Stocks declined last week, putting both the Dow Jones Industrial Average (^DJI 0.56%) and the S&P 500 (^GSPC -0.88%) down roughly 5% so far in 2022. The indexes had been down by over 10%, though.
Earnings season continues in the week ahead, and we'll look at a few highlights from the announcements on the way. CarMax (KMX 0.63%), Bed Bath & Beyond (BBBY), and Delta Air Lines (DAL -0.58%) are among the most anticipated earnings reports for investors to follow.
1. CarMax's inventory
Used car prices are at historically high levels, but investors are still nervous heading into the Wednesday earnings report from CarMax. The automotive retailer entered the period with strong momentum as sales easily set a new third-quarter record through late November.
However, CarMax struggled to fully stock its lots, and that supply pressure might limit growth into early 2022. Yet most investors who follow the stock are expecting sales to land at $7.6 billion, up nearly 50% year over year.
Image source: Getty Images.
CarMax CEO Bill Nash and his team will likely discuss a few challenges in addition to that main supply problem. Labor shortages and the late December wave of COVID-19 cases might have pressured sales volumes. CarMax's earnings won't be soaring, either, as the company works to keep its prices low so that it can win market share.
Management is hoping this strategy will help it reach over 5% of the fragmented used car market by 2025. Look for an update of that bright, long-term outlook on Wednesday morning.
2. Bed Bath & Beyond's profitability
Bed Bath & Beyond's stock has been extra volatile lately because of its meme-stock status. The specialty retailer just attracted activist investor attention from a firm aiming to push management in a different direction too. But on Wednesday, its share price swings will be more directly tied to its operating performance.
Bed Bath & Beyond isn't likely to wow investors on this score. Comparable-store sales fell 7% last quarter, after all, and were even down compared with the pre-pandemic period. The company blamed supply-chain challenges and inflation -- factors that probably worsened in the fiscal fourth quarter. Sales are expected to fall about 20% to $2.1 billion.
BBBY Operating Margin (TTM) data by YCharts
The bullish thesis rests on management's ability to stem those customer traffic declines while succeeding in the online channel. Investors are also hoping the company can unlock more value by considering a spinoff or sale of the popular buybuyBaby brand. We'll probably hear about how those strategies are progressing on Wednesday.
3. Delta's summer outlook
Investors have high expectations heading into Wednesday's earnings report from Delta Air Lines. The company is likely to have more than doubled its revenue compared to a year earlier, when the pandemic was pressuring the travel industry more intensely. And despite soaring oil prices, cash flow and earnings should look strong, according to the company's upgraded outlook.
Watch for CEO Ed Bastian and his team to refresh that 2022 forecast this week, mainly by confirming comments they made in January predicting a "strong spring and summer travel season with significant pent-up demand for consumer and business travel."
If Delta is seeing that scenario play out today, the short-term earnings picture will be bright. And investors' returns from holding the airline stock should track that profit trend over the long term.
