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Investors head into the last week of the quarter with a slightly more cautious positioning as recession fears have jumped to the forefront again. A slow calendar of economic releases means that traders may stew further on Federal Reserve Chairman Jerome Powell’s Congressional testimony in which he signaled more interest rate hikes are ahead. Some of the notable earnings reports next week will be the updates from Carnival (NYSE:CCL) (preview), Walgreens Boots Alliance (WBA) (analysis), Micron Technology (MU) (preview), Nike (NKE) (analysis), and Constellation Brands (STZ). Meanwhile, the release of the results for the Federal Reserve’s annual stress tests will be a major focus in the banking sector. Seeking Alpha analyst Stephen Simpson said the bigger changes for banks are likely to come later, as the Federal Reserve contemplates new rules tied to Basel III Endgame and the failures of Silicon Valley Bank and First Republic. Simpson noted that while the largest banks seem less vulnerable, capital requirement changes could meaningfully impact the profitability of regional banks, with uncertainty likely to weigh on bank stocks in general for a while longer. Bank of America thinks the stress tests are unlikely to boost M&A activity in the sector due to the lack of alignment among policymakers on easing M&A restrictions, mark-to-mark accounting and caution among buyers to acquire someone else’s problems ahead of economic downturn remain hurdles.
Earnings spotlight: Monday, June 26 – Carnival (CCL).
Earnings spotlight: Tuesday, June 27 – Walgreens Boots Alliance (WBA), Manchester United (MANU), and Jefferies Financial (JEF).
Earnings spotlight: Wednesday, June 28 – Micron Technology (MU), General Mills (GIS) and BlackBerry (BB).
Earnings spotlight: Thursday, June 29 – Nike (NKE), Paychex (PAYX), McCormick (MKC), and Simply Good Foods (SMPL).
Earnings spotlight: Friday, June 30 – Constellation Brands (STZ).
Volatility watch: Short interest on both ImmunityBio (NASDAQ:IBRX) and Kura Sushi (NASDAQ:KRUS) is at more than 25% of total float. Options trading volume is elevated on Vroom (VRM) and FibroGen (FGEN) once again. Virgin Galactic (SPCE) continues to see huge price swings as longs and shorts battle it out.
IPO and spinoff watch: The IPO market picks up slightly, with three new companies expected to go public during the week. Kodiak Gas Services (KGS), Fidelis Insurance (FIHL), and Savers Value Village (SVV) are all expected to price their IPOs and begin to trade. Also, watch for some extra volatility with Coya Therapeutics (NASDAQ:COYA) as some shares move off their IPO lockup period.
Dividend watch: Companies forecast to boost their quarterly payouts include Korn Ferry (KFY) to $0.17 from $0.15, Worthington Industries (WOR) to $0.34 from $0.31, Micron (MU) to $0.12 from $0.115, and Lindsay (LNN) to $0.35 from $0.34. Stocks with ex-dividend dates for their upcoming dividend payments include ConocoPhillips (COP), Darden Restaurants (DRI), and Mondelez International (MDLZ). See Seeking Alpha’s list of Quick Dividend Stock Picks.
Nike earnings preview: Nike (NKE) will step into the earnings confessional on June 29 with analysts expecting revenue of $12.58B and EPS of $0.67 to be reported. The full-year guidance update from the Beaverton, Oregon-based company will be closely watched. UBS thinks shares of Nike already reflect a soft guidance due in part to a lack of visibility around the normalized sales trajectory in China. The firm thinks investors are braced for guidance in the $3.60 to $3.80 range vs. the consensus mark of $3.96. Nike’s (NKE) update on the wholesale business and inventory management during the conference call could jolt shares. Recent developments with Foot Locker (FL), Macy’s (M), and DSW adding Nike products to stores again has some investors worried Nike will pull further away from a direct-to-consumer model. Meanwhile, Morgan Stanley warned that Nike is not immune to industry dynamics and could report elevated inventory levels as it exits the fiscal year. A post-earnings decline in Nike could give investors a reason to snap up shares, according to Barclays. The bull case hinges on inventory growth realigning with sales growth, a return to sustainable positive growth in the China region, and margin accretive drivers. Options trading on Nike (NKE) implies a share price move up or down of 7% after earnings. The stock fell 5% after the last earnings report. Foot Locker (FL) and DICK’S Sporting Goods (DKS) are the two retail stocks that correlate the closest with Nike on earnings day. Starbucks (SBUX) also has a very trading correlation due to the China connection.
Constellation Brands earnings preview: Constellation Brands (STZ) will report earnings on June 30 to expectations for revenue of $2.47B and EPS of $2.82. During FQ1, Constellation Brands is forecast to have seen beer business sales increase around 7.5% to 8% off ~6% shipment growth and a 1% to 2% pricing benefit. Over the past few months, scanner data has improved for Constellation Brands (STZ) after weather conditions normalized in key regions and with the company lapping up some extra market share due to the Bud Light controversy. The key issue with the report will be how Constellation Brands (STZ) handles its full-year guidance. UBS said that although STZ has demonstrated a willingness to change guidance after Q1 in the past, the firm expects major guidance components to remain unchanged due to the rapidly evolving competitive dynamics in the U.S. beer category and ongoing uncertainty around the health of the category/consumer. On the earnings call, analysts are looking for… and more color on the long-term plans for the Pacifico brand. Constellation Brands (STZ) heads into earnings day up more than 7% for the year. Options trading implies a swing of 4% after the earnings report drops. Shares of Constellation Brands gained 2% after the company’s last report.
Corporate events: The four-day Snowflake (NYSE:SNOW) Summit 2023 will attract attention next week, with the company expected to give investors a deeper look at its latest innovations, use cases, and thought leadership. The summit will include a fireside chat on generative AI with Nvidia (NVDA) CEO Jensen Huang. Delta Air Lines (DAL) will webcast the company’s Investor Day presentation on June 27. In general, Delta’s guidance updates have had the biggest share price impact across the sector of any of the major carriers. Also, on June 27, Casey’s General Stores (CASY) will outline an updated three-year strategic plan at an investor event. On June 28, Taysha Gene Therapies (TSHA) will host a virtual R&D Day to discuss updates on TSHA-120 and Canadian Pacific Kansas City (NYSE:CP) will webcast its Investor Day presentations in Kansas City. AMC Entertainment (AMC) and AMC Preferred Equity units (APE) will be on watch during the last two days of the week as a two-day settlement hearing takes place in Delaware’s Court of Chancery. Both stocks have swung wildly off developments in the stock conversion case. See a detailed list of key events for next week in Seeking Alpha’s Catalyst Watch.
Investor conferences: The conference schedule for the week ahead is light, with the H.C. Wainwright 4th Annual Neuropsychiatry Virtual Conference, and UBS Healthcare Services Conference standing out as the most notable. The Jefferies Space Summit will include appearances by Terran Orbital (NYSE:LLAP), MDA (MDA:CA), Sidus Space (SIDU), BlackSky Technology (BKSY), and Redwire (NYSE:RDW).
Quant ratings: Stocks with recent quant rating changes include Shopify (SHOP) to Strong Buy from Hold, Amazon (AMZN) to Strong Buy from Hold, and Blue Apron (APRN) to Strong Sell from Hold. See the stocks with the very highest rated Seeking Alpha Quant Ratings.
Barron’s mentions: Boston Beer (SAM) is singled out this week as a strong bet on the growth of the beyond beer category of alcoholic beverages, which includes hard seltzers, canned cocktails, hard cider, and flavored malt beverages. While the Truly business has fallen off dramatically, upside is seen for the Twisted Tea brand, which is noted to exemplify the company’s culture of innovation and taking the long view. As for financials, Boston Beer is forecast to grow EPS by 35% this year to $7.32 despite a drop in revenue. By 2026, analysts see Boston Beer generating EPS of $15.11 per share. Boston Beer is also noted to offer underappreciated defensive potential since it is an attractive acquisition target for the industry heavyweights and has a solid cash position.
Editor’s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.
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