3 Things to Watch in the Stock Market This Week

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Stocks posted big gains last week, as the Dow Jones Industrial Average (DJINDICES:^DJI) rose 2% and the S&P 500 (SNPINDEX:^GSPC) jumped 2.7%. Both indexes are up 10% so far in 2021 and sitting at all-time highs. 

First quarter earnings season is kicking off this week, with several popular stocks set to release fresh operating results. That list includes PepsiCo (NASDAQ:PEP), Delta Air Lines (NYSE:DAL), and Bed Bath & Beyond (NASDAQ:BBBY), whose announcements we’ll preview.

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PepsiCo’s snack sales

PepsiCo announces its earnings results before the market opens on Thursday in what could be a big week for the stock. The snack and beverage giant performed well through the pandemic, beating Coca-Cola (NYSE:KO) in the soda industry while enjoying strong growth in its snack and food segment as demand shifted away from restaurants. Pepsi’s 2020 was nearly as strong as its blockbuster 2019, in fact.

But the stock hasn’t participated in the wider market rally since COVID-19 pandemic lows, which makes Pepsi shares look attractive heading into this report. Sure, profitability is on track to edge lower for a second straight year. But the company has a good shot at converting many of its newest customers into loyal fans of its prepared food franchises. Meanwhile, investors can collect a dividend that will rise by 5% in June to mark PepsiCo’s 49th consecutive annual payout increase.

Delta’s booking metrics

Investors are expecting pandemic stress to continue to weight on Delta’s business as the airline reports fiscal first quarter results on Thursday. Sales are projected to fall over 50% in the context of wide losses. But the stock has soared in recent months on hopes of a sharp rebound ahead as the COVID-19 threat is neutralized by vaccines.

This week’s reports might show some early signs of that recovery. Higher passenger bookings should support rising seat capacity as travel restrictions are lifted. Delta may have some epic year-over-year growth numbers to report in the fiscal second quarter, too, as compared to the 2020 period that coincided with maximum global lockdowns.

Yet the airline is under serious financial stress after a year that saw passenger revenue plunge 70% while operating expenses fell just 27%. That cost burden should have investors feeling cautious about betting on a rebound story before Delta can show a clear path back toward sustainable profits .

Bed Bath & Beyond’s growth plan

Bed Bath & Beyond’s Wednesday report should be an exciting one. The struggling retailer, which in January announced just a 2% sales uptick, has seen its stock soar in recent months, in part thanks to the same short squeeze dynamics that lifted GameStop in 2021 .

Bed Bath & Beyond will have to show some serious progress toward reinventing its business in order to extend that rally. The past two quarters of sales growth, after all, marked the first time in several years that the company grew revenue.

The good news is that the retailer has a solid e-commerce platform and a valuable brand in the quickly growing niche of home furnishings. These assets have some investors betting on a post-pandemic rebound. But the stock price still might be getting well ahead of the fundamentals of this struggling business.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.