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Everybody knows that December is one of the best months of the year from a seasonality perspective. And with the Federal Reserve on pause, the consensus for a year-end rally is almost universal. The S&P is only 40 points below its year-to-date high at around 4600, and my best guess is that the market will gravitate toward that level through year-end.
Personally, I’m more interested in earnings reports out next week from Salesforce (CRM) and Kroger (KR). Salesforce’s stock got some life around nine months ago, when they reported a huge increase in operating margin and forecasted more to come. The stock has leveled out of late as revenue growth is tracking at only 10%, and the stock now trades for 28x current year EPS guidance. The company is to report on Wednesday afternoon.
Up next is Kroger on Thursday morning. Those of you who have followed me for a while may know that I’m a big KR bull. While the stock has flatlined for the better part of two years now, Kroger has continued to make business progress. The company is guiding current year underlying comps to +2.5% to +3.5% and EPS to $4.45-$4.60. It’s hard for me to see how you can go wrong with Kroger – which sells the ultimate necessity (groceries) – at 10x earnings.
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