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Investors may get a better grip on how the Federal Reserve’s tightening cycle will play out after inflation data pours next week in with the consumer price index, producer price index, and an update on unit labor costs all due in. At the moment, Fed officials are indicating that they expect the target interest rate to be lifted to a 3.50% to 4.00% range by the end of the year. However, the bond market isn’t reflecting that level quite yet, even after Treasuries sold off on Friday after the blowout July jobs report arrived. If the inflation reports were to surprise to the upside, speculation of an inter-meeting rate hike by the Fed could be stirred up and lead to some bigger moves in the bond market. The calendar for the week includes Tyson Foods (TSN), Take-Two Interactive (NASDAQ:TTWO), Disney (DIS), and Rivian Automotive (NASDAQ:RIVN) as some of the notable companies heading into the earnings confessional, while the J.P. Morgan Auto Conference is expected to include some intriguing updates, including several from electric vehicle players.
Earnings spotlight: Monday, August 8 Luckin Coffee (OTCPK:LKNCY), Dominion Energy (D), Tyson Foods (TSN), American International Group (AIG), Palantir Technologies (PLTR), and Take-Two Interactive Software (TTWO).
Earnings spotlight: Friday, August 12 – Virgin Orbit Holdings (NASDAQ:VORB).
IPO watch: The downsized IPO for electric sport boat developer Forza X1 (FRZA) is expected to start trading on August 11. IPO lockup periods expire on SKYX Platforms Corp (SKYX) and Modular Medical (MODD) on August 9. Both stocks trade well below their IPO pricing level.
Dividend watch: Companies projected to increase their quarterly dividend payouts include
Tyson Foods earnings preview: Tyson Foods (TSN) will report earnings in a report that will be closely watched in the meat and packaged good sector for signs of a consumer tradedown effect. Consensus estimates are for Tyson to report revenue of $13.3B and EPS of $1.97. By volume, beef sales are forecast to fall 3% for Tyson and pork sales are seen declining 5%. Prices are higher for beef and chicken than a year ago to help offset higher costs for animal feed and transportation, but pork prices have actually declined. Analysts think the margin outlook from Tyson will direct which way shares move following the earnings print. The current full-year margin expectations are for beef adjusted operating margin of 11.5%, pork adjusted operating margin of 5.4%, chicken adjusted operating margin estimate of 5.6%, and prepared Foods adjusted operating margin estimate of 9.2%. “Beef margin might contract as herd liquidations began to accelerate amid droughts and elevated feed costs, tightening cattle supply,” warned Bloomberg Intelligence analyst Jennifer Bartashus ahead of the TSN report.
Take-Two Interactive earnings preview: Take-Two Interactive (TTWO) will report earnings on August 8 to expectations for revenue of $1.09B, EPS of $0.86, and net bookings of $6.5B including the Zynga business. Analysts have been cautious with TTWO due to the risk consumer spending will be pressured by a recession, untested franchises, and some questions around Grand Theft Auto iterations. Potential catalysts for a share price bounce include stronger-than-anticipated Zynga numbers and more details on immersive core games.
Inflation reports: Reports next week on consumer prices and producer prices will keep the focus on inflation again. The July CPI report is expected to show a slight moderation in the headline number to +8.7% Y/Y from +9.1% in June. Core CPI is seen rising 0.6% on a month-over-month comparison. Bank of America expects solid prints in shelter, transportation, and recreation, as well as another month of broad-based firmness in core goods prices. Looking ahead, air fares and used car prices are both expected to move lower in the next several months to take some pressure off the U.S. consumer. The producer price index is forecast to show a 0.3% increase for July, in a deceleration from the 1.1% pace in June. Excluding food, energy and trade services, PPI is expected to increase by 0.4% month-over-month. Economists think the price reports may support some of the peak inflation discussion, but will also support the consensus view that the Federal Reserve will raise the target interest rate by 75 points at the September meeting.
Crypto comeback dreams: A major development in the cryptocurrency sector could happen next week in the lead up to the long-awaited Ethereum (ETH-USD) transition to a proof-of-work protocol. The most anticipated event for Ethereum before the actual merge is the third and final test network environment, which is being called Goerli. A successful Ethereum merge test could add to the positive vibes already stirring up after BlackRock (BLK) announced that it would offer institutional clients direct access to crypto through its Aladdin product, beginning with Bitcoin (BTC-USD). Crypto bulls are also pointing to a positive news on the regulatory front after a bipartisan group of senators put forward a new bill that classifies Bitcoin and Ethereum as commodities. Digital asset broker GlobalBlock said the measure would mean that those are the only cryptos that are not able to be classified as securities, which would remove a significant concern for sidelined institutions. Watch for more news on that potential regulatory development. On crypto calendar next week, the Blockchain Futurist Conference will feature over 100 speakers, industry experts, and thought-leaders to discuss blockchain technology, NFTs, Metaverse, DeFi, Cryptocurrency, DAOs. Ethereum founder Vitalik Buterin is scheduled to make an appearance.
Data reads: Nielsen numbers for retail outlets will be reported with larger focus on how demand for packaged goods beverages, beer, spirits fared over the last four weeks and which companies may have gained market share. Coca-Cola (KO) has been outpacing PepsiCo (PEP) and Keurig Dr Pepper (KDP) in soft drink sales this year, and Constellation Brands (STZ) has been flying in the alcoholic beverages sector.
Corporate events: GlobalFoundries (GFS) will hold its Capital Markets Day event on August 10. GlobalFoundries and STMicro recently signed an agreement to build and jointly operate a new 300mm manufacturing plant in Crolles, France, next to STMicro’s existing facility. GFS is one of the stocks that trades with strong correlation to news around Taiwan. Myriad Genetics (MYGN) will host an Investor Day event on August 11 to provide a strategic business update and overview of the company’s growth opportunities, research and development pipeline, and technology initiatives. Boeing (NYSE:BA) is due to update on its orders and deliveries. Read more about the events next week that could impact shares prices in Seeking Alpha’s Catalyst Watch.
Notable conferences: The conference schedule is headlined by the J.P. Morgan Auto Conference. Companies due to appear include Adient (ADNT0, Stoneridge (SRI), Ford Motor (F), Cepton (NASDAQ:CPTN), Gentherm (THRM), TrueCar (TRUE), TuSimple (TSP), Dana (DAN), (NASDAQ:GTEC), Blink Charging (NASDAQ:BLNK), Aptiv (NYSE:APTV), and Rush Enterprises (RUSHA). Of those names, Tu Simple (TSP) may have the most to prove after The Wall Street Journal published safety concerns about the autonomous driving system despite the 8M road miles driven. Certain auto stocks have seen share price jolts in the past after presentations included guidance and business updates. Other conferences of note include the BTIG Biotechnology Conference, UBS Financial Services Conference, BofA Securities 2022 SMID Cap Ideas Conference, Oppenheimer 25th Annual Technology Internet & Communications Conference, the Wedbush PacGrow Healthcare Conference, the Canaccord Genuity 42nd Annual Growth Conference, the BTIG Biotechnology Conference, the Jefferies 2022 Industrials Conference, and Canaccord 42nd Annual Growth Conference.
Barron’s mentions: General Electric (NYSE:GE) is recommended this week ahead of the company’s plan to split itself into separate aerospace, healthcare, and power-generation concerns. The cover story makes the case that General Electric is trading for far less than the combined value of its three remaining pieces. The math on the three GE businesses is said to add up to $160B in value, which is noted to be about double what GE trades for at the moment. Worried about the GE balance sheet? GE’s debt sits at about $32B, while total cash along with stock in oilfield services and equipment company Baker Hughes (BKR) and aircraft sales and leasing concern AerCap Holdings (AER) adds up to almost $20B. The resulting net debt of $12B is observed by Barron’s to be less than 2.0X the 6.9B in EBITDA that GE earned over the past 12 months vs. the industrial sector average of about 2.2X.
Sources: EDGAR, Bloomberg, CNBC, Reuters