemon (LULU), Chewy (NYSE:CHWY), and Vail Resorts (MTN).

Earnings spotlight: Friday, December 9 – Li Auto (LI).

IPO watch: Another slow week is anticipated for the IPO market with only Erayak Power Solution (RAYA) on the watch for a public debut. The IPO lockup period expires on December 5 for a block of shares of Phoenix Motor (PEV). Shares trade more than 70% below the IPO pricing level. Also of interest, the two-year IPO anniversary hits for DoorDash (NYSE:DASH). The stock trades more than 40% below its original IPO pricing level from 2020.

Lululemon earnings preview: Lululemon Athletica (LULU) will report earnings after the closing bell on December 8. The consensus marks for the quarter are for revenue of $1.81B to be reported by the company and EPS of $1.96. LULU is typically an earnings superstar. The athletic apparel juggernaut has topped revenue expectations in nine of the last ten quarters and analysts have been pushing their profit estimates higher over the last 90 days despite the persistent inflation headwinds in the mix. On the Lululemon conference call, look for an update on holiday sales momentum and potentially some discussion from management on new verticals for LULU in tennis, golf, hiking, and footwear.

Lowe’s investor conference preview: Home improvement retailer Lowe’s (NYSE:LOW) will hold a key analyst day event on December 7. The company is expected to provide updates on key growth initiatives and long-term financial targets. Wells Fargo thinks the event will be a positive catalyst for the stock with it serving as a reminder that Lowe’s is better positioned than most to manage through an economic downturn. Similar to the company’s 2020 Analyst Day, the Wells analyst team believes LOW will provide three scenarios (robust, moderate, and weak market) for 2023 and express optimism in the ability for it to add market share and manage operating margin flattish to slightly down. “So, while underlying housing fundamentals are weak, we believe the co. will make a strong case on why HI is decoupled from housing,” previewed the firm, In addition, Lowe’s (LOW) is expected to reiterate full-year guidance to largely close the operating margin gap with rival Home Depot (HD) over time. JPMorgan also anticipates that Lowe’s Analyst Day will boost sentiment on the stock. While the market is said to remain cautious on housing overall, JP thinks Lowe’s could stand out due to upside with Q4 comparable sales and S&G, as well as continued faith in the company’s ability to drive margin outperformance in 2023 and beyond.

Southwest Airline investor day preview: Southwest will hold a key investor day on December 7 that has the potential to jolt share prices across the airline sector. At the investor day last year, Southwest Airlines (LUV) unveiled a capacity growth forecast and for higher cost outlook that led to a wave of downgrades. Analysts think the setup is more favorable with the COVID overhang largely cleared and travel trends still looking strong. Bank of America said it expects to hear a plan to grow earnings, improve margins and expand shareholder returns on capital. Ahead of the big event, Southwest is already rated as the top airline stock pick at both CFRA and Morgan Stanley. LUV is observed to have the staff and gates in place to materially expand capacity in 2023, especially after more 737s from Boeing are delivered. Also part of the bull case, Southwest Airlines is said to stand out on the metric of cash generated per plane and have low operating costs compared to peers.

Corporate events: There are a large number of events scheduled for the week ahead with the potential to lead to share price swings. Glencore plc (OTCPK:GLCNF), Fortune Brands Home & Security (NYSE:FBHS), and Norfolk Southern (NSC) have investor events scheduled for December 6. Candel Therapeutics (CADL) will also host a virtual Research and Development Day on the same day. Shareholders with InterPrivate II Acquisition Corp. (IPVA) will meet on December 7 to vote on the deal to take global carsharing marketplace Getaround public in a SPAC deal. Getaround believes its digital carsharing marketplace is well positioned to continue to disrupt the traditional car ownership and transportation paradigm. December 8 is a busy day of investor events with the Edwards Lifesciences (NYSE:EW) Investor Conference, MoneyLion (ML) Investor Day, 10x Genomics Investor Day (TXG), a Exxon Mobil (XOM) corporate plan update, a special Rogers (ROG) investor conference call, and the GE Healthcare (GE) Investor Day all on the schedule. Read Seeking Alpha’s Catalyst Watch. for a more complete list of the week’s big events.

Notable conferences: The UBS Global TMT Conference looks to be headliner gathering of the week with top execs from AT&T (T), Netflix (NFLX), Comcast (NASDAQ:CMCSA), Etsy (NASDAQ:ETSY) and Intel (INTC) on the schedule. Other major conferences include the Raymond James Technology Investors Conference, BofA Securities Home Care Conference, Morgan Stanley Global Consumer and Retail Conference, Goldman Sachs U.S. Financial Services Conference, Nasdaq 47th Investor Conference, Barclays Global Technology, Media and Telecommunications Conference, Cowen 5th Annual Cannabis Conference, and Goldman Sachs 14th Annual Global Automotive Conference.

Barron’s mentions: AbbVie (NYSE:ABBV) is the subject of a positive writeup this week with the publication making the case that concerns over Humira patent expirations are overshadowing underlying strength. For starters, the pharma giant is noted to have plenty of profitable products that have begun to fill the gap left by Humira’s decline. There are also billions in sales coming in from new Skyrizi and Rinvoq, which treat psoriasis and arthritis, respectively. The Chicago-based company is also continuing to develop its hematologic oncology, which is projected to generate $7B in sales by 2025. Meanwhile, AbbVie’s ample free cash is expected to make its attractive dividend nearly ironclad. On the valuation front, even after a 20% year-to-date rally, AbbVie is said to look cheap for new investors.

Sources: EDGAR, Bloomberg, CNBC, Reuters