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The economic calendar is heavy next week as releases covering housing, manufacturing, and consumer sentiment pour in just ahead of the three-day weekend for the Christmas holiday. The key release will be the monthly update on core PCE. The Federal Reserve’s favored inflation gauge is forecast to show a soft 0.2% month-over-month rise in November to take the year-over-year rate down to +3.4%. Crucially, that mark would also imply a six-month annualized inflation rate of just above 2.0%, which is the Fed’s stated inflation target. If the core PCE number comes in close to expectations, the buzz over lower interest rates may continue. At the time of publication, federal funds futures trading implied a 95% probability that the Fed’s target rate would be lower than the current level after the May FOMC meeting. Globally, the Bank of Japan meeting next week has the potential for some dramatic news on the end of the negative interest rate era for the nation. Meanwhile, notable earnings reports in the U.S. include updates from FedEx (FDX) (preview), Nike (NYSE:NKE) (preview), Carnival (CCL) (analysis), and Micron Technology (NASDAQ:MU) (Quant Ratings).
Earnings spotlight: Monday, December 18 – HEICO (HEI).
Earnings spotlight: Tuesday, December 19 – FedEx (FDX), Accenture (ACN), FactSet (FDS), and FuelCell Energy (FCEL).
Earnings spotlight: Wednesday, December 20 – General Mills (GIS), Micron Technology (MU), Toro (TTC), and Winnebago (WGO).
Earnings spotlight: Thursday, December 21 – CarMax (KMX), Paychex (PAYX), Carnival (CCL), and Nike (NKE).
Volatility watch: Options trading volume is high again on Spirit Airlines (NYSE:SAVE) as traders wait on the result of the Department of Justice trial on blocking the merger with JetBlue Airways (JBLU). Sirius XM Holdings (SIRI) and Big Lots (BIG) both have an elevated level of short positions on them. The most overbought stocks per their 14-day relative strength index are Snap (SNAP), Impact Fusion International (OTCPK:IFUS), and MBIA (MBI). The most oversold stocks per their 14-day Relative Strength Index are reAlpha Tech (AIRE), Ventyx Bio (VTYX), and Talon Metals (OTCPK:TLOFF). Gold stocks Newmont (NEM), Barrick Gold (GOLD), Franco-Nevada (FNV), Coeur Mining (CDE), New Gold (NGD), Gold Fields Limited (GFI), Sibanye Stillwater Limited (SBSW), and i-80 Gold Corp. (IAUX) are some of the sector names on watch for more volatility.
IPO watch: Linkage Global (LGCB) is expected to start trading in what could be the last IPO of 2023. The e-commerce services company is planning to sell 1.5M shares in an expected range of $4.00 to $6.00. The analyst quiet period expires on Elevai Labs (NASDAQ:ELAB) to free up analysts to post ratings.
Dividend watch: Companies projected to boost their quarterly dividend payouts include ServisFirst Bancshares (NYSE:SFBS) to $0.30 from $0.28, WEC Energy (WEC) to $0.83 from $0.78, Fulton Financial (FULT)to $0.17 from $0.16, and FMC Corp (FMC) to $0.60 from $0.58. See Seeking Alpha’s list of Quick Dividend Stock Picks.
FedEx preview: FedEx (FDX) is expected to report revenue of $22.40B and EPS of $4.20 with its FQ2 earnings reporting. The shipping company has also seen generating adjusted operating margin of $1.49B during the quarter for an operating margin rate of 6.57%. Free cash flow of $695M is expected to be reported. Ahead of the report, Bank of America noted that while pre-holiday volumes have trended mid-range of targets, they remain somewhat muted with no significant macro inflection. The firm has its eyes on FedEx’s ability to ramp returns as it executes on its $4B cost savings program by F25. Investors will also be watching to see if FedEx (FDX) held the line with its pricing discipline after UPS (UPS) became more aggressive about trying to win market share with rebates. Seeking Alpha analyst Stone Fox Capital thinks the key investor takeaway on FedEx is that another big step up in profits could boost the share price. “Investors should watch for improving trends in package volumes and margins to signal an ability for the stock to close the valuation gap with UPS,” advised the firm.
Event schedule: The calendar is extremely light of events ahead of the holiday break. The Bank of America Hydrogen Conference on December 18 & 19 will include presentations by Plug Power (NASDAQ:PLUG) and CF Industries (NYSE:CF). AutoZone (AZO) and Guidewire Software (GWRE) will hold their annual meetings on December 19 & 20.
Stock splits: The 1-for-10 reverse stock split for Canopy Growth (CGC) is scheduled to become effective on December 20. “By implementing this share consolidation, Canopy Growth expects to regain compliance with the Nasdaq’s bid requirement and further support the marketability of the Company’s shares,” said Canopy Growth CFO Judy Hong.
Auto sector 2024 preview: S&P Global Mobility forecasts global new light vehicle sales will increase 2.8% year-over-year in 2024 to 88.3M new units as the industry recovery rolls on. The forecast outlook incorporates stickier interest rates, improving supply chains, the affordability squeeze, lofty new vehicle prices, patchy consumer confidence, energy price/supply concerns, auto lending risks, and ongoing electrification growing pains. “With the brakes off the supply chain, the risk to further growth is that demand momentum fades as consumer uncertainty overtakes pent-up demand,” noted S&P. The light vehicle output recovery continues to feed inventory restocking efforts across many regions, as supply chain and demand are further recovering, supported by lingering pent-up consumer demand. However, S&P also warned consumer demand is being challenged by elevated vehicle pricing alongside challenging credit and lending conditions. “2024 is expected to be another year of cagey recovery, with the auto industry moving beyond clear supply-side risks, into a murkier macro-led demand environment,” updated S&P Director Colin Couchman. He noted that a major concern is how natural electric vehicle demand will fare as governments consider scaling back interventionist policy support – especially for incentives and subsidies, industrial policy, and OEM planning targets. Sales in Europe are forecast to be up 12.8% year-over-year to 14.7M units, as improved vehicle production levels help delivery times and inventory recovery. For the U.S., S&P sees sales volumes up 2.0% to 15.9M units in 2024. With the rollout of several highly anticipated models, U.S. battery electric sales will continue to develop in the new year. By the end of the year, there will be nearly 100 BEV models available, which is double the number of EVs from 2022. The 2024 forecast for Mainland China is for domestic sales to rise 4.9% year-over-year to 25.3M units. The government’s extension of New Energy Vehicle incentives and recovering local vehicle production are seen supporting domestic sales. The largest automakers by sales in 2023 through the end of November were Toyota (TM), Volkswagen (OTCPK:VLKAF), Hyundai-Kia (OTCPK:HYMTF), the Renault (OTCPK:RNSDF)-Nissan (OTCPK:NSANY) alliance, and Stellantis (STLA). Electric vehicle makers BYD Company (OTCPK:BYDDF) and Tesla (TSLA) ranked 10th and 12th.
Editor’s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.
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