Stocks rose to another record last week as strong fourth-quarter reports painted a brightening picture for corporate earnings growth. The Dow Jones Industrial Average (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC) each added roughly 1 percentage point and are up about 3% so far on the year.
Earnings season is rolling on and promises to produce plenty of volatility for investors over the coming trading week. Three of the most anticipated reports will be from PepsiCo (NYSE:PEP), Fossil (NASDAQ:FOSL), and TripAdvisor (NASDAQ:TRIP).
Beverage and snack giant PepsiCo will post its fourth-quarter results early on Wednesday morning -- at 6:30 a.m. EST, to be exact. Like rival Coca-Cola (NYSE:KO), Pepsi is enduring nearly flat growth right now. In fact, core earnings are up 4% over the last nine months, which rises to just 7% after accounting for currency swings.
Organic volume is up 2.5% in its snacks business and 2% in beverages, which is good enough to beat Coke's 1% gains. Yet investors this week will be looking for signs that higher marketing investments across its portfolio are improving its growth trends. According to consensus estimates, sales should rise 5%, to $19.5 billion, to rebound from the 3% loss it has posted over the prior nine months.
Cost cuts and innovations around its healthy snack lines should help profits improve at a faster pace. CEO Indra Nooyi and her executive team are targeting core earnings of $4.78 per share for the full year, which implies $1.13 per share of profit this quarter. Wall Street is a bit more optimistic, forecasting $1.16 per share of fourth-quarter earnings, equating to a healthy 9% boost.
TripAdvisor's average revenue per user
TripAdvisor shares have dipped far below their all-time high as sales growth slowed to near zero from a 30% pace in early 2015. The fact that the decline was mostly self-inflicted -- caused by a shift to an instant booking strategy -- hasn't helped soften the blow to shareholders.
Executives say the change was important to the travel giant's long-term growth since it ultimately delivers a better shopping experience for users. In recent quarters, they have pointed to improving engagement metrics like traffic, user reviews, and conversion rates as evidence that the plan is working.
But in this week's report, investors will be looking for confirmation that TripAdvisor's average revenue per user stayed in positive territory after falling by double digits in each of the last three quarters. Shareholders will also be watching for details on the financial payoff behind its recent partnership with peer Expedia that added a massive hotel portfolio to the service's instant booking platform.
Fossil's rebound plan
Fossil has failed so far to demonstrate that its luxury watch brands can resonate with consumers as shoppers shift away from traditional styles and form factors. Revenue last quarter dipped by 4%, and gross profit margin slumped by 2 full percentage points, to 52% of sales. Annual net income is down below $100 million from the nearly $400 million it managed in 2014 and 2015.
The good news is CEO Kosta Kartsotis and his team understand that they need a different product strategy than what worked in those profitable years. That's why they're working on what they call a multi-year plan to reinvent the company. "We expect the program will touch all aspects of our business as we enhance our operational capabilities, gain greater efficiencies and take optimal advantage of our considerable scale," Kartsotis said in early November.
Investors should get more details about that restructuring initiative this week and will, ideally, hear positive comments on the reception that Fossil is getting with its latest wearables product launches. Executives predicted that sales will rise by roughly 1% over the holiday quarter. If the actual results are much lower than that, the stock could post further losses this week.
Demitrios Kalogeropoulos owns shares of TripAdvisor. The Motley Fool owns shares of and recommends PepsiCo and TripAdvisor. The Motley Fool recommends Coca-Cola and Fossil. The Motley Fool has a disclosure policy.