We’ve been following second-quarter earnings results since late May. Now the seasonal pivot has shifted, with only a few scattered companies left to release their numbers before we transition to the August cycle. That means the next wave of 10-Q filings I’ll be studying over the next few days will reflect mixed signals: four weeks that capture the second quarter that’s already receding in Wall Street’s rear view and nine weeks that hint at what the rest of the market has in store for us in October and beyond.
That said, the second-quarter cycle might be a hard act to beat. All in all the market booked 10.2% richer profit over last summer, which is not only better than the models dared anticipate but objectively bullish even when you cut out all the gaming around expectations, whispers and consensus.
Double-digit growth two quarters in a row is starting to look like a verifiable earnings boom for investors who’ve been starved for decent year-over-year comparisons lately. And with guidance shaping up stronger than average, relatively conservative targets on the current quarter may need to come up fast once the numbers start rolling in.
Earnings Reports That Could Turn Things Upside Down: Hewlett Packard Enterprise Co (HPE)
Hewlett Packard Enterprise Co (NYSE:HPE) checks in Tuesday night with the latest on how the all-important technology sector is holding up. Expectations have been dismal for some time now, so even if the company reports that earnings are only half of what they were a year ago (49 cents per share) Wall Street may not do much more than yawn.
Source: Gobierno de Castilla-La Mancha via Flickr (Modified)
On the other hand, with big fish like Soros and Greenlight Capital buying into HPE, there may be more going on behind the scenes here. I’ll be listening for discussion of how and when management will spin out the software business.
And if the market actually applauds the numbers — good or bad — it’s a great omen that the mood on Wall Street is changing with the season.
Last quarter, even good tech reports were punished more often than not. If HPE can buck that trend, the new trend may become our friend.
Earnings Reports That Could Turn Things Upside Down: Fred’s Inc. (FRED)
Fred’s, Inc. (NASDAQ:FRED) is one of the smaller stocks I track, but while the company’s 300-drugstore chain is only a niche pharmacy player on the national map, it’s an interesting footprint: East Texas to the Carolinas, Appalachia down to Florida.
If you’re looking for a quick read on the economy, consumer sentiment and the state of healthcare policy in that region, Wednesday morning’s conference call should give you as close to an up-to-the-minute point of view as it gets.
The collapse of Walgreens Boots Alliance Inc (NASDAQ:WBA) campaign to buy Rite Aid Corporation (NYSE:RAD) wasn’t kind to this company, which was set up to buy the stores the combined super-chain would have needed to divest, so I don’t have a lot riding on the numbers in themselves.
If FRED lost as much as 18 cents per share, it’s not going to roil a lot of models. And for a small stock like this, if management pulled off a miracle we’ll likely see the chart bounce off currently oversold levels mighty fast.
Earnings Reports That Could Turn Things Upside Down: Kroger Co (KR)
Kroger Co (NYSE:KR) should give you a sense of absolute scale on Friday morning: the giant grocery chain does 5X as much prescription drug volume within its stores as FRED does across its more specialized footprint. The stock has suffered as Wall Street digests what Amazon.com, Inc. (NASDAQ:AMZN) owning Whole Foods Market, Inc. (NASDAQ:WFM) really means.
Source: Nicholas Eckhart via Flickr (Modified)
I think reaction has been exaggerated and the numbers may be enough to help the bulls turn the chart around. I’ll also be glued to the conference call for hints that management is taking the hybrid online/offline competitive threat seriously.
If there’s anything to brag about in terms of online shopping carts and home delivery, Wall Street is eager to hear it.
Hilary Kramer is the editor of GameChangers, Breakout Stocks, High Octane Trader, Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.