3 Things to Watch in the Stock Market This Week

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3 Things to Watch in the Stock Market This Week

Stocks rose in the final week of 2021 to cap off another strong year for indexes. The Dow Jones Industrial Average (DJINDICES: ^DJI) gained 19% for the year, and the S&P 500 (SNPINDEX: ^GSPC) added 27%. Both indexes finished near all-time highs.

Several big-name stocks will announce earnings results in the week ahead, and below we’ll look at the ones on the way from Constellation Brands (NYSE: STZ), Bed Bath & Beyond (NASDAQ: BBBY), and WD-40 (NASDAQ: WDFC).

Image source: Getty Images.

1. Constellation Brands’ growth rate

Demand is shifting in the alcoholic beverage industry, and that fact means investors will be watching the Thursday earnings report from Constellation Brands. The owner of imported beer brands like Corona has been trailing the market in 2021 thanks to slowing growth and struggles in rebooting its wine and spirits division. But there are some bright spots in the business, too.

Sales trends remained strong in the previous quarter despite collapsing demand for hard seltzer and a quick shift back to drinking at bars and restaurants. Sales were up 7%, equating to just a modest slowdown as compared to the jarring deceleration that rival Boston Beer (NYSE: SAM) has seen.

Investors are hoping that Constellation’s wider portfolio will allow it to continue growing its beer business at about a 10% annual rate this year. Higher prices should start lifting profit margins in the coming quarter, too. And management is also likely to talk up the potential for accelerating growth ahead, in part thanks to robust demand in the recreational marijuana space.

2. Bed Bath & Beyond’s customer traffic

The enthusiasm has faded around Bed Bath & Beyond’s stock in recent months. After reaching meme stock status and nearly tripling in 2021, shares are now trailing the market by a wide margin heading into its third-quarter earnings report. Shareholders are hoping for better news in that announcement, which covers the start of the critical holiday shopping season.

The specialty retailer revealed declining customer traffic at its last update in late September, and those trends have Wall Street bracing for some bad news on Thursday morning. Weaker sales at existing locations will likely be compounded by a shrinking store footprint, after all.

Executives are aiming to reduce Bed Bath & Beyond’s costs through slimming down that portfolio. Its focus on home goods might help it capitalize on growth in that category, too. But the stock won’t be a long-term winner unless the business demonstrates a recovery path that includes steadily rising sales in addition to rebounding profit margins.

3. WD-40’s new outlook

Investors have some big questions heading into the Thursday earnings report from WD-40. The maker of chemical solvents, lubricants, and cleaning products disappointed Wall Street in its last announcement, revealing in mid-October that sales increased just 3% in the fiscal fourth quarter. “The dynamics of the pandemic continue to create abnormal swings in our net sales results from period to period,” CEO Garry Ridge said in a press release at the time.

Investors’ main challenge is to look past those short-term swings to judge WD-40’s bigger potential. Sales are expected to rise between 7% and 11% in fiscal 2022, management said, compared to last year’s 19% growth spike. We’ll get an update to that prediction on Thursday that reflects all the latest demand and supply chain data.

An upgrade to the outlook might push shares higher, considering the stock’s weak performance in the past year. But most Wall Street pros aren’t expecting WD-40 to return to near 20% annual sales gains in 2022.

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Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool owns and recommends Constellation Brands. The Motley Fool recommends Boston Beer. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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