5 Things to Watch This Week: Soda, TV, Obama, Luxury Goods, and Organic Groceries
Among the many events that will move the markets this week, we'll see an earnings parade for makers of luxury goods and a showdown between leading pay TV providers. Here are five things sure to help shape the week ahead on Wall Street.
1. Cola Wars: There's never a dull moment for Big Soda.
Coca-Cola (KO) and PepsiCo (PEP) will both be reporting their latest quarterly results this week, and analysts predict mixed results. The pros foresee slight year-over-year revenue increases at both companies, though they see PepsiCo's profitability declining. Coca-Cola, on the other hand, is pegged to post a modest uptick in earnings.
Sugary sodas have been coming under fire lately, and not just in New York City, where an ordinance banned the sale of extra-large soft drinks through some venues last year. Schools have been removing soda vending machines, and the safety of some diet sodas is being called into question.
Coca-Cola and PepsiCo are as ready as they will ever be for any future attacks. They have diversified into juices, bottled water, and other beverages. PepsiCo even has the Frito-Lay line of salty snacks and Quaker oatmeal to mix up its portfolio.
Soda sales performance remains the key driver at both companies, but it's not the only barometer.
2. TV dinner: There's a problematic trend sweeping the pay TV industry: cord cutting Video buffs are saying goodbye to their escalating cable and satellite television bills and relying instead on a growing number of cheaper streaming options, a shift that continues to rattle the middlemen as well as the networks and broadcasters that serve up content.
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Most consumers pay more than $100 a month for programming when they're only interested in watching a fraction of the channels they receive. They're fed up, and after decades of growth the industry is finally vulnerable.
It's against this challenging backdrop that Comcast (CMCSK) and DirecTV (DTV) step up with their quarterly results. Comcast is the country's largest cable provider, and it has seen the numbers of its video customers consistently decline over the past two years. Comcast has been able to make that up through price increases and getting consumers to bundle Internet access and phone services, but it's still a trend that Comcast needs to reverse. DirecTV is the country's largest satellite television provider, and it has been able to grow its rolls largely thanks to its exclusive deal with the NFL to air all regular season games.
We'll see how both companies and a few of their rivals hold up this week.
3. Obama Speaks: There will be some partisan chatter from both sides of the aisle on Tuesday night as President Barack Obama delivers his first State of the Union address since beginning his second term in office.
Politics always plays a part in the way that stocks move. The market sold off late last year as the fiscal cliff approached, only to rally after the issue was temporarily resolved. Now, $85 billion in cuts to both defense and domestic programs are looming if the parties can't agree on a plan by March, and you can be sure that Obama's address -- and the Republican response that follows -- will focus on the effects of the potential austerity measures.
4. Luxury on Display: Shares of high-end handbag giant Coach (COH) stumbled last month after posting disappointing results. Investors began to wonder if the weakness was a Coach-specific issue or if shoppers were holding back on luxury items.
We'll get a clearer snapshot this week. Handbag rival Michael Kors (KORS), online jeweler Blue Nile (NILE), and fashionable watchmaker Fossil (FOSL) are all reporting on Tuesday. The good news here is that analysts see all three companies posting year-over-year improvement in earnings.
5. Organic Growth: Whole Foods Market (WFM) is also reporting this week. The country's leading chain of organic grocery stores has been on a roll lately. The stock's closing in on October's all-time highs, and the supermarkets themselves have been posting strong positive comps for several quarters.
Whole Foods Market felt the pinch during the early recessionary stretches when shoppers tried to save money through more conventional grocery stores, but the improving economy and merits of "better for you" foodstuffs are winning out. Analysts see Whole Foods Market earning $0.77 a share on Wednesday, comfortably ahead of the $0.65 a share it earned a year earlier.
Motley Fool contributor Rick Aristotle Munarriz has no position in any stocks mentioned. Motley Fool newsletters recommend Blue Nile, Coach, Coca-Cola, Fossil, PepsiCo, and Whole Foods Market. The Motley Fool owns shares of Coach, Fossil, PepsiCo, and Whole Foods Market. Try any of our newsletter services free for 30 days.
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