The 7 Most Important Stocks to Watch as Q2 Earnings Season Kicks Off

Earnings season is a combination report card and progress report. The headline results tell investors what already happened. There’s nothing that can be done about it. That’s the report card part of it. It’s the guidance a company gives that can tell investors what may be coming in future quarters. That’s the progress that investors want to hear when thinking about Q2 earnings season stocks to buy.  

The latest read on inflation showed a slight slowdown in the rate of growth. And many investors now believe that the Federal Reserve will start cutting rates in September with increasing optimism that there may be more than one rate cut in 2024.  

The market (i.e. institutional investors) is always looking months ahead. That’s one reason the market seemingly defies gravity. Those investors believe the next directional move for interest rates is lower, and they’re investing accordingly.  

It’s impossible to keep up with every earnings report. But, let’s examine seven Q2 earnings season stocks that investors should watch closely.  

NVIDIA (NVDA) 

NVIDIA (NASDAQ:NVDA) is up 150% making it one of the best-performing stocks in 2024. However, it’s listing as one the Q2 earnings season stocks to watch has less to do with the future stock price movement of NVDA stock than it does with demand for the company’s chips.  

As noted in the introduction, the market is becoming increasingly optimistic about a pivot by the Fed. But will businesses share this optimism? If they do, NVIDIA will be one of the beneficiaries. 

Companies in every sector are racing to create artificial intelligence (AI) applications. And NVIDIA is creating the hardware that these companies need to power those applications. For much of the last 18 months, investors have shrugged off any concerns about a lofty valuation. And for the most part, the company has delivered the revenue and earnings outlook to reassure them. Investors are expecting more of the same, and that’s why it will be a report to watch.  

Apple (AAPL) 

Some investors will say this list of Q2 earnings season stocks to watch should simply include the magnificent seven stocks. But Apple (NASDAQ:AAPL) will be the last one to include in this group. It used to be said that as Apple goes, so goes the market. That title may now go to Nvidia, but Apple still has one of the strongest moats a company can have. That shouldn’t be overlooked.  

After a rough first quarter, AAPL stock has come roaring back. The stock is up about 33% in this past quarter. The company has outlined its AI strategy. That will be showcased in its upcoming iPhone 16 launch.  

Still, even with some analysts bidding the stock higher, Apple continues to have its share of critics. Those detractors believe this earnings report will be a prove-it moment. The iPhone 16 won’t launch until September. But investors will focus closely on what Apple has to say about their manufacturing plans.  

Walmart (WMT)

Walmart (NYSE:WMT) is another obvious choice as one of the stocks to watch this earnings season. In its last earnings report, the company confirmed that many consumers are cutting back on discretionary spending. It also said that it’s seeing more affluent consumers choosing Walmart. And not so quietly, the company has become a digital force to be reckoned with. Global e-commerce sales were up 21% year-over-year (YOY) in the last quarter.  

But earnings reports are about looking ahead. Walmart has recently announced it has opened five automated distribution centers across the U.S. These will help the country manage fresh food for its online grocery business.  

The bigger story is that Walmart plans to expand this use of automation throughout its stores and fulfillment centers in the coming years. All of this will take robust capital expenditures. However, make no mistake. This will also help the company offset rising labor costs. That will be accretive to the company’s earnings over time.  

Eli Lilly (LLY) 

Outside of AI, two of the best-performing stocks are Eli Lilly (NYSE:LLY) and Novo Nordisk (NYSE:NVO). Both companies manufacture and sell GLP-1 drugs for treating diabetes and obesity.

In its most recent quarter, Ell Lilly reported $1.8 billion in revenue for its GLP-1 diabetes drug, Mounjaro. It also reported $517 million in revenue for Zepbound, the company’s GLP-1 obesity drug. LLY stock is up more than 60% for the year and 112% in the last 12 months.

But as the drugs become commonplace, it’s fair to ask which company’s drugs are better. A recent study suggests that Eli Lilly’s Zepbound are producing better results for weight loss than those of Novo Nordisk. The study was not sponsored by Lilly which creates the reason for the intrigue. 

Lilly is conducting its own head-to-head study comparing the two drugs. That will be one key point of interest for investors to watch when the company reports earnings scheduled for August 8, 2024.  

Starbucks (SBUX) 

Starbucks (NASDAQ:SBUX) continues to be a barometer for the economy. The company has recovered from the pandemic. But as its most recent earnings report showed, the company is having problems with difficult comparisons to last year. This reinforces investor sentiment that the consumer is tapped out.  

Currently, SBUX stock is approaching its 52-week low. For all the talk that the consumer discretionary sector has hit a bottom, the stock seems to find new lows. And the earnings report from PepsiCo (NASDAQ:PEP) won’t do much to allay those fears. However, with the stock down 23% for the year, the buying pressure seems overdone.  

Investors will be looking to see if that trends reverses when Starbucks reports earnings on August 6. They’ll also be watching for progress on the company’s “Siren Craft System” which is the company’s initiative to alter its drink-making process to help make the job or its baristas easier. In the meantime, investors can benefit from an attractive dividend that has been growing for 14 consecutive years and has a 3.11% yield.  

D.R. Horton (DHI) 

Perception frequently shapes reality. That’s why the economy won’t feel like it’s on firm footing until the housing market improves. And it’s why investors will pay close attention to the earnings report from D.R. Horton (NYSE:DHI) the largest home builder in the U.S. The report is scheduled to be released on July 18.  

In early July, investors got the latest housing data. Building permits and housing starts were down YOY in May. That suggests that home builders like D.R. Horton may guide for lower revenue and earnings when they report. 

Tight supply and high demand, particularly for first-time home buyers, should be bullish for home builders. And D.R. Horton has been beating analysts’ estimates for revenue and earnings with levels well above 2019 levels. But the numbers are still coming in lower YOY. That reflects the frustration of a housing market that’s navigating inflation and interest rates on both ends of the market. 

SLB (SLB) 

SLB (NYSE:SLB) is the oilfield services provider formerly known as (and still frequently referred to) as Schlumberger. Despite the fact that oil prices are higher YOY, the energy sector has been underperforming the market. SLB has been no different. It’s down 12% for the year. 

But energy prices have been holding steady above $80 a barrel. And if the Fed lowers interest rates as expected, it’s likely to increase demand. And with oil production already near record highs, there will be no incentive for oil companies to decrease production.  

The bullish argument for SLB comes from the company’s technology which is likely to add operational efficiencies to the drilling process. Furthermore, most of the company’s final investment decisions have a breakeven point with oil at $50 a barrel.  

Investors won’t have long to wait. SLB is reporting on July 19 making it one of the first companies to report earnings.  

On the date of publication, Chris Markoch had a LONG position in AAPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. 

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.