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3 Things to Watch in the Stock Market This Week

By Demitri Kalogeropoulos – Jun 23, 2019 at 7:30AM

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Look for Nike, Constellation Brands, and McCormick stocks to make big moves over the next few trading days in advance of earnings reports late in the week.

Stocks rose sharply last week as investors digested news that the Federal Reserve may be preparing to cut interest rates as soon as July to support economic growth. The S&P 500 (^GSPC -2.11%) and the Dow Jones Industrial Average (^DJI -1.54%) each rose more than 2% on the week and touched all-time highs.

The coming week promises to bring potential volatility around a few stocks that are announcing quarterly earnings results. Below, we'll take a look at the metrics that could send shares of Nike (NKE -3.41%)McCormick's (MKC -2.04%), and Constellation Brands (STZ -1.58%) moving in the week ahead.

Two young men holding beers in a bar

Image source: Getty Images.

1. Nike's sales outlook

Nike's sales growth rebound hit a snag in the most recent quarter, so investors will be focused on that metric when the sports apparel giant reports earnings results on Thursday. Revenue gains slowed in the U.S. market in the fiscal third quarter after accelerating in each of the prior two quarters. Sales were still up a healthy 7%, though, to more than double the growth rate of rival Under Armour.

On Thursday, investors will be looking for signs that Nike is still seeing a good balance between supply and demand in the U.S., and that its recent product introductions are resonating with exercise fans. But Wall Street will be even more interested to learn whether CEO Mark Parker and his team still expect robust sales growth and improving margins in the coming fiscal year despite rising input costs.

2. McCormick's growth rate

A volatile growth rate over the last few quarters has put extra focus on McCormick's earnings results, also set for Thursday. The spice and flavorings giant gained market share last quarter, as it has for years. However, sales gains were below expectations in the prior quarter, so investors are keen to learn which of those two results better represents McCormick's current operating trends.

In either case, you can expect to see profitability continue marching higher. McCormick's operating margin has been expanding steadily since it acquired the French's and Frank's condiment brands in 2017, and management expects that momentum to carry on through 2019. On Thursday, investors will find out whether executives still see sales rising by between 3% and 5% this year, while operating earnings jump by about 10%.

3. Constellation Brands' wine rebound

Constellation Brands, the company behind popular beer brands such as Corona and Modelo, will announce its fiscal first-quarter earnings results on Friday. Investors have plenty to look forward to in this report.

Its last quarterly announcement included some big surprises, after all, such as the divestment of a portfolio of lower-margin wine and spirits franchises. That segment has been holding back Constellation Brands' much more successful beer division in the past two years, and this week's metrics might help show whether their removal can lift the broader business. For example, CEO Bill Newlands and his team initially predicted that operating margin will rise to 30% from 26% following the close of the sale in the context of accelerating market-share gains.

Meanwhile, look for Constellation Brands to update investors on the national rollout of the Corona Premier brand, the largest addition to the Corona franchise in decades. Finally, Newlands and his team will likely discuss their updated expectations around marijuana and what they might mean for their massive investment in pot giant Canopy Growth. Constellation Brands has lots of flexibility to expand its bet on this key consumer-focused market, depending on how quickly it develops over the next few years.

Demitrios Kalogeropoulos owns shares of Nike, Under Armour (A and C shares). The Motley Fool owns shares of and recommends Under Armour (C shares). The Motley Fool recommends Constellation Brands, McCormick, Nike, and Under Armour (A shares). The Motley Fool has a disclosure policy.

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Stocks Mentioned

Constellation Brands, Inc. Stock Quote
Constellation Brands, Inc.
STZ
$233.67 (-1.58%) $-3.76
NIKE, Inc. Stock Quote
NIKE, Inc.
NKE
$95.33 (-3.41%) $-3.37
McCormick & Company, Incorporated Stock Quote
McCormick & Company, Incorporated
MKC
$73.51 (-2.04%) $-1.53
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$29,225.61 (-1.54%) $-458.13
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$3,640.47 (-2.11%) $-78.57

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

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