Stocks jumped last week, as earnings season kicked into high gear and the world made progress toward ending the COVID-19 pandemic. Both the Dow Jones Industrial Average (^DJI 1.61%) and the S&P 500 (^GSPC 1.99%) gained over 3% to bounce back into positive territory for 2021.
Earnings season continues this week, with many of the market's favorite stocks reporting results in the next few days. That list includes Walt Disney (DIS 2.28%), PepsiCo (PEP 0.68%), and Twitter (TWTR 6.35%), whose announcements we'll preview below.
Disney's new show
Disney's Thursday report kicks off a new fiscal year for the entertainment giant, which took some big hits related to the global pandemic in 2020. Sales for the 12-month period ended in early October were down 6% as booming growth in the streaming service failed to offset plunging demand at theme parks, film studios, and cruise lines. Disney's profits were severely affected by consumer spending shifts, with operating income falling 45% last year to $8.1 billion.
The possible coming end to the COVID-19 threat has Wall Street hopeful that Disney will achieve a robust recovery soon. Meanwhile, Disney+ gives the company a viable platform it can use to market its own intellectual property, with an attractive bonus of rising fees over time. Netflix is showing how that approach can create massive cash flow under the best-case scenario.
Disney executives will discuss their 2021 plans for their competitive platform this week, while likely sounding cautious about the eventual recovery in other parts of its entertainment empire.
PepsiCo's cash haul
PepsiCo's business was dramatically reshaped by the pandemic, but you wouldn't know that by just glancing at its recent results. The beverage and snack food giant is on pace to grow organic sales by nearly 5% in 2020, after all, matching the strong rate it achieved in 2019.
That success explains why investors are more optimistic about PepsiCo's business right now than about rival Coca-Cola, which also reports earnings this week. Pepsi got a lift from its food segment that Coke couldn't match. Its beverage volume has been stronger, too, as it relies less on away-from-home purchases.
These assets should allow Pepsi to take a bold approach to growth in 2021, including more brand acquisitions. But investors on Thursday will be just as interested in the prospect of rising cash returns that the company should target through higher stock buybacks and a dividend that was recently boosted by 7 %.
Twitter's engagement metrics
Investors are looking forward to the results due out from Twitter on Tuesday afternoon. Like many digital media businesses, the platform has enjoyed strong growth through the pandemic. User and engagement metrics each spiked over the first nine months of 2020, and advertising dollars quickly followed. Twitter's third-quarter sales were up 14%.
The following quarter was a volatile one for the business, which included major disinformation challenges related to the presidential election. Yet, in October, CEO Jack Dorsey and his team predicted that Twitter could maintain its positive momentum through election-related challenges.
We'll find out this week whether politics contributed to a significant hit to engagement levels, or if Twitter instead grew sales by at least 18% in the fourth quarter, just as Wall Street is predicting.