The quiet summer months are over, and the financial markets have gotten back to work after a quiet yet profitable period for stock investors. Now, your attention should turn to earnings reports for the third quarter of 2017, to see whether the fundamental prospects for the companies whose shares you own are still solid. Although earnings season won't begin in earnest until mid-October, there are a few companies that you need to keep an eye on heading into earnings season that will give you some advance notice on what to expect for the rest of the year and beyond. Below, you'll see why Nike (NKE 0.19%), Costco Wholesale (COST 1.01%), and Rite Aid (RAD -31.13%) are must-watch stocks in the coming weeks.
Nike looks for a rebound
The athletic apparel space has been strong in recent years, and Nike has taken advantage of its leadership position in the industry to grow. Yet new competitive threats have emerged to challenges the company. The rise of Adidas in North America has posed strategic challenges for Nike, and the difficult retail environment has also weighed on sales of the company's products. Earnings from Foot Locker in August signaled sluggish sales of athletic products, and some investors inferred that overall results from Nike would suffer as a result.
Image source: Nike.
Nike will release its fiscal first-quarter results later this month, and expectations among those following the athletic apparel giant are for a dramatic decline in earnings on roughly flat revenue. That leaves room for Nike to do better than expected, especially as it rolls out initiatives like its direct-to-consumer page on the Amazon.com marketplace. With its stable of sports superstar endorsements and the promise of new products rolling out for the holiday season, Nike is in a position in which it could start to gain positive momentum to finish 2017 and move forward more strongly in the New Year.
Costco keeps fighting
The challenging retail environment has hurt companies across the industry, and even warehouse giant Costco Wholesale hasn't been immune from the impacts. Yet despite the tough conditions, shareholders aren't giving Costco a free pass coming into its fiscal fourth-quarter financial report early next month. Investors still want to see double-digit percentage gains in Costco's top and bottom lines, and strong monthly comparable sales figures signal that those aspirations might well be achievable.
The recent purchase of Whole Foods by Amazon sent some Costco investors into a panic, figuring that the e-commerce giant would disrupt grocery sales the same way it has a host of other retail niches. Yet Costco investors rightly point out that membership figures remains strong, and with consumers having already invested in a Costco membership, they're more likely to keep coming back and seeing the value proposition that the warehouse retailer brings. As long as Costco's membership fee increase hasn't driven customers away, its long-term prospects remain better than most of its big-box retail peers.
Rite Aid has something to prove
Finally, Rite Aid has been through a lot lately, and most of it has distracted from its fundamental business performance. After a long wait, Rite Aid finally gave up on its pending merger with Walgreens Boots Alliance (WBA 0.57%), instead opting for an alternative plan under which the drugstore chain will let Walgreens buy about 2,100 of its store locations for a cash payment of roughly $5.1 billion. Even that deal isn't a certainty at this point as it will have to pass regulatory scrutiny, but most investors are more hopeful that the asset purchase will gain approval.
What that means is that Rite Aid investors will have to watch to see how the drugstore chain manages to perform from an earnings perspective when it releases its fiscal second-quarter results. Most expect a modest profit on a slight decline in sales from year-ago levels. If the sale goes through, Rite Aid will still have 2,300 stores and a lot less debt, and other businesses like its Envision Rx pharmacy benefit management division will have a much larger role to play in future growth. Strong performance could send Rite Aid stock soaring, but sluggishness could add more questions to whether Rite Aid can survive in the long run.
Earnings season isn't here yet, but it's fast approaching, and these three stocks will give you a taste of what to expect when the majority of companies start releasing their latest results. By seeing how these companies do, you can prepare yourself for what the rest of the year is likely to bring.
