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3 Things to Watch in the Stock Market This Week

By Demitri Kalogeropoulos – Jun 14, 2020 at 3:00PM

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Kroger is one of several big-name stocks set to announce earnings results over the next few days.

Stocks fell hard last week as investors reconsidered the optimism behind the recent rally. Both the Dow Jones Industrial Average (^DJI 2.45%) and the S&P 500 index (^GSPC 2.59%) shed over 5% after indexes had briefly returned to positive territory for the year. The S&P 500 now sits at a 6% decline so far in 2020, with the Dow down 11%. 

A few big-name stocks will announce earnings results over the next few trading days, including Kroger (KR 1.62%), Oracle (ORCL 3.72%), and CarMax (KMX 0.29%). Below we'll take a look at the numbers that might send their stocks moving this week.

Kroger's market share

By announcing booming pandemic-related demand for home supplies, peers like Walmart (NYSE: WMT) and Target (NYSE: TGT) have helped raise expectations for Kroger's earnings report on Thursday. Most investors who follow the stock are predicting sales gains that are closer to 8% than the 2% that the supermarket chain has been reporting in recent quarters.

A man shopping for beer.

Image source: Getty Images.

The pace of growth is important because it will show whether Kroger held its own in the market share battle with other major multichannel retailers during COVID-19 social distancing efforts. The retailer entered the crisis with weaker sales gains than its main rival Walmart, which in May announced a blistering 10% boost at its core U.S. locations.

In addition to market share, look for Kroger to reveal key profitability metrics on Thursday. It likely spent more on cleaning, sanitizing, and paying front-line employees. But operating margin might still have expanded if the chain got a big enough sales boost from extra consumer demand.

Oracle's cash flow

Oracle will announce its fiscal fourth-quarter results after the market closes on Tuesday, and investors are hoping to hear good news from the software giant. Its last report showed encouraging growth in the cloud services segment that more than offset declines in the legacy hardware division.

One key question is whether Oracle's subscription commitments helped it avoid a sharp revenue decline as COVID-19 containment efforts swept across the globe in February and March. That recurring revenue segment was up 5% last quarter, and continued growth there would stabilize the wider business.

CEO Safra Catz and her team might not offer a detailed outlook for the new fiscal year given big variables like economic growth rates and the path of the novel coronavirus. But investors should still get more clarity about demand trends and about whether Oracle still has ample cash to direct toward dividends and stock repurchases.

CarMax's inventory

CarMax has some big questions to answer in its Friday morning earnings report. The leading used car retailer's physical store footprint was mostly idle through much of the lockdown period, and we know that the pause put a real stress on the business, leading to mass furloughs and widespread cost cuts. Its early April operating update described several aggressive moves aimed at preserving cash, including the curtailing of store remodeling, share repurchase spending, hiring, and marketing.

Investors are hoping that Friday's report will detail the resumption of all of these activities as CarMax's lots begin to welcome car shoppers again. The performance of its online selling platform will be key to watch this week. CarMax's inventory level will show whether profitability will be pressured through the rest of the year by any excess automobiles sitting in its lots.

Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool recommends CarMax. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Oracle Corporation Stock Quote
Oracle Corporation
ORCL
$65.42 (3.72%) $2.35
The Kroger Co. Stock Quote
The Kroger Co.
KR
$44.46 (1.62%) $0.71
CarMax Inc. Stock Quote
CarMax Inc.
KMX
$67.94 (0.29%) $0.20
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$30,214.75 (2.45%) $723.86
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$3,773.72 (2.59%) $95.29

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

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