It's the last big week for second-quarter earnings, but that doesn't mean you can tune out yet. Plenty to of big names are reporting this week. Here are the six companies I'll be watching.
Walt Disney (DIS) is at the top of its game. Slightly off all time highs, Disney earnings on Tuesday will likely showcase the immense success of "Avengers: Endgame," as well as "Toy Story 4." I've said it over and over: Disney is the king of content. It knows how to drive demand by creating supply that viewers want. Moving forward, I think the balancing act for Disney will be riding their box office successes as a way to keep the financial statements strong while it makes its further foray into the streaming industry. While many will be watching for profits in this quarter, I'm far more interested in what the company has to say about its plans for Hulu, and Disney Plus. There are a lot of possibilities for this company, and I continue to view them as the main competitor to Netflix (NFLX) .
Planet Fitness (PLNT) is all about growth. The company needs big earnings growth. Over the last five years, PLNT has easily been one of the best-performing stocks you could have in your portfolio; from an earnings standpoint, a revenue growth standpoint and a stock standpoint. What is not often discussed is the debt levels that have been created by Planet Fitness in its expansion. The large-scale gym company had over $1.2 billion in long-term debt at the end of the previous quarter. At that time, its balance sheet had an equity deficit of over $350 million. The stock itself is running at over 50-times analyst estimates for full-year earnings. Sounds like a risky setup doesn't it? Because of this, PLNT cannot afford any disappointments.
Papa John's (PZZA) has been trying to regain a positive story, ever since the fallout surrounding its founder's controversies and eventual exit. To me, the stock is very much trading on the assumption (or hope) that sales will right themselves as the drama fades into the past. Thus far, things haven't corrected yet. But the activism from hedge fund Starboard, coupled with investment from names like Shaquille O'Neal will take some time to get things rolling. It's an interesting story to watch. Whether its tradable is another story.
Zillow (Z) received some buzz earlier this year when it announced its expansion of its home buying program. Indeed, the potential revenue increases from Zillow buying and selling homes on its own, is pretty substantial. So are the costs. The original beauty of Zillow's model was that it essentially acted as a low-cost middle man. It was an intermediary between agents and buyers/sellers. It's a simpler business than buying and selling homes, and certainly a much cheaper one. Investors have been waiting a long time for Zillow's exceptional revenue growth to translate into exceptional earnings. Analyst estimates do not have that happening any time soon. Because of this, the catalyst for Z this week will likely be a continued emphasis on revenues. Investors will want to see continued strength in the rate of growth.
I'm sure there are many investors who wish they had sold their positions in Activision Blizzard (ATVI) about a year ago. The stock has given up roughly nearly half of its value over the last year. The maker of games like "Call of Duty" and "Overwatch," Activision has suffered some weakness in revenues as well as net income. Right now, it's tough to see whether or not this will correct itself soon. The video game maker has said it plans to put more effort into its franchises, while seeking out new ones as well. Analysts are expecting some revenue declines in the second quarter results, so overall it's tough to see ATVI doing too much.
Kraft Heinz (KHC) has been one of Warren Buffett's worst plays it seems; and he doesn't have many. The company certainly is struggling to move what were once staples of America. Kraft cheese and Heinz ketchup, with products like those, it's weird to see Kraft Heinz performing with such weakness. From accounting issues, to the simple lack of innovation, Kraft Heinz seems stuck in a cycle that isn't healthy. Beneath the fallout is a lot of value in terms of the 5% dividend, and a ton of equity. The question is whether Kraft Heinz has any avenue for deriving returns from it. Analyst estimates are showing earnings potential for the year of $2.77 per share. That makes the stock a very cheap buy at current levels. With KHC, it's a question of getting some demonstrative evidence from the company that the headaches have passed. I'm not sure we're going to get that this week.
Disney is a holding in Jim Cramer's Action Alerts PLUS member club.