3 Things to Watch in the Stock Market This Week

Stocks jumped last week, as both the Dow Jones Industrial Average ( ^DJI 0.80% ) and the S&P 500 ( ^GSPC 1.17% ) gained about 6%. The rally erased some of the losses from previous weeks, but indexes are still down so far in 2022.

Nike ( NKE 3.01% ), KB Home ( KBH 1.53% ), and Winnebago ( WGO 2.89% ) are among the most anticipated earnings reports to watch over the next few days. Let’s take a closer look at what investors can expect to hear from these companies.

1. Nike’s inventory

Nike reports its holiday season results on Monday afternoon, and investors have some big questions heading into that update. Sales trends were flat in the previous quarter, mainly thanks to COVID-19-related restrictions in China and supply chain issues in the U.S. market.

This quarter brought new challenges, including the rise of the omicron variant and surging inflation. Monday’s report will show whether these issues knocked the footwear titan from its mid-single-digit growth pace.

Image source: Getty Images.

Nike is also taking a riskier path toward growth by sprinting away from its partnerships with retailers such as Foot Locker ( FL -0.31% ). This move has the potential to boost sales and margins over the next few years. But Nike will also need to manage its inventory and supply chain so that it doesn’t get stuck with too much of the wrong merchandise. Look for CEO John Donahoe and his team to discuss how they’ll hit that balance on Monday.

2. KB Home’s backlog

KB Home steps up to the earnings plate on Wednesday, and there are some good reasons for investors to follow this report. The homebuilder has enjoyed strong demand through most phases of the pandemic, but growth showed signs of a slowdown in the previous quarter. We’ll learn this week whether supply chain challenges, rising interest rates, or inflation hurt KB Home’s expansion pace through early 2022.

KB Home is entering the year with a massive backlog of over $5 billion, giving management a clear view of its annual revenue. Very few of its houses, about 5%, are canceled after building begins.

Those metrics imply a solid year for the business ahead, assuming the home market remains in a steady growth phase. KB Home might even see increased market share if it can maintain a pricing advantage that attracts people looking for values as inflation surges. Those gains will require a bullish outlook from the management team on Wednesday.

3. Winnebago’s margins

You wouldn’t know it by just following its stock price, but Winnebago’s business is booming today. If the recent report from peer Thor Industries is any indication, the RV giant on Wednesday is likely to report solid sales and profit gains through early 2022.

Look for Winnebago to discuss solid demand for its towable RVs, boats, and motorhomes. Weighing against those positive factors will be supply chain and manufacturing challenges. Yet prices should offset any inflation as dealerships pass along higher costs.

Winnebago’s main challenge in 2022 is setting production levels right so that it can take advantage of high demand without exposing the business to big write-offs. Downturns are always a surprise in the consumer discretionary world, after all. That’s why I’ll be watching Winnebago’s backlog figure, and its gross profit margins, for signs that management is striking a good balance between pricing and inventory levels.

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.

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