Earnings Days For Micron, Nike And FedEx + Disney Looks For Avatar Blowout
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A relatively quiet week is ahead for investors with the event and conference schedule thin. Earnings from FedEx (NYSE:FDX), Nike (NYSE:NKE), General Mills (GIS), and Micron (MU) will provide some of the bigger talking points along with a slew of housing data reports, including the December home builder survey, housing starts update, existing home sales release and new home sales report. B. Riley Financial Chief Market Strategist thinks the focus on housing could help traders remember that the calculation for CPI is a lagging indicators. He noted the real data next week is likely to show housing is coming down much faster than what shows up in the inflation reports. On the political front, Congress will to wrap up negotiations on what is expected to be a $1.7T package to keep the federal government running through September.
Earnings spotlight: Monday, December 19 – Heico (NYSE:HEI) and Steelcase (SCS).
Earnings spotlight: Tuesday, December 20 – Nike (NKE), General Mills (GIS), FedEx (FDX), CalAmp Corp. (CAMP), and Blackberry (BB).
Earnings spotlight: Wednesday, December 21 – Micron Technology (MU), Rite Aid (RAD), and Toro Company (TTC).
Earnings spotlight: Thursday, December 22 – Paychex (PAYX) and CarMax (KMX).
Nike earnings preview: Nike (NKE) is due to report earnings on December with consensus estimates having drifted higher over the last three weeks to an expectation for revenue of $12.6B to be reported and EPS of $0.65. Options trading is implying a share price swing of 8% after the Nike earnings report drops. The athletic apparel and footwear giant will be walking a tightrope with investors amid concerns about the impact of excess inventory and margins and profitability. Ahead of the Nike report, Citi opened a 30-day Positive Catalyst Watch on the stock on the expectation for a near-term rally. Analyst Paul Lejuez thinks the Swoosh will top earnings expectations next week due to recent sales and margin momentum. He noted that consumers responded well to NKE’s promotions and the company made significant progress working through excess inventory. The outlook for China has also improved recently amid some relaxing of COVID restrictions, which sets up well for Nike (NKE) bringing in guidance ahead of expectations. Leaning more cautious, Evercore ISI said worse-than-planned apparel promotions are the biggest risk it sees for Nike’s earnings report. Analyst Omar Saad and team warn on the potential for elevated apparel promotions and spillover of excess inventory clearance into the second half of the fiscal year. Of note, 94% of Nike apparel SKUs at Kohl’s are currently on sale and Nike apparel promotions are also somewhat elevated at Dick’s. As part of its preview, Morgan Stanley said it is expecting a FQ2 EPS beat on strong demand & lower-than-expected SG&A. The firm also thinks investors would look through any gross margin driven EPS downside if inventories are improved. Perhaps, crucial for which direction shares of Nike may track, the firm noted Nike’s sales in China may have popped in November after being weak in September and October. UBS thinks the odds are higher for a FY23 guidance raise out of Nike than the alternative. “We think Nike’s Q2 Europe result and gross margin outlook could be better than the market realizes,” updated the firm.
Top picks for 2023: Analysts continue to dole out their top picks for 2023 amid broad expectations for a choppy macroeconomic backdrop. Bank of America named Honeywell International (HON), Emerson Electric (EMR), and General Electric (GE) as top picks in the industrials and singled out Driven Brands (DRVN), Five Below (FIVE) and Tractor Supply (TSCO) in the consumer sector. Fortive (FTV) is the overall favorite of BofA in its multi-industry coverage. In the tech sector, William Blair noted that several long-term trends, such as increased cyber security spending, advertising on the internet, software-as-a-service and the cloud are not likely to go away even with the economy hiccuping next year. As a result, the firm has listed Alphabet (GOOG) (GOOGL), Workday (WDAY) and CrowdStrike Holdings (CRWD) as 2023 winners. Bernstein’s tech favorites list includes Qualcomm (QCOM), Advanced Micro Devices (AMD), and Nvidia (NVDA), and Broadcom (NASDAQ:AVGO). In a scan of the energy sector, JPMorgan said Overweight-rated Halliburton (HAL), NexTier Oilfield Services (NEX) and Tenaris (TS) should benefit in the year ahead from strong upstream spending growth in both international and North America markets, as well as strong execution in the field. While the auto sector has been highly debated over the last few weeks, Nomura’s look ahead sees Kia (OTCPK:KIMTF) selected as its global top. Nissan (OTCPK:NSANY), Mahindra & Mahindra (OTC:MAHMF), and Stellantis (STLA) are also expected to be standouts. Looking at the auto setup, Morgan Stanley is cautious on auto names in general, although it kept an Overweight rating on Tesla (TSLA) and Rivian Automotive (RIVN) – while also staying bullish on FREYR Battery (FREY), Ferrari (RACE), Ford (F), American Axle & Manufacturing (AXL), and Magna International (MGA). Meanwhile, Credit Suisse sees the banking sector holding up better than it has in prior economic downturns and recessions. The firm’s favorites are Bank of America (BAC), USB (USB), and PNC Financial (PNC). As part of its overall market preview, Credit Suisse factored in which stocks carry the “least demanding” market expectations. Microsoft (MSFT), Discover Financial (DFS), and and Motorola Solutions (NYSE:MSI) topped the list of Credit Suisse favorites.
Corporate events: Watch Mullen Automotive (NASDAQ:MULN) with shareholders scheduled to vote on December 23 on the proposed increase in the aggregate number of authorized shares of common stock to 5B from 1.75B. Mullen is also asking shareholders to approve an up to 1-for-25 reverse stock split and an amendment to facilitate the issuance of $150B in convertible notes and up to $190Min convertible preferred stock. The FDA action date on Coherus BioSciences’ (NASDAQ:CHRS) toripalimab arrives on December 23. Phase 2 interim analysis released previously noted encouraging clinical activity with no specific data. The stock has rallied in the past off toripalimab developments. Read Seeking Alpha’s Catalyst Watch. for a more complete list of the week’s big events.
Box office: Disney (DIS) tentpole film Avatar: The Way of Water opens in the U.S. to high expectations. The latest tracking showed the film could debut with an opening weekend haul of $150M to $175M domestically and $450M to $550M globally. “In the big picture, I’d expect a leggy box office run whose story won’t be told on opening weekend alone,” previewed Boxoffice.com media analyst Shawn Robbins. “This is not a comic book blockbuster with an apparent rabid fan base to front-load sales. James Cameron films have historically engaged general audiences deep into their theatrical windows, though it’s worth considering that the box office climate has changed even since his previous Avatar film in 2009,” he noted. The 2009 original grossed $2.9B at the global box office and after a few re-releases is the highest-grossing film of all time. Domestically it ranks fourth all-time at $785.2M. A strong opening weekend box for the Avatar sequel could boost sputtering theater stocks like AMC Entertainment (AMC), Cineworld (OTCPK:CNNWQ), Cinemark (NYSE:CNK), IMAX (IMAX), Marcus (MCS), Reading International (RDI), Cineplex (CGX:CA) and National CineMedia (NCMI).
Barron’s mentions: The publication’s preview of 2023 for the stock market includes a warning the selling pressure could continue if the Fed’s interest rate hikes push the economy into a recession. The positive spin is that a more modest economic slowdown might be enough to reduce price growth to a level near the central bank’s annual target of 2% and set the stage for a strong second half rally. “Call it a soft landing, call it a rolling recession, a growth recession, whatever the case. It will be the most widely anticipated recession of all time,” chimed in economist Ed Yardeni. The line of thought is that with stocks already trading at multiples that suggest recession, the market could take off when the expectation becomes that the U.S. economy will see growth. Coming off a year when its top ten picks smashed the return of the major indexes, Barron’s is at it again by naming its top ten picks for 2023. The list for the new year includes Alcoa (AA), Alphabet (GOOG, GOOGL), Amazon, Bank of America (BAC), Berkshire Hathaway (BRK.A), (BRK.B), Comcast (CMCSA), Delta Air Lines (DAL), Medtronic (MDT), Madison Square Garden Sports (NYSE:MSGS), and Toll Brothers (NYSE:TOL). Two of the stocks, Amazon and Berkshire, are holdovers from the outperforming 2022 list.
Sources: EDGAR, Bloomberg, CNBC, Reuters