Stock Market Action Plan: Salesforce, Broadcom Earnings, May Payrolls

A mixed week for the stock market left the confirmed uptrend intact heading into the three-day Memorial Day weekend. Markets are closed on Monday, meaning just two trading days left in May — not to mention the deadline for the federal debt ceiling negotiations. Investors will have an eye on the Labor Department’s payrolls report on Friday, as well as earnings from Dow Jones heavyweight Salesforce.com (CRM) and fabless chip giant Broadcom (AVGO). The debt ceiling talks will remain center stage, and a deal reached or talks abandoned during the week would very likely have an impact on the market’s behavior.

Stocks To Watch: Five Stocks Near Buy Points

Leadership has been narrow in the stock market’s confirmed uptrend, but a number of stocks are acting well. That’s particularly in the chip and software spaces, which just received a boost this past week from Nvidia‘s (NVDA) earnings report. Arista Networks (ANET) and Mobileye (MBLY) are flashing early entries after breaking badly on earnings several weeks ago. Monolithic Power Systems (MPWR) soared past early entries as well on artificial intelligence chip buzz, although a pause might be constructive. Health products distributor McKesson (MCK) has shaped a short handle on a seven-month cup base. And a three-week advance has lifted Smartsheet (SMAR) to just below a buy point with earnings ahead.

Econ Calendar:

With markets now betting on a rate hike at the June 13-14 Fed meeting after hotter-than-expected inflation in April, the stakes are really high for Friday’s jobs report at 8:30 a.m. ET. Economists are forecasting a 180,000 jobs increase in the payrolls report as the unemployment rate ticks up to 3.5%. Wage growth is seen rising 0.4%, which is still too hot for the Fed.

The Key Fed Inflation Rate Heats Up, Lifting Rate-Hike Odds; The S&P 500 Shakes It Off

The Labor Department’s Job Openings and Labor Turnover survey is out Wednesday at 10 a.m. It will offer important indications of how tight the job market is. Another dive in job openings would be good news for the Fed, but economists are expecting an increase.

The Fed’s Beige Book survey, out at 2 p.m. on Wednesday, will provide an anecdotal update of economic conditions across the country. Evidence of tighter credit conditions amid banking turmoil might give the Fed pause. The Institute for Supply Management’s manufacturing survey index, out Thursday at 10 a.m., is expected to indicate that factory sector activity contracted for a sixth-straight month.

Stock Market Perspective: The Dow’s Debt Ceiling Funk

The Nasdaq finished strong to add a fifth straight weekly advance. The S&P 500 recovered into positive territory, and is working to finish May with a third straight monthly gain. The Dow is off almost 3% for the month and in the red year to date as it tests support at its 200-day moving average. The question: Could those losses reverse on a debt ceiling agreement?

Debt-Ceiling Come-Down: Fiscal Reckoning Will Bring Recession And Stock Market Swoon

Blue Chip Tracker: Salesforce.com earnings

Dow Jones stock Salesforce.com reports Q1 earnings Wednesday. The April quarter is usually seasonally weak for the maker of enterprise software. And, amid cost-cutting spurred by activist investors, analysts project EPS growth of 64% to $1.61 on revenue growth of 10% to $8.18 billion. Operating margin improvement will be a key metric. Management may comment on further cost-cutting since consulting firm Bain is reviewing Salesforce operations. Salesforce’s MuleSoft business rebounded in the January quarter and analysts will look for that to continue. Amid fuss over generative artificial intelligence, management will likely comment on competitive positioning in AI and future plans.

Tech Earnings: Cybersecurity Week

The coming week brings a last wave of earnings reports from cybersecurity firms. Results are due from CrowdStrike Holdings (CRWD), SentinelOne (S), Okta (OKTA) and Zscaler (ZS). The IBD Computer-Software Security group ranks No. 50 out of 197 industry groups that IBD tracked. Earnings reports have been mixed for cybersecurity firms, with Palo Alto Networks (PANW) and Fortinet (FTNT) beating expectations, while Tenable Holdings (TENB), Cloudflare (NET) and Check Point Software (CHKP) fell on results. Generally cybersecurity firms building cloud service platforms, such as Palo Alto, have outperformed. Fortinet is well-positioned in an emerging market, software-defined wide area networks, or SD-WANs.

CrowdStrike reports May 31. Analysts model 64% EPS growth to 51 cents on revenue growth of 39% to $677 million. Okta also reports May 31. Analysts expect Okta to swing to a 12-cent profit from a 27-cent loss a year earlier. Revenue is projected to grow 23% to $511 million.

CrowdStrike rival SentinelOne reports June 1. Analysts expect it to report a loss of 17 cents per share, narrowing from a 21-cent loss a year earlier. Targets call for a 74% gain in revenue, to $136.6 million. Zscaler on May 8 preannounced fiscal third-quarter results and raised full fiscal-year outlook. Zscaler reports after the stock market close on Thursday.

Broadcom Earnings Seen Up 12%

Chipmaker Broadcom plans to release its fiscal second-quarter results late Thursday. Analysts expect Broadcom to earn $10.12 a share, up 12% year over year, on sales of $8.7 billion, up 7%. Broadcom stock is in record-high territory after the company signed a multiyear, multibillion-dollar deal with Apple (AAPL) to supply 5G wireless chips. Analysts said the deal is positive because it addresses concerns about the sustainability of the company’s business with Apple.

Stock Market Earnings Bullets

Tuesday

Hewlett Packard Enterprise (HPE) reports fiscal Q2 earnings after the market close on Tuesday. Analysts expect the maker of computer servers, networking equipment and data storage devices to report 49 cents EPS, up 11% from a year earlier. Revenue will grow 9% to $7.31 billion, analysts estimate.

HP (HPQ) plans to report its fiscal second-quarter results late Tuesday. Analysts expect the PC and printer maker to earn 76 cents a share, down 30% year over year, on sales of $13.1 billion, down 21%. Warren Buffett’s Berkshire Hathaway (BRKB) last quarter increased its ownership stake in HP to about 12%.

Ambarella (AMBA) will release its fiscal first-quarter results late Tuesday. Wall Street is looking for the computer-vision-chip maker to lose 20 cents a share on sales of $62 million in the period.

Wednesday

C3.AI (AI) reports Q1 on May 31 after the stock market close. Analysts expect the maker of artificial intelligence software to report a loss of 12 cents per share vs. a 22-cent loss a year earlier. Revenue will fall nearly 2% to $71 million, analysts estimate.

PVH (PVH), maker of the Tommy Hilfiger and Calvin Klein clothing brands, releases Q1 results late Wednesday. Analysts expect flat earnings year over year at $1.94 per share after four quarters of declines. Sales are seen relatively flat, ticking up to $2.13 billion. PVH stock is nearing the 91.17 buy point for its cup-with-handle base.

Canadian flight simulator company CAE (CAE) announces fourth quarter and full-year results late Wednesday. Analysts expect earnings growth to slow to a 17.2% jump to 34 cents per share after two quarters of accelerating gains. FactSet projects revenue to spike nearly 25% to $1.19 billion after three quarters of 20% growth or more. CAE stock is trading near the bottom of a flat base with a 24.42 buy point.

Donaldson Company (DCI) reports third-quarter financials early Wednesday. Analysts project earnings growing 10% to 74 cents per share while revenue is expected to increase around 2% to $868 million. Donaldson Company profits grew 15% between 2021 and 2022 and analysts expect another 14% jump in 2023 to $3.05 per share. Donaldson stock is in a flat base dating back to March and is trading around 6% below its buy point.

Thursday (Early)

Macy’s (M) reports early Thursday. The embattled department-store chain is likely to see earnings tumble 58% per share on a 6% sales drop. That would mark the fourth sequential quarter of earnings and sales declines, with more pain seen ahead.

Five Below (FIVE) earnings are expected to rise for the second quarter in a row for its Q1 report late Thursday. FactSet projects the discount retailer to post a 6.3% EPS increase to 63 cents while sales accelerate for the third quarter in a row, increasing 13.8% to $728 million. FIVE stock has retreated nearly 19% from its 2023 peak of 220.19 on April 12.

Thursday (Late)

Cooper Companies (COO) is on deck to report its fiscal second-quarter earnings late Thursday. Analysts polled by FactSet expect contact lenses maker to report adjusted profit of $3.03 per share and $865 million in sales. Earnings would dip 6.5% as sales climb more than 4%. Cooper stock broke out of a cup base in late March and it’s pulled back somewhat, though it remains within a buy zone.

Samsara (IOT) reports Q1 earnings. Analysts project a 5-cent loss, the same as a year earlier and revenue growth of 34% to $191.3 million. Founded in 2015, San Francisco-based Samsara provides sensors and cloud-based software to manage vehicle fleets and industrial operations.

Asana (ASAN) reports Q1 earnings after the stock market close on Thursday. Analysts expect the maker of work management software to report a loss of 18 cents per share vs. a 30-cent loss a year earlier. Revenue will climb 25% to $150.7 million, analysts estimate.

Lululemon Athletica (LULU) reports late Thursday. Wall Street forecasts a 32% EPS increase on a 19% sales gain. That revenue growth would be the lowest in multiple quarters, with forecasts calling for further slowing in subsequent quarters. The Canadian leggings and yogawear seller was a pandemic winner. But amid recession fears, several retailers are seeing consumers avoid discretionary items, opting more for everyday essentials. Lululemon has been resorting to markdowns. It used to be known as a retailer whose high-end apparel almost never went on sale.