Stocks ticked up again last week, as both the Dow Jones Industrial Average (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC) gained nearly 1% to add to robust gains for investors. Both indexes are up over 15% this year, in part thanks to strong second-quarter earnings results so far.
Earnings season continues with a flood of fresh reports over the next few trading days. Let’s take a closer look at a few of the most anticipated announcements, from Walmart (NYSE:WMT), Home Depot (NYSE:HD), and Nvidia (NASDAQ:NVDA).
Walmart’s capital spending
Walmart’s Tuesday earnings report will answer several big questions investors have about consumer spending trends moving into the second half of 2021. Sales gains slowed only slightly to start off the fiscal year, with U.S. comparable-store sales landing at 6% in Q1. Walmart is growing its base at a 16% two-year rate since early 2019, which is faster than before the pandemic struck.
However, rivals like Target are faring better as they cater to more upscale niches around home furnishings and apparel. That retailer posts its results on the same day, and so investors can easily compare metrics like comps and operating margin in the two announcements.
Another big drag on Walmart’s stock has been management’s prediction of several years of elevated capital spending ahead. While those initiatives could pinch cash flow in the short term, they’ll likely prime shareholders for bigger returns in 2022 and beyond.
Home Depot’s margins
Home Depot also steps up to the earnings plate on Tuesday morning for a highly anticipated report. The home improvement giant should announce another head-turning operating performance thanks to free spending in its niche and strong economic growth overall. There will be a bit more noise in this report, though, thanks to collapsing lumber prices and surging prices for most other materials.
Looking beyond that volatility, Home Depot is aiming for a second straight quarter of faster gains than rival Lowe’s (NYSE:LOW), which captured more market share in 2020 but stumbled earlier this year. Look for the industry leader to continue setting the pace on profitability, with operating margin likely near 15% of sales compared to the 12% that Lowe’s is targeting this year. Comments from both companies about the strength of the housing market through July will be closely followed on Wall Street.
Soaring returns in 2021 have investors worried about a potential crash looming, and its Wednesday afternoon report might be a catalyst for that kind of volatility in Nvidia’s stock — especially given the swings we’ve seen in cryptocurrency prices. But I wouldn’t bet against the chipmaker here.
Its last report featured broad-based sales gains, including in the core video game segment and the data center niche. Management predicted another double-digit revenue spike in Q2, and we’ll find out on Wednesday if that forecast was conservative, just like its last one was.
Looking further out, Nvidia has a good shot at dramatically expanding its revenue base by catering to growing markets like cloud computing, artificial intelligence, and robotics. Wall Street might initially balk at management’s short-term forecast in any given quarter, but it’s that bigger picture that will drive returns for shareholders.
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.