Stocks rallied last week as investors welcomed the beginning of the second-quarter earnings season. Both the Dow Jones Industrial Average (^DJI 0.78%) and the S&P 500 (^GSPC 1.29%) gained more than 1%, and the S&P has climbed back to roughly even so far in 2020.
The flood of earnings reports continues over the next few days with some standout announcements coming from iRobot (IRBT 0.35%), Coca-Cola (KO -0.17%), and Tesla (TSLA 1.05%). Below, we'll take a look at the key developments that might send these stocks moving this week.
iRobot's holiday outlook
iRobot shares have rebounded sharply since March as investors gained confidence that last quarter's brutal operating metrics were an outlier in an otherwise strong growth story. The consumer electronics specialist added to that optimism by announcing in mid-April that sales gains have accelerated since the early days of the pandemic as people prioritize spending on home maintenance products.
CEO Colin Angle and his team are predicting revenue of at least $260 million for the fiscal second quarter report on Wednesday, which would constitute a quick return to growth following last quarter's 19% slump. The robotic vacuum maker should also show an operating profit after losing $20 million in the first quarter.
Investor focus will be on iRobot's outlook for the critical holiday shopping season ahead. Management has cautioned shareholders to expect modest sales declines for full-year 2020 thanks to the combination of COVID-19 and tariff pricing challenges. But that prediction still leaves a wide range of potential outcomes, including continued growth momentum, heading into the new fiscal year and hopefully beyond the shadow of the current pandemic.
Coke's market share
Rival PepsiCo surprised investors with solid results last week, but expectations aren't nearly as high for Coca-Cola's Tuesday report. The beverage giant lacks a massive consumer food segment, which helped Pepsi report flat sales during the worst months of the pandemic to date. In contrast, most investors are looking for Coke to report a 26% sales drop as on-the-go drinking occasions slumped at places like restaurants, theme parks, movie theaters, and concert and sporting venues.
Coke's sales trends have likely started to rebound in recent weeks from the 25% volume decline the company revealed in early April. That means management's outlook will almost certainly show a path back toward global growth. The speed of that rebound is a major question for investors, and so is the severity of the financial pressure. Pepsi reported falling profitability thanks to COVID-19 expenses and the dramatic drop in beverage demand. Coke is likely to reveal even bigger bottom-line challenges this week while looking ahead toward improving earnings trends in 2021.
Tesla might be the market's single most controversial stock heading into Wednesday's earnings report. The electric car manufacturer's stock more than doubled in early 2020 before crashing back down to negative territory during the market's March swoon. Since then, it has been on an absolute tear as investors salivate over its growth potential.
Most of that enthusiasm came from Tesla's second-quarter delivery update that showed robust demand for its vehicles, even as COVID-19 temporarily challenged production levels. Yet investors are even more excited about the potential for a stronger second half to the year with sales in China combining with Model Y popularity to push Tesla toward 500,000 unit sales in 2020.
To earn the rally that the stock has seen in recent months, the company will have to show progress toward that ambitious goal on many fronts, including production efficiencies, demand, profitability, and customer satisfaction.