Event Data Outlook – Equity markets sell-off, but economic optimism remains

  • Soft consumer sentiment contrasts improving corporate earnings
  • A consumer conference, earnings reconfirmation, and dividend resumption are important corporate events to watch
  • Stuck in place?

Ever Given, the massive container ship that ran aground in the Suez Canal, was the meme of the week, but it could also be analogous to the financial markets recently. The stock market was off to a hot start this year, led by US small caps and value stocks as well as emerging market equities. Those niche areas of the global stock market felt the brunt of the recent selloff. What will it take to turn the stock market around and back on the right path? Perhaps a solid upcoming earnings season.

The economy is still expected to continue on its heading of profound growth both within the US and around the world. The US Federal Reserve even increased their 2022 US GDP forecast to 3.3% with a stellar 6.5% expansion this year. All eyes are on how the economic restart fares in the coming months.

Figure 1: Federal Reserve US Economic Projections (as of March 2021)*

Meanwhile, consumer sentiment continues to run at soft levels despite immense stimulus from Congress and an easy money policy from the Fed. The University of Michigan’s Consumer Sentiment survey shows that optimism regarding current economic affairs remains significantly below pre-pandemic levels. The contrast of a goldilocks economic scenario later this year with a somewhat dis-heartened consumer is significant and maybe even disconcerting for Wall Street. Expect this coming reporting season to shed light on how the corporate world expects the balance of 2021 to unfold.

Figure 2: University of Michigan Consumer Sentiment**

Conference insights: The ISG Xperience Summit 2021 – Consumer Stocks in Focus

Investor conferences, summits, and forums are corporate events Wall Street Horizon tracks for clients. These events often feature a key investment or trading theme. We spotlight the ISG Xperience Summit 2021 to be held virtually on Tuesday and Wednesday this week***. The event looks ahead to tomorrow’s consumer experience and how firms can leverage technology as the economy accelerates into the virtual age.

Wall Street Horizon reports that several major Consumer Discretionary companies will attend and speak at the event. Lilian Tomovich, former Chief Customer & Marketing Officer at MGM Resorts International (MGM), speaks on a panel on day 1 and Sherif Mityas, former CEO at TGI Fridays (TGI), discusses consumer demand on day 2. Finally, Anastasia Zdoroviak, Director of Customer Experience at DoorDash (DASH), presents on Wednesday afternoon regarding how consumer firms can optimize technology, innovate to meet consumer preferences, and succeed in the changing economy. We also expect presentations from Marriott International Inc. (MAR), HubSpot Inc. (HUBS), Walgreens Boots Alliance, Inc. (WBA), and Information Services Group, Inc. (III).

Conferences and summits often provide a forum for executives to express optimism or pessimism in their company and sector. Opinions and data provided at such events often move stock prices.

Earnings Reconfirm – SOC Telemed

SOC Telemed (TLMD), in the Health Care sector, re-confirmed its earnings date. A reconfirmation is when a firm publicly declares an earnings date, then publicly changes it. It’s a potential red flag to traders to be on the lookout for unusual news. Intuitively, TLMD sounds like it would be a major beneficiary of the pandemic as the firm focuses on high-quality specialty telemedicine delivered at scale to hospitals, health systems, and physician networks in the US. The stock chart since early 2020 paints a different picture, however. This is a struggling telemedicine company within a secular growth niche.

Figure 3: SOC Telemed, Inc. (TLMD) Stock Price

On March 12, SOC Telemed announced that fourth quarter 2020 financial results would be released on Tuesday, March 30 after market. The management team then hosts a conference call to discuss the quarter in the evening. March 15 was the originally scheduled Q4 2020 earnings date. This significant two-week delay should be on the minds of traders heading into the quarterly report this week. An earnings announcement delay coupled with a sagging stock price might have negative implications for the report itself.

Dividend Resumption – Freeport-McMoRan Inc

We wrap up this week’s Event Data Outlook on an upbeat note with a dividend resumption from one of the world’s leading international mining companies. Freeport-McMoRan (FCX) in the Materials sector is the biggest producer of copper and molybdenum, vital commodities for industrial activity. The company is extremely cyclical. When there is economic strength, particularly from emerging markets, the stock prices can soar. Periods of low growth often feature major price drops in shares of FCX. With GDP growth in both developed and emerging countries expected to pick up sharply soon, many investors are placing their bets on FCX.

FCX beat BofA’s earnings estimate on its prior report issued in late January, helping to catapult the stock from the mid-$20s to nearly $40 by late February. Recent uneasiness in emerging markets has taken its toll on FCX though, and the stock is down nearly 20% from the high.

So what’s the good news?

CEO Richard Adkerson expected the Board of Directors to resume the firm’s dividend on January’s earnings report and during the conference call. Sure enough, Wall Street Horizon confirms that the dividend is back. After suspending dividend payments due to poor operating conditions in April 2020, a $0.30 annual dividend was announced. It’s a key sign of global optimism when a major economically-sensitive firm has the confidence to resume its dividend.

Conclusion

The next earnings season is on our doorstep. We are at a key inflection point between the optimism of a recovery and actual hard-data proving the global economy is on the mend. Traders must keep a close watch on what firms are saying and doing. Conferences, earnings revisions, and dividend policies are among the corporate events to monitor. Wall Street Horizon has the most accurate and up-to-date information to guide traders during these uncertain times.

*https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20210317.pdf
**https://fred.stlouisfed.org/series/UMCSENT
***https://xperience21.isg-one.com/home/agenda

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