Stocks rose last week, as both the Dow Jones Industrial Average (^DJI 0.60%) and the S&P 500 (^GSPC 1.05%) edged closer to positive territory for the year. Just a few days into the second half of 2020, the Dow is lower by 9% while the S&P is only down about 2%. Both indexes had been down by over 30% in late March.
Big-picture trends around economic growth and COVID-19 outbreaks will dominate headlines over the next few days, but earnings season is also ramping up again. So, let's take a closer look at the upcoming reports that could send PepsiCo (PEP -2.24%), Netflix (NFLX 3.72%), and Domino's (DPZ 1.57%) stocks moving this week.
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Pepsi's cash flow
Pepsi's last operating update only covered the period that ended on March 21, and so investors will be studying Monday's report to learn how the COVID-19 pandemic affected its global business through June.
The results should be mixed. Beverage sales will be hurt by slumping entertainment and restaurant demand. Rival Coca-Cola (KO -0.14%) said drink volumes plunged 25% in early April, due to the cancellation of sporting events and concerts.
Pepsi's snack food business should help offset that decline, though, thanks to booming demand at supermarket chains and convenience stores. Overall, investors are expecting sales to drop by roughly 6% in the fiscal second quarter to $15.4 billion. Management's comments on the subsequent growth rebound will be key to watch this week, and so will any updates to its plan to deliver over $7 billion to shareholders through dividends and stock buybacks in 2020.
Netflix's subscriber trends
Netflix barreled past the $500 per share mark last week as investors became even more optimistic about the streaming video leader's growth prospects. That rally raises the stakes for its earnings report on Thursday afternoon.
Three months ago, CEO Reed Hastings and his team tried to lower expectations following a blowout first-quarter earnings report that included the addition of 16 million new subscribers. Management forecast a much slower second quarter expansion of 7.5 million as governments around the world started lifting stay-at-home orders. But they admitted that uncertainty was unusually high for their forecast. "This is mostly guesswork," Hastings said. "The actual [subscriber] numbers could end up well below or above that, depending on many factors ."
Even if the tech stock trounces expectations for a second straight quarter, it is bound to describe some pressure from the pandemic, especially since new content production has paused. And executives are likely to reiterate their prediction that TV consumption will decline as people prioritize entertainment outside of the home for a while. In any case, look for Netflix to stand by its forecast for improving cash flow trends in 2020 and beyond.
Domino's market share
Domino's has been one of the best-performing stocks in the fast-food niche because its delivery-focused selling approach appears tailor-made for the current selling environment. Consumers flocked toward its convenient offerings during the early days of the pandemic when most restaurants closed. The chain said comparable-stores sales spiked by over 20% in late April and early May.
CEO Richard Allison warned investors in May that there was no telling how those trends might change over the coming weeks and months, which means there's a wide range of potential sales figures that Domino's could report on Thursday. One metric that might cut through the noise is market share. Domino's has been on an almost unbroken 10-year streak of wins in that arena, but rivals both inside and outside the pizza niche have been doing their best to try to stall that positive momentum.
