Earnings season begins with Delta, PepsiCo, JPMorgan and Citi leading the way

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The main focus for markets in the first full week of the third quarter will be the June CPI report and testimony by Federal Reserve Chairman Jerome Powell before Senate and House committees. The CPI print is forecast to show a 0.1% month-on-month increase in inflation, while the annual rate of core inflation is expected to remain unchanged at 3.4%. Bank of America expects the June CPI report to be another confidence-builder after an “undoubtedly strong” report in May. The firm noted that rent and landlord-equivalent rent increases should cool in the coming months, which should boost the Fed’s confidence in the inflation outlook. BNP Paribas said auto insurance and airline ticket prices could also gradually decline.

Earnings season officially begins with Delta Air Lines (NYSE:DAL) and PepsiCo (NASDAQ:PEP) ahead of the earnings confessional, along with big banks like Citigroup (C), JPMorgan Chase (JPM) and Wells Fargo (WFC). The event calendar includes Tyson Foods (NYSE:TSN) Startup Demo Day, Samsung’s (OTCPK:SSNLF) Unpacked Galaxy event and Allen’s conference in Sun Valley. Meanwhile, the auto sector is likely to grab headlines as the battle between the European Union and Chinese electric vehicle companies heats up and Hyundai (OTCPK:HYMTF) workers in South Korea threaten to strike. Tesla (TSLA) stock is also in the spotlight for its recent rally after the company posted a better-than-feared second-quarter deliveries report.

Results in Spotlight: Monday, July 8 – Greenbrier (GBX). See full earnings calendar.

Results in Spotlight: Tuesday, July 9 – Helen of Troy (HELE) and Sushi Chicken (KRUS). See full earnings calendar.

Results in Spotlight: Wednesday, July 10 – Manchester United (MANU) and PriceSmart (PSMT). See the full earnings calendar.

Results in Focus: Thursday, July 11 – Delta Air Lines (DAL), PepsiCo (PEP) and Conagra Brands (CAG). See the full earnings calendar.

Results in Focus: Friday, July 12 – Citigroup (C), JPMorgan Chase (JPM), Bank of New York Mellon (BK) and Wells Fargo (WFC). See full earnings calendar.

Observing variability: Options trading volume is high in Faraday Future Intelligent (FFIE) and Conn’s (CONN). The most overbought stocks by their 14-day Relative Strength Index are Spectral Capital (OTCPK:FCCN), Bio Essence (OTCPK:BIOE), and Simply Better Brands (OTCQB:SBBCF). The most oversold stocks by their 14-day Relative Strength Index are Thunder Power (AIEV), SolarEdge (SEDG), and Sonoco (SON). Short interest is high in Hertz Global (HTZ), Carvana (CVNA), and Cinemark Holdings (CNK) ahead of next week’s action

IPO Watch: No new IPOs are expected to start this week. IPO lock-up period expires for Smith Douglas Homes (SDHC) block of shares. Quiet period expires for Tempus AI (NASDAQ:TEM) to allow analysts to publish ratings. At the time of publication, Tempus AI was trading about 15% below its IPO price.

Dividend Observation: Companies with ex-dividend dates next week include JPMorgan (JPM) and Progressive (PGR). The five stocks in the S&P 500 with the highest dividend yields are Ford Motor (F), Amcor (AMCR), Hasbro (HAS), Best Buy (BBY), and International Paper (IP). Read some of the dividend stock picks from Seeking Alpha analysts.

Delta Air Lines earnings preview: Delta Air Lines (DAL) is set to report earnings on July 11. The airline looks to build on its strong financial performance in the first quarter, when it delivered record revenue and earnings at the top of its forecasts. Ahead of the report, Delta (DAL) CEO Ed Bastian noted that air travel demand remains strong, and that its customer base is in good financial shape, with travel being a top priority. Overall, Delta (DAL) continues to benefit from a mix of premium consumers as a best-in-class operator, with diversified revenue and cash flow. Analysts expect Delta (DAL) to reiterate its 2024 guidance for earnings per share of $6.00 to $7.00 and free cash flow of $3 billion to $4 billion. A positive or negative surprise from Delta (DAL) on its guidance update could be a catalyst for the stock price for the airline sector as a whole. Options trading is predicting a 6% swing in the stock price following the Delta (DAL) report withdrawal. Delta (DAL) shares fell 2.3% following the company’s latest earnings report. United Airlines (UAL), Copa Holdings (CPA), and Alaska Air (ALK) are the three airline stocks that most correlate with Delta following its earnings report.

PepsiCo Earnings Preview: PepsiCo (PEP) is set to report second-quarter results on July 11. The consensus analyst estimate is for revenue of $22.7 billion, earnings per share of $2.16, adjusted operating margin of 17.6% and adjusted EBITDA of $4.72 billion. Organic sales are expected to rise 3.0%, led by strong performance in the Europe and Latin America regions. Volume is expected to rise 4.1% to offset a 1.1% decline in price. UBS noted that while the stock has largely traded sideways to start the year and the company’s crowd analysis indicates PepsiCo is a crowded long position, the conversation suggests sentiment remains negative heading into the results due to concerns about challenging trends in the U.S. “We do not expect Q2 results to be a significant positive catalyst as many investors are taking a wait-and-see approach to see if the top and bottom lines trends can improve. However, in the longer term, we see a path to improvement from here and consider the current entry point attractive,” UBS analysts updated. At Seeking Alpha, Empyrean Research is also cautious on PepsiCo (PEP) due to the continued excess risk of GLP-1 and Russia.

Investor events: Allen’s five-day conference will take place in Sun Valley, Idaho, next week. The guest list includes OpenAI CEO Sam Altman, Meta (META) CEO Mark Zuckerberg, Amazon (AMZN) CEO Jeff Bezos, Apple (AAPL) CEO Tim Cook, Salesforce (CRM) Marc Benioff, Uber Technologies (UBER) CEO Dara Khosrowshahi, Warner Bros. Discovery (WBD) CEO David Zaslav and Airbnb (ABNB) CEO Brian Chesky. Some analysts believe this year’s media moguls’ conference will generate more headlines than last time. There will also be a three-day SEMICON West conference. The event showcases the latest advances in microelectronics, covering electronic design automation, device manufacturing and final production, including assembly, packaging and testing. Meanwhile, Samsung’s (OTCPK:SSNLF) Galaxy Unpacked event will take place in Paris. Industry watchers are expecting the unveiling of new foldable devices and smartwatches, as well as the arrival of the Galaxy Ring smart ring. Tyson Foods (TSN) will also host Demo Day 2024 on the calendar. The event offers startups an exclusive platform for potential partnership opportunities with Tyson. Selected startups can receive mentorship from Tyson Foods executives, access to pilot and test programs, possible proofs of concept and potential commercial partnerships. Other notable investor events include Chewy’s (CHWY) and Axcelis Technologies’ (NASDAQ:ACLS) Investor Day.