Stocks ticked higher last week, with both the Dow Jones Industrial Average (^DJI 0.06%) and the S&P 500 (^GSPC -0.22%) rising slightly to remain close to all-time highs. Both indexes are up more than 8% so far on the year:
Here's why investors will be looking for FedEx (FDX 0.11%), CarMax (KMX -0.91%), and Finish Line (FINL) to post big swings over the next few trading days.
FedEx's volume
With FedEx stock setting new highs this past week, investors are expecting good news from the company when it posts earnings results on Tuesday. This optimism comes despite the fact that the package delivery specialist missed earnings expectations in each of the last two quarters. Back in March, FedEx posted a drop in adjusted profit thanks to a mix of costly operating trends, including increased fuel expenses, and higher spending on network expansion.
Image source: Getty Images.
Investors are looking past those temporary factors and choosing to focus, instead, on the record delivery volumes that the company is enjoying, even as its service levels improve. Ideally, these successes will allow FedEx to return to margin expansion in both its express and ground delivery segments.
At the same time, executives are working to get the newly acquired TNT business up to speed so that it can start making serious contributions to operating income by fiscal 2020. Consensus estimates call for the TNT segment to help overall revenue jump 20% this quarter, to $15.6 billion.
CarMax's customer traffic
Used automobile retailer CarMax will announce its fiscal first-quarter earnings results before the market opens on Wednesday. The stock hasn't moved much since the last quarterly report and is trailing the broader market in 2017 as investors wait for clarity on its volatile business trends.
At its last quarterly check in, CarMax edged past Wall Street's expectations and showed strong sales gains, thanks to both higher customer traffic and improved efficiency at converting those browsers into buyers. Detracting from that success was a dip in demand both in volume and profit margin in the wholesale business, in addition to a further decline in financing availability for customers on the riskier end of the industry.
Image source: Getty Images.
CarMax is hoping it can offset that financing challenge by making improvements to its customer shopping experience, which will keep traffic churning higher. Gross profit margin will be worth watching, too, since pricing pressures could mount if new car dealerships boost their promotions. Meanwhile, look for CarMax to continue an aggressive expansion plan that will see it add 15 new locations to its store base this year.
Finish Line's profit margin
Finish Line shares are down sharply this year as its business struggles to find traction in a weak selling environment. The sports apparel and footwear retailer had an especially brutal end to its fiscal year, announcing in March that comparable-store sales fell by a surprising 4.5%.
Executives explained that competitors scaled up their promotions, and Finish Line was forced to follow suit, which sent profitability lower. "As elements of our footwear offering did not resonate with our customers as we expected and the overall retail environment in February became increasingly difficult," CEO Sam Sato said in a press release, "we made the decision to get more aggressive on pricing to be competitive and clear slow moving product."
The good news is that this move put the company in a better inventory position for the current quarter. But investors likely won't push the stock higher after Friday's results unless they see evidence that sales growth is turning higher in the context of steady or improving profit margins.
