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The Week Ahead & A Look Back: June 17-21

It's a relatively light week for earnings reports from major companies, but there are still several interesting releases for investors to keep an eye on. Here's a look at some of the key names set to report this week and what metrics analysts will be watching closely:

Monday, June 17

Lennar (LEN) - ★★★★ : The homebuilder will kick off the week when it reports fiscal second quarter results after the close on Monday. Investors will be honed in on new home orders, deliveries, and average selling prices - key metrics that provide insight into housing market demand. They'll also want an updated outlook from management given ongoing concerns around elevated mortgage rates, inflation, and a potential economic slowdown weighing on the housing market.

Thursday, June 20

Darden Restaurants (DRI) - ★★★★ : Olive Garden parent Darden reports fiscal Q4 earnings on Thursday. In addition to the restaurant chain's profits and sales, Wall Street will scrutinize traffic and pricing trends as Darden aims to strike a balance between passing through higher costs and keeping customers coming through the doors. Any commentary on dealing with still-high food and labor inflation will also be in focus.

Accenture (ACN) - ★★★★ : The global IT consulting firm releases fiscal Q3 results Thursday morning. Revenue growth, bookings and the company's outlook will be in focus given economic uncertainty and corporate clients potentially pulling back on IT spending. Profitability metrics like operating margins and earnings will also be closely monitored.

Kroger (KR) - ★★★ : Grocery chain Kroger rounds out the week on Thursday with its Q1 report. Comparable sales and profit margins will be top of mind as the company contends with still-elevated food inflation and shifts in consumer spending habits.

A Look Back

  • Adobe Earnings Smash Expectations, Stock Rallies 14%

Adobe (ADBE) - ★★★★ - Ranked #39 in Q2 2024 Large Cap Rankings

Adobe Inc.'s stock surged 14% on Friday, rallying after the software giant posted better-than-expected fiscal second quarter results and raised its full-year guidance. The one-day pop provided relief for Adobe investors after the company's shares had fallen over 20% so far this year amid economic uncertainty.

The San Jose, California-based company reported quarterly profit of $1.57 billion, or $3.49 per share, easily topping Wall Street's consensus estimate of $3.40 per share. Revenue climbed 10% year-over-year to $5.31 billion, exceeding analysts' average projection of $5.29 billion.

Adobe's upbeat performance was driven by robust demand for its creative software products and cloud services. The company has benefited from the digital transformation underway across many industries as businesses invest in tools for online marketing, e-commerce, and remote working capabilities.

Looking ahead, Adobe raised its fiscal 2024 revenue outlook to a range of $21.4 billion to $21.5 billion, up from its previous target. The guidance hike signals management's confidence in Adobe's ability to sustain growth through innovative product launches and strategic acquisitions.

The stellar results reinforce Adobe's position as a leader in creative software and cloud-based services. While economic headwinds persist, the company's expanding product suite positions it to capitalize on the secular tailwinds of digitalization across enterprises and small businesses.

After today's rally, Adobe's stock is now down around 10% for the year. However, today's earnings beat could mark a turning point and renewed bullish sentiment around the tech stalwart.

  • Paramount at a Crossroads After Skydance Merger Collapse

Paramount Global (PARA) - ★★★ - Ranked #50 in Q2 2024 SMID Equity Rankings

Shares of Paramount Global (PARA) have been in freefall after the media conglomerate's proposed merger with Skydance Media was unexpectedly nixed by controlling shareholder Shari Redstone. The scrapped $8 billion deal leaves Paramount at a strategic crossroads as it looks to chart a new path forward.

The Skydance tie-up, which would have combined Paramount's legacy media assets with David Ellison's successful production company behind hits like Top Gun: Maverick, was seen as a potential catalyst for Paramount's future.

However, with Redstone rejecting the terms, Paramount must now reassess its M&A strategy and overall direction. Some key options for the company could include pursuing other company tie ups such as Sony or private equity firms.

The strategic uncertainty has weighed heavily on Paramount's stock, which has plummeted 13% this week and 20% over the past month alone. Shares are now down a staggering 29% year-to-date as investors sour on the company's prospects.

For years, Paramount (formerly ViacomCBS) has been viewed as a prime acquisition candidate given its attractive media properties like CBS, MTV, Nickelodeon and Paramount Pictures. The company briefly explored a sale or merger in 2021 before deciding to remain independent under CEO Bob Bakish's leadership.

Bob Bakish stepped down earlier this year as ironically he was voicing concerns about the Skydance deal which fell apart months later. However, that calculus may need to be revisited if Paramount struggles to gain traction in boost its stagnant share price.

In the meantime, all eyes will be on Paramount's next strategic moves and its ability to steady the ship. Investors had high hopes for unlocking value via the Skydance deal, so the company will need to quickly reassure the Street with a new game plan. Without a clear path forward, Paramount risks being left behind.

  • KKR Stock Surges 10% on S&P 500 Index Inclusion News

KKR (KKR) - ★★★★ - Ranked #10 in Q2 2024 Large Cap Equity Rankings

In a significant market move shares of KKR & Co. Inc. (NYSE: KKR) jumped an impressive 10% during intraday trading following the announcement of its imminent inclusion in the prestigious S&P 500 index. The global investment firm, known for its private equity, real estate, and credit strategies, will officially join the index on June 24, 2024.

This inclusion is a major milestone for KKR, as the S&P 500 is widely regarded as the benchmark for large-cap U.S. equities. Being part of this index often leads to increased demand for a company's shares, as many index-tracking funds and ETFs are mandated to replicate the index's composition. This sudden influx of buyers can drive up the stock price, as witnessed today with KKR.

The market's enthusiastic response aligns with our own analysis. In our Q2 2024 Large Cap Rankings that we released in April, we highlighted a positive outlook for KKR. We ranked it #10 among large-cap companies and this bullish outlook was based on KKR's business model, management, and track record of navigating complex market conditions.

KKR's inclusion in the S&P 500 validates our positive assessment. We believe this move will not only increase KKR's visibility among investors but also provide a more stable investor base, potentially reducing stock price volatility in the long run.

Investors and market watchers are now eagerly awaiting our Q3 2024 Large Cap Rankings, set to be released in July. These rankings will be available exclusively to our subscribers and will provide updated insights on KKR and other large-cap companies.

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The information provided in this report is for general informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. The opinions expressed in the report are our own and are subject to change without notice. We may have a position in the securities mentioned in the report, and we may buy or sell such securities without notice. Any investment decisions made based on the information in this report are solely the responsibility of the recipient. We do not accept any liability for any direct, indirect, or consequential loss arising from any use of this report or its contents.


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