These 2 Consumer Stocks Could Move Markets This Week

Monday brought new closing lows in 2022 for the S&P 500 (^GSPC -0.74%) and Nasdaq Composite (^IXIC -0.39%), with the Dow Jones Industrial Average (^DJI -1.53%) just barely escaping the same fate. Although U.S. bond markets were closed, fears about rising interest rates made investors think twice about expecting any relief from the Federal Reserve anytime soon.

Data source: Yahoo! Finance.

Earnings season is kicking off this week, and investors will get a couple of key reports from consumer-facing companies. In the food and beverage arena , PepsiCo (PEP -1.55%) will have a lot to say about some of the inflationary pressures that its customers are facing. Later in the week, drugstore chain giant Walgreens Boots Alliance (WBA -3.16%) will offer its own look with its unique mix of healthcare and general retail items in its business. What the two companies say could have dramatic impacts on how the market moves later in the week.

Will PepsiCo stay fizzy or fall flat?

Shares of PepsiCo were actually up slightly on Monday, indicating a general investor preference toward defensive names in consumer staples. The snack food and soft drink giant is set to report its latest financial results on Wednesday morning.

One big problem that PepsiCo faces is that it does a lot of business overseas. With a strong U.S. dollar, the snack and beverage company has had to choose between equally unattractive options, either boosting prices in foreign currency in its overseas markets and accepting the resulting drop in demand, or leaving prices as they are and accepting shrinking revenue and profit margins as measured in dollars. Moreover, with some consumers having to cut back on discretionary purchases, shareholders will be watching closely to see if PepsiCo suffers from shoppers substituting generic store brands for its name-brand products.

Even in a tough environment, though, investors are optimistic about PepsiCo's prospects. Most of those following the stock currently project that PepsiCo will see slightly higher earnings than in the year-earlier period, with sales rising as much as 3% year over year.

Conservative investors rely on PepsiCo as a stalwart performer with a healthy 2.9% dividend yield and consistent demand for its products. If anything in its coming financial report runs counter to that thesis, it could be a big disappointment for the broader market.

Can Walgreens finally bounce back?

Shares of Walgreens Boots Alliance did even better on Monday, rising more than 4%. The drugstore chain company reports its results on Thursday, and investors hope that Walgreens can finally get things moving in the right direction after stiff losses throughout 2022.

Unfortunately, current views suggest Walgreens could struggle to move ahead. Those following the stock now expect earnings to fall by more than a third, with revenue likely to sink more than 6% for the quarter compared to year-ago results.

Walgreens has sought to break out from its somewhat sleepy retail pharmacy business by incorporating more healthcare services at its locations. Long-held plans to offer clinics at current stores as well as new stand-alone locations could help bolster traffic and diversify its business exposure further. Given that people don't stop needing healthcare, this aspect of Walgreens' business could keep it afloat if a potential recession becomes severe.

With a dividend yield of more than 6%, income investors like Walgreens, but some fear that deteriorating fundamentals could make the stock a value trap. What it says on Thursday could go a long way toward answering whether Walgreens has what it needs to mount a full recovery.