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4 Stocks to Watch This Week

By David Butler – Sep 29, 2019 at 8:45PM

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Some big names report earnings this week; here are a few that I'll be watching.

This week has a few notable earnings releases lined up within consumer goods. Some are large retailers, while others are growth companies seeking to finally realize some profits from scaling their business.

Mark your calendar. These four companies, in particular, will be worth watching this week.

1. Stitch Fix (Oct. 1)

The last 12 months have not provided Stitch Fix (SFIX 2.54%) investors with much to smile about. The stock has lost more than half of its value and still carries a very high premium. The online service that provides style and clothing services has created strong annual revenue growth over the past three years. The struggles, however, have been in delivering earnings that justify the clothing service stock's big premium.

Overall, financials are still up over the first half of the fiscal year, and I think there's potential in this business. As much as I dislike online shopping, the company has a situation where it can create repeat customers thanks to the monthly structure. Once someone gets involved with this, and likes it, they're most likely not going to leave. Client counts increased 16.6% year over year in the fiscal third quarter. This is, of course, assuming Stitch Fix keeps its pricing in check. The consensus analyst estimate is calling for $0.04 per share this week.

2. Bed Bath & Beyond (Oct. 2)

Bed Bath & Beyond (BBBY 0.16%) has been on the wrong side of retail trends. The retailer of home goods reported fiscal first-quarter results that were in line with analyst estimates with regard to revenue, but total sales still declined. We've watched the profitability of the business decline year after year. The downfall seems to be not just the rise of online competition, but also a failure of management to react to it. Estimates seem to be for $0.29 per share. I'll be more interested in what comparable-store sales have done.

A row of coins of increasing height, with a red arrow and percentage sign over them.

Image source: Getty Images.

3. Constellation Brands (Oct. 3)

Constellation Brands (STZ 0.03%) has managed to maintain a very consistent sales trend within an alcohol industry that's been rather up and down. Over the last five fiscal years, Constellation Brands has drastically improved its profits from sales. The two weaker points in its business have been the wine and spirits segment, as well as its investment in Canopy Growth (CGC 4.38%).

Canopy has not performed well over the last 12 months, as losses have mounted in the quest for revenue expansion. That has impacted Constellation's unrealized gains from the investment. Weakness in wine/spirits has also been a problem, but a sale of some poor brands in the second half of the year will hopefully offset that situation. Overall, I'll be looking to see maintained strength within the company's beer segment next week. For now, that is the driving force of Constellation Brands' business.

4. Costco (Oct. 3)

There's been some positive sentiment on Costco (COST -0.42%) ahead of its earnings report next week. My feelings on Costco reflect the performance of other retail companies that have reported before it. Walmart (WMT -0.27%) had a strong second quarter. Target (TGT -0.16%) reported strong sales that surprised many. With the bigger names performing well, I think Costco is likely to follow suit. It would seem that consumer spending was strong based on the performance of retail rivals, and I see no reason Costco wouldn't have also benefited throughout the quarter, which will be its fiscal fourth. The piece of the puzzle here will be whether or not a good quarter can make up for the stock's big premium.

Analyst estimates have earnings of around $2.54 per share. That would mark a 7.6% improvement over last year's $2.36 per diluted share.

David Butler has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Stitch Fix. The Motley Fool has the following options: short January 2020 $180 calls on Costco Wholesale and long January 2020 $115 calls on Costco Wholesale. The Motley Fool recommends CannTrust Holdings Inc, Constellation Brands, and Costco Wholesale. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Constellation Brands, Inc. Stock Quote
Constellation Brands, Inc.
$232.73 (0.03%) $0.07
Costco Wholesale Corporation Stock Quote
Costco Wholesale Corporation
$478.30 (-0.42%) $-2.00
Bed Bath & Beyond Inc. Stock Quote
Bed Bath & Beyond Inc.
$6.38 (0.16%) $0.01
StitchFix Stock Quote
$4.04 (2.54%) $0.10
Walmart Stock Quote
$130.95 (-0.27%) $0.36
Target Corporation Stock Quote
Target Corporation
$148.47 (-0.16%) $0.24
Canopy Growth Stock Quote
Canopy Growth
$2.86 (4.38%) $0.12

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

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