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3 Things to Watch in the Stock Market This Week

By Demitri Kalogeropoulos – Aug 4, 2018 at 7:31AM

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Disney is one of several big-name companies set to post earnings over the next few trading days.

Stocks didn't move much last week. Generally strong earnings and economic reports faced off against worries of rising trade tensions to keep both the S&P 500 (^GSPC 0.25%) and the Dow Jones Industrial Average (^DJI 0.08%) stuck in a narrow range. So far this year, the two indexes are up, but the S&P is outpacing its narrower peer.

^SPX Chart

^SPX data by YCharts.

Hundreds of companies are set to post second-quarter earnings reports over the next few trading days. Below, we'll take a closer look at the announcements that could send shares of Weight Watchers (WW 10.54%), Disney (DIS -0.15%), and Arcos Dorados (ARCO -1.25%) moving this week.

Weight Watchers' subscriber numbers

Investors could hardly be more optimistic heading into Monday's earnings report by Weight Watchers. Shares doubled over the first half of 2018 on news of significant improvements in the company's operating trends. Weight Watchers managed a 29% year-over-year spike in paid subscribers last quarter, for example, to 4.6 million users. And these customers are sticking around longer, with retention climbing past nine months on average. These engagement gains translated into a doubling of operating income to $63 million in the fiscal first quarter.

A man stands on a scale.

Image source: Getty Images.

CEO Mindy Grossman and her executive team hiked their earnings guidance in early May, and the company now sees profits rising to between $3.00 and $3.20 per share, up from the prior target range of $2.40 to $2.70. That aggressive forecast assumes strong uptake of the company's "freestyle" program and continued close cooperation with Oprah Winfrey, who has lent her powerful brand to Weight Watchers' increasingly effective marketing campaigns.

Disney's streaming update 

Media giant Disney will announce its fiscal third-quarter 2018 results before the market opens on Tuesday. The organization's last quarterly outing included some head-turning results out of its studio and parks and resorts segments that together offset weak growth in the core television broadcasting unit. Disney's sales ended up higher by 9% last quarter as theatrical hits like Black Panther dominated the box office.  

Avengers: Infinity War should help that division continue growing this quarter, but investors will be more focused on Disney's latest over-the-top streaming initiative. ESPN+ now has a full quarter of operating metrics behind it, including subscriptions, cancellation rates, and user engagement. So Disney's management team should have a better idea about how well the service will protect Disney's overall subscriber base as the broadcast cable TV pool shrinks. Success here would set the stage for even bigger growth when the company launches its Netflix–style content streaming service in late 2019.

Arcos Dorados' customer traffic

Leading McDonald's franchisee Arcos Dorados will post its quarterly report on Tuesday. Investors weren't happy with its last announcement despite generally positive results from the Latin America-based restaurant chain.

Five young adults eating a fast food meal.

Image source: Getty Images.

Arcos' 9.8% comparable-store sales gain marked a slight improvement from the prior quarter and was comprised of positive guest traffic across its geographic divisions. The company held the line on expenses, too, which allowed adjusted earnings margin to expand to 8.5% of sales from 7.9% a year ago.

The chain seems well positioned to benefit from favorable trends like an improving macroeconomic environment and better menu options. It is also making a significant down payment on future growth by remodeling its restaurants so that they can work more seamlessly with online ordering and delivery offerings. Investors are likely to see initiatives like these continue to deliver market-share growth for Arcos Dorados, which would eventually be reflected in a rising stock price.

Demitrios Kalogeropoulos owns shares of McDonald's, Netflix, and Walt Disney. The Motley Fool owns shares of and recommends Netflix and Walt Disney. The Motley Fool has a disclosure policy.

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