3 Stocks To Watch In The Coming Week: Costco, Broadcom, Adobe Systems
Investing.com | Dec 08, 2019 03:22AM ET
With U.S. economic data continuing to show strength and U.S.-China trade talks seemingly back on track, investors are anticipating another strong equity market rally. That bullishness was certainly on display as the trading week came to a close this past Friday: three major U.S. indices rallied about 1% during the session after the monthly nonfarm payrolls report showed that the U.S. economy generated 266,000 jobs in November, far exceeding the projected 187,000 figure.
Still, some analysts haven't yet ruled out more volatility, especially since the Federal Reserve will be communicating with the markets about its interest rate outlook on Wednesday. Though the Fed rate decision is probably the most important event investors will focus on this coming week, there are also some big earnings announcements that shouldn't be ignored. These three large caps might surprise markets when they report quarterly numbers:
h2 1. Costco Wholesale/h2The retail sector will come under scrutiny once again when Costco Wholesale (NASDAQ:COST) reports its fiscal 2020 first quarter results on Thursday, Dec. 12, after the close. Analysts are expecting $1.71 a share in profit on sales of $37.36 billion.
Unlike the weak showing by some retailers during their recently concluded quarters, chances are that Costco will provide a strong report. The company has been benefiting from robust consumer spending, which has helped boost the U.S. economy for much of the year, even amid worries about slowing global growth and uncertainty related to tariffs.
Comparable sales, meaning from Costco stores open for more than a year as well as online sales, increased 5% in the quarter that ended Sept. 1. Online sales on their own were up 22% in the same period.
Shares rose 0.63% on Friday. The stock is now up 44% so far this year, against just +6% for its closest rival, BJs Wholesale Club Holdings (NYSE:BJ).
h2 2. Broadcom/h2The final big chipmaker to release earnings this current season is Broadcom (NASDAQ:AVGO). The company reports Q4 2019 numbers on Thursday, Dec. 12 as well, also after the close. Consensus calls for $5.36 EPS on $5.74 billion in revenue.
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The latest downturn in the semiconductor industry is showing signs of bottoming out with the Semiconductor Index surging close to 50% this year. By that measure, Broadcom shares are underperforming, having risen just half the level of the index's gains. The stock closed at $316.05 on Friday, up 1.56%.
In the latest earnings report, investors will be keen to know whether the company's current strategy, spearheaded by CEO Hock Tan—to grow through acquisitions as well as buying software assets that are struggling—is paying off.
This past year, Broadcom announced it was acquiring Symantec's (NASDAQ:NLOK) enterprise security division , which produces software to keep hackers out of corporate systems, for $10 billion. The acquisition marks Broadcom’s second big bet on software.
In 2018 the company concluded a $19 billion takeover of CA Technologies. After these deals, more than 80% of Broadcom’s sales will now be derived from segments considered stable and sustainable such as cloud, networking, software and storage businesses.
h2 3. Adobe Systems/h2Another stock that could surprise investors this coming week is Adobe Systems (NASDAQ:ADBE). The maker of Photoshop also releases its fiscal 2019, fourth quarter earnings on Thursday, after the close. Wall Street expects $2.26 EPS and almost $3 billion of revenue.
In September, Adobe provided a revenue forecast for the Q4 period that fell short of Wall Street estimates, signaling slower sales growth for its newer marketing products. Chief Executive Officer Shantanu Narayen has made several marketing and e-commerce product acquisitions in the past two years in order to boost revenue, which has climbed at least 20% each quarter since 2015.
Last year, Adobe bought Magento Commerce, an e-commerce platform developer, and marketing automation software creator Marketo. Adobe, which competes with Salesforce.com (NYSE:CRM) in both the marketing and e-commerce technology segments, is trying to facilitate growth by expanding its business offerings while strengthening its core, creative software business.
Adobe shares have had a powerful rally this year, surging about 35%. The stock closed at $306.23 on Friday after rising more than 1%.
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