Still Planning to Take That Cruise?
- By John Tierney
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- 4 min read
Summary
- We are starting to hear warnings of a coming earnings recession. But so far, analysts are still raising their year-ahead earnings forecasts.
- In earnings this week, consumers are in the spotlight. Lennar will report on the cooling housing market, Darden Restaurants may indicate whether dining out is losing its lustre, and Carnival Corp will tell us whether people still plan to take that cruise they booked last winter.
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Summary
- We are starting to hear warnings of a coming earnings recession. But so far, analysts are still raising their year-ahead earnings forecasts.
- In earnings this week, consumers are in the spotlight. Lennar will report on the cooling housing market, Darden Restaurants may indicate whether dining out is losing its lustre, and Carnival Corp will tell us whether people still plan to take that cruise they booked last winter.
What We Learned Last Week
- Warnings of an earnings recession – a period where earnings growth is stunted -are starting to appear in the press, and not in the same paragraph as a recession. Causes would include rising costs, difficulty passing them on, and faltering demand that triggers falling operating leverage.
- None of that is showing up in earnings so far. 12-month trailing earnings for the S&P 500 keeping trending up – to 200 per share in recent weeks. Analysts continue to pencil in year-ahead 228.49, for a 14.2% increase, and a dollar higher than a month ago.
- In its earnings call last week for the period ending in May, grocer Kroger (KR) said consumers are turning to store brands to save money. Meanwhile, Procter and Gamble (PG) said in its April call that, as of March, consumers were not subbing store brands for national brands. That is what two months of painful inflation will do.
Tuesday
- Homebuilder Lennar (LEN) will likely report strong earnings, and a rapidly cooling housing market. The big question will be the state of their visible pipeline of orders – it may be shrinking, but as long as they can build for existing demand, they will make money.
Thursday
- Darden Restaurants (DRI), a family restaurant chain, may confirm what we see in the retail sales data – that Americans are eating out like there is no tomorrow as the economy fully reopens. But is it concerned inflation could send them back to preparing home-cooked meals?
- FedEx (FDX) will likely indicate whether consumers are cutting back on online shopping. But the big news will be a planned restructuring that sent its stock up 15% last week.
Friday
- CarMax Inc. (KMX) should provide an update on the used car market.
- Last we heard from Carnival Corp (CCL) in March, cruise bookings through 2022 were up and rising. Now that summer is here and gas costs $5/gallon, are people still booking cruises? Or are they cancelling previous plans?
