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3 Things to Watch in the Stock Market This Week

By Demitri Kalogeropoulos – Apr 1, 2018 at 12:02PM

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CarMax is one of a few big-name stocks set to post earnings results over the next five trading days.

Stocks ticked lower last week following a brutal 5% decline in the prior week. The declines left both the Dow Jones Industrial Average (^DJI 0.18%) and the S&P 500 (^GSPC 0.37%) in modestly negative territory so far this year, despite having been up nearly 8% by late January.

^SPX Chart

^SPX data by YCharts.

As for the week ahead, Dave & Buster's (PLAY 3.35%), CarMax (KMX 1.74%) and PriceSmart (PSMT 0.03%) each have earnings reports scheduled for release that could drive volatility in their stocks. Let's take a look at what investors can expect from these announcements.

Dave & Buster's 2018 forecast

Dave & Buster's stock has trailed the market since the entertainment chain revealed weakening traffic trends in early January. Rather than speeding up during the seasonally strong holiday weeks, comparable-store sales worsened from the third-quarter's 1.3% decline, to fall by 5% early in the fourth quarter. As a result, CEO Steve King and his management team now believe comps will be slightly negative for the full 2017 year. Dave & Buster's also lowered its profit forecast to between $108 million and $110 million compared to $91 million in 2016.

On Tuesday, investors will be looking for an explanation from the company for that slowing demand, in addition to a credible plan to get growth back on track for the fiscal year that just started. Dave & Buster's should provide an update on the financial efficiency of its latest crop of stores, too, since the returns these locations generate form the support for management's plan to more than double its store base over the long run.

CarMax's customer traffic

Used-car giant CarMax will announce its fourth-quarter earnings results on Wednesday. Sales haven't been stellar in this business lately. In fact, revenue growth slowed in each of the last two quarters and fell below 3% in its most recent report. Thus, investors will be focused on whether that trend reversed itself over the holiday season.

A car salesman hands over the keys to a customer.

Image source: Getty Images.

Amid a broader industry slowdown, CarMax has been struggling with weak customer traffic figures that have been partially offset by improving conversion rates. Look for the company to provide important updates on both these metrics on Wednesday. Gross profit per vehicle also is critical to the business, and that figure should hover at around $2,100, or about 11% of average selling prices.

Looking further out, CarMax should update shareholders on its plans to expand into new markets at a pace of around 16 dealerships per year to continue making steady market-share progress in this large, but highly fragmented, industry.

PriceSmart's membership income

On Thursday, international warehouse club PriceSmart updates investors on its fiscal second-quarter earnings. Its top-line growth has been steady in recent months, with comps rising at a roughly 2% rate in each of the last three quarters. But that figure masks lots of volatility across the retailer's different regions.

A customer browses the aisles at a warehouse retailer.

Image source: Getty Images.

Its Colombian segment, for example, grew by double digits last quarter, thanks to improving economic trends and a steadier exchange rate. Other markets, including Trinidad and Honduras, turned in far weaker results.

Overall growth should be solid, though, given that comps improved by 4% in the month of February. On Thursday, investors will be looking for signs that PriceSmart paired those sales gains with steady profit margins and a healthy uptick in membership income.

Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends CarMax. The Motley Fool recommends Dave & Buster's Entertainment and PriceSmart. The Motley Fool has a disclosure policy.

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Stocks Mentioned

PriceSmart, Inc. Stock Quote
PriceSmart, Inc.
$58.80 (0.03%) $0.02
CarMax Inc. Stock Quote
CarMax Inc.
$81.36 (1.74%) $1.39
Dave & Buster's Entertainment, Inc. Stock Quote
Dave & Buster's Entertainment, Inc.
$31.82 (3.35%) $1.03
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$29,312.58 (0.18%) $51.77
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
$3,668.40 (0.37%) $13.36

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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