The Short List, May 24 - As the best earnings season in 11 years winds down, inflation fears stoke volatility in the markets

Introduction

As inflation fears continue to ramp up and earnings season subsides, volatility has returned to global equity markets. We feature two firms with important earnings-related corporate events that traders should monitor. The first is an auto parts provider that recently hiked its dividend by 300%. The second is an enterprise tech company that was once the darling of the space but has struggled with competition and posted earnings growth declines in the last 4 quarters. 

Use of Cash

The emerging theme is, “what will firms do with capital now that lending standards are easing and companies are ripe with cash?” M&A, returning value to shareholders, and rising wages are three routes corporate managers can take. We hear headline after headline regarding rising low-end wages, but investors should monitor other uses of cash as we exit earnings season.

Retail Earnings Season

And while we are out of peak earnings season, we did start to get a read on the health of US consumers last week as retailers started to report. Everyone from department stores to discounters to specialty retailers were blowing expectations out of the water. All together, this week, we’re expecting results from 512 worldwide companies, with 300 of those located in North America.

We will see results from more retailers as well as enterprise tech names this week, here’s just a few that we’ll be keeping our eye on: 

Earnings Outliers

As always we’re keeping a close look at earnings date outliers, companies that are reporting earnings on a date outside of their historical range, which could provide a clue as to what the upcoming report and call will reveal. 

We’ve got 2 earnings date outliers that are worth paying attention to in the next couple weeks, both report on June 2.

Advance Auto Parts, Inc. (AAP)

Company Confirmed Report Date: Wednesday, June 2, BMO
Projected Report Date (based on historical data): May 25, BMO
Z-Score: 3.25
DateBreaks Factor: -3
May 15 - 24

Advance Auto Parts historically has reported Q1 results between May 15 - 24, typically on a Tuesday or Wednesday. As such, we set a report date of Tuesday, May 25. On May 13 the company issued a press release stating that Q1 2021 results would be released on June 2 BMO, with the conference call at 8am ET. This change resulted in a high Z-score of 3.25. A high positive Z-score (we consider anything higher than 3 or lower than -3 to be significant) reflects a later than usual confirmed earnings date, which in this case could signal that AAP is getting ready to surprise to the downside. Z-score is also incorporated into our DateBreaks Factor*, for which AAP has a factor of -3, meaning there is a high negative deviation from the historical trend for the same quarter.

Splunk Inc. (SPLK)

Company Confirmed Report Date: Wednesday, June 2, AMC
Projected Report Date (based on historical data): May 20, AMC
Z-Score: 3.5
DateBreaks Factor: -3

Since its IPO in April 2012, Splunk has reported Q1 earnings in the last two weeks of May, typically on a Thursday. As such, we set a report date of May 20. On May 4 they issued a press release stating that Q1 2021 results would be released on June 2 AMC, with the conference call at 4:30PM ET. This change resulted in a high Z-score of 3.5. A high positive Z-score (we consider anything higher than 3 or lower than -3 to be significant) reflects a later than usual confirmed earnings date, which in this case could signal that SPLK is getting ready to surprise to the downside. Z-score is also incorporated into our DateBreaks Factor*, for which SPLK has a factor of -3, meaning there is a high negative deviation from the historical trend for the same quarter.

Shareholder Meetings

In addition to earnings, once again we see several upcoming shareholder meetings shown in the graph below. This week 587 companies will hold their meetings, 43 of those from the S&P 500. We’re starting to see more meetings held in-person including:  two weeks ago, 8%, last week 17% and this week 14%. The 6 companies going in person this week are: IPG Photonics, Incyte Corporation, Extra Space Storage, Quanta Services, UDR and LyondellBasell Industries.

The concentration of Shareholder meetings will be within the Consumer Discretionary sector and Energy. And you can see some big names are holding their meetings this week. 

Next week, earnings season continues to taper off with 189 companies reporting worldwide, and 138 in North America. There will also be 332 shareholder meetings.