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3 Things to Watch in the Stock Market This Week

By Demitri Kalogeropoulos - Jan 17, 2021 at 7:00AM

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Netflix is just one of several rallying stocks set to announce earnings results over the next few days.

Stocks dipped last week, as both the Dow Jones Industrial Average (^DJI -0.03%) and the S&P 500 (^GSPC -0.02%) shed about 1% while remaining in slightly positive territory for the year so far.

A few widely owned stocks will announce operating results over the next few trading days, including Netflix (NFLX 3.18%), Procter & Gamble (PG -0.65%), and Fastenal (FAST -0.90%). Below, we'll look at the key trends that might send these three stocks moving this week.

1. Netflix's outlook

Its business got a huge boost in the early days of the pandemic, but investors are bracing for slower growth from Netflix in Tuesday's report. The streaming video leader's last announcement showed weak customer gains, which CEO Reed Hastings and his team attributed to a pull-forward effect from the first half of the year when over 15 million subscribers joined the service.

A man watches TV.

Image source: Getty Images.

Management in October predicted another sluggish result ahead as gains slowed to 6 million in the fourth quarter compared to 8.8 million a year earlier. Yet hitting that figure would still leave Netflix with a record 34 million new subscribers this year to blow away the previous annual record of 29 million that was set in fiscal 2018.

The big question is where growth goes from here, given Netflix's modest potential in the U.S. market and rising competition in the global streaming space. Those challenges aren't likely to get in the way of solid overall gains for the industry leader, especially given its growing list of breakout exclusive-content hits. Look for Hastings and his team to highlight some recent wins, such as Bridgerton and The Queen's Gambit, on Tuesday.

2. Procter & Gamble's cash flow

Procter & Gamble steps up to the earnings plate on Wednesday, and expectations are running high for the consumer-staples giant's report. P&G hasn't suffered much of a growth hangover from COVID-19 stock-up behavior, as sales gains nearly hit double digits in the most recent quarter. P&G was beating most rivals before the pandemic, and that performance gap only widened in 2020.

Management predicted in late October that P&G would still see solid organic growth in the fiscal second quarter despite major headwinds, including COVID-19 outbreaks and economic slumps in key markets like the U.S. Beyond that spike, look for executives this week to talk up their large (and growing) cash return targets. Rising profit margins combined with accelerating growth to lift P&G's dividend and stock buyback goals to $16 billion in fiscal 2021 even as the Dividend Aristocrat prepares to announce its 65th straight annual payout raise in April (reinforcing its added designation as a Dividend King).

3. Fastenal's sales trends

The giant in construction and industrial supplies will announce its results on Wednesday morning. Given the stock's surging returns last year, investors are expecting plenty of good news in that update.

Its last report contained conflicting growth signals, with weaker operating results paired with signs of a strengthening industrial sector. Fastenal has added to the bullish attitude since then, announcing in early December that sales growth accelerated in the month of November.

We'll find out on Wednesday whether the supply company expects that momentum to carry through into early 2021, or if shareholders should brace for a potential economic slowdown ahead as COVID-19 continues to pressure its customers.

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Stocks Mentioned

Netflix, Inc. Stock Quote
Netflix, Inc.
NFLX
$193.60 (3.18%) $5.96
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$32,187.25 (-0.03%) $-42.04
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$4,022.93 (-0.02%) $0.96
The Procter & Gamble Company Stock Quote
The Procter & Gamble Company
PG
$152.62 (-0.65%) $-1.00
Fastenal Company Stock Quote
Fastenal Company
FAST
$52.22 (-0.90%) $0.47

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

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