Investors are bracing for another big week as some of the largest global companies tee up to report earnings. This will test the strength of this bull market which doesn’t show any sign of slowing down.
With about 150 S&P 500 companies set to report earnings in the week ahead, the current season has been a significant contributor in pushing major stock indices to record highs. The S&P 500 gained 1.2% in the past week, closing Friday at 2,939, just under its all-time intraday high. The NASDAQ was up 1.9% for the week at a new closing high.
Along with the prospect of yet more bullish momentum, in the coming week investors will receive additional insight on U.S. monetary policy from the Federal Reserve, when the central bank releases the latest FOMC minutes. As well, here are the top 3 stocks we're keeping an eye on as earnings season heads into full swing:
1. Apple
Apple (NASDAQ:AAPL) will report second-quarter 2019 earnings on Tuesday, April 30, after the market close. On average, analysts expect the maker of iPhones to report $2.36 a share profit, down from $2.73 during the same period a year ago. Sales are likely to decline 6% to $57.44 billion, according to consensus forecasts.
Apple stock has been steadily creeping up after the company disappointed investors in January when the tech giant reported that iPhone sales are slowing due to weaker demand in China. At that time, the California-based computer and smartphone maker also cut its revenue outlook for the first time in almost two decades.
Shares, which closed on Friday at $204.30, have surged 31% this year, regaining much of their losses on optimism that the company will be successful in diversifying its revenue away from iPhones. In a major shift in its growth strategy, Apple last month unveiled a suite of new services, including a just launched video-subscription service, an Apple credit card and a gaming subscription service offering access to 100-plus exclusive games.
But we don’t expect a major positive surprise in the company’s next earnings report as these measures will take time to pay off. In addition, a rebound in iPhone demand is unlikely to be seen this quickly when the company has no major hardware release in the pipeline.
2. McDonald’s
Global fast food colossus, McDonald’s (NYSE:MCD) will also report on Tuesday, releasing first quarter 2019 earnings before the market opens. Analysts, on average, are expecting $1.76 a share profit, down from $1.79 a share a year ago. Sales are forecast to fall 4% to $4.93 billion.
Since 2015, McDonald’s has beaten earnings estimates in all but one quarter. We expect that trend may continue, especially when the restaurant operator and franchiser has been recovering market share through a variety of initiatives including all-day breakfast offerings, menu innovation such as healthier food choices, as well as higher quality ingredients and improvements to the overall restaurant experience.
The successful execution of these turnaround efforts has fueled gains in the company’s shares, which, over the past five years, have consistently beaten the broader market. The stock closed at $197.42 on Friday, gaining about 25% during the past one year, helped by strong domestic and global growth.
McDonald's' Q1 earnings will provide further insight into whether Big Mac is able to maintain its current winning streak in the face of some powerful headwinds. Economic growth is slowing in China and Europe while escalating wage costs and heightened competition in the U.S. have the potential to hurt McDonald’s future growth.
3. General Motors
Another mega cap releasing Q1 earnings before the market opens on Tuesday is General Motors (NYSE:GM). The Detroit car maker is likely to report a decline in profits to $1.11 a share from $1.43 a share a year ago, according to average analyst forecasts. Sales may fall by 2.5% to $35.21 billion.
Despite this pessimism on the part of analysts, one of the biggest Detroit auto manufacturers could still deliver a positive surprise in its earnings report, helped by the company’s efforts to cut costs and move to the more profitable areas of the car industry.
GM is also betting big on electric and autonomous cars for its future growth. To prepare for that imminent shift in consumer preferences, the company announced in November that it plans to cut more than 14,000 jobs and close seven factories worldwide by the end of next year.
Ford Motor Co. (NYSE:F), GM’s main rival in the U.S., surprised the market last week when it reported strong demand for its F-Series pickups. In addition, its massive cost cuts improved the automaker’s earnings outlook.
GM shares closed at $39.68 on Friday, up 19% this year on hopes the company’s early move to limit exposure to underperforming regions and unprofitable vehicle segments could improve its earnings outlook.