Stocks To Watch: Earnings Season Launches With PepsiCo, Delta And JPMorgan

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Investors will have plenty on their plate in the week ahead, as high interest rates and chaos in Congress continue to weigh on investor sentiment. The consumer price index report could be the key event next week, as it arrives on the heels of a hot U.S. jobs report. The Q3 earnings season will begin to ramp up, with PepsiCo (NASDAQ:PEP), Delta Air Lines (NYSE:DAL), and JPMorgan (JPM) just a few of the big names set to report. Ahead of the earnings flood, analysts have pushed on revenue and EPS estimates higher on 10 of the 11 main groups in the S&P 500 Index to add just a little bit more drama to the mix. Jefferies calculated that Q3 estimates for S&P 500 companies have been boosted by 6.5% over the last few months, which is more than twice the historic average of 3.1% for the quarter. The firm warned the S&P 500 revisions may have set the bar too high. Amid growing jitters in the retail sector, Amazon (AMZN) will hold its two-day Prime Big Deal Days shopping event next week. Analysts expect Prime Big Deal Days and rival promotions from Target (TGT), Walmart (WMT), and Best Buy (BBY) will give a significant boost to overall e-commerce sales, with some estimates indicating a higher sales tally than what is typically seen on Cyber Monday. On the big screen, the widespread release of the Taylor Swift Eras Tour movie is expected to give the theater sector an early Q4 box office jolt after both AMC Entertainment (AMC) and Cinemark Holdings (CNK) pointed to record-shattering advance ticket sales. Heading into the new week, Seeking Alpha analyst Brad Thomas has a breakdown as investors should view soft landing or recession scenarios.

Earnings spotlight: Tuesday, October 10 – PepsiCo (PEP), Neogen (NEOG), and AZZ (AZZ).

Earnings spotlight: Thursday, October 12 – Fastenal (FAST), Delta Air Lines (DAL), Walgreens Boots Alliance (WBA), and Domino’s Pizza (DPZ).

Earnings spotlight: Friday, October 13 – UnitedHealth (UNH), JPMorgan Chase (JPM), Wells Fargo (WFC), BlackRock (BLK), Progressive (PGR), and Citigroup (C).

Volatility watch: Short interest levels elevated Fisker (FSR), Theravance Biopharma (TBPH), Novavax (NVAX), Bowlero Corp. (BOWL), and Bicycle Therapeutics plc (BCYC). Options trading volume has moved higher recently on Virgin Galactic (SPCE) and Replimune Group (REPL).

Dividend watch: Companies projected to boost their quarterly dividend payouts include Commercial Metals (CMC) to $0.18 from $0.16, Penske Automotive (PAG) to $0.78 from $0.72, MSC Industrial (MSM) to $0.83 from $0.79, and THOR Industries (THO) to $0.46 from $0.45. See Seeking Alpha’s list of Quick Dividend Stock Picks.

IPO watch: Birkenstock (BIRK) is expected to price its IPO and start trading during the week. The German premium footwear brand is seeking a valuation of up to $9.2B in what will be a closely-watched public debut. A $9.2B valuation for Birkenstock would rank the company third in the footwear sector by market cap behind NIKE (NKE) at $147.0B and Deckers Outdoor (DECK) at $13.1B, but ahead of On Holding (ONON) at $7.9B, Skechers (SKX) at $7.5B, and Crocs (CROX) at $5.2B. Birkenstock (BIRK) is selling about 32.3M shares, with a target price range of $44 to $49 per share. Elsewhere in the IPO universe, the quiet period ends on Arm Holdings (NASDAQ:ARM) on October 9 to free up analysts to post ratings. Arm Holdings (ARM) priced its IPO at $51 per share and shot up to $69 before settling back. The quiet periods also ends on Neumora Therapeutics (NMRA) and RayzeBio (RYZB) on October 10.

Delta earnings preview: Delta Air Lines (DAL) will lead off the earnings season in the airline sector on October 12. The airline company is forecast to report revenue of $15.1B and EPS of $1.97. Passenger revenue per available seat mile is expected to fall to $0.1785 vs. $0.1819 a year ago and $0.1914 in Q2. Delta is expected to report a load factor of 87% for the quarter vs. 87% a year ago and 88% in Q2. Analysts do not expected any major surprise with the report because Delta just updated on current trends a few weeks ago and a drop in full-year guidance is likely already factored in. Bank of America thinks that the key focus points of the earnings conference call will be whether any soft industry pricing has crept into the premium leisure business, and if there are any changes to capacity growth today given higher fuel prices.

PepsiCo’s earnings preview: PepsiCo (PEP) will step into the earnings confessional on October 10. Analysts expect the food and beverage giant to report revenue of $23.4.B and EPS of $2.15. Organic sales are forecast to rise 8.3% during the quarter, led by double-digit gains in Europe and Latin America. Pricing is anticipated to be strong again for the food and beverage giant, with estimates calling for a 9.6% increase during the quarter. PepsiCo is expected to report an adjusted operating margin of 16.6% vs. 17.3% in Q2. Ahead of PepsiCo earnings day, Evercore ISI said it feels comfortable with 2023 expectations, but is becoming more concerned about the outlook for 2024 estimates if pricing benefits return to a more normal low single-digit range and volumes do not recover from current trends. Hargreaves Lansdown also has a cautious stance on PepsiCo, and warned that raising prices too sharply risks alienating loyal customers, pushing them down the value chain towards cheaper alternatives. Topics of interest for the earnings conference call could include the plan to make up for recent market share losses to Coca-Cola (KO), the latest update on inflationary trends, and the strategy with alcohol. There could also be a question on the expected impact of the new weight loss drugs. Options trading implies a 3% swing in share price for PepsiCo after the report drops, and the beverage stock gained 2.4% after its last report. The stock that has the highest trading correlation to PepsiCo over the last year has been General Mills (GIS).

Key events: Adobe (NASDAQ:ADBE) will hold an investor meeting on October 10, during which the company may highlight its generative AI upside. Other notable investor events include Rayonier Advanced Materials’ (NYSE:RYAM) Investor Day, Planet Labs’ (NYSE:PL) Investor Day, and HP’s (HPQ) Securities Analyst Meeting. A full plate of investor events on October 11 includes HashiCorp’s (HCP) Financial Analyst Day, Lamb Weston’s (LW) Investor Day, Longboard Pharmaceuticals’ (LBPH) Investor & Analyst Event, Worthington Industries’ (WOR) Investor and Analyst Day, and FRP Holdings’ (FRPH) Investor Day.

Conference schedule: The conference schedule includes Maxim Group’s Virtual Tech Conference, Citi’s Global Resources Conference, the Dawson James Annual Investment Conference, and Roth’s Healthcare Opportunities Conference.

Box office: The U.S. box office is expected to be dominated by the movie release based on Taylor Swift’s record-breaking Eras Tour. It took less than 24 hours for the concert film to shatter AMC Entertainment’s (AMC) U.S. record for the highest ticket-sales revenue during a single day in the theater chain’s 103-year history. The Taylor Swift movie will be released in more than 100 nations on October 13. Expectations for a strong box office prompted Comcast’s (CMCSA) Universal Pictures to move its release date for The Exorcist: Believer (CMCSA) up from Friday the 13th to avoid the Swift juggernaut. The trend of superstars releasing films based on concert tours will continue in December when Beyoncé releases a film version of her Renaissance World Tour. The unanticipated concert film trend could provide a Q4 boost for AMC Entertainment (AMC), Cineworld (OTCPK:CNNWQ), Cinemark (CNK), IMAX (IMAX); Marcus Corporation (MCS), Reading International (RDI), Cineplex (CGX:CA), and National CineMedia (NCMI).

Quant ratings: Stocks with recent quant rating changes include Baker Hughes (BKR) to Strong Buy from Hold, adidas AG (OTCQX:ADDYY) to Buy from Hold, and Aramark (ARMK) to Sell from Hold. See the stocks with the very highest rated, Seeking Alpha Quant Ratings.