With the U.S.-China trade war escalating and no solution in sight, the mood in the market has suddenly turned bearish.
The last week was the worst for U.S. stocks in 2019 as investors rushed to reduce their risks after President Donald Trump threatened to slap more tariffs on Chinese imports from Sept. 1. The euphoria related to the Federal Reserve’s first rate cut in a decade also evaporated quickly after investors saw no assurances of further easing from the central bank.
These negative developments are putting investors in a tough spot as they weigh options in a market which has rebounded strongly from every correction. There are several important earnings announcements scheduled for the next week that are worth paying attention to. Here are our three picks:
1. Disney
Riding on the success of its powerful content and future growth prospects, the Walt Disney Co. (NYSE:DIS) will report fiscal 2019 third-quarter earnings on Tuesday after the market. On average, analysts are expecting the company to post $1.72 a share profit on sales of $21.46 billion.
Disney’s stock has climbed almost 30% this year on the back of several recording-breaking film releases, the robust performance of its theme park business and hopes that its new streaming service, Disney+, will be a huge success.
Trading at $141.62 as of Friday's close, Disney shares hit a record high of $147.15 on July 29.
The mass media and entertainment conglomerate plans to introduce its Disney+ service later this year. Expectations are that it will pose a major challenge to Disney's main rival, Netflix (NASDAQ:NFLX).
With this upbeat environment for Disney stock, the possibility of escalating costs and the company's guidance for the rest of 2019 will be the two most important details to focus on.
2. CVS Health
CVS Health (NYSE:CVS) will report second-quarter earnings on Wednesday before the market open. Analysts on average are expecting $1.69 a share profit on sales of $62.65 billion.
A healthy profit outlook for 2019 and a strong Q1 earnings report, however, have so far failed to boost investor confidence in the stock which is down 15% this year. It closed on Friday at $55.71 amid worries over the changing U.S. drug landscape and strong competition from Walgreens (NASDAQ:WBA).
CVS in May boosted its adjusted earnings per share forecast for this year to $6.75-$6.90, higher than the $6.68- $6.88 that it had earlier forecast. Next week’s report will be important to see if the health giant is on track to deliver.
Concerns persist regarding the integration costs of 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 while boosting the services side of the business. It's a response to Amazon's (NASDAQ:AMZN) efforts at taking on the healthcare industry.
3. Uber
Uber (NYSE:UBER) is another important name to keep an eye on as the world’s largest ride-hailing provider releases its second-quarter earnings on Thursday.
The company is likely to report a $2.1 a share loss on sales of $3.31 billion amid investors’ concern about eroding profitability on rising competition and costs.
Uber, which went public in May, will need to survive in a tough and competitive environment where consumers remain highly price conscious, HSBC analysts Masha Kahn and Henning Cosman wrote in a note last month. The main rival in North America, Lyft Inc. (NASDAQ:LYFT) often prices 20-25% below Uber in New York and Daimler AG-backed Bolt is now doing the same in London, they wrote.
Uber shares have remained in a bearish spell since the IPO in May. They closed down more than 2% on Friday.