Earnings are the heartbeat of the market - and every week brings a fresh set of opportunities and risks. With each report, we get new information about corporate health, investor sentiment, and the sectors driving leadership (or lagging).
In the Weekly Beat, we spotlight the most important earnings reactions from the prior week - the winners, the losers, and the surprises that moved markets. Then we shift our focus forward, breaking down the biggest setups and expectations for the week ahead.
Whether itโs mega-cap leaders, niche growth stories, or the sectors most tied to the economy, weโve got you covered on what traders need to know right now.
Before Monday's opening bell, the $38B cruise line giant, Carnival $CCL, beat its headline expectations, but suffered a -4% earnings reaction.
While this post-earnings reaction was a setback, we still think the setup is constructive. The price is a stone's throw away from resolving a massive bearish-to-bullish reversal pattern.
Tuesday, we heard from the $8B French fry producer, Lamb Weston $LW, which beat its headline expectations and had a +4.3% earnings reaction.
We also received an update from the human resources software provider, Paychex $PAYX. They posted a double beat, but the market responded with a -1.4% earnings reaction.
Wednesday, we heard from the $9B packaged foods company, Conagra Brands $CAG, which beat its headline expectations and had a +5.4% earnings reaction.
We also received an update from the world's largest footwear & accessories company, Nike $NKE. They posted a double beat, and shareholders were rewarded with a +6.4% earnings reaction.
There were no S&P 500 earnings reactions on Thursday, but we couldn't help but talk about what's happening with healthcare. The sector just got a shot of adrenaline straight into the heart of Wall Street via Donald Trumpโs new deal with Pfizer $PFE.
We also outlined one of our favorite setups in the sector, Grail $GRAL, which is breaking out to new all-time highs.
What's happening next week ๐
Next week, four S&P 500 components will report earnings, with the largest being PepsiCo $PEPโ โ โ โ โ โ โ . The other three are on the smaller side, but one of them looks ready to rip. We'll tell you about it in a moment.
With respect to companies outside of the S&P 500, we'll also be watching:
The second-largest apparel manufacturing stock, Levi Strauss $LEVI.
The marijuana bellwether, Tilray $TLRY.
And the Bitcoin miner, which has recently transformed into a data center play, Applied Digital $APLD.
This is one of the final weeks before the end of the current earnings season, so it'll be on the slower side. However, there will be plenty to cover at the Daily Beat.
Now, letโs dive into the top setups heading into next week.
Here's the setup in PEP ahead of Thursday's earnings report ๐
PepsiCo is expected to post $23.86B in revenue and EPS of $2.25 before Thursday's opening bell.
The stock decisively resolved a massive top late last year, and the sellers have maintained control of the price action since then.
So long as PEP is below 154, the risk of a big downside move is elevated.
Here are the past 3 years of earnings results & reactions for PEP ๐
As you can see, the year-over-year earnings per share growth has flipped negative over the past two quarters. The market is expecting more contraction this quarter.
Despite this negative fundamental trend, the market responded to last quarter's earnings report with the best earnings reaction of the 21st century.
There's nothing bearish about that...
However, we want to be cautious with PEP so long as the price is below the previously mentioned key level of interest around 154.
Here's the setup in DAL ahead of Thursday's earnings report ๐
Delta Air Lines is expected to report $15.06B in revenue and EPS of $1.53 before Thursday's opening bell.
After nearly doubling from the April low earlier this year, the price has consolidated in a textbook bullish continuation pattern. The volatility has compressed dramatically, and we expect this week's earnings report to spark an expansion in volatility.
Next, we'll show you why we believe the volatility expansion in DAL will be to the upside.
Here are the past 3 years of earnings results & reactions for DAL ๐
The past three earnings reactions for Delta Air Lines have been some of the best in its history as a publicly traded company. This came after a record beatdown streak of eight consecutive negative earnings reactions.
With the fundamentals and technicals pointing higher, we expect the previously mentioned volatility compression in DAL to expand to the upside. This is likely the final consolidation before the bulls attempt to make a run for new all-time highs.
Here's the setup in LEVI ahead of Thursday's earnings report ๐
The market expects Levi Strauss to report $1.50B in revenue and EPS of $0.31 after Thursday's closing bell.
Ahead of the report, the bulls are running the stock to new 52-week highs. So far, this appears to be a decisive upside resolution, but Friday's earnings reaction will be the final verdict.
So long as LEVI holds above 24, the path of least resistance is likely to remain higher for the foreseeable future.
Here are the past 3 years of earnings results & reactions for LEVI ๐
Last quarter, Levi Strauss had its best earnings reaction in years, and as we previously mentioned, the bulls are front-running another blockbuster earnings report.
Fundamentally, the company has grown its year-over-year earnings per share in five consecutive quarters. This fundamental uptrend is being translated in the stock chart with new 52-week highs.
Additionally, denim stocks are among the most sought-after in the market. For example, American Eagle Outfitters $AEO recently doubled in price in a few weeks.
Putting it all together, we expect LEVI to be rewarded for its earnings report next week.
