Market Overview

The Week Ahead: Earnings from JC Penney, Groupon, Salesforce

The second month of the year has been good for stocks, with the S&P 500 remaining above the key 1500 level for the majority of February. Going into the final week of the month, can the market hold onto its recent gains?

Earnings reports

Investors will get earnings from a number of key companies, including retailer JC Penney (NYSE: JCP), daily deal website Groupon (NASDAQ: GRPN), cloud services company salesforce.com (NYSE: CRM), and electronics store RadioShack (NYSE: RSH).

RadioShack is set to release its earnings Tuesday. Analysts currently expect the company to post a loss of $0.05 on revenue of $1.36 billion. Shares of RadioShack have performed extremely well over the last quarter, rallying about 45% in the last month alone.

However, analysts at Wedbush are concerned. The firm has an Underperform rating and $1 price target on RadioShack. Wedbush cites margin erosion and an “ill-advised” growth strategy.

“We expect further margin erosion,” Wedbush writes. “Management forecasted weak sales [on its last earnings call] and said it expected gross margin compress to continue.”

Groupon will follow on Wednesday. Like RadioShack, shares have runup significantly -- more than doubling since setting an all-time low in mid-November.

Barrington Research is cautious on the company with a Market Perform rating.

“We expect in line results,” Barrington notes. “We suspect the company's Goods business benefitted from the Holiday season, but we continue to worry about its lack of visibility and international difficulties, which represents about half of its business.”

Retailer JC Penney is also set to post earnings Wednesday. Analysts currently expect the company to report a loss of $0.14 per share on revenue of $4.10 billion. The company has been a controversial stock over the last year, as CEO Ron Johnson's turnaround strategy has led to a steady decline in sales.

Deutsche Bank has a Hold rating on JC Penney and a $17 price target. Analysts remain cautious, noting that the company has had to abandon many of the radical changes it made to its pricing model last year.

“The changes suggest CEO Ron Johnson has embraced promotions as a necessary evil to re-engage the core JCP customer; but with our checks indicating traffic has only experienced modest improvement in recent weeks, we believe the return of coupons may be next.”

Salesforce.com will report Thursday. Analysts anticipate the cloud computing pioneer to post earnings of $0.40 per share on revenue of $830.8 million. Since hitting a recent low November 14, shares are up over 20%.

Analysts at Piper Jaffray are bullish on Salesforce, with an Overweight rating and $208 price target. “We believe CRM remains a core long-term holding for its prominent role in the cloud computing mega-trend,” Piper Jaffray notes.

Economic releases

In the U.S., investors will get data on new home sales on Tuesday, followed by durable goods orders Wednesday. On Thursday, the GDP report will be released, along with the Chicago purchasing manager index. Friday will be the biggest day, with data on personal income and spending, along with the ISM manufacturing index and the University of Michigan's consumer sentiment.

Internationally, Wednesday will bring the GDP report for the U.K. and Japanese Industrial production. Thursday will have a variety of economic reports, including Indian and Swiss GDP, German unemployment data, Eurozone and German CPI and the Chinese manufacturing PMI. The Eurozone unemployment rate and Brazil's GDP will come out Friday.

The sequester

March 1 -- Friday -- will mark the deadline for the budget sequester. If Congress doesn't act to avert it, $85 billion will be cut from a variety of both defense and non-defense agencies. President Obama has warned that it could have a damaging effect on the economy, while others have downplayed its severity.

Going into the end of the week, the market could see some volatility ahead of the deadline. Still, it doesn't appear to be as significant of a factor as the fiscal cliff was at the end of last year.

Weekly calendar

Monday

  • Earnings from: 3D Systems (NYSE: DDD), Vivus (NASDAQ: VVUS), Hertz Global (NYSE: HTZ)

Tuesday

  • Earnings from: AMC Networks (NASDAQ: AMCX), Dreamworks (NASDAQ: DWA), RadioShack, Priceline (NASDAQ: PCLN), MetroPCS (NYSE: PCS)
  • Swiss Employment Level, South African GDP, U.S. New Home Sales, New Zealand Trade Balance, Japanese Retail Sales

Wednesday

  • Earnings from: Universal Display (NASDAQ: PANL), Groupon, Mylan (NASDAQ: MYL), JC Penney
  • U.K. GDP, U.S. Core Durable Goods, U.S. Pending Home Sales, South Korean Industrial Production, Japanese Industrial Production

Thursday

  • Earnings from: Universal Health Services (NYSE: UHS), Kodiak Oil (NYSE: KOG), Sandridge Energy (NYSE: SD), Salesforce
  • Indian GDP, Swiss GDP, French Consumer Spending, German Unemployment, Eurozone CPI, German CPI, U.S. GDP, U.S. Chicago PMI, Chinese Manufacturing PMI

Friday

  • South Korean Markets Closed for Holiday, Eurozone Unemployment Rate, Brazilian GDP, U.S. Personal Spending, U.S. University of Michigan Consumer Sentiment, U.S. ISM Manufacturing Index

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