What to Watch on Wall Street: Grocers, Restaurants Provide Food for Thought

MENLO PARK, CA - APRIL 04: A Facebook employee holds a phone that is running the new
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You can never know in advance what news will move the market in a given week, but some things you can see coming. From a mysterious media event unveiling at the world's most popular social networking website to a struggling restaurant operator's latest opportunity to impress investors, here are some of the items that will help shape the week that lies ahead on Wall Street.

1. Facebook Sends a Friend Request: There was no shortage of tech giants with major announcements last week, but now Facebook (FB) wants some time in the spotlight. The world's largest social networking website operator is inviting tech journalists to a press event at its Menlo Park headquarters.

"A small team has been working on a big idea," read the invitation. "Join us for coffee and learn about a new product." Is Facebook introducing its own coffee? If you think that, you probably read the invitation the wrong way. It's always fun to speculate on what Facebook is cooking up, but it's more than likely a new way to monetize its more than a billion active users.

2. When You're Here, You're Family: Things haven't been going so well at Darden Restaurants (DRI).
The parent company of Olive Garden, Red Lobster, and LongHorn Steakhouse has been struggling. Same-restaurant sales of the three flagship chains clocked in 4.6 percent lower than a year earlier in the company's most recent quarter.

Consumers have been moving away from casual dining. They're either trading up to more upscale fare or trading down to the fast casual eateries that provide quality food at lower prices without having to wait. We'll see if Darden is bouncing back on Friday with its next quarterly report.

3. Delivering the Goods: Analysts see Darden posting a decline in profitability this week -- and that's not a surprise -- but it is stunning to see FedEx (FDX) also expecting to post lower earnings this time around.

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FedEx reports quarterly results on Wednesday, and Wall Street's bracing for net income of $1.96 a share -- surprising given that the speedy delivery service generated a profit of $1.99 a share a year earlier during the same period. Despite the recent decline in fuel costs, FedEx is slipping. Making matters worse, FedEx has actually missed analyst estimates in its two previous quarters, so maybe $1.96 a share is overly ambitious.

4. Monsters Ball: Disney's (DIS) Pixar has been a hit factory in the realm of computer animation, but the last time that the studio went for a sequel -- "Cars 2" -- critics panned the production. "Monsters University" -- a prequel to Pixar's popular "Monsters, Inc." -- opens on Friday. The original movie raked in $562.8 million in ticket sales worldwide.

Disney has already had a successful year at the box office. It has 2013's two highest grossing movies so far in "Iron Man 3" and "Oz The Great and Powerful." Given the way Disney can turn its animated features into merchandising goldmines, it's naturally hoping to land another big winner here that it can exploit through its theme parks, stores, and cable properties.

5. Groceries Check Out: Supermarkets have historically been all-weather investments. In good times and bad times, people have to eat. And when the economy hits those rough patches, more consumers switch to cheaper store-brand generics that actually deliver higher margins for grocers.

However, many supermarket investors have been burned lately. Some grocery store operators have slashed dividends, suspended payouts, and even sold off assets as their financial performances are slipping.

That hasn't been the case with Kroger (KR). The supermarket chain has been able to serve up consistent growth, delivering dividend increases along the way. Kroger reports on Thursday, and analysts see another period of top- and bottom-line growth.

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What to Watch on Wall Street: Grocers, Restaurants Provide Food for Thought

1. Activision Blizzard (ATVI)

Life was easy when everyone was playing Guitar Hero. Facebook has reinvented the way game-hungry masses spend their time, logging into Facebook to tend to virtual farms, mafia campaigns, or item-finding experiences.

It's not a surprise that the traditional video game industry has been struggling for three years. Market leader Activision Blizzard doesn't even make Guitar Hero games anymore, and its World of Warcraft player count has been steadily declining over the past year. Call of Duty is still a growing franchise, but that can't last forever.

As traditional game companies are struggling, Zynga (ZNGA) -- which accounts for 18% of Facebook's revenue -- is thriving.

Diehard gamers are still firing up their consoles and are toting around their portable gaming systems. The problem is that mainstream gamers -- the casual players who didn't live and die by every franchise's latest release -- have moved on to casual and social diversions. They're free or nearly free, and the viral magic of Facebook connecting friends as players made it possible.

2. Google (GOOG)

Few will suggest that Google is in trouble. The world's most valuable Internet company is worth more than twice the market cap that Facebook is commanding. However, Big G is nervous.

Google's bread and butter business remains paid search, and what happens when folks stop trekking over to Google.com whenever they need to launch a query? If asking friends or simply relying on Facebook's own search box is easier, won't that hurt Google?

There are other ways that Facebook is having an impact on Google.

Google's YouTube may be the world's hottest video-sharing website with more than 800 million monthly visitors, but Facebook also allows its more than 900 million unique monthly users to upload clips on its site to share. We also have Gmail, Google's popular email platform. A lot of people are just sending private messages through Facebook that would normally go through traditional email.

3. Angie's List (ANGI)

Subscribers turn to Angie's List for unbiased reviews. Members pay dues to have access to customer reviews for local service providers. Need a handyman who can fix a pocket door? Is your clogged drain not clearing with your plunger? Who can tutor you daughter for her upcoming college entrance exam?

Angie's List prides itself on the vetted and unbiased opinions that can be found on its site. Well, as fate would have it, these are the same things that can be effectively tackled for free by posting a request as a status update on Facebook.

4. American Greetings (AM)

Remember when shelling out a few bucks for a greeting card was the most cost-effective way to commemorate a special occasion?

Well, thanks to Facebook, offering up birthday wishes or congratulatory acknowledgements is simply a Facebook posting away. Is it cold? Is it impersonal? It doesn't matter. It works. American Greetings has done its part to beef up its digital presence, but analysts still see earnings growth going the wrong way here this fiscal year.

5. Shutterfly (SFLY)

Facebook has also changed the way we consume photographs. We're no longer printing them out, and that's bad news for Shutterfly. The company turns digital snapshots into prints, photo books, and other customized merchandise.

Facebook is a hotbed for the sharing of photos, and that is something that has intensified since its recent acquisition of Instagram.

Shutterfly has managed to grow nicely even as Facebook ascends, but the perception that Facebook is turning Shutterfly and its peers into an elephant's graveyard exists.

All five of these companies may have cheered Facebook's plunge below its $38 IPO price on Monday, but their business models still have to reckon with the beast that the undisputed champ among social networks has become.


Motley Fool contributor Rick Munarriz owns shares of Walt Disney. The Motley Fool recommends Facebook, FedEx, and Walt Disney. The Motley Fool owns shares of Darden Restaurants, Facebook, and Walt Disney. Try any of our newsletter services free for 30 days.
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