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3 Things to Watch in the Stock Market This Week

By Demitri Kalogeropoulos – Apr 16, 2017 at 9:47AM

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Look for Netflix, American Express, and Johnson & Johnson stocks to make big moves over the next few trading days.

Stocks shed more than a full percentage point last week to push the Dow Jones Industrial Average (^DJI -0.32%) and the S&P 500 (^GSPC -0.62%) down to a 4% gain for the year -- down from 6% in early March.

^SPX Chart

^SPX data by YCharts.

Earnings season kicks into high gear in the coming week, and so investors can expect plenty of volatility in individual stocks. A few of the most anticipated reports set to be released include those from Netflix (NFLX -0.35%), Johnson & Johnson (JNJ -0.80%), and American Express (AXP -1.30%).

Netflix's membership trends

Investors are bracing for a growth slowdown from Netflix when the streaming-video giant posts fiscal first-quarter results after the closing bell on Monday. The company blasted past expectations last quarter by adding 7 million new subscribers compared to management's forecast of 5.2 million. As a result, Netflix managed a healthy acceleration in annual growth as member sign-ups sped to 19 million in 2016 from 17.4 million the year before.

Chart showing increasing annual subscriber gains.

Annual subscriber gains by region. Chart by author.

CEO Reed Hastings and his executive team forecast a slowdown in this quarter as membership gains drop to 5.2 million from 6.7 million. That's partly thanks to a year-ago period that saw booming growth tied to its international expansion, and partly because management believes that pulling forward subscriber growth played a role in last quarter's surprisingly strong growth.

In addition to member gains, investors will be watching for evidence that Netflix is expanding profitability toward its 7% goal for 2017, and that cash flow trends aren't worsening to the point that they'll require another debt infusion before the end of the year.

Johnson & Johnson's drug pipeline

Healthcare titan Johnson & Johnson is set to announce its results on Tuesday morning. The stock is beating the market so far this year, but that's no surprise to long-term shareholders who have seen shares compound at a double-digit annual growth rate since 1985.

Operating results have been impressive lately. Sales rose 7% in fiscal 2016 thanks mainly to surging results from Johnson & Johnson's pharmaceutical segment. The consumer division, meanwhile, managed improved profitability in a tough selling environment.

The company expects the drug business to help push organic sales up by between 4% and 5% in 2017, to mark an improvement over last year's 3.9% boost. At the same time, the company's industry-leading profitability should ensure plenty of cash is generated that management can direct toward research and development, as well as the strong dividend growth that income investors have come to expect from this diversified healthcare giant.

American Express aims for a rebound

Credit services giant American Express will post its latest operating numbers on Wednesday afternoon, and investors are hoping to see continued positive momentum in loan growth and card-member spending. The business was hit hard in 2015 and early 2016, especially by the loss of its Costco credit card partnership.

A person orders something online using a credit card.

Image source: Getty Images.

However, things are looking up lately. Global loan balances rose 11% last year to mark a solid rebound from the prior year's 17% decline. "At the start of 2016 we said we would move with a strong sense of urgency to change the trajectory of our business," CEO Kenneth Chenault told investors in January. "The results we're reporting today reflect substantial progress on that commitment," he added.

Shareholders this week will be looking for more of that progress in the form of rising loan balances and card issuances, excluding the lost Costco business that's still crimping results. Additionally, they'll be demanding evidence that ramped up marketing and promotional spending is generating solid results by delivering market-share gains and putting American Express back in position to deliver healthy, growth-fueled profit gains.

Demitrios Kalogeropoulos owns shares of Costco Wholesale and Netflix. The Motley Fool owns shares of and recommends Costco Wholesale, Johnson & Johnson, and Netflix. The Motley Fool recommends American Express. The Motley Fool has a disclosure policy.

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