Stock Market Action Plan: Tesla, Netflix And Airlines Fly Into The Q2 Season

After a rousing week of stock market gains, earnings season is upon us. Analysts and companies have lowered their expectations for second-quarter earnings. Early rounds of reports, however, have shown investors briskly rewarding performances that top those low targets. That sets up an optimistic tension as the market swings into full reporting season in the coming week. Tesla (TSLA) and Netflix (NFLX) headline the earnings roster. But United Airlines (UAL) and Delta Air Lines (DAL) also report, along with Dow Jones names like Goldman Sachs (GS) and Johnson & Johnson (JNJ). On Tuesday, June retail sales data also has the potential to move the market.

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Stock Market Leaders: Five Stocks Right At Buy Points

A slew of stocks jumped above buy points this past week in stock market action, as the S&P 500 and Nasdaq raced to fresh 52-week highs. Many leading stocks are now extended, but those who look carefully can find a number are still actionable. Advanced Micro Devices (AMD) rebounded Friday from the 21-day and 10-week lines, offering an early entry.

Cloudflare (NET) rebounded late in the week to clear an early entry and is close to an official breakout from a six-week base. Shift4Payments (FOUR) is trying to move past a key resistance area as it holds above 10-week support. Arista Networks (ANET) broke above a trendline and short-term levels this past week. On Holding (ONON) is hovering right at a handle breakout.

Economic Calendar: Reading The Retail Tea Leaves

June retail sales data, out Tuesday, headline the week’s economic news. The first read on June’s consumer activity, it is expected to show a moderate overall 0.5% increase, following May’s 0.3% rise. A raft of housing reports will also be in focus after May data surprised on the upside. The NAHB Housing Market Index, also out Tuesday, hit an 11-month high last month.

Housing starts and building permits, due Wednesday, surprised with a 21.7% jump in May. They are expected to fall 11% to a 1.45 million annualized rate for June.

Existing-home sales, a key metric, remain historically low as would-be sellers are dissuaded by the jump in mortgage rates. They are due out Thursday morning.

CPI Inflation Rate Slides To 3% As Services Prices Cool, Easing Fed Fears; S&P 500 Rises

EV Industry: Tesla’s Margins Face A Test

Tesla reports Q2 results late Wednesday. Analysts expect profits up around 4% with revenue of $24.26 billion, up 43%. Last week, Tesla reported record global deliveries — as price cuts, tax credits and discounts propelled demand well above Wall Street forecasts. On Wednesday, Citigroup raised its Tesla price target from 215 to 278, just below where shares ended Friday. The note saw a “neutral-to-slightly negative” setup going into the Q2 report, with concern around price cuts eating into margins. Meanwhile, investors will be on the lookout for any news regarding the Cybertruck, Tesla’s next-generation vehicle, a revamped Model 3 and autonomous driving.

Stock Market Perspective: Nasdaq Snags A 4-Month Best

Despite a slow session on Friday, the Nasdaq had its strongest week since mid-March. The S&P 500 and Dow industrials were not far behind, in a broad advance. Among industries, home furnishings posted a strong week, with RH (RH) and Lovesac (LOVE) landing double-digit gains. But Friday’s slowdown may hint at challenges as the Q2 season progresses.

Fang Earnings: Netflix Eyes A Mixed Target

Internet television network Netflix plans to report its second-quarter results late Wednesday. Key focus areas include the company’s paid-sharing rollout and advertising-supported offerings. Analysts polled by FactSet predict Netflix will add 1.8 million subscribers in the June quarter. Wall Street forecasts Netflix earnings of $2.83 a share, down 12%, which would mark a fourth straight decline. However, analysts see revenue climbing 4% to $8.27 billion. Netflix’s second-quarter earnings come amid reports of consumers cutting back on streaming video services.

Blue-Chip Notebook: Picking Up Q2 Pace

Dow industrials stocks are jumping right into the Q2 earnings season, with Goldman Sachs (GS), IBM (IBM), Johnson & Johnson (JNJ), Travelers (TRV) and American Express (AXP) all due to report in the coming week.

FactSet generally sees earnings declines and narrow revenue gains for the group. Goldman’s net interest income is expected to decline for the first time in more than a year. Expectations are highest for AXP, set for a 9% earnings gain and a 15% rise in revenue. AXP also has the best-looking chart, set up below a cup-with-handle buy point. In the following week, a full 30% of Dow issues are due to report. 

Travel Industries: Sellers Test Airline Rally

Investors get a closer look at the highflying airline industry, with American Airlines and United Airlines set to report. The group, up almost 43% year to date, pulled back sharply in the past week, possibly on profit-taking, after  Delta Air Lines‘ (DAL) Q2 earnings beat and full-year profit guidance increase. Delta reported “robust” air travel demand. United reports second-quarter results late Wednesday, with American delivering its Q2 financials early Thursday.

Collectively, the 19 stocks in IBD’s Transportation-Airline industry group have rallied around 49% in 2023. That’s the eighth-best year-to-date increase among the 197 industries tracked by IBD. Analysts expect United profits to surge 181% to $4.02 per share with sales increasing 15% to $13.89 billion. Meanwhile, Wall Street forecasts AAL’s EPS ballooning 108% to $1.58 and revenue growing 2% to $13.73 billion. Multiple firms ahead of earnings this week hiked stock-price targets for both UAL and AAL.

Regional Banks: Low Expectations After The Crash

Many regional banks that were caught up in the early 2023 banking crisis are due to report in the coming week. Those include Zions (ZION), PacWest Bancorp (PACW) and Comerica (CMA), along with U.S. Bancorp (USB) and Fifth Third (FITB). Analysts are largely pessimistic on the sector, expecting a mixed bag for earnings and net interest income growth. Morgan Stanley noted Thursday that the midcap bank stocks’ rally in recent weeks, spurred by easing deposit outflow fears, has “now largely played out.” The report expects the group to face near-term pressure.

Jefferies downgraded ZION shares to hold from buy Thursday, noting U.S. banks face “multiple uncertainties,” including negative earnings revisions and credit normalization. That followed a broader community and regional bank update from Truist on June 29, which anticipates lower net interest margins, slower loan growth and higher credit costs. Analysts also forecast slower stock buybacks in anticipation of regulatory changes. Of the reporting banks, FactSet predicts Zion, PacWest and Comerica will report earnings declines. Fifth Third and U.S. Bancorp have positive EPS targets. Zion and PacWest are the two from the group expected to post declines in net interest income.

Stock Market Earnings

Tuesday

Bank of America (BAC) earnings are expected to rise for the third straight quarter for its Q2 report Tuesday morning, jumping 15% to 84 cents per share. Analysts see revenue at $24.98 billion, slowing to 10% growth following four quarters of accelerating gains. 

Analysts expect Lockheed Martin (LMT) adjusted earnings to tick up 1.7% to $6.45 per share for its Q2 results early Tuesday. Revenue is projected to increase 3% to $15.92 billion.

Morgan Stanley (MS) releases Q2 results early Tuesday. Analysts expect earnings to fall for the sixth consecutive quarter, dropping 16.7% to $1.20 per share on $13 billion in revenue, creeping down for the first time in three quarters.

Consensus views see Synchrony Financial (SYF) extending its streak of earnings declines to five quarters with its Q2 results Tuesday morning. Analysts forecast a 20.6% EPS drop to $1.27 per share while revenue leaps 12.5% to $3.23 billion. 

Q2 Earnings Race Underway; JPM Stock, WFC Turn Mixed

Novartis (NVS) is on deck to report its second-quarter earnings before the stock market opens on Tuesday. Analysts polled by FactSet expect the pharmaceutical giant to earn $1.71 per share, minus some items, on nearly $13.5 billion in sales. Earnings would rise close to 10% as sales edge up nearly 6%.

Broker Charles Schwab (SCHW) reports earnings Tuesday morning followed by Interactive Brokers (IBKR) after the market close. Analysts see Schwab earnings tumbling 26% to 71 cents per share after four quarters of double-digit gains. Revenue is expected to decline 9% to $4.63 billion. Meanwhile, analysts guide a 66.7% spike in earnings for Interactive Brokers to $1.40 per share while revenue vaults 60% to $1 billion. 

Toymaker Hasbro (HAS) is expected to report its Q2 earnings early Tuesday. Analysts see earnings cut in half, to 56 cents per share, while revenue tumbles 17.2% to $1.1 billion. 

Wednesday

Halliburton (HAL) reports second-quarter financials early Wednesday. Analysts expect the oilfield service firm to see earnings grow 53% to 75 cents per share. Revenue is forecast to increase 15% to $5.85 billion. Wall Street expects full-year 2023 profits to jump 43% to $3.07 per share, even with drooping oil and natural gas prices so far this year. HAL stock is below a 42.99 buy point in a six-month cup base.

Baker Hughes (BKR) announces Q2 earnings before the stock market opens Wednesday. Analysts predict profit ballooning 200% to 33 cents per share, according to FactSet. Meanwhile, sales are also expected to jump 24% to $6.27 billion. Baker Hughes profits have surged over the last four straight quarters, averaging a 52% growth rate.

Discover Financial (DFS) is trading in the buy zone for a cup base ahead of its late-Wednesday results. Analysts expect Discover Financial earnings to decline 6.3% to $3.71 per share while revenue spikes 20% to $3.88 billion. 

Thursday

Philip Morris (PM) announces second-quarter financials before the market opens Thursday. Profits are forecast to grow 14% to $1.50 per share in Q2, according to FactSet analyst consensus. Meanwhile, Wall Street sees revenue increasing 12% to $8.76 billion. Philip Morris’ full-year profits slipped nearly 2% in 2022 to $5.98. However, analysts expect 2023 to be more favorable to the tune of 4% EPS growth.

Intuitive Surgical (ISRG) is expected late Thursday to report adjusted earnings of $1.33 per share and $1.74 billion in second-quarter sales. Earnings would jump almost 17% as sales pop more than 14%.

Abbott Laboratories (ABT) will post its second-quarter earnings before the stock market opens on Thursday. Adjusted earnings are forecast to sink roughly 27% to $1.05 per share while sales fall about 14% to $9.71 billion.

Freeport-McMoRan (FCX) posts Q2 results before Thursday’s open. Analysts expect the copper giant’s EPS to fall 38% to 36 cents. Revenue is seen up 9% to $5.89 billion. Copper prices have bounced recently amid hope for stimulus in China and a soft landing for the U.S. economy. That’s helped lift FCX stock above its 50-day moving average. Thursday’s move above the down-sloping trendline connecting its Jan. 25 peak to its July 3 advance opens an early entry opportunity, though IBD advises using an options strategy when trading ahead of earnings. 

Taiwan Semiconductor Manufacturing (TSM) will deliver its second-quarter earnings report early Thursday. Analysts predict the world’s largest contract chipmaker will earn $1.07 a share, down 30% year over year, on sales of $15.4 billion, down 14%. Strong growth in AI chips likely will only partially offset slumping sales of PC, server and smartphone chips.

D.R. Horton (DHI) reports third-quarter earnings early Thursday. Analysts expect profits for the homebuilder to fall 40% to $2.80 per share. Wall Street predicts sales falling nearly 7% to $8.21 billion as the U.S. housing market digests high mortgage and interest rates. Full-year profits are expected to contract to $11.27 per share, a 32% drop from the $16.51 per share in 2022.

Friday

SLB (SLB) announces second-quarter financials before Friday’s stock market open. Analysts predict EPS of 71 cents, a 42% jump compared with last year. Meanwhile, sales for the oilfield service firm are forecast to increase 21% to $8.2 billion in Q2. SLB full-year earnings dropped off in 2020 during the first year of the pandemic. However, profits have been increasing since then, averaging 80% annual growth over the past two years.

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