Stocks to watch: Inflation, busses and hopes for a crypto comeback
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Investors may get a better handle on how the Federal Reserve’s tightening cycle will play out after inflation data pours in next week with the consumer price index, producer price index and an update on unit labor costs. Currently, Fed officials indicate that they expect the target rate to be raised to 3.50% to 4.00% by the end of the year. However, the bond market isn’t quite reflecting that level yet, even after Treasuries sold off on Friday after the July jobs report came out. Should the inflation reports surprise to the upside, speculation about a rate hike by the Fed could be set in motion and lead to some major moves in the bond market. The calendar for the week includes Tyson Foods (TSN), Take-Two Interactive (NASDAQ:TTWO), Disney (DIS) and Rivian Automotive (NASDAQ:RIVN) as some of the notable companies heading into the earnings conference, while the JP Morgan Auto Conference is expected to include some exciting updates, including several from electric car players.
Earnings focus: Monday 8 August Luckin Coffee (OTCPK:LKNCY), Dominion Energy (D), Tyson Foods (TSN), American International Group (AIG), Palantir Technologies (PLTR), and Take-Two Interactive Software (TTWO).
Earnings focus: Tuesday 9 August – Emerson Electric (EMR), Sysco (SYY), Globalfoundries (NASDAQ:GFS), Norwegian Cruise Line Holdings (NCLH), Coinbase Global (COIN) and Wynn Resorts (WYNN).
Earnings focus: Wednesday 10 August – Disney (HAZE), Honda Motor (HMC), Coupang (CPNG), Jack in the Box (JACK), Wendy’s (WHEN), CyberArk (CYBR), and Fox (FOX).
Earnings focus: Thursday 11 August – Cardinal Health (CAH), Brookfield Asset Management (NYSE:BAM), Rivian Automotive (RIVN), US Foods (USFD) and Illumina (ILMN).
Earnings focus: Friday 12 August – Virgin Orbit Holdings (NASDAQ:VORB).
IPO Clock: The reduced IPO for electric sports boat developer Forza X1 ( FRZA ) is expected to begin trading on August 11. IPO lock-up periods expire on SKYX Platforms Corp (SKYX) and Modular Medical (MODD) on August 9. Both shares traded well during the IPO. price level.
Dividend Clock: Companies projected to increase their quarterly dividend payouts include
Tyson Foods Earnings Preview: Tyson Foods (TSN) will report earnings in a report that will be closely watched in the meat and packaged goods sector for signs of a consumer impact. Consensus estimates are for Tyson to report revenue of $13.3 billion and EPS of $1.97. By volume, beef sales are projected to fall 3% for Tyson, and pork sales are down 5%. Beef and chicken prices are higher than a year ago to compensate for higher animal feed and transportation costs, but pork prices have actually declined. Analysts believe the margin outlook from Tyson will drive which way shares move after the earnings release. Current full-year margin expectations are for beef adjusted operating margin of 11.5%, pork adjusted operating margin of 5.4%, chicken adjusted operating margin estimate of 5.6%, and prepared food adjusted operating margin estimate of 9.2%. “The beef margin could contract as herd eliminations began to accelerate amid drought and high feed costs, tightening cattle supplies,” Bloomberg Intelligence analyst Jennifer Bartashus warned ahead of the TSN report.
Take-Two Interactive earnings preview: Take-Two Interactive ( TTWO ) will report earnings on August 8 expecting revenue of $1.09B, EPS of $0.86, and net bookings of $6.5B including the Zynga business. Analysts have been cautious about TTWO due to the risk that consumer spending will be squeezed by a recession, unproven franchises and some questions surrounding Grand Theft Auto iterations. Potential catalysts for a share price jump include stronger-than-expected Zynga numbers and more details on immersive core games.
Inflation reports: Reports next week on consumer prices and producer prices will keep the focus on inflation again. The CPI report from July is expected to show a slight moderation in the headline figure to +8.7% y/y from +9.1% in June. Core CPI is seen increasing 0.6% on a month-on-month comparison. Bank of America expects solid pressure in shelter, transport and recreation, as well as another month of broad stability in core commodity prices. Looking ahead, both airfares and used car prices are expected to decline over the next few months to take some pressure off the American consumer. The producer price index is estimated to show an increase of 0.3% for July, down from 1.1% in June. Excluding food, energy and trade services, PPI is expected to increase by 0.4% month-on-month. Economists believe the price reports may support some of the talk of peak inflation, but will also support the consensus view that the Federal Reserve will raise its target interest rate by 75 basis points at its September meeting.
Crypto comeback dreams: A major development in the cryptocurrency sector could happen next week ahead of the long-awaited Ethereum (ETH-USD) transition to a proof-of-work protocol. The most anticipated event for Ethereum before the actual merger is the third and final test network environment, which is called Goerli. A successful Ethereum merger test could add to the positive vibes already stirring after BlackRock (BLK) announced it would offer institutional clients direct access to crypto through its Aladdin product, starting with Bitcoin (BTC-USD). Crypto bulls are also pointing to positive news on the regulatory front after a bipartisan group of senators introduced a new bill that would classify Bitcoin and Ethereum as commodities. Digital asset broker GlobalBlock said the move would mean these are the only cryptos that cannot be classified as securities, removing a significant concern for institutional outsiders. Look for more news on the potential regulatory developments. On the crypto calendar next week, the Blockchain Futurist Conference will feature over 100 speakers, industry experts and thought leaders to discuss blockchain technology, NFTs, Metaverse, DeFi, Cryptocurrency, DAOs. Ethereum founder Vitalik Buterin is scheduled to appear.
Data reads: Nielsen retail figures will be reported with a greater focus on how demand for packaged goods, beverages, beer, spirits fared over the past four weeks and which companies may have gained market share. Coca-Cola ( KO ) has surpassed PepsiCo ( PEP ) and Keurig Dr Pepper ( KDP ) in soft drink sales this year, and Constellation Brands ( STZ ) has been flying in the alcoholic beverages sector.
Corporate events: GlobalFoundries (GFS) will hold its Capital Markets Day event on August 10. GlobalFoundries and STMicro recently signed an agreement to build and jointly operate a new 300mm production facility in Crolles, France, adjacent to STMicro’s existing facility. GFS is one of the stocks that trades with a strong correlation to news around Taiwan. Myriad Genetics ( MYGN ) will host an Investor Day event on August 11 to provide a strategic business update and overview of the company’s growth opportunities, research and development pipeline and technology initiatives. Boeing (NYSE: BA) must be updated about their orders and deliveries. Read more about the events next week that could affect share prices in Seeking Alpha’s Catalyst Watch.
Important conferences: The conference schedule is led by the JP Morgan Auto Conference. Companies to appear include Adient (ADNT0), Stoneridge (SRI), Ford Motor (F), Cepton (NASDAQ:CPTN), Gentherm (THRM), TrueCar (TRUE), TuSimple (TSP), Dana (DAN), (NASDAQ:GTEC), Blink Charging (NASDAQ:BLNK), Aptiv (NYSE: APTV), and Rush Enterprises (RUSHA). Of those names, Tu Simple (TSP) may have the most to prove after The Wall Street Journal published safety concerns about its autonomous driving system despite its 8M driving miles. Certain car stocks have seen price shocks recently following presentations including guidance and business updates. Other important conferences include BTIG Biotechnology Conference, UBS Financial Services Conference, BofA Securities 2022 SMID Cap Ideas Conference, Oppenheimer 25th Annual Technology Internet & Communications Conference, Wedbush PacGrow Healthcare Conference, Canaccord Genuity 42nd Annual Growth Conference BTIG Biotechnology Conference, , Jefferies 2022 Industrials Conference and the Canaccord 42nd Annual Growth Conference.
Barron’s reviews: General Electric (NYSE:GE) recommended this week ahead of the company’s plan to split into separate aerospace, healthcare and power generation companies. The cover story shows that General Electric is trading for far less than the combined value of the three remaining parts. The calculation for the three GE companies is said to add up to $160 billion in value, which is said to be roughly double what GE currently trades for. Worried about your GE balance sheet? GE’s debt is about $32 billion, while total cash along with shares in oilfield services and equipment company Baker Hughes ( BKR ) and aircraft sales and leasing company AerCap Holdings ( AER ) total nearly $20 billion. The resulting net debt of $12B is observed by Barrons to be less than 2.0X the 6.9B in EBITDA that GE has earned over the past 12 months vs. the industrial sector average of about 2.2X.
Sources: EDGAR, Bloomberg, CNBC, Reuters
