Stocks extended their rally last week as both the Dow Jones Industrial Average (DJINDICES:^DJI) and S&P 500 (SNPINDEX:^GSPC) gained over a full percentage point. The two indexes are up nearly 5% so far for the year.
Earnings season is likely to continue to produce big stock swings for the companies involved. And the next five trading days have no shortage of big names posting their results, including Wal-Mart (NYSE:WMT), Tesla (NASDAQ:TSLA),and Gap (NYSE:GPS).
Wal-Mart's customer traffic
The world's biggest retailer announces earnings results before the market opens on Tuesday. Expectations are low, with consensus estimates pegging sales growth of just 1% as earnings fall 13%, to $1.29 per share.
Customer traffic figures will be key to watch this week. Wal-Mart has managed seven straight quarters of improvements there, but last quarter, the figure slipped to nearly flat. Since then, rival Target revealed a surprising 1.7% traffic decline over the holiday season, which suggests growth was hard to come by as competition heated up last quarter.
Any growth slowdown might be complicated by rising costs, especially in the U.S. business. On the positive side, Wal-Mart is likely to keep showering shareholders with dividends and stock buyback spending that's being funded by surging free cash flow.
Tesla's deliveries forecast
Tesla shares are up over 50% in the last three months heading into Wednesday's earnings release despite the fact that investors know the electric-car manufacturer won't hit management's delivery forecast. CEO Elon Musk and his team signed over roughly 22,000 vehicles to customers, representing 27% growth year over year compared to the 25,000 that executives were targeting. Management blamed what they called short-term production challenges around the transition to new autopilot hardware that delayed shipping.
Investors will be looking for evidence this week that those production challenges are in the past. At the same time, there's less hope Tesla will announce bottom-line profitability this quarter, but gross margin and gross profit per car should continue marching higher.
Looking forward, shareholders are eager to learn Musk's thinking on the company's sales targets for the coming year as the mass-market Model 3 comes online. Telsa is hoping to use that car to help bring its annual production up to 500,000 units from about 100,000 automobiles today, and its 2017 forecast will communicate a lot about whether that aggressive goal is realistic.
Gap's profit margin
Gap recently revealed encouraging operating details about the fourth-quarter report it will publish on Thursday. Comparable-store sales rose 1% to reverse an 8% dive in the prior-year period. That improvement includes a 5% uptick for the Old Navy brand, flat results for Gap, and a 3% drop for Banana Republic. "Against a challenging retailer backdrop," CEO Art Peck said in early February, "we're pleased to report growth in our top-line and comp sales during the critical holiday quarter."
This week's announcement will provide important context on those revenue gains, including whether Gap was forced to ramp up its promotions to protect market share from rivals. That's why investors will be focused on the retailer's merchandise margins and any comments management might have on customer traffic trends.
Peck and his team will likely discuss Gap's plan to return to growth across the Gap, Banana Republic, and Old Navy franchises through improved product offerings like the recent Athleta launch. That job will be made harder by a weak retailing environment, though, and so investors might want to brace for a conservative 2017 forecast from management this week.