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What to Watch in the Stock Market This Week

By Demitri Kalogeropoulos - Apr 4, 2016 at 8:27AM

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On tap for investors over the next few trading days: An important update from the Federal Reserve, and three key earnings announcements.

Stocks continued their rally last week as the Dow Jones Industrial Average (^DJI 2.68%) and the S&P 500 (^GSPC 3.06%) each rose by nearly 2%. For investors keeping count, that's six straight weeks of gains following double-digit year-to-date losses in mid-February.

^INX Chart

^INX data by YCharts.

For the week ahead, investors can expect volatility around the Federal Reserve's data release set for 2 p.m. EST on Wednesday, when the central bank publishes minutes from its March monetary policy meeting. That meeting produced a forecast of two quarter-point interest rate hikes in 2016, and investors will be scrutinizing the minutes for clues to the Fed's thinking on supporting economic growth while keeping inflation in check.

Major earnings reports are also due out for Darden Restaurants (DRI 3.64%), Constellation Brands (STZ 2.57%), and CarMax (KMX 7.19%).

Tuesday, April 5 -- Darden Restaurants' customer traffic
Darden Restaurants, owner of national sit-down chains such as Olive Garden and LongHorn Steakhouse, will post its fiscal-third-quarter results before the opening bell on Tuesday. The company in early March pre-announced a few operational highlights, including achieving 6% comparable-store sales growth (marking an acceleration from the prior quarter's 2% uptick), and adjusted earnings of about $1.19 per share (20% above last year's result).

Source: Darden Restaurants.

In Tuesday's release, investors will be interested in Darden's customer traffic figures. Those trended lower at both Olive Garden and LongHorn in November, and while increased menu prices made up for the drop, the company needs to continuously fill its booths if it hopes to keep its turnaround momentum going strong.

Wednesday, April 6 -- Constellation Brands' beer sales
Constellation Brands posts quarterly results on Wednesday morning that will close out what's expected to be a banner fiscal year for the alcoholic-beverage giant. Last quarter, sales jumped 6% higher as operating income soared 15%, to reach $476 million, as the beer business took off. In fact, beer shipments, led by Corona and Model brands, are up 12% during the last nine months, trouncing Constellation's 6% uptick in wine and spirit volumes.

Source: Constellation Brands.

In January, CEO Rob Sands and his executive team forecast 23% profit growth for fiscal 2016 that will be powered by double-digit gains in the beer business. The long-term outlook for that segment is improving, as well, thanks to two new breweries that will start contributing to results soon.

Executives project that Constellation Brands will post $5.10 per share of earnings for fiscal 2016 on Wednesday, up from $4.17 per share in the prior-year period.

Thursday, April 7 -- CarMax's used-car volume
On Thursday, auto retailer CarMax hopes to bounce back from weakening operating results that have helped push shares 25% lower during the last year. Three months ago, the company posted what CEO Tom Folliard admitted was a "challenging sales quarter" in which comparable-store sales fell 1% on declining traffic at its dealerships. Gross profit per used vehicle was flat, at $2,200. That result, plus increased advertising costs, produced a 1.3% decline in net income, to $128 million.

Consensus estimates call for a similarly sluggish result for the fourth quarter. Revenue should rise by 4.7% for a minor improvement over the prior quarter's 4% uptick. Earnings per share will grow 6%, Wall Street believes, but mainly because of stock repurchases.

CarMax investors can expect a CEO transition sometime this year, as Folliard has announced he will retire before the end of 2016 to be replaced by fellow executive Bill Nash. Folliard called the incoming leader "the right choice to guide CarMax through the next phase of our growth and development," which includes expanding into new markets including Seattle, San Francisco, and New York City in the coming years.

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Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$31,500.68 (2.68%) $823.32
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
$3,911.74 (3.06%) $116.01
Constellation Brands, Inc. Stock Quote
Constellation Brands, Inc.
$245.50 (2.57%) $6.15
Darden Restaurants, Inc. Stock Quote
Darden Restaurants, Inc.
$119.81 (3.64%) $4.21
CarMax Inc. Stock Quote
CarMax Inc.
$98.36 (7.19%) $6.60

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

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