Earnings playbook: How to trade the biggest reports this week, including retail giant Walmart

Published Sun, Nov 12 20238:02 AM EST

Investors will get a glimpse this week on the state of the consumer with a slew retail companies slated to report earnings. Among the companies scheduled to post their earnings are Target, Walmart and Home Depot. Those reports will come as investors fret over the possibility of a recession taking hold next year. The third-quarter earnings season has mostly exceeded expectations. More than 90% of S & P 500 companies have already reported. Of those names, 80% have posted better-than-forecast results. Take a look at CNBC Pro's breakdown of what's expected from some of this week's key reports. Tuesday Home Depot is set to report earnings before the open, followed by a call at 9 a.m. ET. Last quarter: HD earnings beat estimates , but sales dipped as consumers held off on big-ticket items. This quarter: Analysts polled by LSEG expect the home improvement giant to report a double-digit earnings per share decline. What to watch: Home Depot shares have struggled this year, losing more than 7% as the Federal Reserve raised interest rates in its fight against inflation. Investors will look for clues on whether rate pressures are easing for the company. "Potentially peaking rates provide some stock support, but the risk is still weaker demand for longer, with trouble well into FY24," wrote Barclays analyst Seth Sigman. What history shows: Home Depot exceeds earnings expectations 86% of the time, according to Bespoke Investment Group. However, the stock has fallen in two of the last three earnings days. Wednesday Target is set to report earnings in the premarket, with a call slated for 8 a.m. ET. Last quarter: TGT cut its full year earnings forecast as the company struggled to entice thrifty shoppers. This quarter: Target is expected to post slight year-over-year declines in earnings and revenue, according to LSEG. What to watch: Target comes into this report against a tough backdrop. The stock is down 27% in 2023, and CEO Brian Cornell told CNBC earlier this month that shoppers are pulling back — even on groceries . Still, UBS analyst Michael Lasser reiterated a buy rating on Target shares last week, noting: "We think Target managed its margin well in the quarter. If this was the case, this would mark the third consecutive period wherein which TGT exhibits margin stability." What history shows: Bespoke data shows Target beats earnings expectations 65% of the time. The stock has also risen more than 2% in each of the last three earnings days. Palo Alto Networks is set to report earnings after the close. Management is slated to hold a call at 4:30 p.m. ET. Last quarter: PANW posted earnings that exceeded analyst expectations , sending the stock higher. This quarter: FactSet data shows analysts expect the network company's earnings to have jumped 40% year over year. What to watch: Palo Alto Networks has been on a monster tear this year, surging 81%. Hamza Fodderwala of Morgan Stanley thinks the company can maintain its momentum after this week's report. "We expect PANW to pull further away from the pack and sustain durable high-teens billings growth," the analyst said. What history shows: Palo Alto beats earnings estimates 93% of the time, per Bespoke. The stock also does well on earnings days, averaging a 2.1% gain. Thursday Walmart is set to report earnings in the premarket, followed by a call at 8 a.m. ET Last quarter: WMT hiked its full-year earnings guidance thanks to strong online and grocery sales. This quarter: The retail giant's earnings are forecast to be flat year over year, according to LSEG. What to watch: Walmart is riding high, with the stock reaching an all-time high last week on bets of a strong holiday season for the retail giant. "Similar to recent quarters, we expect continued broad-based momentum throughout the enterprise, including in the Walmart US grocery and health/wellness categories, to fuel another above-plan delivery," wrote Oppenheimer analyst Rupesh Parikh. What history shows: Walmart was higher in four of the last five earnings days, Bespoke data shows. The company's earnings per share also beat expectations 70% of the time. — CNBC's Michael Bloom contributed reporting.