Macro
Earnings season spotlight on stocks like Intuitive Surgical and Royal Caribbean amid inflation concerns and Fed rate cut delays.
By Bill Bullington
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The second quarter has started on a shaky note for U.S. stock markets, with major indexes like the S&P 500, Dow Jones, and Nasdaq all in the red. This downturn follows a stellar first quarter but has been exacerbated by recent inflation data that came in hotter than expected. This inflationary pressure has led to a recalibration of expectations around the Federal Reserve's interest rate path, pushing out the timeline for anticipated rate cuts. As the market navigates through these uncertainties, the upcoming earnings season is being closely watched as a barometer for the stock market's health and potential direction.
With the earnings season kicking off, attention is turning to companies with a strong track record of surpassing analyst expectations. According to Bespoke Investment Group data, companies like Intuitive Surgical, D.R. Horton, and Snap-on are among those anticipated to make significant moves post-earnings. Intuitive Surgical, in particular, has seen a notable year-to-date jump of nearly 15.5%, driven by robust demand for its surgical robots. Citigroup's recent upgrade of Intuitive Surgical, citing FDA approval of its Da Vinci 5 robotic surgery system, underscores the optimism surrounding the company's continued leadership in robotic surgery.
Goldman Sachs has identified several stocks with potential for significant earnings surprises, including Royal Caribbean Cruises, Nasdaq Inc, and Broadcom Inc. These selections are based on a combination of factors such as growth in travel demand, fintech space expansion, and sustainable market leadership. The options market's anticipation of notable price movements for these stocks post-earnings highlights the focus on idiosyncratic opportunities in the current market environment. Additionally, Goldman's emphasis on stocks with attractive microeconomic setups, particularly in the consumer discretionary and technology sectors, points to targeted investment strategies amidst broader market uncertainties.
Citi Analyst, Joanne Wuensch (Bullish on Intuitive Surgical):
"Intuitive continues to maintain its robotic surgery leadership position and the approval of Da Vinci 5 solidifies that this will not change anytime soon... We anticipate Da Vinci Xi demand will hold strong in the interim as customers await the commercial launch of da Vinci 5, benefiting from improving utilization and procedure volume trends in the near-term."
Wedbush (Bearish on D.R. Horton):
"Homebuilders will see weaker demand heading into the summer."
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