What to Expect in the Week Ahead (CCL, MU and NKE Earnings; U.S. PCE Index)

Moomoo Breakfast US joined discussion · Jun 23, 2024 14:59

What to Expect in the Week Ahead (CCL, MU and NKE Earnings; U.S. PCE Index)

Earnings Preview

As a new week of earnings announcements approaches, all eyes are on Carnival, Micron, and Nike, each set to disclose their financial performance.

$Carnival (CCL.US)$ is set to kick off the week with its second-quarter fiscal 2024 earnings release on June 25, before the market opens. The cruise giant has been riding a wave of improved booking activities, with a strong pricing environment and increased advertising efforts expected to have lifted its top line year over year. Carnival has been steering toward expanding its customer base through diverse market strategies, attracting new guests and securing repeat customers. The company's comprehensive approach might have fueled demand and supported sustainable revenue growth, with projections from Zacks indicating a 16% increase in passenger ticket revenues to $3.64 billion and an 11.8% rise in onboard and other revenues to $1.97 billion.

Following Carnival, $Micron Technology (MU.US)$ will unveil its earnings on June 26, after the market close. The chipmaker, which is a key player in the AI space, has forecasted earnings of 45 cents per share, with a possible variance of 7 cents, and revenue in the vicinity of $6.6 billion. Analysts, showing a hint of optimism, are expecting earnings of 51 cents per share and revenue reaching $6.7 billion, as per Yahoo Finance. Micron has historically delivered positive surprises in its earnings reports, and this trend could continue, supported by growth in DRAM and NAND memory chips essential for AI infrastructure.

Wrapping up the week, $Nike (NKE.US)$ will report its fourth-quarter fiscal 2024 earnings on June 27 after the closing bell. As Nike gears up for potentially lucrative events like the Summer Olympics, analysts are forecasting a strong performance with net income estimated at $1.28 billion, or 84 cents per share, on a robust $12.9 billion in revenue. Despite these expectations, analysts from Wedbush Securities and Bank of America Securities suggest that the fourth-quarter results might not sway Nike's stock significantly. They believe that the company's guidance for fiscal 2025, as outlined in the previous quarter's earnings call, will be the focal point for investors during the earnings conversation.

Macroeconomic Data in the Coming Week: US PCE

In May, the US Consumer Price Index (CPI) softened to an annual rate of 3.3% (expected 3.4%, previous 3.4%), with the core index, which excludes volatile items, also decreasing to 3.4% year over year (expected 3.5%, previous 3.6%). Additionally, the supercore rate, which further refines the core measure, dropped to 4.8% year over year, marking the first decline in the annual supercore rate since the previous October. At the same time, the Producer Price Index (PPI) slowed down to a year-over-year rate of 2.2% for the month (expected 2.5%, previous 2.3%), with the core PPI—which strips out food and energy prices—easing to 2.3% year over year (expected 2.4%, previous 2.4%).

Armed with this data, analysts have made predictions for the upcoming Personal Consumption Expenditures (PCE) index figures. Nick Timiraos, a prominent Fed observer from The Wall Street Journal, reported that inflation models are anticipating the core PCE index to have increased by approximately 0.08-0.13% month over month in May (versus a 0.2% rise in April). This would equate to an annual core PCE inflation rate of 2.6%, a decrease from April's 2.8%, and maintain the six-month annualized core PCE rate in the vicinity of 3.2-3.3% for May. The three-month annualized rate is expected to dip below 3% for the first time since January.

In its June policy statement, the Federal Reserve acknowledged "modest further progress" on curbing inflation, though it slightly increased its year-end inflation forecast to 2.6% from the previously projected 2.4%. Despite officials welcoming the recent downtrend in inflation figures, they have emphasized the need for continued evidence of declining inflation to confidently assert that it will stabilize around the target rate and potentially justify rate reductions.

The Fed's updated economic forecast from June has also scaled back expectations for interest rate cuts, now foreseeing only a single reduction in 2024, in contrast to the previously anticipated three cuts. Nonetheless, analysts point out the narrow gap between median and mode predictions, suggesting that just a few additional Fed officials supporting rate cuts could lead to two decreases this year.

Currently, the money markets are pricing in roughly 47 basis points of rate cuts for the year, which fully anticipates one 25 basis point cut and assigns a high likelihood to a second cut occurring.