Stocks jumped last week, as both the Dow Jones Industrial Average (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC) gained roughly 3% and approached new records. The Dow is up 13% so far in 2021 and the S&P 500 has gained 14%
Several popular stocks will announce earnings results over the next few trading days. Let’s look at why McCormick (NYSE:MKC), Bed Bath & Beyond (NASDAQ:BBBY), and Constellation Brands (NYSE:STZ) are due for higher volatility this week.
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Investors are taking a wait-and-see approach to McCormick lately as they watch for more hints about its growth prospects. The spices and flavorings giant is in the middle of a slowdown as economies reopen and people spend less time around the home. The pace of that deceleration is the big question on Wall Street’s mind heading into Thursday’s report.
If you believe the management team, McCormick will have no problem notching impressive sales growth even in the wake of COVID-19. Elevated cook-at-home habits may persist so that sales rise by nearly 10% this year.
CEO Lawrence Kurzius and his team are predicting even faster profit gains, thanks to higher demand for premium sauces, spices, and condiments. That success implies surging direct cash returns for investors who hold on to this Dividend Aristocrat over the long term.
Constellation Brands’ market share
Constellation Brands, the company behind popular imported beers like Corona and Modelo, reports its fiscal first quarter results on Wednesday. Investors haven’t seen impressive returns lately even though the company, along with Boston Beer, achieved industry-leading growth in 2020 as demand shifted toward at-home bottled and canned beverages.
That modest return story could start changing this week if Constellation can show continued market share gains in its Modelo and Corona franchises. The Corona hard seltzer product likely got a boost from the launch of a lemonade version, and Modelo has been a standout performer throughout the pandemic.
Beyond that, investors are hoping to hear good news about Constellation’s revamped wine and spirits portfolio. They’re also eager for updates about the prospects for growth in the nascent cannabis space following several years of aggressive investments in the Canopy Growth business.
Bed Bath & Beyond’s rebound plan
Its meme stock status has made Bed Bath & Beyond one of the market’s most volatile stocks so far this year. That means investors can expect more fireworks around its Wednesday earnings report.
Wall Street pros are looking for the specialty retailer to show a sharp sales rebound compared to a year earlier when COVID-19 containment measures kept most shoppers out of stores. Earnings should be back in positive territory following last year’s nearly $2 per share loss.
But Bed Bath & Beyond is still facing a potential fourth year of declining annual revenue as it divests underperforming brands and closes many of its locations. The profit picture is brighter thanks to cost cuts and that shrinking store base. Yet management hasn’t demonstrated a clear path toward increasing earnings.
The good news is the chain’s home furnishings focus should give it a nice lift as that niche continues to grow quickly. Its cash position provides plenty of flexibility, too. But investors will soon start demanding better operating results to support the stock’s surging rally since late 2020.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Constellation Brands. The Motley Fool recommends Boston Beer and McCormick. The Motley Fool has a disclosure policy.