Stocks stayed firmly in rally mode last week, as both the Dow Jones Industrial Average (^DJI) and the S&P 500 (^GSPC -0.16%) gained more than a full percentage point. The indexes have each risen by more than 4% in just the nine trading days that have passed in 2018.
Fourth-quarter earnings reports are just starting to roll in, and investors are hoping that good profit news will help extend the streak that has pushed markets up by over 20% since the start of 2017. A few of the most anticipated reports set to publish in the days ahead are from CSX (CSX 1.25%), Alcoa (AA) and IBM (IBM 0.02%). Let's take a look at what Wall Street will be watching in these reports.
CSX's management transition
Railroad giant CSX closes the books on its fiscal year by releasing fourth-quarter results on Tuesday. This will be its first report following the shift to a new CEO after Hunter Harrison passed away in mid-December.
That leadership transition will be on the top of investors' minds while they process the company's latest operating results. CSX managed only slight improvements in its last quarterly outing. Sales and profits both inched higher by 1%, as rising coal shipments offset declines in the merchandise-moving segments.
Back in October, CSX projected another roughly flat quarter to close out its fiscal year. Specifically, investors can expect falling automotive demand and a weak domestic coal market to almost completely offset the growing intermodal and export coal niches.
Yet that mixed performance shouldn't get in the way of meeting management's goal of between 20% and 25% higher earnings for the full 2017 fiscal year. Look for CSX executives to discuss that profit outlook, along with a preview of the management transition plans they'll likely present in more detail at the company's investor-day conference in March.
Alcoa's aluminum pricing
Alcoa shareholders are optimistic heading into the aluminum specialist's quarterly report on Wednesday. The stock trounced the market in 2017, as metal prices improved and the company started benefiting from its 2016 divorce from the finished-products business. Alcoa's most recent quarterly report included a 27% sales spike, which translated into $135 million of adjusted net earnings -- compared to a $95 million loss in the prior-year period.
That strong result led CEO Roy Harvey and his executive team to raise their full-year profit target to $2.4 billion, up from $2.2 billion. Global aluminum demand is now expected to rise by a healthy 5.5% in 2017. On Wednesday, investors will be looking for evidence that these positive industry trends are holding, or even accelerating, into the 2018 fiscal year, while profitability benefits from continued cost cuts.
IBM's sales growth
IBM sat out of the stock rally last year, but shares have beaten the market more recently. That's because investors found a few faint reasons for optimism in Big Blue's third-quarter report. Sales were steady, for example, rather than declining, as Wall Street had projected. IBM also managed to edge past profit estimates in the period as gross profit margin held steady, at 48% of sales.
Big Blue's most promising growth avenues include its refreshed mainframe server lineup, along with the strategic imperatives segment that's responsible for most of its revenue gains these days. That combination of legacy and new businesses is laying the foundation for a minor earnings improvement following years of consecutive declines that shareholders have endured.
IBM's massive, slow-moving business makes it unlikely that it will shock investors with dramatic changes to its operating trends this week. Instead, shareholders might glimpse signs that its steady turnaround is progressing along management's plan to eventually return to low-single-digit annual sales gains.