With so many high-profile, mega cap, global companies reporting earnings during this next week, it's fair to say it's a “make-or-break” week for the market’s future direction. More than 100 S&P 500 companies are scheduled to report, amid renewed risk appetite from investors showing no sign of fatigue and a market that continues to defy all doomsday predictions.
This coming week's earnings reports could prove that the slowdown fears which triggered last December's major correction were overblown and the American economic expansion continues unabated. With so much at stake in a single week, it’s always a good strategy to stay on the sidelines till any headline risk passes, in order to make a rationale investment decision. Here are the top 3 stocks we're keeping an eye on as earnings season heads into full swing:
1. Procter & Gamble
Consumer staple giant Procter & Gamble (NYSE:PG) is scheduled to report earnings for its fiscal Q3, 2019 on Tuesday, April 23 before the market opens. Analysts, on average, expect earnings per share of $1.03, up from $1 a share a year ago. Sales for the same period are forecast to have increased slightly over the period to $16.34 billion.
Despite it being a mature and often slow-moving stock, P&G shares, which finished the trading week at $106.05 have not lagged the broader market rally. The stock has surged more than 16% in 2019, gaining 40% over the past one year, at a time when the S&P 500 Index rose just 7%.
What’s propelling the maker of Tide detergent, Pampers diapers and Crest toothpaste higher is the growing belief among investors that the company’s turnaround plan has started paying off and the bearish spell in its revenue growth is over. During the second-quarter, P&G delivered strong growth in its organic sales, which excludes items like acquisitions and currency effects. They rose 4% in the October to December quarter. That was more than the 2.7% better than analyst expectations.
To counter smaller disruptive competitors who have started chipping away at PG's market share, the company has been focusing on 10 big product segments to help streamline both focus and profits. After such a powerful rally in its stock, if P&G misses even a little on expectations, we expect some pullback. But the stock remains a great buy-and-hold candidate with its hefty quarterly dividend which currently has an annual yield of almost 3%.
2. Microsoft
One of Wall Street’s tech darlings, Microsoft (NASDAQ:MSFT), will report fiscal Q3 2019 earnings after the market close on Wednesday, April 24. The computer giant is likely to post $1 a share profit, up from $0.95 a year ago, according to analysts’ consensus estimates. Sales should grow by 11% to $29.84 billion.
If the past provides any clues, the tech giant should show strong growth momentum fueled by surge in technology investments, its foray into cloud computing and the strength of its core Office products. Shares of Microsoft—which hit a record high $123.52 on Thursday and closed just a hair below that, at $123.37 to finish the holiday-shortened trading week—have been a very successful bet for investors who believed in CEO Satya Nadella’s growth strategy which has helped reinvent this legacy tech company.
That strength was on display in the second quarter when Microsoft reported 76% growth in its Azure cloud-services revenue, after nearly doubling that business during each quarter of 2017 and in early 2018. The company's shares might give up some gains if growth in this key segment slows. However, Microsoft predicted "solid" March quarter in the commercial business and continued improvements in cloud margins when it interacted with analysts in January.
3.ExxonMobil
The largest U.S. oil producer, ExxonMobil (NYSE:XOM), will be on the hook when it delivers its Q1 results on Friday, April 26, before the market opens. Analysts, on average, are expecting $0.74 a share profit, down from $1.09 a year ago. Sales are likely to decline as well, by about 6% to $64.26 billion.
The oil and gas giant may again surprise the market to the upside, after the past quarter saw oil prices soar to over $70 a barrel in the wake of the Organization of Petroleum Exporting Countries (OPEC) and its allies coordinating production curbs. Still, one of the most important metrics investors are watching is Exxon's production levels after several quarters of declines.
In the fourth quarter, Exxon surprised analysts by showing some improvement, and it will be interesting to see whether the company can translate this win into a trend. With shares trading at $81.13, Exxon's stock has jumped more than 19% this year, far exceeding gains made by shares of its closest American rival, Chevron (NYSE:CVX). Improving cash flows and production growth could further power this rally.